As digital health comes into the spotlight, established healthcare players are looking to enter the space by partnering with startups and building or buying new technologies.
While digital health companies have been around for decades, industry maturation and COVID-19 have led to wide-scale adoption, Michelle Snyder, a partner at McKesson Ventures, said during a ViVE panel this week.
“If we want to keep up, and we want to be competitive, we probably can’t build all this ourselves, and look to do more partnerships,” Snyder said about larger businesses.
When it comes to partnerships, it’s important to know the market pain points and develop tools around industry needs.
“Hashed is a venture studio, which means we have a process by which we build new startups, and we often do that in partnerships with enterprises,” John Bass, founder and CEO of Hashed Health, said during the panel.
“We have a very specific … set of steps that we take through an iterative intentional discovery and delivery process. So it’s all designed to find product market fit before we waste a lot of time and money spinning out a company or really building anything.
“We want to fail as early in that process as possible. So we try to bring resources, and expertise, and partnerships to that process, so that by the time we build something and we spin out a new company, it has customers.”
While buying and partnering can have similarities, partnering may come with more onus on both parties.
“Buying can be a full-on business acquisition … but I think of it sometimes as a vendor relationship, because it doesn’t really involve what I think of as partnership, which is where there’s a shared risk in the outcome, the ups and the downs, full-on risk,” Aimee Quirk, CEO of Ochsner Ventures at Ochsner Health, said during the panel. “A lot of times that involves codevelopment, sitting down thinking about it from soup to nuts, starting with the ideation and doing that together with a partner. Then going to the validation, the utilization, and bringing in expertise you may or may not have, the product market fit … So partnership has lots of different flavors.”
Meanwhile, buying can indicate a company’s dedication to integrating a tool.
“When we are talking strategically about buying, and certainly within our portfolio, when we think about folks approaching that acquisition process or buying, there is usually a fairly long path of relationship development. But in that case, we are talking about potentially acquiring a business into a larger organization,” Liz Rockett, managing director at Kaiser Permanente Ventures, said during the panel.
“I know for some, how the organization thinks about it is buying and taking on a vendor relationship and more traditional commercial relationship. In the context of how we think of it, if we’re talking about a buying process, we are thinking about, ‘Is this an area that’s so important to us that we may not believe that we want to build it ourselves?’
“But we do want it to become part of the core of what we are offering. So we want to buy a company and pull it fully into the whole.”
Whether it is buying, building or partnering, companies need to be clear about the desired outcome for every stakeholder from the get-go, said panelists.
“Any sort of relationship and partnership relies on trust. Trust is built over time. A lot of times you can see that come through in transparency, transparency of communication. That is so important. If someone says I can deliver this, they deliver it, and if they can’t, they explain why it makes sense. …
“[Y]ou also want to be clear on the give-get. What am I going to give? What am I going to get? And what is the partner going to give? And what is the partner going to get? Both of those things almost need to be written down on a piece of paper. … Because everybody should be really clear what’s in it for me and what’s in it for you. There has to be something in it for us both.”
Bass said that when he is working with startups, he advises them to solve the issues that organizations can solve on their own and build trusting relationships.
“We dabble in these emerging technologies … And what we learned is you’ve got to go after these hair-on-fire problems, and we focus on stuff that people can’t solve by themselves, credentialing, supply chain,” Bass said.
“Healthcare is a team sport and there are really big problems out there that are driving the cost of care that we have really struggled to figure out. Something about COVID is now kind of opening the window towards these more collaborative partnerships. …
“There are so many amazing opportunities, but it’s all about trust, transparency and incentive alignment.”