It’s a long road to commercialization
Since the healthcare industry is so heavily regulated, healthcare startups may require significant peer reviews, independent testing and clinical trials of products, technology and services before reaching capitalization.
In the medical device industry for example, it takes a new product an average of 7.5 years to reach an M&A deal when investors can really see a profit.
The investor’s left brain
Investors are looking for ROI above all. Data is critical. Healthcare startups typically allocate a lot of time and resources for research into market, competition, pricing, operating costs and sales projections.
That’s critical, but venture capital is an emotional investment and people don’t invest solely on data — just look at the stock market. Passively indexed funds outperform managed funds 84% of the time. Why does the human brain not make smarter investment decisions than an indexed sample? The answer to this question could determine whether a startup is bought into or passed by.
The investor’s right brain
Managed funds underperform the market because we make emotional decisions about investing. Investors in a healthcare startup are passionate beings. They love a good story. They love a visionary. But startups have to make the vision shine. That’s where branding comes in.
“A brand is a voice and a product is a souvenir.”
Healthcare startups need to look, walk and talk in a way that makes their vision shine. Lisa Gansky has the right idea—perception often trumps reality. Clinicians understand this well, as they see the placebo effect consistently.
The brain of Theranos
To see how much influence branding can have on the healthcare investor, look at Theranos, the health technology company that rocked the diagnostic testing world when they claimed to have technology to run blood testing from a single drop of blood.