Why Telemedicine Startups are in Trouble
(I’m still interested in the topic beyond a simple explainer.)
Despite the hype, software-only telemedicine startups are not necessarily good investments, as there’s large (and growing) competition from video platforms (Zoom, Webex, etc.) and existing hospital information systems (they evolve, too, adding communication features).
It’s hard to differentiate the “doctor on demand” apps from each other, as they try to access the same pool of doctors and health professionals. [MK: Hospitals have an upper hand in having their own non-shareable pool of doctors (the moat) and consistent service delivery.]
Similar to Uber / Lyft, telemedicine lowers certain medical costs, thus eroding margins for everybody, which can only be offset by either differentiated offering (see above) or the scale, which startups are having more and more troubles to achieve. Monetization opportunities for software-only telemedicine startups end pretty much after the initial consultation and the customer is lost afterwards.
So the focus for such startups effectively becomes on retaining a customer, which means using all the black magic of online marketing, retention and reactivation, as well as possibly going a slightly offline route (opening small medical offices) following up with patients after the initial consultation.
Higher patient monetization can also be achieved by adding e-pharmacy (legislation permitting) to the mix when a patient can be prescribed medications and either going to a pharmacy themselves or have the medications delivered to them.
Managing chronic diseases is probably the most revenue-friendly application of telemedicine because of the repeated interaction with a doctor and the ability to offer existing or custom monitoring hardware (hardware-as-a-service).
Parallel Bubbles (2020-11-13)
Some irrational bubbles occur when one firm’s growth is perpetuated by the growth of firms relying on its outputs (say, in 1998 it was Yahoo and a bunch of startups that grew by paying Yahoo for traffic). Same can be said about industries. The outputs can be raising asset prices when a bunch of business models / industries (construction, real estate) rely on them to deliver returns.
The key factor here is that abrupt stop / reversal of the main growth driver is able to bring down not just one firm/market, but lots of supplementary markets, too. Also see the “jumping on someone’s locomotive” below. And the other way around, of course. So the stability of the system is based on the parallel growth of a main product (cars, for instance) and the supplementary products/services (say, fuel / charging stations).
An example of a failed synchronized bet is the fibre optics infrastructure that was delivered years before the emergence of video as the most consumed content, and the existing technologies at the time didn’t require and were not prepared to pay for all the available bandwidth.
Byrne gives a number of examples, I’ll list only one here: Nvidia keeps growing, as the demand for their GPUs doesn’t seem to stop: increasingly, new GPU-intensive AI/ML applications are appearing demanding even higher performance.
Status preservation and enhancement (2020-11-09)
MK: please don’t be surprised that some of my summaries focus more on my thoughts on the author’s subject and less - on the summaries themselves.
I’ve always believed and preached that any resource the firm has abundant access to is used inefficiently. However, there’s a symmetrical counterargument from Byrne saying that if a complementary product to yours becomes abundant, your product’s value to users increases accordingly. It is slightly different from the “jumping on someone’s locomotive” (like socials apps jumped on the growing Facebook platform), because the platform is older than the apps, and in the case of complementary product this is not a necessary rule.
Many investments are first and foremost a status symbol (think of owning shares of the BTS band’s Korean parent, or India’s Reliance, or, god forbid, Tesla). You are what you invest into as long you make other status-seeking people aware of this.
Investment into collectibles (which by definition are in scarce supply) is all about the status – and fractional ownership of collectibles creates a wider pool of people with bragging rights. Thus, the game is upped, and more and more money needs to be invested to stand out.
Status seeking among angel investors works in the favour of startups (more competition —> higher valuations). There’s also a phenomenon that regardless of the dilution, early stage investors are more interested in the bragging rights of having invested into Airbnb than in the quick look at the cap table.
It’s harder to keep the status intact without close interpersonal communications; Zoom weakens the ties regardless of the amount of time spent “together”.