The healthtech sales framework: What VCs want you to pitch

Selling to the healthcare providers is considered a nightmare among VCs. Let's explore your options and why this might change...

When I recently wrote about VC decline reasons, not believing in the market was top on the list. Scalability and business model followed in 4th position.

What do these factors have in common? They are heavily driven by the founders’ ability to create a top-performing marketing and sales machine.

In fact, the go-to-market can make or break healthtech investment cases.

Bad news first…

Unfortunately, the healthcare sector is notorious for its difficult sales environment:

1. For therapeutic or diagnostic products, highly regulated pathways apply. These introduce evidence creation as an upfront barrier and often come with prescriptions as a gatekeeper. To compensate for these barriers, you need to realize a high price point or a huge volume. Germany’s DiGAs (digital therapeutics) btw achieve neither: ~200€ per quarter AND low uptake.

2. When selling tech to hospitals, you can achieve high contract sizes (e.g., € ~100k and up to millions), but face long sales cycles. Large hospitals can take 12-18 months for a buying decision. Decision making differs wildly: Sometimes the chief surgeon decides, sometimes the purchasing department, sometimes the IT department. On top, the buying process might come with a tender.

3. If you sell services or products to small clinics or practices, you avoid some of the above. Decision makers are more accessible and decide faster (up to 3 months, perhaps 2-3 weeks if you’re good), but you end up with small annual contracts (usually up to €5k per physician), turning your business case into an extreme longtail play.

For these reasons, many VCs decline startups on autopilot if they sell tech to healthcare providers.

Good news: There are loopholes

Looking at all 3 points above, it’s the last one that currently fascinates me: Selling to small clinics in the outpatient sector. While tough to crack, it allows for creativity and growth hacks.

Today, I’ll share our internal framework for healthcare provider sales. We’ll discuss which strategies seem most scalable from a VC perspective. The framework stems from smaller clinics, but applies to large institutions as well. Here’s the guiding question:

How does your product or service impact the clinic’s profit and loss statement? Financial incentives are your friend.

“If you sell tech to clinics, think in value pools.”

There are essentially 3 ways you can influence the clinic’s business outcome:

Let’s rate these options one by one:

1. Increase the clinic’s top line (=revenue sharing, I wrote about this here in-depth)

   1. Use existing reimbursement codes for your product or service. A 50/50 revenue split with the clinic seems standard. Easy to convince clinics, but you need to be early in the market before it’s a red ocean. Also, check the market size - often reimbursement is geographically limited. Example: Moca Health.

      VC Rating: 4/5

   2. Alternatively, get the patients to pay out-of-pocket. It allows you to tap into a theoretically unlimited value pool, but it’s more difficult to prove willingness to pay. Example: Floy.

      VC Rating: 4/5

2. Let someone else pay (3rd party monetization)

   1. Sell reimbursed therapeutics. In this case, the physician is not your end customer, but their prescription is the gatekeeper of success. Convince them to sacrifice additional time per patient and prescribe your product - but usually without tangible benefit on their end, except a promise of improved patient outcomes. Example: All DiGAs.
      VC Rating: 1/5

   2. Give your product to healthcare providers for free and make sure it’s useful for them. Then monetize the data or ads to a 3rd party such as a pharma company. Entering the clinics is easier of course, but it requires a critical customer mass and it’s difficult to scale to large contracts on the pharma/medtech side. Example: Dehaze.

      VC Rating: 3/5

3. Sell into the bottom line (=be a cost item)

   1. Tap into the clinic’s software budget. Most healthtech startups do this. It can work, but needs a tangible ROI for the clinic and a top-notch sales team. Prices seem somewhat capped at ~500€/month for practice software, ~200€ for add ons. “It seems that “new” AI-driven use cases sell better than old ones, where you replace existing software. Example: Nelly.

      VC Rating: 2/5

   2. Tap into the clinic’s HR budget, which is usually by far their largest OPEX item. The value pool is magnitudes larger than the software budget. This is where “agents” such as AI receptionists come in: They promise to replace human employees partially or completely, unlocking magnitudes higher pricing (perhaps 10k€+ annually per physician?) than regular software. It’s a nascent category and I assume pricing will depend on the agents’ ability to perform tasks end-to-end. Example: Vocca.

      VC Rating: 5/5

   3. Tap into the clinic’s CAPEX budget, for example as an MRI manufacturer. Such a one-time payment can be easier for practices to commit, but doesn’t create a recurring revenue stream. Unlikely approach for healthtech startups.

      VC Rating: 1/5

As always in venture, there are exceptions to the rule and we love outliers. Some of the most successful European healthtech startups have used go-to-markets that I’m bashing above (e.g., Avelios).

Many companies actually use a mix of these strategies, such as Nelly charging monthly costs but also positively influencing the clinic’s business. And obviously there are healthtech business models that avoid selling to healthcare providers altogether.

Either way, the best teams understand their customers’ incentives and align their business model accordingly.

Happy Monday,
Lucas