B2C or B2B?
When it comes to discussions of business models for digital health startups, they usually revolve around two options – should we go down the B2C route or play the B2B game? But maybe the two don’t have to be so much of an either/or issue, and instead they can interact in more of a yin and yang relationship. I’m a big believer that the two monetization strategies can be combined in different ways and, ultimately, work together to reach a goal. For instance: Implementing a successful B2C strategy that can be a stepping stone to some lucrative B2B deals.
In an earlier post, I touched on this when talking about the importance of retention rates in catching the attention of a VC. Here’s the thing, high B2C retention rates are a sign that customers are coming back to the app/device, paying for a digital health product/service or are consistently engaged. Not only that, they’re a good indication that your company is capturing value in some way. In short, they can be a solid proof of concept.
Because there are so many consumer-facing apps in the digital health space, investors and B2B partners (pharmaceuticals, governments, healthcare providers, etc.) are often overwhelmed by pitches and find it difficult to identify the best opportunities. However, increasingly, good retention rate is a being used as a benchmark to narrow down the options.
In the last couple of years it’s become evident that personalized healthcare via smartphones and the economic interest of data are two of the main drivers for companies in digital health. And so, retention rate factors into the picture, because it can be a good indication that the data source is useful and interesting. Basically, once you can demonstrate that you have a valuable and usable product/service through traction and retention, you’re in a much stronger position to go on to approach investors and potential partners with your proposition – and then sell it to them.
Min-Sung Sean Kim is Partner at XLHEALTH, a Berlin-based venture capital fund specializing in Digital Health Series A investments. He believes that healthcare startups with innovative solutions have the potential to create impactful social change. This is his blog: Digital Health VC.