In anticipation of Frontiers Health Global Conference (October 20-21^st, in Milan & online), we spoke to Tanja Dowe, CEO of Debiopharm Innovation Fund, about a white paper the Fund is about to release: Surviving and Thriving in a Tough Market: Advice for Start-Ups.

In their third consecutive year as a conference partner, Debiopharm will curate a session  where they will present the findings of the white paper and share more comments and personal perspectives of entrepreneurs and startups on the topic.

Tanja, first of all, do you think that most of the startups in the industry have clearly realized that the market conditions have changed?

I think that everyone has realized that times have changed and we see a lot of writeups in the media about the investment amounts that are decreasing or increasing depending on the source, stage of the companies and so on. Many opinions are out there on what you should think about the markets or how you ensure that you survive through these times. Which means that, indeed, the entrepreneurs acknowledge they are in the middle of the shifts in the environment. But the important question is: have the entrepreneurs adjusted and how have they adjusted?

In our white paper we decided to talk to people who went through the recessions of 2003 and 2008 to get some depth, try to understand if we are going into a full-blown recession that many banks are now forecasting, and what does that mean to entrepreneurs? And how can you find a better way to get through it if you are a startup or a scaleup from the digital health & life sciences industry. During our session at Frontiers Health, we will reveal the summary of the white paper findings.

In a startup-investor relationship during hard times, the responsibility of a startup would be to manage investors’ expectations. What is the responsibility of an investor? How is Debiopharm Innovation Fund supporting the portfolio startups?

One of the first things that you have to do as investor is to adjust your expectations. You have to take a very close look at your portfolio companies one by one. Can they grow as quickly as anticipated? Can they get to profitability as quickly as you expected? And what is the exit market going to look like?

Usually, when we invest in a company, we have an idea of how the company will grow if things go well, when they are going get profitable, when they are going to exit, and so on.

Obviously, in this type of market, we have to revisit our expectations and adjust them. It doesn’t mean that we’re going to be happy with lower IRRs, but we may have to adjust the timelines or think about what can we do to support the companies. For example, we may have to be ready to bridge some of our portfolio companies if their fundraising rounds are coming in the next 6 or 12 months, because it might make sense to postpone the next bigger raise till times get a little bit better. Some adjustments to the business plan might be needed and so on. So we have to be flexible, just like the startup entrepreneurs have to be flexible as well.

Another important thing worth taking into consideration is that a lot of investors are very good at modeling financial performance and growth. But startup life is much more about pivoting, and the best investors can help with that. I think there has to be a balance between listening to startups that are in the field and sticking to strategies and milestones. . If we work together as investors, board members and founders, it’s great, but it really has to be a team. The entrepreneurs have to listen to investors, but investors also have to listen to entrepreneurs.

Is there a place for optimism when adjusting the goals and numbers during a downturn?

I think that especially in such industry as digital health, the fundamentals and the macro trends remain the same. The need to renew healthcare and to bring digitalization into it is not going to go away. The solutions that help bring healthcare costs down might even attract more attention.

Also, we have to admit that pressure forces every one of us to be more creative. I think that startups have the best chances to be creative and to change quickly, compared to big industry players who are having a harder time adjusting to tougher markets.

To know more about the white paper findings and valuable insights for startups, secure your pass to Frontiers Health now and join the Debiopharm’s session, moderated by Tanja’s colleague, Nicolas Stalder, Investment Associate at Debiopharm Innovation Fund, at 11 00 CET on October 21^st!

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About Debiopharm’s strategic digital health fund

As Debiopharm’s strategic corporate fund, the Debiopharm Innovation Fund invests in digital health, smart data, and innovative tech start-ups. Find out more about seeking digital health start-up funding.

#BHHSummit is the annual conference of Barcelona Health Hub, a global and international ecosystem for the health transformation. It will be held on October,3^rd 2019 in Sant Pau Art Nouveau Site.

Join 500 attendees and 25 speakers from Spain and abroad to talk about collaboration between healthcare startups and corporations.

The summit will include keynotes, panel discussions, startup showcases, business meetings and networking events.

REGISTER NOW – Special prices available for startups, healthcare professionals and investors!

You’ve lived and worked in Asia, the US, and Europe. Can you tell us more about your experience?

I’ve been fortunate to work with great people to tackle challenging health problems in all these regions. Today as Managing Director for Taliossa, I serve as an independent board director for fast growth companies including health tech, I advise startups CEOs, and sometimes invest into their businesses.

My current activities build on my previous experiences, including being a founder and operator of multiple businesses, and my most recent corporate role in driving the health innovation agenda for MetLife Asia / LumenLab.

How do you prioritise which healthcare problems to solve?

My time at MetLife and LumenLab allowed me to spend significant time learning about customer problems in 11 countries in Asia Pacific including China, India, Japan, South Korea, Hong Kong, Singapore, and Australia.

Through a lot of research and on the ground discovery, I not only connected with the vibrancy of the region, but also found the alignment of consumer interests, commercial opportunity, and viable product-market fit within three areas: cancer, human longevity – specifically in brain health, and population health models for the Asian market.

Ideally, the companies I collaborate with have core IP stemming from AI, Genomics, Blockchain, and smart devices to solve these challenges.
Although these problems are global in nature, I spend most of my time with an Asia-focused lens in how these solutions can be deployed at scale for this region.

Can you summarize the Health Tech opportunity for Asia for our readers who aren’t as familiar with the region?

Let me describe four facts to give some context.
First, let’s start with the geographic landscape. The Asia Pacific region is enormous and diverse: 4 plus billion people, 44 countries, and over 2 thousand languages.
It helps to think about the region as six main Hubs:

1. China and Hong Kong
2. The Indian subcontinent
3. Japan
4. The Korean Peninsula
5. Southeast Asia and Singapore
6. Australia and New Zealand

Each individual Hub has broad similarities including: economic stage of development ranging from developing to developed, cultural and lifestyle history, and climate. Keep in mind, there is still a lot of diversity within each Hub – this approach is simply a way to create a starting point for identifying and grouping commercial opportunities into relatively smaller areas. China alone is still nearly 1.4 billion people!

A second fact relevant to healthcare is how insurance works as compared to the West. Single payer government systems are more common. And the largest form of private insurance is a type of policy called critical illness. This insurance looks like a life insurance policy, except that the claims trigger is a debilitating health event such as getting diagnosed with cancer or losing eyesight or a limb to advanced diabetes.   The insurance claim is paid to a policy holder as a one-time payment instead of the insurance companies reimbursing each visit to the doctor’s office.

Third, the largest fast-growth technology companies are active participants in health innovation. In the US, we hear about the role that Amazon, Google, and Apple are taking. In Asia, the technology titans are Baidu, Alibaba, and Tencent (BAT). In Southeast Asia, Grab is also very active in linking insurance, health, and their ecosystem of offerings including ride-sharing together.
To bring this to life, let me briefly give you an example using a recent example from Tencent in China.

Through one of their affiliate digital insurance platforms called WeSure, insurance policy holders will now be given more choices to manage their cancer diagnosis. WeSure has 20 million policy holders as of Dec 2018 (after only 1 year of operations), and takes a user-centric approach to insurance. As a result, in addition to a one-time financial payout at the time of a cancer diagnosis, WeSure will leverage partners to support their policy holders through their cancer management phase with curated products and services.

The expected result is an improvement in survival rates. Other life insurers such as Prudential, MetLife, and PingAn area also pursuing this approach.
In the West, this might be expected from a company like CIGNA or Kaiser Permanente, but this is a new trend for private insurers in Asia.

My last area to discuss regarding the Asia opportunity is funding for startups. Many organisations track global healthcare investments in startups by Venture Capital Funds. A key insight from these reports is that Health Tech funding today in Asia is nearly the same as in the US as measured by USD invested into startups within a given year. Asia should surpass the US in the next 12-24 months. And this data doesn’t necessarily include family office funding which is more common in Asia than in the US.

That’s very helpful, especially given the case study. As Western investors and startups consider a focus on Asia, what unexpected challenges might they face?

Given how I focus on Population Health as one of my priorities, two topics come to mind, both related to data. For background, one company I’m partnering with to succeed in this space is CXA Group, which is driving towards improved health outcomes for employers and employees across Asia. I also recently penned an article on LinkedIn which talks about the influence of AI on population health models in China. Here’s a link.
Topic 1: Can your business get the “clean” data it needs?
Technology systems, especially AI models, function best when they have consistent and accurate data. While there are lots of sources of data in Asia, especially because of the mobile-first nature of the region, that doesn’t necessarily translate into usable healthcare data.
Startups entering this region should consider how the quality and access to data affects their business operations and even monetisation approach for each Hub.

Topic 2: How quickly can you adapt to the data management and privacy approach for each Hub? Or for each country?
As I mentioned earlier, splitting Asia Pacific into the six Hubs can help shape commercial strategies. Data management and privacy is one of the key differences between these regions. For example, data in China must stay in China. As a result, Alibaba and PingAn have developed cloud businesses as alternatives to AWS.
There are also questions on how to deal with consumer privacy and data. Europe is still the strictest region in the world with their approach to GDPR. This topic will likely require a country-by-country approach.
My final point on data is to explore opportunities to tap into government-sponsored data Sandbox programmes. These allow startups to experiment with local data in order to iterate and perfect a data management approach, which suits the needs of consumers, corporate partners, government, and the startup itself.

And last, you’ve recently published your debut fiction novel Comatose. What’s the link between Health Tech, lucid dreams, and your book?

Comatose is a fiction novel about lucid dreaming, which is when you not only know you are dreaming, but you control yourself in the dream. I’m a lucid dreamer, and it’s also how I wrote the book. I dreamt the end, overall plot, characters, and key scenes.
While the story is an exciting globe-trotting thriller that explains why we dream, it’s also a way for me to talk about the future of Health Tech. In the story, I integrated my views to describe the hospital of the future which includes how Artificial Intelligence, holograms, robotics, and smart devices can be used in patient management.
My research into the book and subsequent conversations with sleep, dream, and coma experts have made me realise how early we are in understanding these three areas. It’s like the knowledge we had about space travel in the 1950’s – we know some basics, but have lots of unanswered questions. As a result, I’m excited to play an active role in sleep science as a 4^th area of focus for me.

We managed to cover quite a lot! Thanks so much for your insights and time.

If you’d like to learn more about Tony, please visit his website at www.tonyestrella.com. You can also find his book in UK bookstores at Waterstones and Foyles, or on Amazon globally.

2 days of conference activities to dive into guiding themes inspired to healthcare trends and innovation topics: Breakthrough Innovations, Scientific and Medical Validation, Reimbursement and Business Models, Strategic Partnerships, Digital Therapies, Design for Health Transformation, Funding, M&A, path to value, Health Insurance Innovation.

2017 in numbers

500 delegates, 30 countries, 74 presentations, 130 startups and over 70 investors.

Book your seat and join the conversation!

After conducting numerous more due diligence projects, a clear pattern emerged. Outstanding companies are defined by purpose – one that is fostered and communicated by the founders or the management team. I realised that a company that is driven by such purpose can access and use energy, enthusiasm and dynamics that other companies often find themselves lacking.

With our first notable digital health exit in Europe, I have come to believe that our ecosystem is becoming more stable and professional. Further, it is also good to see that more serial entrepreneurs and professional investors are joining the digital health scene.

Four years ago, when I joined a Venture Capital Fund that specialised in digital health as a Partner, I saw over 3,000 relevant companies in Europe. Back then, the European digital health scene was romantic and in its baby shoes. It was mainly filled with doctors who wanted to start their own company, or self-affected patients that wanted to build a service around their own problem. Very few of them had the experience of building up tech companies and positioning a company within the money streams of the healthcare system.

Watching the eco system develop in Europe I noted that the first companies that went bankrupt were the ones that mainly saw building up a healthcare company as solving a technological challenge, not a business challenge where you need to align yourself with the existing interests within the healthcare system. On the other hand, there were very few VCs and investors that wanted to touch digital health startups. Digital health startups were seen as too risky, very static and undynamic.

This attitude has changed since digital health companies in the US have begun producing trade sales and IPOs. In Berlin alone, we currently have 4 Venture Capital Funds and 2 company builders who raise funds for digital heath investments. Founders and investors of today’s startups are professionalising growth channels and B2B relations. Looking at companies that have successfully surpassed the Series A stage, it is notable that most of them are about digital access to doctors (KRY, Doctolib, DocPlanner, Min Doktor, Babylon Health, Push Doctor, Infermedica), consumerism (MEDIGO, mimi, Natural Cycles, Clue), health data (Symptoma, AdaHealth) or monitoring (dacadoo, Kaia Health). I am very happy for these entrepreneurial teams and expect them to find their strategic niche within the (digital) healthcare chain along the way.

Despite the professional approach of these growth companies, one of the major trends I have seen with digital health founders is that they focus solely on the patient benefits and neglect the business figures behind their purpose. They believe that being close to the end consumer and serving their needs will align stakeholders behind them and disrupt healthcare. Growth companies in digital health have to better-understand how to embed their value proposition towards the end customers within the existing healthcare stakeholder system too. Understanding the goals, KPIs and money streams of healthcare stakeholders is crucial for growth companies. In the digital health space of the future, competition will not take place between companies, but between alliances who have a connected value proposition.

As corporate growth investors, we have to look deeper into the financial substance of the companies. During our due diligence process, we have to assess if the company can establish itself long-term within the healthcare system. Having been an early stage VC, I understand that my colleagues need to focus more on the future potential and, more importantly, the next round’s valuation. Unfortunately, looking at a lot of Series A companies I have come to the conclusion that being purpose-only, or saying how many lives will be saved through the product/service, is not enough.

During growth, investing smart money is good, but what is more important for post-Series B investments is access. Scaling in healthcare is different to most other industries. Access to customers, stakeholders and, most importantly, data is key. This element to success can be provided by deep partnerships built on mutual trust and alignment of incentives. Corporate investments are a highly effective tool for cementing partnerships between key players in the healthcare system and innovative startups. When strategic priorities are aligned, such corporates provide access to a range of stakeholders that startups would otherwise have trouble reaching.

In contrast to the holy grail of MedTech, being non-invasive blood sugar monitoring, I believe that in digital health the holy grail lies with algorithms. For instance, startups like Predemtec are using their data for early detection of dementia patients. Detecting and predicting the onset of dementia or Alzheimer patients is crucial. Proactive treatment can transform the lives of patients, and the collection of data can further our research and work towards curing the disease, instead of just reactively treating or managing it. As for what is probably biggest blindspot in medicine, Symptoma has raised the bar for this field, providing the first and only viable deep-data solution. Their search algorithms analyse millions of medical publications and empower doctors to diagnose even rare diseases, based on symptoms, age and sex.

Last month, at a digital health startup competition, there were more investors and corporates in the room than startups. Hopefully this new ratio will push digital health founders to not only pitch the purpose of their offering, but also show a financial business opportunity. Nevertheless, it will be interesting to see how investors want to differentiate to attract good deals. At the moment, competition among VCs favours digital health entrepreneurs. Therefore we, as VCs, need to re-evaluate our value proposition as well, so that we can participate on the best deals. Watching the ecosystem develop over the past 5 years, digital health is one of the greatest opportunities available to combine making a meaningful impact with personal economic goals. The opportunities are there for those who understand that purpose alone is not enough – that financial opportunities are one of the key drivers that attract the capital injections needed to undertake the company’s purpose.