MobCon DH 2015 - Matt Otterstatter - the value of experience in healthcare it startups

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The Value of Experience in Healthcare IT Startups

Matt Otterstatter, Partner, Vilicus Ventures


Rochester, MN

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Rochester, MN

3


Experience as a Prerequisite to Raise Venture Capital

4

“If you have good experience then

the VC will be leaning forward for

the rest of the presentation.”

- Mark Suster

25 Reasons I Will Not Invest in Your Startup

(#3. You have an inexperienced team)“Ask any venture capitalist, and

they will tell you that they consider

the experience of the founding

team to be a more important factor

in their investment decision than

the technology that is being built.”

- Vivek WadhwaExperience taught me a few things.

You're generally better off sticking

with what you know.

- Donald Trump“There is no substitute for direct

experience.”

- Tim Westergren

CONFIDENTIAL © MobCon Digital Health. All rights reserved.5

Ewing Marion Kauffman


The Data Set

Looked at Healthcare exits from 2005-2012

Exit defined as >$50M acquisition or market

cap at IPO

Focused on Digital Health (ignored pharma,

biotech, and medical devices)

50 companies were on that list

14 responded for interviews (28% response

rate is actually quite good)


The Interview Questions

How many years of professional experience did you have prior to your

startup?

How many of those years were in the fields of healthcare, biotechnology,

or life sciences?

Did you find the inspiration while working in the healthcare industry, or

were you on the outside looking in at a problem?

Was this your first experience with a startup?

How many times were you told no by investors before receiving funding?

How many major pivots did you go through until you got the traction you

needed?

What percent of the company's customers did you personally acquire, as

opposed to a hired sales force?



Statistical Confidence

How reliable is 14 samples

(28% of 50 data points)?

In landslide elections, states

can be called after less than

1% of precincts reporting!


Statistical Confidence

Thinking of having prior healthcare

experience as a “yes/no” question;

71% (10/14) had no experience

Consider the actual population to

be a binomial distribution (binary

variable)

Predict upper and lower bounds of

actual population based on a

desired confidence level & number

of samples


The Interview Answers


startup?


or life sciences?






needed?






startup?


or life sciences?






needed?






startup?


or life sciences?






needed?






startup?


or life sciences?






needed?






startup?


or life sciences?






needed?



100%• Had early customers

• Figured out a viable

revenue model

• Founders themselves

acquired all early

customers


Airplane story

Abraham Wald

Mein Flugzeug

ist kaputt!


Airplane story application

Airplane = startup company

Bullet hole = shortcoming of the ideal investment (ie a flaw

in operations, strategy, management, etc)

Plane that comes home = successful exit

Plane that crashes and burns….obvious

Adding armor = applying resources and due diligence to a

particular area – the data challenges investor behavior

Not having healthcare experience is an easily

survivable bullet hole

Not having startup experience is more serious

Not having a clear revenue model is fatal


….speaking of fatal airplane crashes

Preventable medical errors kill an

equivalent number of people every

day as two fully loaded 747s.


Possible Explanations of Experience Paradox

“The problems that exist in the world today cannot be solved by the level of thinking that created them.”- Albert Einstein

Healthcare Experience as a Possible Liability


Possible Explanations of Experience Paradox

“The secret to creativity is knowing how to hide your sources.”- Albert Einstein

Alternative Experience as an Asset


Implications

Digital Health is exploding in popularity and a little

guidance now to the nascent industry based on

empirical data could go a long way

To healthcare investors, don’t rule out entrepreneurs from

outside the industry. Startup experience is more important

than healthcare experience.

To traditional healthcare companies seeking innovation,

consider finding people with an outside perspective

To entrepreneurs, consider healthcare as a whitespace that

is ripe for disruption (just make sure you figure out the

revenue model)


Questions?


If Time Permits……

Topics for further discussion about Minnesota/Twin

Cities entrepreneurial ecosystem:

Cultural Strengths/Weaknesses

Fundraising Climate

Entrepreneurial Education

Corporate Involvement

Diversity

Others?

Date post:	17-Jul-2015
Category:	Healthcare
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