Why Digital Health Startups Fail to Create a Revenue Rocket-ship (and How to Fix It)


Powerful revenue engines don’t happen by accident especially when it comes to digital health startups. Vying for more venture capital and acceptance within the medical community, businesses like these have to be aggressive with their health tech marketing. Not only that, but startups also face the reality that if they don’t scale within a reasonable timeframe, they risk losing invaluable market shares.

Without revenue streams backing your product or services, investors may doubt the effectiveness of your digital health solution, resulting in stunted growth for your company.

To get to the point, health tech startups need to generate a revenue rocketship that can drive long term expansion, yet many fail to do so. The result is that around 9 out of 10 digital health companies fail simply because they haven’t generated a predictable revenue engine.

For the future of your startup, it’s vital that you avoid this breakdown by addressing these key areas that commonly stunt growth.

Driving without a destination in mind

All startups launch with a great ideas, but if they never gain traction in the industry, they won’t last for the long run. Just like any road trip, if you want to get to the destination, you need a plan. And you’re in luck because I have just that for you.

Inflection points are the major mile markers of a startup growth strategy, and they’re a key way to assess your growth in relation to the limited time you have to establish your company. By defining these key phases, you’re then able to design growth plans that get you to your next inflection point... and the one after that.

Start up

In this first stage, you’ll be doing a lot of listening. Your goal is to learn about and understand the businesses you serve and want to sell your product to in the future. Ideally, you should have 2-3 customers at this point to show proof of revenue capabilities in your market.

Here are some key concepts you need in order to glean real insights during this inflection point:

  • What are my target audience’s major priorities in the next 12 months?

  • What is my customer’s typical buying process?

  • How do my potential customers make decisions?

  • Where does my product fit in buyers’ value chain?

  • What’s our company’s realistic solution to customers’ greatest problems?

  • What business model and pricing model could set us apart from other vendors?

To sum it all up, this phase is about proving the viability of your tech solution and business model by learning what your customers value most. As a result, your startup will be better prepared for the next round of funding that will propel your company through each stage of growth.

Ramp up

During ramp up, your startup should be building the infrastructure for sales and marketing teams. This includes creating a sales pipeline that really works. Your team should be focusing on drawing qualified leads from places like conferences, LinkedIn, and referrals.

The goal is to create a repeatable process that regularly converts customers. In addition, this is also the stage where you want to be ruthless as you qualify and assess how long it takes customers to buy OR to reach closure as they move out of your pipeline.

Scale up

The key word here is managing. This phase is focused on implementing the systems and procedures you created during ramp up. As the infrastructure guides and shapes the behavior of your growing team, you can then show sustained repeatability while you expand outward into your serviceable addressable market targets.

During this phase, you also need to be establishing hiring systems as well as routine reviews of your daily progress, weekly pipeline growth, monthly performance, and quarterly comp plans. These inflection points do more than just grow your in house team, however. More importantly, they mobilize your employees to focus on accomplishments that merit funding.

Shooting without a target

If you don’t know your target market, it’s very likely that you’ll waste precious time and money reaching the wrong people. These unqualified leads will only clog your revenue engine instead of making it more efficient and profitable.

Since investors look at hundreds of investment opportunities each year, having a defined target can help you de-risk their potential contribution. That’s what your Serviceable Obtainable Market and Serviceable Addressable Market serve to do. In contrast, your Total Addressable Market enables investors to see the potential for expansion over the long run.

If your startup is in the Start-Up and Ramp-Up phases, you need to nail your SOM as quickly as possible. Rather than going broad, you want to dive deep into your customers by creating Ideal Customer Profiles and Buyer/Evaluator Personas.

The reason this matters so much is if you can’t succeed with this small part of the market, investors will be wondering how you can ever capture a major part of the global market? This is why you need to prove through stories and metrics that you can reach your SOM, revealing to investors your growth capacity and credibility.

In Ramp-Up, your Ideal Customer Profiles and Buyer/Evaluator Personas build the foundation for content marketing, digital marketing, as well as inbound and outbound prospecting systems. These deep dives into your target customers also help your teams hire sales members, create customer service measures, and manage customer accounts during Scale-Up.

These are just some of the benefits you lose out on if you don’t know your target audience.

Floating your boat but not your customer’s

In health care, everyone needs to know where they fit within the regulatory landscape. For instance, if your customer is going to stay afloat, what legislations or complications do they need to address so they don’t lose reimbursements or patients?

Many within health care are feeling the weight of changing demographics such as “baby boomers” dealing with chronic comorbidities. These population sectors regularly consume the majority of U.S. medical resources. In a scenario like this, how is your digital health solution going to help your target audience change and adjust to value-based reimbursement?

Or consider the system-wide realignment of incentives such as the Quadruple Aim. These Accountable Care initiatives seek to incentivize clinical quality while reducing costs. For most health systems, companies, and practices within health care, these measures impact their bottom line. How can your health tech innovations help your customers thrive amidst all this change?

All of this to say, your solution needs to reach deep into your customers’ problems... all the way down to regulations and changes that affect their revenue streams. By doing this, you set yourself apart from the competition, making your product or service more desirable to your customer.

Competing for budget but not mindshare

Speaking of competition, what makes you different from your competitors? Do you even know your competitors are all the way down to their strengths and weaknesses?

Differentiating yourself goes back to who can solve the customer’s problem the best. That’s what buyers care about. Your marketing strategy and messaging needs to clearly define how you practically help customers. If it doesn’t, one of your competitors will likely capitalize on your lost opportunity.

With that being said, you do need to know the strengths and weaknesses of your competitors, too. In their weak spots, you can make major wins. If they’re neutral in certain categories, you know where you don’t need to spend marketing resources. In other words, knowing your competition can help you prioritize and hone your messaging goals to create a better revenue engine.

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Whitney is a consultant, speaker, and writer on a mission to help life-saving, life-changing technology break through the noise and achieve mass user adoption. Learn more about her here.