Should Digital Health Entrepreneurs Focus On B2B Or B2C Business Models?

Stephanie Baum (Philadelphia, PA) –

Before digital health entrepreneurs start a company, they have to decide two important things: who will use their product, device, or app and who will pay for it? To help weigh the merits and challenges of these business models, a report from Rock Health provides some common sense and some surprising realities about investment trends for each. So before you decide whether you want to build the next ZocDoc or Practice Fusion, have a look at some of the findings of Rock Health’s report on Business Models in Digital health.

B2B Seventy-seven percent of digital health venture funding went to business-to-business models. The average amount of venture funding B2B companies received was $11 million compared with $9 million business-to-consumer companies received. The downside of business-to-business models is there is usually a longer sales cycle and it requires “gatekeeper approval” or systems integration.

B2B “It’s less about monetization early on and more about downloads, engagement and retention to prove the utility of the product,” according to Rebecca Lynn and Missy Krasner of Morgenthaler Ventures.

B2B What’s the secret sauce guiding B2B investment decisions? The ability for a company to reduce costs, get sustained engagement and demonstrate improved outcomes, according to Abhas Gupta, an associate with Mohr Davidow Ventures.

B2B Some of the needs for business-to-business models according to physicians are greater access to information, wireless access to electronic medical records and increasing patient compliance.

B2C Although business-to-consumer models tend to generate less venture money, they have a faster sales cycle and get speedier feedback from the customer base. A bigger downside is greater competition.

B2C Designing for an end-user consumer is easier than for a vice president in a company whose needs will likely be dictated to a certain extent by the company culture.

B2C Tools rating hospitals and physicians will attract more consumer investment. Analysts say consumers are willing to spend $14 billion on digital health products. They are willing to spend more than half, a whopping $8.9 billion, on tools rating physicians and hospitals. The next biggest moneymaker looks like health-related video games at $4 billion followed by $700 million for mobile health applications.

Stephanie Baum is the Philadelphia bureau chief for MedCityNews.com, where this article first appeared.

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