How to tell a better value story for your healthtech startup

The road to healthtech commercialization is long, and the margins, always a challenge. This you already know. But with interest rates the way they’ve been the past few years and now billions in grant funding cuts, valuations are tightening and investors are cautious.

This is why it’s more critical than ever to have a strong narrative that articulates your value. In this article, we explain six factors to making that case based on our work helping 300+ startups raise a collective $2.1 billion. 

Learn more about how our CFO Services team can help you raise.

Six ways to tell a better healthtech value story

1. Know the market
To show more than a general knowledge of your market, avoid wishful claims like, “If we just capture 1% of the market …” Healthtech founders should define their total addressable market narrowly, for example, going after the $12 billion diabetes management market and growing at 8% annually—with a specific, quantifiable niche like immunosuppressant implantables. 

For this, it’s helpful to have a seasoned advisor who can draw upon comparables. Nothing makes a greater starting point than looking at what other healthtech companies have recently raised on.

Equally important is knowing your timing. For example, there was a steep correction in 2023, and following that, 38% of healthcare dollars have gone to AI-related startups. The question corporate development teams and investors are wondering, which you should answer, is why now? What market tailwinds, such as changing regulators or recent technological breakthroughs could help you? What headwinds such as reimbursement difficulties make now a tough time?

Also know your buyer(s). If you sell to busy, skeptical doctors who will never read your emails, what is your go-to-market approach? It helps to have an advisor on your team who fits that buyer profile and can speak from firsthand experience. 

2. Know your impact
Investors want to see a strong emphasis on human impact as a narrative hook. How will you help patients and providers? Can you clearly articulate a “before and after” scenario that illustrates that patient impact? Writers have a phrase, “In the specific is the general,” and it applies here—a 9% plasma wastage rate is less memorable and illuminating than the story of Lucinda, who desperately needed a blood transfusion but the blood products had expired.

Although statistics help too. If you can, show cost savings per patient or increased access—plus quotes and endorsements from a physician-advisor who has used the product.

Ask yourself: 

• How are you improving cost, quality, or access?
• Who has suffered this and can you tell their story?
• What clinical or financial metrics can you show? 
• Who has tried this and will stand behind it?

3. Know your model
Your metrics, projections, and story will of course entirely depend on your type of healthtech startup. Whereas healthcare SaaS might be worth an 8-15x multiple, a tech-enabled service might command 6.3x, and tech-enabled service might command 2.7x.

Further, you should know who the payer is and where the money will come from. Many great ideas have failed because they didn’t fit into any particular department’s budget. How does what you’re selling fit into existing payment structures, such as CPT codes, value-based contracts, or direct-to-consumer payments? 

You may also have “users” at many levels, who you must win over—patients who need the device, physicians who administer it, and Chief Medical Officers who purchase it. Your model should consider all of this. 

Also consider your “moat”—what is unique and defensible about your product in your particular total addressable market? For example: 

4. Have a record of execution and present traction
What can you speak to in your plan that is already done? Great storytelling can only get you so far in such a competitive field. Wrap your story around tangible examples of projects you’ve completed on schedule, partnerships you have already secured, or FDA clearances you have already achieved.

This is where it can help to tie a financial forecast to your product roadmap to give investors an idea of what to expect down the road. Making sure the data is reinforcing the compelling story that you're telling is crucial to earning an investor's trust and making the big vision come to life.

Also consider what concrete evidence you have to show product-market fit. Share study results, user growth, letters of interest, and of course revenue. Where you do not yet have impressive traction and numbers, much will hinge on you and your co-founders’ reputation. What are your backgrounds and what can you point to that suggests you are someone who overcomes all obstacles?

5. Long-term vision and potential exit opportunities
Investors will understand that your healthtech startup won’t be profitable immediately. But they must understand how it will be profitable eventually, or it falls into the “science project” discard pile of decks. Tell them how you can rely on economies of scale, unique competitive advantages, data moats, and so on. Or ideally, more than one together. For example, “Our proprietary data creates high switching costs, as seen with Livongo’s diabetes management platform.”

If building in AI
Explain how you’ll build a proprietary dataset that remains valuable no matter how the underlying models change. Also explain your path to phase out all the “humans in the loop.” Today AI margins are lower than SaaS margins because there are more people involved. But their multiples are higher because the assumption is that eventually, the AI will do the work. 

For an example of data moats, look at Tempus and Flatiron Health. 

If building in hardware
Explain your manufacturing and supply chain strategy, like how you select contract manufacturers, manage production timelines, and handle inventory. Hardware takes longer and costs more. So anywhere you can highlight how you are protected by patents or regulatory shielding, it will be highly persuasive. 

If building a digital health
Emphasize your clear path to scale and distribution—for example, integrating with a major EHR system, using telehealth reimbursement channels, and so on. For example, Doctor on Demand’s partnerships with health insurers significantly accelerated their growth. 

6. Be realistic about the risks
There are two ways your investors figure out the risks to your healthtech startup’s success: 

1. You tell them
2. They figure it out

Far better to be upfront about the challenges—from regulatory to clinical adoption—and share your plans to overcome them. The genomics startup 23andMe just filed for bankruptcy and it’s a great example of not properly understanding the risks to your business model over a long period—the demand for genomic testing dropped and they didn’t have another plan.

One big risk right now for all healthtech is the state of regulation and budget cuts. The Health and Human Services Department has cut 10,000 employees.

You don’t have to pretend it’s alright. But you do have to have a plan.

Need help shaping that story? 

Retelling your value story to meet this moment can be a lot of work. Contact our CFO Services team, who’s helped 300+ startups raise $2.1 billion and has thoughts on the state of healthtech.