Why Digital Health Startups Fail - Part 1: The Tech Fetish ??

This is part one of a three part series on Health Startups and why they fail, all inspired by a recent Sifted article on the current desperate state of DTC health startups and scaleups. You can read Part 2 - Myopic Marketing here.

Technology will revolutionise health! I bet you've heard that one before. And in many cases it's been true, but when we look at the world of Health Startups we may have been a bit overly optimistic.

In a sobering article published in late January this year, Sifted highlighted the slowdown in health tech investment, and the unavoidable sell off of many cash strapped startups in the space.

There are a range of different drivers that have put pressure on health startups, especially those targeting consumers directly. The pandemic drove lots of advertising spend online to target people in their homes, driving up marketing costs for many digital health startups that rely entirely on these channels. Modest customer lifetime values, and unclear paths to extend these have also become apparent forcing man businesses to diversify towards business offerings or seek acquisitions to ensure some sort of exist for investors and founders.

But I think there's a deeper issue at root here that has no doubt impacted these other aspects over a longer period, an obsession with Tech over humans. Faddy gadgetry over patients.

I first started out in health tech back in 2011/12, co-founding a business called F1000 BUZZUMI LIMITED that was one of the early wave of telehealth platforms here in the UK. The notion that we could replace much of the drudgery of everyday life with apps and iPhones was still an exciting prospect (the iPad had only just been launched and even the iPhone was still in the early stages of its evolutions). So of course there was a view that these technologies could be applied to solve challenges in the healthcare space. Even then there was significant pressure on the NHS, and getting any help for mental wellbeing was a challenge.

So we thought about how we could replace every aspect of the in-person doctor appointment with a digital equivalent. But we hit some significant snags early on, firstly there wouldn't be an opportunity for GPs to examine the patients, secondly even a visual assessment of some issues might be problematic due to poorer video/image quality. Nonetheless we pressed on, hoping that this would at least enable doctors to remotely support a significant % of issues. We were also working on a mental health solution in parallel where these constraints weren't as significant.

It seems that many other services developed at the time, notably the erstwhile behemoth Babylon, had the same insights, and built out there systems in similar ways. But the problem was that we were solving for technology and not for end users. After all, if doctors weren't able to visually or physically examine patients via a telehealth platform, what was the functional advantage of a complicated video call compared to a simple phone call? Remember, back then internet connections were much slower and video calls were much more unfamiliar (especially to older generations).

We could have had an 'as good' solution, at a lower cost, with easier user-uptake if we had focused more on the end user experience. Babylon made this same mistake when it rolled out its much celebrated 'ai chat bot' back in 2018. It was basically a digital form, with a lot of unnecessary technological bloat built in.

Would it not been easier to have a patient simply fill out a form and have that forwarded to GP practices? But again tech was the focus, and the media and health industry played along, fetishising the technology even as healthcare practitioners pointed out its potential flaws. Obviously we all know how the story ended with Babylon. But this tech-first/solution-first approach still remains.

More recently I have seen it in the remote diagnostics space, where the convenience of home blood tests is marred by the sectors eye-wateringly high test failure rates. Repeatedly piercing your fingers and dripping your blood into tiny plastic containers isn't quite as convenient as it's been presented to be. Whereas in reality, many customers using this service actually value the speed, range of choice and preventative information that these tests can deliver, which can perhaps more effectively be achieved by encouraging them to book an in-person blood draw as a first priority. There is actually some new tech that could make this process simpler, but again this is likely to fall afoul if the priorities of the customer/patient are eclipsed by the shiny, new tech.

What this fundamentally boils down to is the fact that health is a complicated area, with much risk and (rightfully) much regulation. Some aspects of health will always been complicated and inconvenient. But in obsessing with tech solutions a lot of the true value for customers and patients has been missed. In many cases this means that health care startups will need to focus on smaller market segments that can afford to pay for a more bespoke service, or (as they have already recognised) shift focus to other payers such as governments, employers and insurers. But by taking a level headed view of the available tech in context of the broader experience, they can save costs, time, increase customer lifetime value and deliver a more satisfactory experience.