In 2021, at the height of the Great Resignation, I left a secure director-level job in “martech” (marketing technology) to join a promising healthtech startup that had recently raised $200 million. This new role checked plenty of boxes: better pay, a chance to build our content strategy from scratch, and a path to VP at a unicorn experiencing hockey-stick growth. The kicker, I convinced myself, was its mission to improve healthcare for everyone.
Less than a year later, I was laid off, along with roughly 150 coworkers.
The incident certainly hurt my pride. I felt naive for buying into the hype so willingly. At the same time, I was upset at the executive team for mismanaging the company by doing things like opening a massive new office in the middle of the pandemic. Looking back, though, what really sticks with me are the major flaws of the entire healthtech industry.
If I sound like an unhappy ex-employee, let me say this: I truly hope my old company succeeds. The mission is so important, and there are a lot of smart people there still trying to make a difference. But I’ve come out the other side somewhat pessimistic about the immediate future of healthtech. The industry was booming at the start of the pandemic. But now, many players in the space—no matter how noble their vision—are cruising toward the same mistakes that upended so many other healthtech companies.
When I started looking for a new job, a recruiter friend sounded surprised when I told her what happened. “Healthcare is usually recession-proof,” she said.
Technically, she was right. Healthcare is recession-proof to a large degree. But, as I learned the hard way, healthtech is not. And there are three major red flags holding it back.
1. Too many healthtech companies are trying to position themselves as end-to-end solutions
According to the Silicon Valley playbook, startups should focus on solving a niche problem at first, grow rapidly, and then expand into other fields. Amazon famously started out selling books before expanding to . . . everything. Uber began with ridesharing until it decided to handle deliveries of all kinds. Rinse and repeat.
In the thick of the pandemic, digital-health startups flourished. There was a dire need for innovation and a willingness among incumbents to play ball (more on this later). So, naturally, healthtech companies got ambitious. In 2020, digital-health companies raised a record $21.6 billion in funding, more than double the 2019 mark. In 2021, funding increased to over $29 billion.
The problem with this approach is, when you grow too fast, you expect that trajectory to continue forever. Many of the companies that raised huge rounds just a year or two ago under the pretense of “solving healthcare” had to announce massive layoffs this year.
Olive AI, which aimed to build the “internet of healthcare,” dropped 31% of its staff in 2022 after adding $400 million in capital in 2021. Ro (formerly Roman) originally succeeded when it offered hair-loss and erectile-dysfunction meds for men, but after its venture to start online health clinics backfired, it eventually had to fire 18% of its employees. Noom, a digital weight-loss company, raised a $540 million series F in 2021 to expand into stress management; in 2022, it’s already reported multiple rounds of layoffs, affecting well over 500 workers.
It’s the same growth strategy every time—and it’s not working.
There’s only one Amazon. And for what it’s worth, even Amazon, which dipped its toe into healthcare with a hybrid service called Amazon Care, announced in the summer that it was pulling the plug on its pilot after three years.
The healthtech companies best positioned to last are focused on solving one clear problem really well—think ZocDoc with appointment scheduling—instead of trying to save a broken system riddled with challenges.
2. Healthtech is plagued by execs who only talk to other execs
During my stint in healthtech, my company had a problem: We spent an overwhelming amount of our budget and time trying to woo healthcare executives; but once deals were official, there was little to no buy-in from people who actually had to use the software.
This caused plenty of heartburn since implementation for our product could stretch beyond 18 months. With a timeline that long, there were more chances for things to go wrong and for clients to back out. Every team was aware of the problem, yet not much was done about it. Instead, I sat through plenty of meetings in which the executive team would scrutinize VIP guest lists for events and debate who should shadow leaders from potential clients during, say, a snowmobiling activity or scotch tasting.
While focusing on the decision-maker is a good idea, it shouldn’t come at the expense of other important figures involved in the process. Our execs seemed to operate with the mindset: Get bigwigs to sign the deal and figure out the rest later.
This dynamic appears to be common not just in healthtech, but also throughout the healthcare industry as a whole. When I joined the industry, a number of people described the culture as an old boys’ club. A study published in the Journal of the American Medical Association (JAMA) found that women hold just 15% of CEO positions in healthcare.
Gender gaps affect all sectors, but in healthcare, it’s particularly troubling because women make up 76% of the industry’s workforce and 87% of nursing jobs, per federal data. This means they typically don’t have a say in the tools they have to use on the job.
As a result, nurses, administrators, and even doctors often struggle to get value from digital-healthcare solutions. Physicians who use electronic health records (EHRs) spend 1.84 hours a day outside of normal working hours just on documentation. And in a recent study, researchers gave EHR systems an “F” grade for usability, based on feedback from nurses.
During the pandemic, healthcare burnout received a lot of media coverage. Since then, staffing has been a top priority for healthcare execs. Healthtech solutions are marketed as a way to help here, specifically to improve efficiency and reduce worker stress. But a growing body of research suggests healthtech may actually worsen the problems.
That’s because there’s a disconnect between the decisions being made at the top and the work being done on the ground.
3. Established players have little incentive to improve
EHRs are the original healthtech innovators. They date back to the 1960s but really gained momentum in the ‘80s and ‘90s as computing took off. They are the heart of a healthcare provider’s tech stack. The most important information flows through the EHR, and since it’s so entrenched in a given healthcare system, any additional healthtech solution needs to complement it.
That puts healthtech companies in a tricky position because, as I pointed out above, EHRs aren’t very good. They tend to be clunky systems that have been patched together over time, a far cry from the cutting-edge, streamlined, user-friendly products that new tech companies want to bring to market. So, not only do EHRs have a decades-long head start, but new healthtech solutions are also at their mercy. No major hospital is going to rip out its EHR to accommodate a healthtech product, no matter how great it is. The consequences would be too costly.
With this power dynamic, it’s more plausible that an established leader would expand into the territory of a startup than vice versa.
I saw this dance up close when my former company was handcuffed during sales talks by a major EHR organization. We promised healthcare providers increased revenue, smoother operations, and happier patients, but our solution would’ve cut into the EHR activity. It didn’t take long for encouraging negotiations to suddenly go cold once their EHR said it would build similar features in upcoming software updates. Whether or not they do is beside the point.
It’s not just the EHRs either. The major forces of U.S. healthcare have a reason to keep the status quo. Legacy insurance and pharma companies are thriving despite an uncertain economy. Meanwhile, major hospital systems are paying executives millions in bonuses and stock—even when some have nonprofit status and claim they are struggling with thin margins. On top of that, insurance companies and healthcare providers see each other as adversaries, complicating things even more for any solution that hopes to bring them together efficiently.
Not that long ago, it seemed as if we were on the cusp of a healthtech revolution. But without government intervention or huge subsidies, it’s hard to imagine a healthtech company getting ahead the way a brand like Tesla has in the automotive industry.
Healthtech has great potential to improve the experience for consumers and doctors, but also serious issues to grapple with. Truth is, most revolutionary ideas fail. We only focus on the ones that don’t. For healthtech to avoid that fate, something drastic needs to change.
