For entrepreneurs and innovators like you breaking into the health industry, it can be difficult to secure funding. The health industry presents unique challenges, especially for those unused to it. However, finding investors does not need to be as challenging as it looks. With quality advice, an understanding of the commercialization process, and an eye on the competition, any innovator can maximise the odds to secure the funds to develop their project.
At Health Horizon, we know of the hurdles that you’ll face when entering the field. As the creators of a platform designed to track the progress of health innovations worldwide, we are familiar with its unique difficulties, having spent six years researching it. We’ve examined why funding may be challenging to receive and have decided to answer some of the most common questions from new health entrepreneurs or researchers deciding to start their commercialization journey.
What is the funding process in the health industry like?
For health-related projects, it’s useful to treat public and private funding differently. Private funding includes all non-government funding from large pharmaceutical companies down to your friends and family. Each source of private capital is best suited for different stages of the journey.
On the public side, grants are the primary source of federal funding. The most obvious source for researchers working on early stage development is research and development funding. It has become more and more common for governments to provide commercialization grants designed exactly to help you survive the research-to-market translation step. Public funding can also appear through universities and colleges for promising projects created by those affiliated with them.
Now, regardless of the private or public nature of potential investors, you must understand the health industry’s challenges to obtain funding. On that note, it’s important that you ask yourself…
Do you need the money?
You see, when it comes to health innovations, money can be so hard to come by it’s easy to become too focused on it. It’s important to remember that funding is a means rather than an end in and of itself. Because the truth is that it won’t solve all problems (it even adds new problems).
As an entrepreneur or researcher, you need to take a hard look at the dollar value you’re looking for and question the necessity of every line item. It’s possible that a little creativity will get you out of the need to compete for the limited funds available.
As a general rule of thumb, try to ask yourself these questions:
- Do you really need the resources you are after?
- Again, do you really, really need the resources you are after?
We’re asking the questions because your innovative solution is not enough. The path to commercialization may need to be as innovative as the solution itself. You need to take the creativity it required to create your solution and channel it toward a commercialization plan that doesn’t have you blindly brute-forcing against competitors for resources.
But okay, let’s say you do need the money (and we mean here that you do really need it). If so…
- Money is usually for services and resources. Is there any other way to get these?
- Could you get the resources without money? For example, through partnerships, borrowing, favors…
- Can you generate your own money by providing services based on your technology or knowledge?
The better you achieve this, the better the odds you may save the need for tens, even hundreds of thousands of dollars. In doing so you improve the odds of finding funding and your odds of making progress because of your competitive commercialization path. You’ll also have a well-thought out, lean financial plan to impress investors because they will expect that you know exactly what you’ll spend money on and why.
What are the main challenges innovators may face when it comes to funding?
One of the major hurdles of the health industry is the amount of money required for some projects. It’s just the way it is – you may need large amounts of money, and there is not a real way to work around that. In other fields, connections and networking could provide free services. However, in some parts of the health industry, this is nearly impossible to do. Beyond that, projects need qualified, and therefore expensive facilities to be attached to validate the results. Most countries require extensive regulation to be overcome which can cost hundreds of thousands to millions of dollars. The combination of these expenses means that it is a high risk, high return proposition for funders.
Developments in health take a large amount of work. Anything designed to affect the human body requires vigorous testing and research. Most projects are highly specialized to treat a specific problem, meaning that they will not have wide-spread use. They require long development periods and thorough testing. Starting in a laboratory, then moving to animals, and ending with humans, each stage of testing is regulated and becomes more so as the trials continue.
Development can take years. For example, LASIK, the common eye-correction surgery, was first performed on a human in 1988. The United States did not approve its use until 1995. Without considering the years of trials and research that came before its first usage, LASIK’s approval took seven years. This means it’s common that investors must be willing to bet millions on a long-term investment that may not even succeed.
Because of said high likelihood of failure, the health industry is conservative. It is less willing to adapt to change and innovation because success is not guaranteed for any research project or development and failure can hurt people. Many promising projects will have negative results as their tests progress. A survey published in 2018 found that fifty-four percent of trials failed while in clinical development.
That said, this isn’t necessarily the norm in all cases. Some innovations are actually able to get into our lives without any testing at all, like digital health innovations, which have become more and more common in recent years, though there is growing interest in the regulation of digital therapeutics globally.
How does competition affect the ability to obtain funding?
Just imagine standing in front of a room full of investors, and they ask you who your ten closest competitors are. Could you answer them? If you had a Health Horizon competitive channel, you could. You’d always know who they are and every step they’ve ever taken in their entire history. Imagine how impressive it would be to be able to tell them that.
The health industry is a competitive field (for reasons described before). To stand out, you must make your projects as appealing as possible to potential investors. Expensive and complex projects are less likely to attract attention. The more complex a project becomes, the more likely it is to encounter problems.
This is why it’s so important that you are aware that your potential investors will want to know what they are financing and why. You can’t just ask for money and not be sure of what you’re going to spend it on. This is another reason why it’s critical to do the exercise described above (questioning whether you really need the money).
You must also develop a regulatory and funding strategy. Preparation for all of the challenges health developments face is vital, and thus should find an efficient method to overcome those hurdles. It is also essential to perform thorough market research on your competitors. By showing investors that you are aware of the competition, you will appear more competent and likely to succeed.
You’ll be able to achieve this by keeping track of where competitors are receiving funding from, how quickly their projects are progressing, learn of and emulate collaborations that are taking place.
You can see some of your competitors right now by going to https://thehealthhorizon.com/channel and creating a channel with a search term describing your solution. It will populate competitors for you to track from our publicly curated dataset and you can request a demo and we will do a free deep dive to find all your competitors.
Regardless of your project’s purpose, you can look at the reservations funders may have and be prepared to counter them. By demonstrating your understanding of the complex challenges of the domain, you can appear confident and competent to potential investors.
For innovators like you who are looking to break into the health industry, platforms like Health Horizon can lend you a hand. It offers data and information that may help you secure money from potential investors.