During my Master's I have built a working prototype for clinical documentation that could be universally used in multiple clinical areas. However I have very little experience in founding a company or talking to investors. I am based in Germany. And since the startup scene here still lacks a lot of funding I wonder what my next steps should be. The university hubs are not an option, since they require you to hand over up to 45% of the company for only 100.000€-500.000€ funding. Given the regulations in the medtech market this money would not give that much runway. And looking in the future with multiple investment rounds I would end up with very little stake in the company.
I talked to my family and could collect 35.000€ in total myself.
I think the issue here is that this company would most likely not be a unicorn, or a fast growing startup that most investors look for. However, the profit margins are very large and the solution is very easy to scale. Thus the worldwide market is open at relatively little cost, compared to other solutions.
I already did market analysis, tested the solution with multiple clinicians, and my solution would cut the costs of clinical procedures (depending on the type of procedure performed) by up to 20%. I also have very positive feedback by the four clinicians that tried out the solution so far.
Four doesn't sound like much but it is very hard to get in touch with a clinical expert as a single student without funding.
I could really use some advice on my situation here. I am also looking for co-founder advice. How much stake should a co-founder be offered? I really do not want to end up only owning a fraction of the company in 10-15 years.
My personal goal with this company is to grow old with it.
[1]: https://news.ycombinator.com/item?id=33733854
".. profit margins are very large and the solution is very easy to scale. Thus the worldwide market is open at relatively little cost.."
".. cut the costs of clinical procedures (depending on the type of procedure performed) by up to 20%"
Unless you have "been there, done that already" kind of experience to back these claims, it is hard for anyone to take it seriously.
Obvious next step for your working prototype is to get more users. What are the hurdles for this? Can you get more clinicians to use it today? Do you need regulatory certifications to do so? Are there other entry barriers? Can you surmount all of this by yourself? Can you self-fund yourself? For how long? Can you afford other operational expenses? What would those be?
Who are the other startups and their investors in this broader product segment and in your markets? What are their KPIs? What are they going after? How are you differentiated? Can you talk to the same investors or other investors who might want exposure to this product/market segment?
Have you found anyone else who is as passionate as your about this product/market? Are you willing to work with them?
- The distinction between a user and a customer is a big one here. Customer pays for your stuff. User uses it. These two are usually light years apart in terms of what they want
- Fine balance to build for the user but also keep the customer happy
- Doctors care about their work and don't want to change too many things since it there's a cognitive cost
- Any language that hints at making doctors redundant is an obvious no-no (Here's looking at you , AI)
- Long sales cycles. Be prepared for cash burn
- I'll type more tomorrow when I wake up :)
Clinical documentation is often the bane of my existence, so there is definitely a need for innovation. But entering this market (in the US, anyway) may be challenging. I do not know anything about the German market, but in the US, there are a few things to note. First, this market is already pretty saturated. There are some big players (like Epic) that dominate the hospitals, as well as many smaller companies that cater to specialized markets, such as solo practitioners or mental health providers. If your clinical documentation system is not outrageously better than these (and even if it is), it may be hard to break into this market.
Another challenge in the US is around regulations and CMS requirements. Clinical documentation is the way providers ensure that they can get paid. CMS has a lot of requirements in what needs to be in your software. I don't know this area as well, so can't comment too much. But if you want to come to the US, you will need to know it really well.
As a physician, I find it hard to believe that you could cut the cost of clinical procedures by 20% with just documentation software. How are you calculating that? I'm also skeptical about such large profit margins.
Here in the US, recent deregulation has opened up venture funding online, drastically reducing the 20% carry (commission) Silicon Valley has traditionally charged. As an example, RUV Alliance, a syndicate of angel investors, gives founders access to 1,200+ accredited investors at zero cost (investors pay a one-time 2% management fee). I don't know what the implications of being in Europe are, but you can find out more at https://ruvalliance.notion.site.
Assuming you've already got the technical side covered, I'm thinking a co-founder should be recruited mainly for their sales or, perhaps, regulatory expertise. Not sure how Germany compares, but B2B (business-to-business sales) here is built primarily on relationships and healthcare's heavily regulated nature makes it even tougher to navigate. Guessing someone with the relevant experience and contacts could make or break the company, making a sizable minority stake worth the sacrifice.
Hope that helps!