The Guide to Avoiding Failure as a Digital Health Startup


Dasha, marketing director

Published: September 1, 2022

Time to read: 2 min

It’s a brutal world out there for startups, and MedTech startups are no exception. Studies show that an eye-watering 90% of startups close within the first year. And of these, 42% close due to lack of demand, and 17% fail because the final product isn’t simple or user-friendly enough. However, we believe that most failures can be avoided from the outset. With this in mind, let’s dive into the popularity of digital medicine products, what to consider when launching a medical startup, how to attract investment, and what to avoid when planning your next project.

The State of Digital Medicine Today

According to Statista, Medtech products have generated more than $150 billion in revenue over the past ten years, and this growth is still going strong today. As you might expect, the COVID-19 pandemic accelerated the healthcare market. For example, $16.2 billion was invested into global health startups in Q4 of 2021 and $10.4 billion in Q1 of 2022. However, the share of startups that have successfully launched their products in the market is around 56%. This tells us that there’s a significant interest in MedTech products and progression but that startups don’t always deliver on getting their products to market.

Major advances in emerging technology like IoT, artificial intelligence (AI), and machine learning (ML) are driving innovation in MedTech. For example, the Internet of Medical Things (IoMT) market is estimated to be worth $158.1 billion in 2022. This industry segment is expected to improve patient outcomes, lower ever-rising health costs, improve efficiencies, and empower patients to take more control over their health.

`total global medicine revenue | Active Bridge` [source: Statista]

But IoMT isn’t alone. Other promising areas in digital health are:

  • Telemedicine.
  • Decision support systems.
  • Management systems for medical institutions and marketplaces.
  • Wearable devices for health monitoring.

For example, experts predict that the telemedicine market will grow from $45 billion in 2020 to $175 billion by 2026. Other areas are experiencing similarly impressive levels of success.

Considerations When Launching a Medical Startup

There are many factors healthcare startups need to consider before rushing to the finish line. Let’s dive into them.

What Stages Do Medical Products Go Through Before They Reach the Market?

`Stages Medical Products Go Through Before They Reach the Market | Active Bridge`

Market Research and the Ideas Stage

When done properly, market research can help you identify which products to focus on and how to better position your business to be competitive in the market. As a healthcare startup, you have almost limitless possibilities for market research. For example, you can probe the market by conducting focus groups, online surveys on social networks or pre-order webpages, offline surveys in medical institutions, and by gathering information from news agencies. To get comprehensive and reliable information, you must attack research from several angles and combine several methods.

The key here is to ask people what they lack - the thing that could add value to their health. This might be an electronic family doctor, a medical card on their phone, an app to remind them to take their medicine, and so on.

Next, you want to take a closer look at existing projects. You can start by studying the market, analyzing your peers, and determining their strengths and weaknesses. You can also look to other countries where specific products have gained popularity and examine whether they would be a good fit for your market. You can leverage unique portals like TechCrunch to help here. Similarly, suppose you intend to develop or improve an existing medical application concept. In that case, you can find comparable solutions on the App Store or Google Play Store and test them out.

Large portals, like Statista, can be an invaluable resource for a healthcare startup. Statista regularly publishes information on current and emerging trends. They react quickly to evolving market patterns and analyze them with context (combining current and historical data to get a solid picture). As a result, the information on sites like Statista is often very reliable and useful. Moreover, you can seek the help of agencies that specialize in studying the MedTech market, like MedTechEurope or

How to Choose Outsourcing Contractors

It should come as no surprise that when working on medical technology, you need someone who understands the technology. With this in mind, here are some essential factors to consider when choosing an outsourced service provider.

  • Reviews: What do other people think of the company? How does the company respond to reviews and engage with its audience? Active participation in the market is often an indicator of the quality of work they put out.

  • Portfolio: Has the company worked on projects similar to yours? If so, it will be easier to find common ground, and you’ll often find the work will be completed faster.

  • Technology Stack: Is your potential contractor up to speed with current digital technologies? Are they invested in constantly learning new things? On a related note, it’s a good sign if they can explain in detail which languages and frameworks are best for specific projects.

  • Price: Cost is a huge factor for any startup. Compare prices on the market and consider how much you are willing to spend on development.

  • Terms of post-release support: You will likely need to debug or fix the finished product post-launch. How long can the developers provide support, and what will it cost?

You can read more about the stages of product development here.

Product Testing

How will the product work? To understand this, you must create the MVP, the minimum viable product, or the basic version of the future fully-fledged startup. Then, users can explore its main functions and determine whether the full version would meet their needs. It’s much cheaper to develop an MVP than to immediately offer your audience a ready-made version of a medical startup.

Critically, medical startups need a proof base. This means references from other people who have already used the product, official certificates, and medical documents showing its medical value and the literacy of your idea. By doing this, you prove the project’s value, reliability, and necessity. This often requires a consultation with medical experts to really drill down into the details. Any gaps of vagueness in your documentation can inspire suspicion and distrust.

Full Entry to the Market

Okay, so you’re ready to enter the market. What’s next?

The first step for any eager healthcare startup is marketing. After working on your MVP, attracting investment, and launching your start-up, you’ll want to recruit and study a specific target audience. Use free traffic sources, online publications, and show your expertise. You’ll want to write articles related to your area of expertise and communicate with your audience as a subject authority.

Next is sales. Many different sales models exist in the medical startup world. For example, you might opt for direct sales, content or service subscriptions, online sales, or generate income from advertising or affiliate marketing.

Finally, you’ll want to further work on development. This means expanding the product’s functionality, tweaking or changing your sales model, developing a new design, and so on. If your customers see that you’re actively working on bettering your company and product, they will be more willing to reach out.

The How, Who, and Where of Attracting Investment for Healthcare Startups

It is easier to approach investors with a ready-made version of your product - even in the early stages, a tangible product is always more convincing than a theoretical idea. In addition, you need to prepare an economic model for the project. This document should detail all the components that impact the return on investment. For example, the size of the market, financial indicators, the project team, and analysis of your competitors are just some of the things that you must include here.

But what kind of investors should you be looking for? It’s best to scout for “smart investors” - those who invest in medical projects, have medical companies in their portfolio, and have experience running a medical business or working with a MedTech startup. These could be large infrastructure giants, well-known reputable companies, or even business angels. And critically, grants, venture funds, crowdfunding, and acceleration centers can also be sources of investment.

Pitch sessions and startup marathons will be the primary tools for attracting investment. But how do you boost your presentation’s chance of success? The first factor is compelling storytelling. You want a tightly woven story about your background and how it relates to the product’s value story. This sparks confidence in the potential investor. The second factor that determines your success is your level of legal protection. Do you know (with certainty) the legal standing of your product? Do you have a clear strategy of how you will navigate legal issues like patents and exclusive rights? Legal considerations can be a huge factor for investors because they don’t want to invest in a product they later discover isn’t legally viable or is too expensive to get off the ground due to legal issues.

Equally important is keeping in touch with industry representatives. This doesn’t mean you have to befriend industry leaders and turn up at their house but instead participate in tech competitions, hackathons, gas pedals, and pilot projects. Pilot projects are especially powerful here. Potential investors always have a keen interest in tested solutions that use quantitative metrics to back up their value.

`Tips to Attract Investment for Healthcare Startups`

If you’re unsure where to start, use Peter Thiel’s PayPal pitch template. It consists of the following items:

  • Problem: Here, you entice potential investors into wanting to know everything about current consumers’ pain points.

  • Solution: The solution your company has come up with to address the problem.

  • Market: Here, you define your target market and discuss its size, location, and the price points they are comfortable with.

  • Product: What is it? What does it do? How does it do it? Here, it’s crucial to be descriptive but not overly detailed. You want product annotations to be brief, memorable, and easy to understand.

  • Success: What are the barriers to entry? What’s your sales plan?

  • Team: Investors want to know who runs the healthcare startup. Medical startup investors bet on the jockey (founder), not the horse (idea). It’s the founder and the team that determines the success of the idea.

  • Competition: Express how significant and relevant this opportunity is. You should discuss how your healthcare startup is better than the competition and how many competitors are in the market.

  • Financial performance: Do you have previous investors or funding rounds? Do you have a financial model with detailed information about how you arrived at your valuation? And crucially, what amount of money are you hoping to get from the potential investors?

What Supporting Programs for Medical Start-Ups Exist?

An accelerator is an organization that helps startups and early-stage companies mature and grow their businesses. They provide services like management assistance, recruiting services, access to finance, administrative support, and co-office spaces. Lots of health startup accelerators exist, but here are some of the most prominent ones.

  • Rock Health: Rock Health funds and supports entrepreneurs in healthcare technology.
  • Startup Health: A global health innovation company with the world’s largest portfolio of digital health companies.
  • Blueprint Health: A community of healthcare entrepreneurs dedicated to building the next generation of healthcare IT companies. They invest $20,000 and time in 20 healthcare IT companies a year.
  • Dreamit Health: They provide capital, advice, and teams to support revolutionary technology in the digital health space.
  • Healthbox: A new breed of accelerator, Healthbox is focused on helping healthcare startups rapidly pressure test and validate their companies to scale.

For more options, check out New York Digital Health Accelerator, Startupbootcamp, SmartHealth Catalyzer, and Health Wildcatters.

What Challenges Do Healthcare Startups Face at Launch?

It’s vital to have a clear focus and the right marketing. It’s important to remember that medicine is a social sphere and directly impacts the lives and health of the population at large. This means it’s not sufficient to just come up with a good idea; you also need to understand the technical nuances and the wealth of legislation surrounding your concept.

There are obstacles to getting telemedicine startups off the ground because there have to be - when patient care or population health is impacted, extra considerations are at play. For example, there are many legal details you need to consider when building a telemedicine startup, including data security. If you’re inattentive to these factors, you risk providing subpar medical services.

These legal factors can also differ between regions. For example, MedTech startups with European customers must be compliant with GDPR. As part of this, digital health startups must employ workers in the data protection field to ensure internal compliance with GDPR. In addition, they also need to ensure security by using secured online portals where clients can view how their data is shared, processed, and stored by the startup.

In the US, the FDA oversees the safety and effectiveness of medical devices, including mobile medical apps, with the Policy for Device Software Functions and Mobile Medical Applications Guidance. In addition, there are other regulations and guidance you need to be aware of. You can find out more here.

One critical mistake many medical startups make is investing all of their efforts and resources into their idea to the detriment of other aspects of product development. Unlike innovative pharmaceutical companies, MedTech startups risk losing their uniqueness if they don’t act quickly. As a result, healthcare startups must rapidly move from idea to hardware.

Of course, solving legal issues like patent protection and registration can also be a challenge that gets in the way of success. In addition, legal processes can often be time-consuming, so acting quickly is essential.

Another significant mistake is betting on one strategy. So often, MedTech startups focus almost exclusively on the consumer audience. While focusing on your consumers seems intuitive, it’s also important to recognize that the market for medical devices depends on doctors’ expert opinions. So any device should have a sound evidence base and, ideally, a registration certificate. Doing this can significantly expand the possibilities of application.

Over the last five years, the market for MedTech products has almost doubled and shows no signs of slowing down. On the one hand, this is good news because fledgling healthcare startups can still jump on this accelerating train of industry growth. On the other hand, however, the competition is also steadily increasing. This means you need to ensure high quality to compete for consumers.

Customers Demand Quality Services

Consumers use several factors when choosing a product - cost, accessibility, and brand authority. However, the quality of services and interactions with the company is now more critical than ever. So when working on a telemedicine startup, be sure to take care of your customers by putting quality first. Some quick tips here:

  • Brand loyalty depends on customer service;
  • Most people prefer robots to talking with live people;
  • Customers share negative experiences with other people.

However, it’s also worth noting that even with good customer service, not everyone is willing to use digital services, especially in healthcare. So you have to consider how your product will look to these people, what you can do to bridge this gap, and whether you can provide more options for engaging with your brand in a way these customers feel comfortable with.

Choose Your Niche Carefully

Telemedicine comprises many fields, all of which are primed for success if you strike carefully. However, some niches are pretty narrow, so it’s essential to do your research and look at equivalent businesses in other regions.

Today’s most popular health app categories are nutrition, fitness tracking, patient health record, remote consultation, medical consultation management, diagnostic apps, and remote monitoring. You can read more about the telemedicine industry and its outlook here.

Competition is still competition. It’s always possible that someone will create a more convenient, marketable, or quality solution. With this in mind, keeping an eye on the competition and adapting to market changes is crucial. Here’s the bottom line. You join the ranks of the best; you need to learn from their experiences.

In What Areas of Medicine Does Demand Now Exceed Supply?

Where can you strike? Wearable gadgets and related products are in hot demand. Here, we’re talking about devices for remote monitoring of health indicators, like electronic tonometers and stethoscopes, which can save, interpret, and transmit data to medical practitioners. The populations increasing digital literacy and reduced access to medical care in the context of the pandemic are major demand drivers in this area.

Similarly, application gadgets are extremely popular with people who want to monitor their health and physical activity regularly.

Telemedicine is also actively developing, a trend also reinforced by the pandemic. As a result, telemedicine applications and services are in high demand, and you can find easy access to currently available products for research.

Moreover, medical decision support systems that use AI and big data analytics are a promising avenue for MedTech startups. Also, on the point of AI, there’s significant demand for varied AI platforms that can analyze medical images used for diagnostics. Finally, everything related to practice-oriented training of medical personnel is also in high demand. This is especially true for simulation equipment like VR and AR simulators.

Final Thoughts

Startups are constantly developing new solutions to meet users’ growing needs, and you can join their ranks, but you may need a little help along the way. We have worked in the medical and healthcare industry since 2010, helping startups develop insurance, consulting, and telemedicine projects. If you want to launch a MedTech product, contact us today to get a free consultation on your project.


Dasha, marketing director

Published: September 1, 2022

Time to read: 2 min