[J&P Medi Partners Column] Investment is Not the Only Thing Early Healthcare Startups Need

Investing money alone does not make a healthcare startup grow. When meeting early-stage companies, it is more common to see them get stuck in the next stage rather than struggling with the technology itself. Research results may be excellent, but it is unclear who the actual customers are, or products are made but clinical validation in hospitals does not lead to purchases. There are also cases where clinical development plans exist, but the amount of funding required for the next stage has not been calculated. There are not a few companies that conduct PoC with large corporations but fail to move on to joint development or contracts, or those that possess competitive pipelines but do not know how to contact global pharmaceutical companies.

These problems usually do not arise from a lack of technology. Rather, they occur because the connection between technology and the market, research and business, or the current stage and the next stage has not been properly designed.

Therefore, it is difficult to explain the growth of a company in bio-healthcare with the word 'investment' alone. While funding is certainly important, it is often more crucial to determine what needs to be proven with that money and what decisions need to be made after the funds are injected.

In general startup investment, indicators such as market size, revenue growth rate, and customer acquisition speed serve as important criteria for judgment. Early-stage healthcare is slightly different. Many companies do not have a product yet, and even if they do, it may take a long time before significant revenue is generated. They must go through clinical trials or regulatory approvals, and in some cases, they must establish new production processes and quality control systems. In other words, what events occur in the future often influences corporate value more significantly than current performance. This is why clinical trial results, changes in regulatory pathways, the scope of patents, and the possibility of licensing agreements with global pharmaceutical companies have a major impact on a company's value.

Therefore, investors do not look only at current numbers. They must also look at what will be proven next with the current funds, how the corporate value will change if that proof is successful, and at what point additional capital will be needed. Most importantly, it is the task of judging whether the next milestone set by the company is truly a milestone that increases corporate value. For example, rather than the simple fact that a clinical trial has started, it is more important to know what kind of data is secured in that trial and what significance that data holds for regulatory approval, follow-up investment, or technology transfer negotiations. For medical devices, one must see if usability evaluations or hospital validations serve as the basis for actual purchases; for digital health companies, one must see if indicators such as repetitive use and cost reduction, rather than the number of users, connect to the actual decision-making of customers.

Ultimately, what is important in early healthcare investment is judging 'whether there is a structure to move to the next stage' as much as the question of 'is it good technology'. Choosing good technology and choosing a good company may seem similar, but they are not the same question.

The problem arises after the investment. Just because cash has entered the bank account of an invested company does not mean the problem of commercialization is automatically solved. Rather, from that point on, one must decide more accurately what to spend the money on. Since startups have limited resources, deciding what not to do is also important. For example, suppose a company conducts a PoC to demonstrate the performance of its technology in a hospital. Many companies accept a PoC as a single achievement. In fact, the fact that they conducted validation with a large hospital or a large corporation can be a good signal to investors and the market.

However, there is a separate important question from a business perspective. What kind of verification leads to an actual purchasing decision? Who evaluates those results, and if the verification is successful, what form will the next contract take? One must confirm from the beginning whether it is simply checking performance, or whether it must also demonstrate improvements in work efficiency or cost reduction, and who the budget holders and decision-makers for the main contract are after the PoC.

A PoC that lacks these questions may be a technical success but may leave nothing behind from a business standpoint. There are cases where a hospital gives an evaluation of "the performance is good," but there is no actual purchase budget, or cases where a PoC is successfully completed with a working department of a large corporation, but the contract is halted because it fails to meet the decision-making criteria of the headquarters' purchasing organization or management. From the startup's perspective, they have invested months of time and manpower, but it is as if there is no next stage. A PoC that cannot answer these questions is highly likely to end with leaving behind nothing but a single good presentation slide.

The same applies to open innovation. Innovation is not created simply by gathering startups and large corporations in one space. Large corporations must have problems they actually want to solve within their internal business units, and startups must show how their technology solves those problems. In that process, emphasizing only the excellence of the technology is insufficient. From the perspective of a large corporation, they also look at how it can be applied to existing processes, the level of implementation cost and risk, and whether it conflicts with the existing supply chain or organization. A path leading to purchase, joint development, strategic investment, or licensing agreements after verification must be designed to some extent. Ultimately, good open innovation is a matter of 'conversion' rather than 'introduction'.

Business incubation and accelerating also need to be viewed somewhat differently. When people think of startup support, they often imagine programs such as mentoring, networking, connection to government support projects, and investor meetings. All of these are meaningful. However, from the perspective of a company's growth, what is important is not the number of programs, but finding out what the bottleneck is that is currently hindering the company's growth.

A good support program is not a program that operates on behalf of the startup. It is closer to a process of identifying what problem the company must solve first and increasing the quality of the next decision-making.

Some companies need to refine their business models before their technology, and some need to organize their regulatory approval strategies before their markets. There are companies that must strengthen their patents before proceeding with further R&D, and cases where it is more rational to seek global partners from the beginning rather than generating revenue domestically.

Here, the order is important. Early-stage companies cannot solve all problems at once. Capital and manpower are limited, and one choice determines the scope of the next choice. If the clinical design is finalized first, the subsequent regulatory pathway and the scope of data utilization may change, and depending on which market the first customer is secured in, the product's functions and pricing policy may change. Therefore, the core of support is not providing the same prescription to all companies, but finding where each company's bottleneck lies and determining the priority of what must be solved first. Good accelerating is closer to a process of reducing the use of resources in the wrong order rather than a process of providing the correct answer.

In early-stage healthcare companies, another growth path called licensing out is also important. Companies developing new drugs or medical devices do not necessarily have to launch and sell products directly to succeed. A business model where candidate substances or platform technologies are transferred to global pharmaceutical companies, receiving upfront payments, milestones, and future royalties, is also an important business model. Especially in fields where clinical development costs increase rapidly, deciding at which point to develop directly and at which point to share risks with external partners becomes an important management decision.

However, having good technology does not automatically lead to technology transfer. One must analyze the counterpart company's pipeline and strategy and judge which indications and data will look attractive. It is also necessary to organize non-clinical/clinical data, intellectual property, market size, and competing pipelines into a single business development logic.

Even for the same candidate substance, the potential partner may change depending on which indication is put forward, and the timing and conditions of negotiations may change depending on which data is secured first. This means that the value of technology is not completely determined in the laboratory. This is because, from the perspective of global pharmaceutical and medical device companies, 'why this asset should be reviewed now' is as important as the technology itself.

Regulation also cannot be viewed merely as a separate legal issue. In bio-healthcare, the choice of which regulatory approval pathway to take changes the development period, cost, clinical trial design, and market entry timing. In the medical device or digital health fields, the required clinical evidence itself can change depending on the regulatory strategy. Even in new drug or medical device development, specific clinical development paths and the results of consultations with regulatory agencies directly affect financing and technology transfer strategies. If the results of consultations with regulatory agencies lower development risks, the investor's judgment may change; conversely, if more additional tests are required than expected, the entire subsequent financing plan may change.

In other words, regulation is not a checklist to be confirmed after the business is finished, but a part of the business model. A good regulatory strategy does not only mean finding a way to get approval quickly. It is closer to making it predictable what must be proven, when, and what costs and time must be endured in that process.

Looking at it this way, the problems surrounding the growth of early-stage healthcare startups are not separate from each other. Even for companies with the same technology, the required investment amount changes depending on which clinical milestone is selected first, and the subsequent business model changes depending on whom they take as their first customer. For the same pipeline, the possibility of technology transfer and negotiating power can change depending on which data is secured first and which market is targeted.

Investment and business development, regulation and clinical trials, patents and market entry strategies may be divided into different tasks within an organization. However, in the actual growth process of a company, one decision continuously moves other areas.

A company's value is not created by the technology alone. Every time that technology moves to the next stage, it is important what kind of evidence is created, what kind of capital is invested, and what kind of customers and partners are met. And it is at this very point that the gap between companies is created. Even among companies possessing similar technology and founded at a similar time, one may accurately set the next milestone to secure the necessary data, while another may concentrate resources only on the technology development itself. After a few years, the cumulative difference in decision-making can appear much larger than the initial difference in technology.

In this column, I intend to examine the questions that repeatedly appear in that process one by one. I plan to cover issues centered on actual field problems, such as what investors should look for in early-stage companies, how milestones to increase corporate value after investment should be set, why technology verification often does not lead to contracts, and what makes good open innovation different.

Additionally, we will be able to look into what conditions technology and pipelines must meet to become subjects of actual transactions, where early-stage companies should first invest their limited resources, and how regulatory and clinical strategies affect investment and business development.

When looking back at the history of a successful startup, the process seems surprisingly simple. They developed technology, received investment, met good partners, and eventually entered the market. However, the actual field is not that linear. Most companies undergo multiple revisions of hypotheses and changes in priorities. Expected customers may not buy the product, planned clinical trials may be delayed, and unexpected regulatory or patent issues may arise. Conversely, the needs of a customer met by chance can create a new market, and a single proof of concept can lead to an unexpected partnership.

Between good technology and a good company, there are ultimately countless decisions. What creates competitiveness in the early healthcare sector is not just the technology itself, but the ability to properly connect that technology with the evidence, capital, markets, and partners required to move to the next stage. This is why understanding where that technology gets stuck and what it must overcome is just as important as discovering good technology.