Why are startups and corporates not a good match today?

Most of the partnerships between healthcare companies and digital health startups fail. One of the main reasons is the unmanaged mismatch of expectations although there is an easy fix.

Most of the top 50 pharma, medtech, hospital chains or research institutions worldwide have closed partnership deals with digital health startups to support innovations over the last years. Still, it seems that both sides have not found their way to talk and work together. Only 13% of partnerships between healthcare corporates and digital health startups are claimed to be a success (R2G Digital Health Partnership Study 2023).

Professionally managing expectations would be a good starting point to increase the share of successful corporate – startup partnerships in digital health. It is normal that both parties want to get something else out of a collaboration, but different expectations have to be expressed, acknowledged and managed. The larger the expectations mismatch the more important the management of expectations becomes, and the mismatch between startups and corporates in digital health partnerships is large.

According to R2G’s global partnership survey, corporate expectations are access to new technologies and products (67%), new business models (48%), data and valuable insights (43%).

On the other hand, startups are looking for funding (62%), increase in sales (50%) and access to new distribution channels (46%).

Corporates seem to be happier with the meeting of their expectations compared to their counterparts. The satisfaction rate is significantly higher on their side. More than half of the companies seem satisfied with the access to new technologies provided by startups (57%). After all, half of the companies that have entered a partnership with one or more startups see their expectations in terms of developing new business models as fulfilled.

Startups seem to not get what they want from the partnerships with e.g., a pharma, or MedTech company. Startups do not seem to get their expectations of financial support (19%) or sales push (27%) met. Only 18% of the startups see the desired access to the partner’s sales channels as fulfilled.

If it is the case that, despite the mostly intensive selection talks that take place before a partnership, most of them are not viewed as successful and the expectations have not been fulfilled, at least for the most part, then it is obvious that the process of initiating and the management of partnerships must be fundamentally redesigned.

Improvements should begin in three phases of the partnership.

I. Partner scouting and selection:

The startup scouting of companies is often too imprecise and spontaneous. Accelerator events, conferences or online database queries often do not offer the opportunity to explore the expectations of both sides in a partnership. New partner scouting and evaluation platforms such as R2GConnect.com offer the opportunity to detail corporate’s own expectations and to query those startups and to include them in the selection and evaluation.

II. Partnership setup:

Most companies use a standard template for initiating the partnership. This usually includes a period of time (e.g. 3-6 months), services (e.g. creating a business plan, access to experts, money). In order for the partnership to succeed, however, both sides should respond much more individually to the respective needs and expectations at the beginning. Even before the actual conclusion of the contract, both sides should design their partnership model together (preferably with the help of a moderator). The process for this typically takes no longer than 4 weeks and offers the possibility of significantly shortening the subsequent drafting of the contracts. Research2Guidance typically captures and describes all relevant aspects of the partnership in a term sheet, which flows directly into the contract and thus saves months of contract design.

III. Partnership monitoring:

Why should a partnership between a startup and a pharmaceutical company, for example, be any different than any other project? What both sides intend to do at the beginning does not necessarily have to happen that way. It is much more likely that the partnership will develop differently than planned due to changes in the regulatory environment, competition or internal changes in responsibilities. That is normal. What is not normal is that very few companies track the changes and make them visible in order to react to them. Partnership monitoring is only carried out by 47% of the companies. This means that more than half of the companies start a partnership and do not have a tool to see how the goals and expectations are met. Timely countermeasures are not possible. At the start of the partnership, both sides should also agree on the KPIs, frequency and governance structure of ongoing monitoring. No different than other important projects.

Solutions to better manage the different expectations are available. Greater application would also significantly increase the success rate of partnerships between startups and companies in the healthcare industry.

R2G has been supporting companies in setting up and managing partnerships between startups and companies since 2010.

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