I talked to a practicing doctor and a former pharmacy exec this week about their software startups. They asked me about funding options.
I used the healthcare industry to describe how I think about funding for software startups these days:
Funding for startup software companies is a lot like pills and prescriptions in the healthcare industry.
- Both are way over-prescribed as a simple fix for a bigger problem. Prescription drugs and outside funding can be useful but are probably 10X over-prescribed.
- Both are simple answers that work for doctors and investors but are not usually healthy for patients and founders in the long run.
- There are HUGE businesses that are selling something and making a lot of money that don’t really have the best interests of the patient’s health or the founder’s business in mind.
There is absolutely a Health-Industrial Complex that has completely taken over in the US and really isn’t about patient health. It’s about making money treating sickness.
The Funding-Industrial Complex has been growing bigger for 30 years.
There are many great stories of unicorn success, but overfunding on the investors’ terms usually is not best for most founders, customers, and employees in the long run.
If patients just ate healthfully and exercised more and managed their own health (did the actual work), we could remove 50% of all expenses in the healthcare industry, by some estimates.
Likewise, if founders created better businesses that were more efficient and effective early on, most could avoid big funding altogether or procrastinate it and take it for the right reasons.
Prescription pills and big funding sound like simple fixes to patients and founders who are not experts in these areas.
I told these two healthcare IT founders that I was like an MD doctor who learned holistic practices and understands both. That made perfect sense to them.
Do we have an “opioid crisis” of over-prescribed funding in the software industry? There’s a strong argument to be made for that.
Founders should take funding and prescription drugs only when absolutely necessary. And they are usually not absolutely necessary.
#practicalfounders
