8th July 2024
Whether you are an investor or an entrepreneur, the concept of a “unicorn” sparks excitement and inspiration. However, investors and start-up founders who joined our latest Healthcare Hackers discussion agreed that there are many more critical aspects for start-ups to consider than merely reaching a US$1 billion valuation. The answers might surprise you.
EU start-ups have a substantial market to promote their products and services to, but the challenges can often outweigh the opportunities. One significant challenge in the healthcare industry is the lengthy validation period. Both Mehak Mumtaz (COO & Co-Founder, iLoF) and Adrian Gorritxo (Venture Developer, Kunsen) pointed out that the validation periods in health tech are extended due to regulatory compliance, making it harder for these start-ups to generate revenue in the early years. “Deep tech in healthcare moves at a very different pace than consumer tech and consumer healthcare. So building a deep tech requires proper scientific validation, building the evidence that the technology works, testing it out in real-world settings, and collecting the data for it.” -elaborated Mehah Mumtaz. These create a necessity for fundraising or bootstrapping during the initial stages of business development.
Another challenge, as highlighted by Bertalan Jazskuti (Managing Director, Syreon Research Institute), is the fragmented markets within the EU. Each European country requires specific go-to-market strategies, meaning companies spend considerable time adapting to new systems compared to launching in more homogeneous markets such as the US. “Europe is not a unified market, certainly not in healthcare. So this makes it for companies active in health often an option from the first instance to immediately go to the US instead of developing their first market in Europe.” – emphasised Bertalan Jazskuti. Consequently, some start-ups founded in Europe continue their journey in the US, benefiting from a more standardised market, which results in a shorter time to market. This was the case for companies like Noom (a consumer-led digital health company) and Oscar (a health insurance company), who attained unicorn status despite their European origins by relocating to the US. Tamas Bekasi (RIS Business Creation Lead, EIT Health InnoStars) also pointed out that in addition to the European market’s heterogeneity, there exists a gap in innovation between the Western and Central Eastern European regions, highlighting the need for more innovators and entrepreneurship education in the latter. “First, we need to raise several innovators coming from this region, and this is what I refer back to as a kind of social culture that is lagging behind because of the education or the entrepreneurship supportive system,” noted Tamas Bekasi.
Despite these challenges, Europe recognises these obstacles and is taking steps to harmonise regulations. Bertalan Jazskuti, as an example, mentioned the recent Pharmaceutical Act, which ensures access to medicines for all patients in the EU, and the upcoming European Health Data Space Act, which will focus on the availability of patient data for secondary use in research. Moreover, businesses are given tax credits for R&D investment and specific solutions to guaranteed markets. Bertalan also stated that Syreon Research Institute is collaborating with the government in one of the lower-income Central European countries to reform price reimbursement and health technology assessment regimes.
Furthermore, the panellists shared their expertise on funding and risk management. They stressed the importance of having fundraising discussions from the early stages of business and validating ideas as soon as possible for earlier-stage start-ups.
Another crucial piece of risk management advice was identifying an early value-generating market. Discovering the company’s strengths and understanding what it wants to excel at is essential for generating revenue. Another step is knowing what the company would like to collaborate with other partners. This approach helps the company leverage others’ expertise to de-risk some of its operations. Mehak Mumtaz advised entrepreneurs to build collaborations to mitigate the risks associated with developing deep tech and proving out business models.
In conclusion, while there are many obstacles for start-ups in Europe today, numerous opportunities are also waiting to be unlocked. Returning to our initial question: are unicorns worth chasing? In general, the panelists agreed that terms such as unicorns or camels are simplified badges that aren’t the priority for an investor. More importantly, the company’s ability to grow, create value for patients and medical professionals, and have a clear path to revenue. Mehak Mumtaz summarised the discussion: “Whatever strategy you choose, be it a camel or a unicorn, the focus should be on how that can generate lasting sustainable impact.”
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