The surge of tech-driven healthcare startups in recent years is striking. In 2010, digital health companies raised $1 billion in venture capital. By 2021, this soared to $29.1 billion, fueled by the pandemic’s push towards telehealth and digital solutions.
Despite this growth, early outcomes are disappointing. Digital health startups have even higher failure rates than those in other sectors; only 10-20% achieve significant success or “unicorn” status. Regulatory hurdles and integration challenges into healthcare systems are certainly major factors, but I believe that neglecting culture and values in early stages also plays a crucial, overlooked role. Startups that build and scale culture thoughtfully are poised to defy these odds.
In this second blog post, I delve into these challenges and opportunities – which also reflect the work I find most energizing at Luminary People Advisors.
The Task Before Digital Health Startups
Investors have increasingly funded startups focused on value-based care, which are committed to striving for the “quadruple aim” in healthcare:
1. Improving patient experience by providing care that is respectful, responsive, and centered around patients’ preferences, needs, and values;
2. Enhancing population health by addressing broader determinants (e.g. preventative care, chronic disease management, health education);
3. Reducing costs by improving delivery and eliminating inefficiencies, making it more affordable and sustainable; and
4. Improving provider experience by reducing burnout, increasing job satisfaction, and staying focused on their overall well-being.
These goals demand alignment from startups and require deliberate efforts to shape mindsets and behaviors. The high-stakes nature of digital health organizations and their unique mix of employees require tailored approaches; “copying and pasting” from other sectors won’t suffice.
Building Mission-Aligned Cultures
Building culture is challenging and subjective. Early teams naturally align as they work closely together, but as companies scale, relying on intuition becomes inadequate. Over-communication is key — documenting values, integrating them daily, using them for decisions, and revisiting them regularly.
In the past, I understood the importance of shared values but overlooked the diverse backgrounds of team members in their creation and messaging. It’s essential to remember that people have a mix sector-agnostic roles (e.g., engineers, product managers) and patient-facing roles (e.g., nurses, physicians). In the case of the latter, many come from large hospitals or private practices, where HR isn’t always seen as a strategic partner or trusted confidant. Culture needs to unify and value all teams in order for them to achieve bold missions. There are no silver bullets, but I can offer five recommendations based on my experience:
1. Stick with Patient-Centered KPIs, Even When it’s Hard
In resource-constrained startups, effective leaders constantly navigate trade-offs between quality, cost, and speed. For example, shipping a new feature quickly in a B2B SaaS product without additional spend may reduce its quality, affecting user satisfaction and future business prospects.
The stakes are higher in digital health startups, where patient care and experience are paramount. Despite intentions to prioritize the quadruple aim, operational and financial pressures often sideline patient-centered approaches. Many still operate under fee-for-service models, focusing on metrics like daily patient visits or maximizing concurrently-billed CPT codes, potentially undermining patient experience and outcomes, and contributing to provider burnout. I’ll explore this more below.
Establishing clear KPIs centered on patient NPS, engagement, and clinical outcomes can guide teams toward meaningful success metrics while maintaining high standards of care.
2. Prioritize Provider Sustainability
Startups are inherently fast-paced, which is prone to creating excitement in employees’ first few months and burnout thereafter. A 2020 survey by Blind, a workplace community app, found that 73% of startup employees report experiencing burnout, with 61% attributing it to the high-pressure work environment. Sustainability should be a universal priority, but providers need a specialized approach.
The fourth item in the Quadruple Aim was added because providers face unique challenges, yet it’s often overlooked in practice. Providers generate revenue and validate care models for investors, but the common pressure to maximize patient visits and CPT codes leads to burnout. Unlike other over-extended employees, they have less flexibility in when and how work gets done.
Prioritizing provider sustainability benefits everyone, including company performance. It improves mental health, working conditions, care quality, patient outcomes, satisfaction, and retention rates. Long-term benefits include increased provider retention, reduced hiring costs, and attracting top talent. The combination of reduced turnover, improved care, and better patient outcomes collectively foster improved financial outcomes; contrary to popular belief, the two aren’t mutually exclusive.
In addition to using patient-centered KPIs as mentioned above, leveraging generative AI for diagnostics, documentation, and clinical decisions supports sustainability efforts effectively.
3. Foster Mutual Appreciation & Inclusivity
When employees come from diverse professional backgrounds, there’s a risk they won’t fully understand or appreciate each other’s roles. This can lead to a siloed organization, perceptions that some teams are more valued, and a lack of appreciation for how others’ work fits into the bigger picture. Fortunately, this problem is solvable without a heavy financial or operational lift.
One effective method is “spotlighting” teams at company-wide meetings. Teams can share who they are, their backgrounds, current priorities, and how they contribute to broader goals (photos help!). Additionally, casual lunches with two teams that don’t typically collaborate, whether in-person or virtual, foster mutual appreciation and common ground. Make sure these activities don’t conflict with patient care responsibilities so everyone can be fully present.
It’s also critical to remember that broadly using team-specific jargon can inadvertently reinforce divisions. I once used the phrase “post mortem” during a cross-functional project review. To many, this term means a blameless discussion to learn and improve. Luckily, a physician colleague politely told me that in clinical settings, “post mortem” signifies a patient’s death, the most serious of outcomes. Speaking in plain terms is the most inclusive approach.
4. Share Compelling Patient Stories
Storytelling is beneficial in many contexts, and this is no exception. Sharing patient stories that highlight barriers to accessible, high-quality care, how the organization’s delivery model overcame them, the technology used, and long-term clinical outcomes illustrates the contributions of multiple teams. It’s also valuable to discuss instances where care delivery fell short, the lessons learned, and subsequent improvements. Transparency about these experiences builds long-term trust.
Team members not directly interacting with patients have consistently told me that these stories anchor them in the purpose of their work and reaffirm their commitment.
5. Be Intentional With Equity Compensation
I tend to see that, by virtue of different professional backgrounds, patient-facing team members often undervalue or misunderstand equity, leading to inconsistent allocation across organizations. Proactive education at every stage of the employee lifecycle — starting with recruitment — is critical. While corporate practice of medicine requirements make granting equity to clinical team members more administratively cumbersome, and CEOs may be tempted to deprioritize it, the potential benefits outweigh the challenges.
Early-stage team members are taking inherent risks and have their fingerprints on the company’s DNA. Equity represents skin in the game and can offer dramatic upside if collective efforts succeed. This reinforces that everyone is working towards the same goals, and collective long-term successes benefit entire organizations.
Conclusion
I’m excited to continue learning alongside Luminary’s partners as we cultivate strong cultures in digital health startups. In the meantime, I hope that these five tips resonate. If you have more questions or challenges to tackle, don’t hesitate to book a free consultation with Luminary People Advisors today.
