Exploring the Link between Innovation and Investment Success in Healthcare

Investment Success in Healthcare

In the ever-evolving landscape of the healthcare industry, innovation has always played a pivotal role. From the discovery of penicillin to the advent of robotic surgeries, revolutionary advancements have continually transformed the way we approach medical care. Yet, these innovations are not just medical triumphs; they represent significant economic opportunities as well. There exists a compelling correlation between innovation in healthcare and investment success. A study published in the Journal of Health and Medical Economics underscored this by highlighting that nations with the highest investment in healthcare innovation invariably reported superior patient outcomes and more streamlined healthcare delivery. This link is further emphasized by Deloitte’s 2020 Global Health Care Outlook, which projected that global healthcare spending would surge at a CAGR of 5% from 2019 to 2023. A significant chunk of this anticipated investment is expected to flow into groundbreaking solutions. Mirroring this trend, Statista indicated a burgeoning digital health market, which soared from $78 billion in 2017 to an impressive $96 billion in 2021. Such staggering growth can be attributed to cutting-edge innovations, including telemedicine, wearable health technology, and AI-driven diagnostics. As we delve deeper into the subject, the intertwined relationship between healthcare innovation and its investment attractiveness becomes undeniably clear.

The Dynamics of Innovation in Healthcare:

The impetus for innovation in healthcare is multifaceted. While technological advancements play a significant role, they are only one piece of the puzzle. The underlying drive often stems from evolving patient needs. As the Harvard Business Review articulates, patient-centric care, characterized by tailored treatment plans and proactive patient involvement, is a predominant force propelling healthcare innovation. This shift not only results in enhanced patient outcomes but also facilitates more cost-effective healthcare solutions. Furthermore, global health crises, such as pandemics, invariably underscore the urgency for swift and efficient healthcare innovations. While recognizing the promise and potential of novel advancements, it is essential to address the inherent challenges in seamlessly integrating these innovations into prevailing healthcare systems.

But who champions these innovations? The answer lies in a combination of nimble startups and established behemoths of the industry. The Global Startup Ecosystem Report of 2021 provides a testament to the burgeoning role startups play in this arena. With healthcare startups amassing a whopping $31 billion in funding, it’s evident that investors are increasingly enthralled by cutting-edge health tech solutions. On the flip side, established companies, leveraging their vast resources and networks, act as critical catalysts, either by pioneering innovations themselves or by fostering and integrating breakthroughs from younger enterprises. Together, they form the dynamic tapestry of innovation in today’s healthcare ecosystem.

Challenges and Barriers to Investment Success:

The journey of innovation in healthcare is rarely straightforward. The pathway to turning a groundbreaking idea into a market-ready solution is fraught with numerous challenges. Regulatory intricacies present one of the most formidable barriers. John H Abeles, CEO at MedVest Group Inc, US, stated during a recent healthcare-focused Club gathering, “A significant deterrent to biopharmaceutical investment is the cumbersome nature of our approval systems. The continuous establishment of challenging barriers by regulatory bodies often hampers progress and innovation.” In some instances, these complexities are so daunting that they inhibit startups from bringing their innovative solutions to fruition. Another significant challenge emerges in the form of ethical considerations. As technologies burgeon and take transformative leaps, ethical dilemmas become more pronounced, especially when these technologies directly impact patient lives and health outcomes. The temporal dimension presents yet another hurdle. Developing novel healthcare solutions, especially drugs, is an endeavor that demands immense patience. PhRMA (Pharmaceutical Research and Manufacturers of America) points out that the gestation period for a new drug stretches over a decade. To put this into perspective, clinical trials, which form just a segment of the entire developmental journey, consume an average of 6-7 years. But even after clearing these challenges, there remains the final test of patient acceptance. A revelation from a PwC Health Research Institute report exemplifies this trust chasm. Despite an FDA stamp of approval, almost half of the consumers expressed hesitance in using an AI diagnostic tool, unless advocated by their trusted physician. This sentiment underscores the paramount importance of not just innovating but also fostering trust and acceptance in the healthcare consumer base.

Lessons from Failed Investments:

The landscape of healthcare innovation, though marked by triumphant breakthroughs, is also littered with ventures that failed to capitalize on their initial promise. A pivotal factor underpinning many such missteps is the absence of market fit. As highlighted by the Harvard Business Review, an innovation’s inherent brilliance doesn’t guarantee its success. Rather, it must resonate with and address genuine market needs. Joshua McClure, Chairman at Maxwell Biosciences, US, remarked during our recent healthcare forum, “In the realm of innovation, it’s crucial to remember that not all that glitters is gold. I recall attending a major virology conference, surrounded by the brightest minds in biology. Yet, to my astonishment, I didn’t encounter a single groundbreaking idea. True investment success demands fresh, transformative ideas that genuinely address market needs.” This sentiment is further accentuated by a telling statistic from CB Insights, which states that 42% of startups falter due to a sheer lack of market demand. The misadventure of Theranos stands out in this context. Once considered a beacon of Silicon Valley innovation, it later unraveled due to its inability to deliver on its technological promises, despite securing over $400 million in investments. Ventures outside the direct purview of healthcare, like Quibi, further echo this sentiment. Quibi, armed with a staggering $1.75 billion investment, had to shut down within a year of its launch. Its rapid ascent and subsequent plummet underscore the importance of rigorous user research and a deep understanding of market needs. Both tales, Theranos and Quibi, serve as reminders that while innovation is seductive, true investment success is found at the nexus of groundbreaking innovation, market fit, and genuine user acceptance.

Post-Investment: Nurturing and Scaling the Innovation:

Once an innovative solution secures investment, the real challenge begins. This phase – which spans from nurturing the innovation to ensuring its successful scaling – demands as much attention, if not more, than the initial investment phase. Savvas Neophytou, CIO at Deepbridge Capital LLP, UK, said at a recent healthcare PIFW that, “A significant shift in the industry dynamics is the off-balance sheet development predominantly observed in big pharma companies. This strategy has inadvertently placed a greater risk burden on smaller entities. These nascent companies often find themselves deeply tied to their flagship product, with their entire fate resting on its success. Their inherent limitation in executing true portfolio management which accentuates the importance of meticulous post-investment nurturing and scaling.” At this juncture, the investor’s role transforms; it’s no longer just about providing capital but becomes a partnership characterized by deep involvement and guidance. Drawing from a compelling study by the MIT Sloan Management Review, it’s clear that startups and innovative ventures benefit immensely from investors who are actively engaged. This engagement isn’t solely about monetary backing. Strategic counsel, operational insights, and sometimes even hands-on involvement are paramount. Such multifaceted support can serve as the bedrock for a startup, enabling it to navigate the choppy waters of the business ecosystem. Yet, even with funding in place, scaling remains a formidable challenge for many. Startup Genome paints a telling picture, noting that a staggering 70% of startups encounter scaling issues post-investment. These hurdles often spring from misaligned strategies or unforeseen operational challenges. Without apt guidance, even the most promising ventures can lose their way. This highlights the indispensable role of investors as not just financiers but as mentors and strategic allies. By providing consistent and tailored guidance, ensuring alignment with evolving market needs, and instilling a robust operational framework, investors can pave the way for their funded innovations to flourish and achieve lasting success in the marketplace.


In the nexus of healthcare, the interplay between innovation and investment is undeniable. While innovations have the power to redefine patient outcomes and reshape the industry, their full potential is harnessed when backed by informed and strategic investments. As healthcare continues to evolve, this symbiotic relationship will remain pivotal, offering a brighter future for patient care and profitable opportunities for insightful investors. To be able to have first-hand access to this and much more information, be sure to register for our next healthcare event at: https://pif.events/registration-form/