The tempo of funding within the digital well being house seems to have leveled off lately. Startups within the house raised practically $6 billion within the first half of the 12 months, and whole funding in 2024 is anticipated to surpass final 12 months’s whole of $10.7 billion.

Throughout a panel dialogue held final week in MedCity InformationOn the INVEST Digital Well being convention in Dallas, three enterprise capitalists shared a number of the questions they ask when pitching healthcare startups.

What drawback are you fixing?

In keeping with Tom Hawes, companion at Sandbox Industries and Blue Enterprise Fund, it's a giant warning signal if a startup can't clearly clarify the issue it needs to unravel.

“The factor that signifies that [a potential investment opportunity] “Possibly it’s not fascinating if an entrepreneur simply says ‘I’ve a digital remedy’ or ‘I take advantage of blockchain’ — they usually use these buzzwords with out filling in what drawback they’re fixing. What sort of work are they getting executed?” he famous.

As an investor, Hawes stated he needs to listen to about the issue a startup is attempting to unravel earlier than they begin explaining how nice the know-how is. He additionally stated the startup must reveal that its workforce has the mandatory abilities, expertise and community to unravel that drawback.

One other investor — Emily Durfee, managing director of company enterprise capital at Healthworx, the funding arm of CareFirst, a payer within the Mid-Atlantic area — agreed with Hawes, including that she additionally needs to ensure the startup solves one of many prime 5 issues.

“I feel quite a bit about not simply ‘Is that this an issue that must be solved?’ but in addition ‘Is that this one of many prime 5 issues for the shopper you’re promoting to?’ As a payer, we get a whole lot of firms that need to be suppliers to us. And there are in all probability 30 issues that we as a payer ought to be fixing at any given time, however we don’t have the mind house to do this,” Durfee defined.

As a result of payers can't clear up all of those issues, they need to prioritize the 5 most urgent points, she stated.

“I ask each entrepreneur, ‘Is that this a prime 5 drawback? For whom? Why do you consider that?’ And if they’ll’t reply that query, I’m not going to speculate,” Durfee stated.

Do you’re employed with a fee mannequin the place you pay per service?

Durfee believes that value-based care is the longer term, however she is just not prepared to spend money on firms which are fully depending on that fee construction.

“We’ve talked to a number of firms whose whole enterprise mannequin is targeted on delivering value-based care. It’s not only a matter of whether or not a startup is prepared and ready, however whether or not their prospects, usually payers, are prepared to obtain and construction these contracts with them,” she famous.

Durfee “essentially” believes that value-based care is the longer term, however she can also be conscious that the longer term has not fairly arrived but, she stated.

She identified that there are a lot of payers who will not be but able to create value-based contracts throughout completely different affected person teams and specialties.

“I don’t actually spend money on an organization that doesn’t have an everyday fee-for-service enterprise mannequin. That’s to not say I would like them to remain there. That’s to not say I don’t need us to maneuver to value-based care. But when value-based care is a prerequisite for the success of the corporate, then it’s going to be very laborious to alter my thoughts,” Durfee famous.

Is AI important for your online business?

AI isn’t the fantastic buzzword some startup founders may assume. When a startup presents an AI resolution, they’re including a layer of threat to their enterprise, famous Janet Xu, senior principal at Distributed Ventures.

“To begin with, is AI 100% essential to your targets? Secondly, how does that improve your threat profile for the shopper that you just’re attempting to serve now? As a result of your AI may be nice, however you then additionally should undergo a complete different stage of scrutiny due to the truth that you have got a number of knowledge coming out and in,” she defined.

To spend money on an AI-forward firm, Xu must be satisfied that the AI ​​is integral to the product. She would additionally should know that the startup is conscious of the dangers concerned and has the suitable protections in place for affected person knowledge, she stated.