HealthTech companies are those aiming to prevent illness. Companies within this sector will be offering a product or service which is not only available in a hospital or medical facility. The difference between the MedTech and HealthTech industries is that MedTech companies focus on treating an existing illness or condition, whilst HealthTech companies can include preventative care. Both
Where Do HealthTech Companies Find Funding?
HealthTech companies can source funding through running funding rounds or crowdfunding campaigns to attract investors in the same way that startups in other sectors would. These campaigns attract both angel investors and venture capitalists, however there are also alternative options for investment available, some of which will be exclusive to the HealthTech sector.
How Do Startups Traditionally Source Funding?
Startups can source funding through running crowdfunding campaigns and funding rounds. The first round is referred to as the pre-seed round, which is followed by the seed funding round, where friends, family and other investors can provide funding alongside the founders.
These are followed by series A-D rounds, depending on how much funding a business requires and how far they have progressed. Companies can continue to run additional funding rounds, however most stop at series D.
Venture capitalists frequently invest into startup companies in return for equity within the company. Venture capitalists are private equity firms, functioning in the same way as angel investors. This means that they inject capital into a startup in return for equity shares.
The key difference is that venture capitalists will have access to any liquidated assets if the company they have invested into goes bankrupt. Angel investors are therefore sometimes a preferable option for businesses who do not want to repay investments if the worst case scenario occurs. Consequently, both types of investor are looking to invest in businesses which they believe have the potential to create a large revenue, to generate returns on their investments.
Companies can also generate investments from angel investors and venture capitalists through organising crowdfunding campaigns which usually take place online. As a consequence, crowdfunding campaigns have the ability to reach many people at once; both investors and customers, meaning they are also a great source of advertisement.
More from funding
How Else Do HealthTech Companies Source Funding?
There are various schemes and grants available to support HealthTech companies, such as the East Midlands AHSN Accelerator Programme. Schemes such as these will ask for companies searching for funding to provide a variety of documentation alongside business plans, before electing which companies will receive the grant.
Accelerator schemes such as these can be useful for businesses within the HealthTech industry as they may also offer additional advice, guidance, office space or equipment for companies in the early stages of progression. They are also exclusive to the HealthTech industry, meaning that companies with new and innovative ideas will be likely to stand out.
What Do HealthTech Companies Use Funding For?
HealthTech companies will use funding in a similar manner to startups across all sectors. However, HealthTech companies will be using the funding for additional means such as the purchase of new technology or equipment. In addition to this, companies within this sector will be completing extensive research and trials of any products or services they are offering.
This will be done to reduce the risk of side effects and to ensure that products offered really are preventative, benefitting wider society and improving quality of life.
Funding within the sector can also be for more traditional purposes such as asset purchase, moving out of a startup incubator into new office space or taking on additional employees. All funding should be spent with the aim of progressing the business and creating products which can be beneficial within the industry.
