[Viewpoint] Five laws of financing for medical and health companies

As the current medical environment is becoming more complex and changing, emerging medical health technology companies eager to obtain funding have invested in olive branches as private equity investors. Although there are a lot of interesting new products and services emerging, we must also do our part to ensure that the companies we work with are truly suitable for ourselves. I am often asked: "When you decide whether to invest in a health care company, what is the basic quality that you value most?" The answer is not simple, because there are many factors involved. However, for companies seeking joint ventures, the following five golden rules are available.

Understand the market

This seems to be very obvious to most entrepreneurs, but its importance cannot be overemphasized. From the inside out, thoroughly understand the market you want to enter and find out who will be the buyer of your product or service. We know that there are different players who make up the health ecosystem, for example, are you targeting patients, medical providers or health insurance companies? Your customer base plays a key role in what you can do and how to capture your audience. It is important to ensure that there is a targeted, value-accurate positioning. In addition, identify your competitors, have the ability to show why your products or services are stronger than them, the key differences in what you offer, and what are the barriers to competition. If you can't do this, most private equity firms will miss you.

Have a disruptive business model

Far-reaching medical health technology companies generally have innovative business models that completely subvert their target markets. Companies that create value by providing economical, simple solutions to complex problems are the most attractive. Equally important in the healthcare arena is the alignment of these solutions with the workflow of users such as clinicians. Investors always want to increase gross margins while lowering unit prices. This approach often requires creative use of technology and human capital, a business model that is sustainable in today's ever-changing healthcare environment.

Ability to clearly demonstrate your business model

When you see an investor, you have the ability to clearly demonstrate your business model - the so-called "elevator lobbying" is crucial. Investors have heard of numerous business lobbying by medical technology companies and are not interested in plans that are too complex and difficult to understand. We want to understand how your business model works in as simple and straightforward as possible, how big your target market is, and what success you rely on. Describe your vision and planning clearly. Finally, investors must be fully convinced that you have all the elements you need to succeed in a competitive market. Form a strong management team

A strong management team is critical to success, so most private equity investors will consider the ability to fully assess the management team as a top priority before investing in an organization. Investors must be absolutely certain that the management team is fully capable and ready to accept the investment and the resulting responsibilities. The most efficient leaders will have some of the necessary visible qualities, such as relevant educational background and experience, as well as some invisible qualities such as leadership skills, loyalty and professional ethics, which will determine whether the management team is efficient. In addition, management teams or boards with real-world experience in the target market are always mentioned. For example, a computer programmer is an expert in establishing machine learning algorithms that reduce readmission rates, but does not have the first-hand experience of a former chief medical officer. Experts in the field of health care are the key to success in the market, and investors are favored by those management teams that have worked together before and are effective.

Prove success

Finally, for investors, nothing is more convincing than the return on investment. Companies with a provable customer base show late-stage income, and having a substantial interest-free interest is even more enticing. These results show investors that the company has a business model that can be successfully and sustainably developed, which in turn will greatly reduce the risks investors can bear.

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