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  • A Founder’s Guide: VC funding in the health and wellness industry

    According to McKinsey & Company, the consumer wellness market is estimated at $1.5 trillion with an expected growth rate of 5–10% annually. The COVID-19 pandemic sped this up, with funding being funneled into industries aiming to improve the health and well-being of their consumers.

    Deloitte’s insights into the healthtech investment trends observed that healthtech investors are aware of technology’s ability to pivot the future of the healthcare industry. Investors are keen on investing in innovators who are capable of utilizing the newest technologies to improve consumer health. The pandemic has placed importance on the need for telehealth services and more research into aspects of health and wellness, such as mental health.

    However, following the product development, understanding, and approaching investment can be a slightly daunting task.

    Understanding challenges faced by new startups

    Digital health markets are projected to grow by 17.4% between 2021 and 2027, which makes competition within the health and wellness space an ever-present reality. Staying on top of new requirements and technological advances can often be difficult for new founders.

    Even serial entrepreneurs with relevant industry knowledge can pose new challenges, especially when adopting new technology. Research and integration into the healthcare sector also come with their trials. These are often key points VCs seek out during investment rounds.

    Founders also falter when placing higher importance on investor needs versus those of the product. To satisfy potential investors, changing the vision of their product can sometimes deviate significantly from the initial consumer need.

    Startup founders should be firm in their vision and work toward building a product that is filling a distressing gap within the market. Founders also need to stand their ground when seeking investments, limiting how much equity they give away during the initial stages.

    How VCs fail companies

    It can be relatively easy to assume that VCs have the final say in how the market runs. However, it is possible to know more about a dynamic market such as health and wellness technology than your VC firm.

    Venture capitalist funding generally gets disbursed when companies have already set their product, with initial signs of growth, out into the market. It is here that VC firms step in to assist with building infrastructure to facilitate further product growth. The long-term (or rather short-term) goal is to build a robust system, which can then be sold.

    However, with the pressing need now more than ever to provide usable solutions in the market, it is possible to push companies to the point of burnout where the initial aim of the product gets lost. This might also influence leadership change within the company, which can lead to floundering downstream within the teams as well.

    Goda Mikocionyte, Strategic Partnerships Manager at Kilo Ventures, highlights that once VC firms have provided funding, they expect to get fast returns but don’t provide additional support or guidance.

    With limited market knowledge, new companies might not know how to introduce their products effectively or launch them in a new market. Since the market grows and changes quickly, startups need to gain experience fast, provide smart solutions, and scale if they want to stay competitive.

    “Startups that are looking for investment don’t require funding only. They also need access to proven strategies that work in the particular market. This is one of the things we offered when we invested in companies such as Octomoves, Pulsetto, or Tyler,” explains Mikocionyte.

    Kilo Ventures want to set goals and celebrate success together – a close environment is key. “With Kilo Ventures, we think the key factor is to work closely as a team, use the strengths of your strategic partner, and celebrate success together,” adds Mikocionyte.

    New approaches to the investment process

    UiPath took ten years to reach its first million in annual recurring revenue. During this time, they raised only small funding rounds and continued to shape themselves for the evolving market. After the first million, it took five years to reach $600 million.

    This simple case study can be emulated for a new startup looking to make its break in the health and wellness industry. The pandemic has shown evident gaps in the healthcare system. Tapping into these requirements is the key to standing out within the market today.

    When it’s time to approach funding, consider long-term partnerships with a few trusted VCs. This makes it easier to be transparent about how processes work within the startup. Consider being mindful about how funds are used within the startup and request assistance only when required.

    Keep running tests to understand the evolving market. While the need for technology to facilitate accessibility and delivery was noted, consider experimenting with new technologies to improve consumer experience and overall outcomes. These strategies can help raise more funds to scale the startup further.

    Startup accelerators can play key roles for early-stage startups with limited knowledge of the markets. They allow for networking opportunities and help startups explore possible ways to improve their product and effectively pitch to secure funding.

    Kilo Health Ventures offers innovative support for health and wellness companies. Using the IEES model, digital health and wellness startups can receive in-house product research along with tactical marketing strategies assisting with long-term scaling. Mikocionyte states that Kilo Health hosts over 600+ experts, medical and nutrition teams, along with doctors to provide strategic insights into product development.

    Femtech’s market size is roughly $1 billion. However, it receives only 3% of the funding for its startups. FemTech Lab is a global accelerator program assisting startups building specifically for the women’s health and wellness market. Understanding the nuances of this market can be crucial, and such accelerators are best to cater to such needs.

    Creating an impact within the industry

    While seeking investment is the most painstaking task of any startup journey, it is often the most rewarding, too. Having funds facilitates the formation of actionable outcomes filling the gaps in consumer needs.

    The health and wellness industry impacts everyone at an individual level. And the pandemic showed how limitations could be catastrophic on a global scale. Something as simple as perfecting telehealth services could have improved healthcare accessibility drastically.

    In the journey to building and finally approaching investments, it is crucial to stick to the vision. Seek opportunities that sync with this vision. Good relationships built during this process only help foster the health and wellness ecosystem, favoring innovation that closes the gaps within the industry.


    Stuart O'Brien

    All stories by: Stuart O'Brien

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