Health Innovators
Health Innovators

Episode · 2 years ago

Commercializing in a Noisy, Regulated Marketplace w/Lisa Suennen

ABOUT THIS EPISODE

The digital health movement has spawned so many solutions, which makes the process of innovating in the space more chaotic than ever before. How do we rise above the noise to create awareness and demand for our innovations? How do we make ourselves more appealing to venture capital? What are the biggest healthcare myths innovators should stop buying into?

On this episode, healthcare industry consultant, and venture capital partner, Lisa Suennen shares on how innovators can overcome or work around the challenges that come with commercialization. 

 

3 Things We Learned 

 

Regulation and information are a huge barrier to successful commercialization

There’s an imperfect marketplace and a disequilibrium in the sharing of information in healthcare. The patient has no information, the providers have less than they need, and the payers have the wrong kind. Additionally, healthcare is heavily regulated, and regulatory expertise, which many innovators don’t have, is critical. 

 

Focus on numbers to appeal to VCs 

Venture capitalists would be more willing to invest in people who really know their numbers. It’s less about telling them a story about the innovation, and more about showing its financial viability. But don’t jump into venture capital too quickly. If we get too far ahead with raising money but we haven’t done enough to validate our concept, we will waste money and give up ownership too early.  

 

Understand how compensation works in healthcare

One of the biggest mistakes innovators make is not appreciating how payment moves through the system, and how many hands an innovation passes before it gets to the patient. Going direct-to-consumer is almost impossible. It’s hard to get a patient to pay out-of-pocket for something they expect to be covered by insurance. 




There is a noise in healthcare right now, and while there are opportunities for big companies to work with, invest in and partner with innovators, there’s also more chaos. If innovators want to succeed, it’s important to understand how the system is set up. Financially, the incentives of the various players are not aligned in healthcare. Patients, providers and payers are financially at odds. On the regulatory side, innovators have to become knowledgeable about the rules that govern innovation, and buying cycles are long so we need to be patient. To succeed we have to be clear on who is going to pay for our innovation and why. We have to come into healthcare innovation with the mindset of a coalition builder, because it’s impossible to succeed going in it alone. 

Welcome to Coiq and first of itskind video program about health innovators, early adoptors and influencers and their stories aboutwriting the roller coaster of healthcare innovation. I'm your host, Dr Roxy,founder of Legacy DNA marketing group, and it's time to raise our COIQ.Welcome back to the show coiq listeners. On today's episode I have a fantasticguest with us, Lisa soon in, and she is a woman of manytalents, many titles, many awards, and so I'm going to actually hurther introduction would probably be the entire show. So I'm going to actually just handthis over to her and tell us a little bit about her background andwhat she's doing these days kind of shop some of these highlights with us.Well. Thank you, hied, to be here today. So what Ido now is I the the digital technology group in the Venture Fund for Manatt, Phelps and Phillips, which is a large integrated pressonal services firm in theUS cross country. Spend a lot time foousing on healthcare, on financial servicesand digital entertainment, digital media. As a firm, and although I personallyam more of a healthcare person, daytoday really for the last twenty years II've been mostly of venture capitalist. I also, and I teach venture capitalat Berkeley and before that, an entrepreneur. I've had my entrepreneurial activities along theway as well, but I helped build a large behavioral healthcare company backin the s. So I'm am delighted to be here. I have apodcast as well, called techonic. So I love doing the payback lest right, right, exactly. So, so just describe, because you've been inhealthcare innovation for so long, that describe how you've seen it changed over thelast the decades. That just sounded like I'm so old. You know.It's interesting. I think there was a time where we just didn't call itthat. You know, now it's so popular to say innovation, Innovation,and you know, as if it's some new thing. Will obviously innovation itselfis something, but the concept of coming up with new ideas and starting newcompanies and finding solutions, you know, as old as time and now Ithink there's a an emphasis on it as almost like a discipline, and ofthat it's the natural and appropriate state of any good leadership to find new waysto do things, which is it makes bleck thing. To be honest.There's also just a huge amount of energy at very large corporations to figure outhow to innovate. I think ever since Clay Christiansen published the innovator's prescriptions,yeah, everybody's been worried that they will, you know, go the way ofblockbuster and unfortunately, I mean you know, often God it's out tobe true. It's very hard to innovate from the band that large organizations.So there's a lot of energy now that there didn't used to be, Ithink, on big companies working with, investing in partnering with Small Companies tofill that gap. That's also, I think, a big change. Yep, so how would you describe it today? I describe it as like this crazyroller coaster. How would you describe it if by it you mean sortof the innovation ecosystem? Yes, it's really the whole in it like tryingto commercialize an innovation, whether you are an entrepreneur in a startup or whetheryou one of these big, vehemous companies that are trying to innovate within youknow, I'm not sure it's any harder...

...now that it ever was. Ithink there's just a lot more people trying to do it. You know,I think particularly over the last ten years, as digital health has become more andmore of a area of focus in its own right. You know,there's been something like forty billion dollars of venture investment in digital health. Youknow, the intersection of health care of one type or other end technology.There's just been a lot of chaos, I think. And you know,unlike in biotech or traditional medical devices, it's a lot easier to a certainextent, to start these companies, and so there's a lot more of them, and so there does, I think, and and it spawned, you know, the whole digital health movement, spawned all of these accelerators and incubatorsand a whole world of other people around this marketplace, and I think itdoes feel chaotic and I think there's, you know, not just one typeof, you know, solution for this or that or two, but forty, you know. So it's harder to tell, I think, what's goingto work. When you're talking about health tech. They you know, byand large, biotechnic forma are also becoming part of the chaos because we're startingto apply technology like ai and the like to discovery, clinic trouts. Soit's all, you know, sort of going faster and fast. M Ihave to be particularly discerning now, not that you didn't always have to bediscerning, but an even more amplified level of scrutiny has to be put on, you know, your efforts, your strategies, your companies, to whenyou're trying to change things, because there's so much noise. Yeah, yeah, absolutely so. Why do you think that it is particularly complex or difficultto commercialize and innovation in healthcare as opposed to other industries? Can I justwrote an article about this. It's on my my blog. It's called VentureValkyrie. It's called I don't remember the exact tyle, but it's about bythirteen rules for healthcare entrepreneurs and the the reasons that's hard in healthcare are aeconomics, the the incentive, the financial incentives of the various players are notat all aligned. And healthcare, you know, patients and providers and payersoften times are financially at odds with each other. There's a there's a dissequilibreeam around the sharing of information in the patient often has none and the providersoften have less than they need and the payers have the wrong kind. It'sreally terrible. So there's an imperfect a market place of information. There's massivenumbers of regulations. So I talked with a company yesterday and, you know, they've sort of back their way into a lot of regulatory areas that didn'teven realize having expertise, regulatory expertise, is essential for most companies, evensoftware company sometimes, and they just simply do not understand that. And italso the buying cycles are very, very long, very long. Yeah,yeah, a lot of company these you know that I come across, endup in the Zaza, what I call the Zombie graveyard, before they actuallystart generating any type of sales because they are just often not funded and notplanning, especially if they've not been in healthcare before and they're coming for otherIndi Industries and they see this explosion of growth and let me go in thereand get my pass high really quick, and it's like rude awakening. Nothinghappened quickly in health you know. No. No. So, as you've workedas a venture capitalist or been an entrepreneur yourself, you know why.Do you think some innovations succeed and some...

...fail? What are some of thosekey ingredients or key factors. Well, the related to really to what Ijust said. I mean a you really have to have a deep understanding ofWHO's going to pay and why they're going to pay, what their incentives areparticipate with your product. Is it going to increase their revenue or decrease theirrevenue? Is it going to help them get a better financial otcome or not? Honestly, unfortunately, that is the number one driver, I think,of most healthcare adoption. So obviously you have to have the clinical side ofthat to you certainly need to appreciate how payment moves through the system, mm, because a lot of people touch things and you know, I think abouthow a specialty drug gets to a person with a you know, with acomplex disease. You know there's four or five, six, ten touches onthat before it gets to the patient. I think you have to have apretty remarkable ability to be flexible and think about regulatory issues and design your productto fit within what is a very complex, very complex world of you willing toaccept help to do that if you're not a lawyer, which most nentreursare not, or regulatory lawyer anyway, and I think, you know,think we've got no really depending on venture capital. I think people go totoo quickly for that kind of yeah, my Flore that a little bit becauseI will be interested in that. You know, I think you have to. You know, one of those things that drives me absolutely nuts is whenI see companies who have things for that are ultimately going to touch a patient. It's just a for instance, Yep, and they haven't gone out, notto any patients. I mean they haven't done any user centered design explorationat all and they are just assuming because their grandmother had some particular problem thanthey observed it, that they've got the solution for the entire marketplace. Yea, all the time. Starts be crazy. So I think, you know,people need to spend a bunch of time way up front on understanding whatpeople really want. The product market fit things that people call it and now, but really just, you know, will the dogs that your dog food? Yeah, and unless you need lots of money to design that dog foodbecause it's a drug for instancing, you'd go to be FDA with it.Try and bootstrap it for a little while, you know, really try to geta clarity of thought about who will pay, why and what it isyou are exactly selling and how long it's going to take to sell and howlong it's going they take to get paid and whether you need to call allthe things that you can think about without raising twenty five million dollars. Yeah, and I really you know, I think people have come to it tooearly a lot of times, to large amounts of money, to get caughtup in this funny valuation game and when they find themselves in your Zombie grayer. Yeah, yeah, I was going to ask you so, like why? Why is that important? You know? What's the consequence of going to venturecapital too early? Well, I mean here's the worst case scenarios.Yep, you know the word. I mean sometimes you know it works out, but the consequences are you use up a lot of money early and thenyou need a lot more but you haven't got enough to show for yourself thatallows you to raise that. Yep. That May, first of all,result you're not being able to raise it and secondly, may result you beingable to raise it, but at a lower valuation than last time, becausenow you're not selling a dream, you're selling some more reality and it's measurableagainst the dream. Yep, and that is always difficult to enter into kindof a down around situation and it happens all the time, but it's nota pleasant experience for anybody. Sure you know. I think the other thingis what I said earlier. As you...

...get too far out of yourself withmoney and haven't enough work to validate your concept, it's just waste money.You just waste money and wasting that money, you've also given away ownership of yourcompany early, you know. So you don't want to end up havingany give away so much of your company because you need to read so muchmore money that you have, you know, effectively no real say or control andhow it operates. So, I mean we vent your puppalists or not. We're not super fun to hang out with. You know, a lotof it for I mean well, obviously want management seems to run their companies, not to run their companies. But sure you know it takes takes alot of patience, you know, to watch these companies grow. When theygo sideways really early, it's really tough. Yeah, yeah, so you knowin your experience what is the optimal scenario, right as a venture capitalist, what is kind of like if you had your dream of the innovator walkingin the door, what would they look like? I'm not sure there's ananswer to that question because there's so much variation fading on what part of Healthcarryer in and what problem you're trying to solve. I mean, if it'san administrative product, it's totally different than if it's a clinical product. Ifit's a pet price is totally different than it's the drug that has been software. There's just so but what I could say? I can give you acouple basic rules of helf. Okay, when you walk in an entrepreneur,you should be really savvy about your numbers and what you think they're going tobe. You may not be totally right, but you should have its sense ofit. You should be savvy about your market place. Know the numbers, you know the market opportunity and just because you have a women's health productdoesn't mean fifty one percent of the population is eligible to use it. Youneed to be clear and what you who? You're real customer basis. Yeah,yeah, if you're good to have a diverse management team. Diverse managementteams make more money and while most management teams are not diverse, people arebeginning to think about that in a more realistic way. Absolutely, yeah,more and more content being produced and getting that message out. HMM. ButI think, Holfu, you need to be really thoughtful about how to spendmoney. No, you have to be telling the story of using the moneyin a very judicious way. Clear uses of capital, what it's going tocost to do things. Know How that's going to get spent and what you'regoing to get for it filestone wise, because that's what investors really don't understand. You know, what is it that they're buying in terms of progress?Many are welcome, you know, many investors are happy and doing seed inearly, early stage things. There's a lot of investors that are fine withthat, but they're going to want to see, at the end of theeighteen months of money, that you actually achieve the milesons you said. You'reRouchi. Yeah, yeah, and I think some of the things that you'retalking about are not necessarily rocket science, but but we still need to bewe still need to talk about them and remind folks of some of the basicssometimes, because sometimes we get so enamored with it that we kind of forgetthe basics. Yeah, yeah, I know, I see way too manyentreneurs that are very excited about their technology, but they really forgot some like lookup and say who's going to buy it, which is such a shame. Yeah, yeah, it really is. Say So. That kind of tiesto this question that I wanted to ask you. Is, you know, in your experience, what are some of the myths or false beliefs thatyou think health innovators have? HMM, it's a good question. I thinkthere's a false belief that consumers will pay for things out of pocket that insurancenormally cover. Hmmm, I often hear companies saying that, well, wedon't want to go to insurance companies to pay for it because takes too long, so we'll go direct consumer. Very tough, I mean unless you're sellingsmakes more aligned with the beauty market or...

...self help but not really medical innature, it's almost impossible to do. Yeah, I think consumers just expectit to be covered. They don't expect to pay out of pocket. Imean, what's your take on that? If it's something that would normally becovered by insurance, I think that's correct. You know, I think you mightbe able to find a few people who are willing to pay for something. You know what, once you've gotten out of, you know, NewYork City, Boston, San Francisco, you know, it's gets harder andharder. Yeah, I think you know. Another myth is that you know,if you build it, they will come. Right, if you buildsomething that actually improves surgery or, you know, producing a better clinical outcome, that everybody will want it. Well, that's not always true, unfortunately.Yeah, if it improves that come but reduces somebody's income by considerable amount, they may not want it, they may not pay for it and it'sno worth understanding. Again, back to the economic dynamics. How what youhave to deliver and exchange for the reduction and revenue that makes it worth it. You know, follow the money is sort of the most important mantra andyou know, again it's very important, but it is true. Yeah,other myths, Oh, my personal favorite check people could come in and changehealthcare of the way we always helped her people screwed it up so badly throughthat. People coming from the tech world can do things and think about thingsdifferently and freshly in a way that we do not from healthcare side, nodoubt about it, but not understanding how the healthcare system works, how buddyflows, how regulations work out. All of that is your downfall. Soyou really need both. You need you need to bring smart people from bothsides of the world along with you, or you will not probably be successful. HMM. Yeah, any other mrcross police before we move on? I'msure there's feel like I feel like you have this soap box of stuff.I do. Yeah, all these pet peas that you encounter and you're likeyeah, true, yeah, you know. I think another thing is when youwhen you meet with enter capitalists, I think a lot of people feellike they have to tell the most fantastical story in the world. MMM,and I don't think that's correct. I mean if you get so fantastical thatit's hard to believe, yeah, you've crossed the line, you know,and putting financial projections, not a piece of paper, that look like they'regoing to go from zero to a hundred million and five years, which isthe standard thing. I think people must brings out the Internet. It's veryrare, almost impossible, for that's happened. And so, you know, berealistic, I mean optimistic, but realistic, about what you have,what you know, what you can do, what you would choose. Yes,you have to tell a great story and build a vision of why thiscan be a great company and pretty great returns. Absolutely true. Yeah,but if you get so far ahead of yourself and you know, to thepoint where you've lost credibility, you're not going to help yourself. You're sure. So, as you kind of indicated the beginning of the conversation, there'sthis explosion of healthcare innovation right, more players in the mix and the ecosystemthan it seems like ever before. How, how does a health innovator rise abovethe noise? Right? So you think about these buyers of healthcare innovation, bless you, especially in the you know the B Tob World. Youknow that have people knocking on their doors all day, every day. Sohow do you rise above the noise to create that awareness and that demand?Yeah, it's getting harder and harder, I think. I mean, Ithink again, you have to come in with a clear understanding of the problemthe person you're meeting with is likely facing.

Yet a clear understanding and ability todescribe how you're going to solve it within the context of their environment,what evidentiary based results you're going to provide them. You know what are yougoing to save them? What you're going to create new for them businesswise,solving a workflow problem, whatever, really the clear benefits and a way toprove it. If you haven't done an have to prove it yet, away to prove it with them in a willingness to be open about it andstrike deals with people that allow that evidence to be created. So I thinkthere's a much you know, I think this rise of companies has resulted,appropriately and a rise of skepticism that is abated only by Truf you know,value based proof and coming with proof or coming with a plan to get itis really, really important and being open to that. So about that alittle bit. You know, there's a lot of talk in the industry aboutpilots. You know, and I think you and I talked early on about, you know, pilot purgatory and death by pilot and you know, proofof concept engagements. And then, you know, we've had some conversations aroundpeer reviewed studies. You know, how far does an innovator need to goin order to actually build that value brase proof? Do I need one pilot? Do what? Do I need a specific size of pilot? Do Ineed it to be a, you know, more rigorous peer reviewed study, becausethere's less credibility around pilot, you know, data and structure. Whatdo you think I get? I don't know that there's a heart of factanswer and I think it spends on the industry or in yeah, part thepart of this. But you know, and I laughed, whatever right I'vegotten in my head now, whenever people talk about pilots, I think abouthow you want to be Charles Lindberg, not Amelia are art, but yeah, I do. I think. I think the important thing with pilots isthat a that the customer beliefs is worth paying for the pilot. HMM,they believe there's something of, you know, enough value potential here that they payfor some of it. I think you have to be willing to publishwhat comes out of it, no matter how good are bad it is.I think you have to do some early pilots that are just tests with friendlyfolk without, you know, pretending that's revenue. Yeah, I think youhave to, when you're in a real paid pilot, have a contract thatsays if I meet these particular milestones, I actually get there. The contractfor how you're going to turn this into a commercial agreement is already written.Yep, agree. So, I mean those are those are pieces of thepuzzle. But I mean you and you have to commit as an organization tostudying and testing. I mean you have to do the clinical trial or theyou know, the financial study or whatever it might be. To have todo it. It's you can't shortcut around it or you will ultimately regret thatdecision. Have you encountered? You know. So sometimes I hear this conversation of, you know, the health innovator. I went to this health system.They were interested in my pilot, you know, they they didn't wantto pay for it or that if they were going to have to commit tosomething in the more long term, then there almost becomes like some skin inthe game because the the health system is saying like, I'm not going to, you know, invest all this time and effort into helping you actually likebuild and grow your product in Your Business for free, otherwise I'll do thatmyself. Do you see that as well? I do. I do. Isee often times that the companies who are the pilot site, you know, would like some of equity if, you know, the pilot goes well, I think of the earliest days. That's fine and appropriate to a certainextent, but if you're doing a couple of those, that should be it. Right, right, right. Well, don't really commercial. You know,if you're at number ten, pilot,...

...where you're giving away equity, you'redoing something incorrect, most likely. Right, yeah, you don't wantto find yourself. You get a piece of my company. You get apiece of my company. You get a piece of my company, you geta piece of my company. Otherwise, somethings. By point you should havecreated enough value that people will pay pay you for it. Right, right, YEP, exactly, one hundred percent. So what what would be some advicethat you would have to our listeners that are in the trenches right now? So we've got a mix. So there's folks that are innovators, thatare immerged, you know, emergent startups, and then we've coome folks that areinnovating internally as well. With you. There aren't organization. So what aresome of the advice and guidance that you have for them? Well,I would look, you know, I actually would go look at the articleI wrote about this a couple weeks ago. Yeah, I think those are goodguidelines for Compani as that I've seen so many thousands of companies. Ifeel like those are pretty good rules. I think you have to be patient, especially in large organizations. You have to be a coalition builder. It'svery hard to change practices and large organizations it's very hard. You have tospend more time getting the buy in than you do building the product. Soyeah, you have to be willing to fight that fight and you probably alsoneed to be separated out from the main organization. To a certain extents youhave the freedom to break the rules for young innovators. You know our youngcompany entrepreneurs. You know also that you patient with yourself. It takes along, long time. This is not an industry where you start a companyand selting three years. I mean occasionally it happens, but extraordinarily rare.More of a more vuncher back companies and healthcare take ten or twelve years toexit. Then, you know then less than five. So by a longshot. And I think you have to be in it, you know,for the long game and not start your company thinking about exit. That isa mistake. You need to start your company thinking about solving problems and provingthat you solve problems and really nurturing that opportunity until you've got it down.Awesome. Well, thank you so much for sharing your wisdom today. Sowe're how can people best get ahold of you and where can they find thatarticle that you referred to? The article is on my blog at venture valpyriecom. It is just a couple weeks old, so it's pretty easily found and ifyou go there, just to a search for thirteen rules, you'll findit. That's also how you reach me. You can find me through the blog. It's re Linkedin. Okay, all right, excellent. So thankyou so much for being on the show today. Thank you so much.I really appreciate the opportunity. What's the difference between launching and commercializing a healthcarein avation? Many people will launch a new product, few will commercialize it. To learn the difference between launch and commercialization and to watch past episodes ofthe show, head to our video show page at Dr Roxycom. Thanks somuch for watching and listening to the show. You can subscribe to the latest episodeson your favorite podcast APP like apple podcasts and spotify, or subscribe tothe video episodes on our youtube channel. No matter the platform, just searchcoiq with Dr Roxy. Until next time, LET'S RAISE OUR COIQ.

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