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CONFIDENTIAL © MobCon Digital Health. All rights reserved.
The Value of Experience in Healthcare IT Startups
Matt Otterstatter, Partner, Vilicus Ventures
CONFIDENTIAL © MobCon Digital Health. All rights reserved.
Rochester, MN
2
CONFIDENTIAL © MobCon Digital Health. All rights reserved.
Rochester, MN
3
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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
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Ewing Marion Kauffman
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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)
CONFIDENTIAL © MobCon Digital Health. All rights reserved.7
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?
CONFIDENTIAL © MobCon Digital Health. All rights reserved.8
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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!
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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
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The Interview Answers
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?
CONFIDENTIAL © MobCon Digital Health. All rights reserved.12
The Interview Answers
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?
CONFIDENTIAL © MobCon Digital Health. All rights reserved.13
The Interview Answers
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?
CONFIDENTIAL © MobCon Digital Health. All rights reserved.14
The Interview Answers
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?
CONFIDENTIAL © MobCon Digital Health. All rights reserved.15
The Interview Answers
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?
100%• Had early customers
• Figured out a viable
revenue model
• Founders themselves
acquired all early
customers
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Airplane story
Abraham Wald
Mein Flugzeug
ist kaputt!
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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
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….speaking of fatal airplane crashes
Preventable medical errors kill an
equivalent number of people every
day as two fully loaded 747s.
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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
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Possible Explanations of Experience Paradox
“The secret to creativity is knowing how to hide your sources.”- Albert Einstein
Alternative Experience as an Asset
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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)
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Questions?
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If Time Permits……
Topics for further discussion about Minnesota/Twin
Cities entrepreneurial ecosystem:
Cultural Strengths/Weaknesses
Fundraising Climate
Entrepreneurial Education
Corporate Involvement
Diversity
Others?