In response to a recent guest column by Rick Morrison in PandoDaily about the challenges of starting a health IT company, we’re sitting down with Alan Ying to discuss this issue. As a physician, turned founder of healthcare IT startup MercuryMD, turned Chief Medical Officer at Thomson, now Venture Partner at Chrysalis, Alan speaks to us about overcoming the challenges and recognizing the opportunities when starting a health IT company.
In Morrison’s column he gives this advice to health IT entrepreneurs:
- Find people who know the system;
- Expect to devote substantial resources to testing and validation; and
- Start building your reputation and name recognition early.
You’ve been a health IT entrepreneur, founding Mercury MD, now you advise them as an investor; do you agree with Morrison’s advice to health IT entrepreneurs?
Alan Ying: Sure, although I think this advice is good for entrepreneurs in any industry. The difference with healthcare is that the relative importance of these guidelines is different – it’s a non-starter to start a business unless you are *intimate* with the problem, market, and users. That particular criteria is perhaps not as critically important for, let’s say, a web media startup. One example of how this impacts a startup is that in healthcare, perhaps more than in other industries, there’s almost always a significant difference between the business problem the customers are solving and the problem the users are facing. Companies can end up focusing too much either on the customer or user, which alienates the other and makes it hard to sell. That’s a specific healthcare dynamic that “people who know the system” can help clarify.
When starting MercuryMD, what was your biggest challenge? How did you overcome it?
Alan Ying: “Living” in the healthcare industry as a doctor before starting MercuryMD, I had an intrinsic understanding of what the user wanted because I was the target user. The challenge was really strategic – how to fit in a tactical solution that the user wanted into a strategic priority and budget item that the customer wanted.
Once we solved that specific issue for my business, the greatest problem is the intrinsic barriers to doing any business in healthcare – legacy relationships and risk aversion. Healthcare is very clearly about 10-15 years behind the rest of the corporate markets in adoption of technology in its core operations. Trying to penetrate that dynamic can be slow, expensive, and frustrating.
The key to penetrating such a market is to make sure you provide a “straddling” solution. This means that you solve a “here and now” problem with a business model that they can understand and a technology that is not bleeding edge. This solution is your way in and must generate sustainable revenue. The “straddle” comes in when you provide an innovative service or technology that has the potential for tremendous returns. You mitigate the risk for the customer by solving something they need to solve anyway, and that buys you the opportunity to do something that – if bought on its own – would be risky.
In the next year, Americans will start to see the changes being made to the U.S. healthcare system. How is all this change going to happen so quickly — especially in an industry so large and complex?
Alan Ying: The healthcare system always bridges technology innovation with services. The HIT startups will be the sharp tip of the spear, pushing hard into the meat of the problem. The market, however, will need services to bridge the infrastructure that they have – not just technology, but process as well – to the point that it can fully utilize the technology. The startups who can “straddle” this dynamic with a “here and now” solution that leads into a future game-changing technology will be the winners.
We are certainly at a cross-roads in healthcare — large-scale change will happen. What impresses us most at Chrysalis is how much time and money smart people and powerful organizations are putting into change. This is too big and important to fail.