Digital health startups need more doctor CEOs

In my decade living in Silicon Valley as a digital health journalist and now an investor, I can’t tell you how many times I’ve heard people in the tech industry claim that doctors don’t have what it takes for a career in entrepreneurship. As the traditional thinking goes, because they’re so risk-averse and lack business training, physicians are not well suited to a high-growth, venture-backed startup environment.

Many of the physicians I know have heard these ideas so much that they’ve internalized them. Byron Crowe, an academic hospitalist, told me that physicians who want to move into business must work “very intentionally” to become businesspeople and most lack the confidence to make the leap.

But as an investor in digital health, I’d argue that there’s nothing that inherently should stop a doctor from becoming a startup CEO. In fact, I’m ready to make the opposite bet. Digital health is still a nascent category, but there’s an increasing number of success stories of physicians-turned-founders to point to. Some of these have practiced for years, while others took the leap shortly after medical school.

Take Doximity, one of the few health-tech companies in the public markets. It was co-founded by a physician, Nate Gross. And Teladoc, one of the early telemedicine companies, was co-founded by a physician back in 2002. In health tech, many of the current most promising “unicorns,” (that is, the companies with a valuation of over $1 billion), have physicians either as a co-founder or at the helm, including Viz.AI (Chris Mansi), Cityblock (Toyin Ajayi), Carbon Health (Caesar Djavaherian), and Aledade (Farzad Mostashari).

Furthermore, one of the industry’s biggest exits — One Medical, which sold to Amazon for $3.9 billion — was founded by a physician, Tom Lee. After he stepped down to start another company, he brought in another doctor, Amir Dan Rubin, to run things. And One Medical’s big acquisition, Iora Health, was also founded by a physician. And the list goes on.

To borrow an analogy from a prominent physician turned investor — Venrock’s Bob Kocher — becoming a founder is kind of like having a child. Nothing prepares you for it before you do it; you just have to take the plunge and learn as you go. And doctors, of course, are great at learning.

They may even have a few advantages up their sleeve versus other founder backgrounds, which Kocher readily acknowledges. In Kocher’s view, physicians who really understand the patient population that the company is serving add immense value, such as geriatric medicine specialists working in Medicare Advantage or obstetricians founding women’s health companies. They will also likely have a deep understanding of the clinical workflow, which is often a black box for those who haven’t practiced. And then there are more tactical benefits with a physician founder being involved in a care delivery startup, as that person can manage the entity that employs physicians to administer care.

Many investors in my network actively seek out physicians to start companies. Eric Epstein, a health-tech investor with Santé Ventures, believes that doctors have an edge because they understand their customers. And getting that “founder/market fit” right is absolutely critical, he believes, or there’s very little hope of getting to what’s called “product/market fit.” Product/market fit, or “PMF” in industry terms, refers to the degree that a product satisfies market demand. Without that, a company will struggle.

Another secret weapon for physician founders, according to Epstein, is that they can better navigate health care organizations, including large hospitals, which are often laggards in adopting new technology. Because physicians know the culture of medicine, they have a richer understanding of who the real stakeholders and buyers are. And it helps them avoid going down months-long rabbit holes where they’re talking to the wrong people. That often includes chief innovation officers, who are not typically the ones making the buying decisions at a large health system or payer.

Then there’s the fact that many clinicians innately trust one another more than a slick MBA when it comes to new products or solutions.

There may also be more indirect cultural factors at play. Being a physician can be “scrappy work,” according to physician-turned-investor Brenton Fargnoli, given that there’s often different teams and stakeholders to work with that change in real-time. Startups are similarly designed, and those who join early will have to adapt to quickly growing teams that frequently fluctuate based on the company’s stage.

Similarly, Shivdev Rao, founder of the medical AI company Abridge, notes that while doctors follow evidence-based guidelines, they sometimes must pivot quickly if the standard path isn’t working. Sometimes a diagnosis is about an idea that has to be proven out, or it’s the end result of a process of elimination. Being able to recognize that early enough and change direction as needed is actually a sign of a good physician, but also a good founder.

To be sure, there are also plenty of examples where physicians have started companies and not been successful. One missing piece, in my view, is the lack of training and education around the business side of medicine (except, of course, for the small but growing cohort of M.D./MBAs). I often see physicians who think that it’s enough for a startup to solve an unmet clinical need. But even solutions to significant unmet clinical needs can’t help patients without marketing and sales.

There are also important considerations for health investors to consider around whether the business is truly venture-backable. That is, will it really drive an outsize return? Not all companies are built for this kind of trajectory, perhaps because the customer isn’t willing to pay or the market opportunity is too small.

There are increasingly solutions for this education gap. Dozens of social communities have sprouted up in recent years for physicians interested in entrepreneurship, including the Society of Physician Entrepreneurs, Doctorpreneurs, Physician Side Gigs. I also recently started a Slack group for physicians interested in entrepreneurship — Clinicians Who VC — alongside Jonathan Slotkin of Contigo Health and Vive Collective physician-turned-investor Rebecca Mitchell. Hundreds of physicians joined in the first few weeks, which is an indication of the interest in startups and entrepreneurship.

I’m also seeing physicians in my network who are choosing to spend time during their fellowship year working at a health-tech startup versus in a traditional research role. UCSF’s Anjali Thakkar, for instance, joined a company started by two fellow physicians and entrepreneurs for a year in order to immerse herself in product development. I’m also buoyed by the emergence of programs like Stanford’s Biodesign, which teams medical students up with MBAs and technologists to test out and ship new products.

Arlen Meyer at the Society of Physician Entrepreneurs believes that we need to go a step further and redefine what entrepreneurship means to physicians. Even if a doctor is employed by a health system or health plan, rather than serving as CEO of their own high-growth startup, they can still bring innovative thinking to their role. As an example, some physician executives adapted quickly to offer telemedicine options to patients in the early innings of the pandemic.

And there are reasons to learn about the business side of medicine — where money flows and why it flows, versus focusing purely on care, particularly as the system gets overloaded with cost and patients are increasingly on the hook.

I’d like to push forward a new narrative. Physicians aren’t innately bad businesspeople. In fact, this kind of career might self-select for a disproportionate number of founders. Medicine used to be a career path that talented, young people chose in large part because it was more entrepreneurial than other fields. Rather than working for a large employer, many physicians would have the opportunity to open their own practice. Nowadays, in part driven by the trend toward consolidation, most physicians are employed by a hospital or corporation. More medical schools should include entrepreneurial tracks or opportunities for those who want to start businesses or be part of one.

For many doctors, that entrepreneurial itch is still there. And that’s a good thing. With rising rates of burnout and massive labor shortages across the various specialties, we need to be figuring out ways to “scale” care. And technology, which opens up opportunities to provide asynchronous and remote care, could be a key part of the solution. As more doctors move into this space, digital health should be willing to welcome them with open arms.

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