Leading a growth technology company in 2023 is a lot trickier than it used to be. A recession is looming, interest rates are high, and the window for the IPO market seems to have closed for the time being, as 2022 saw a 90% razor sharp drop in IPO proceeds compared to 2021. The appetite for risk among investors looks smaller than ever.
This economic downturn did not spare digital health, which experienced a post-Covid boom like no other innovative field, but saw a 38% drop in investments and a series of post-IPO value destructions in 2022. The companies best positioned to make an impact in 2023 are those who deliver clinical value, can navigate this turbulence, adapt to the new economy, and thrive with limited resources.
Transitioning from the strong economy we were used to—with 2021 seeing the fastest growth rates in decades—to the current situation will be challenging for many companies. The lush green meadows that fed the would-be tech unicorns have become arid deserts. To adapt to the new terrain, we need a new framework. Abandoning tech fairy tales is a good place to start. Instead of aspiring to become unicorns, we need to start thinking like camels.
So-called unicorn companies are topline-focused and built to pass the $1 billion valuation, rapidly burning cash as they blitz scale. Unicorns don’t have a detailed and verified roadmap to profitability in the early stages of their existence, as their innovation could be—down the line—disruptive to their fields and applicable to many products. They run fast and break things on the quick path to early adoption and an IPO to fuel further growth and a path to profitability.
On the other hand, camels can move both fast and slow. They endure challenging and extremely long roads by sustaining themselves on the most minimal resources. The idea of camel and unicorn mentalities came from my experiences during the early weeks of the pandemic. When clinical trials were repeatedly delayed by multiple quarantines, it was clear that companies that chase consumers and those who take the long road by introducing clinical-grade, regulated products were two completely different creatures. The disruption mentality is ill-fitted for digital health. When it comes to patient safety, we don’t break things. When clinical trials and dialogue with the FDA are involved, we need patience and transparency.
Not only that, anyone with experience in digital health solutions knows that developing the technology—brilliant as it may be—is only the first hurdle. Getting it adopted by overburdened doctors and diverse groups of patients while adhering to HIPAA and other rules and regulations are the final—and often more challenging—hurdles.
Camels can acclimate to the challenges and the bumpy roads they face—long legs keep a distance from hot desert sand, while long eyelashes offer protection from the sandy storms. As long as the expert consensus holds that this year will be a recession year, an adaptive, long-term vision that demonstrates how their company will fend off competition and liquidity challenges is what CEOs will need in 2023. In this dry season, the IPO market will most likely be closed for most companies—taking flexibility away from CEOs and making investors even more meticulous in their due diligence. A clear and feasible market adoption strategy is number one on their wish list.
This also means thinking about one’s competitive edge. If your innovation’s adoption could be endangered by the entrance of a tech giant in your field, as they can do it better and stronger (and cheaper), you need to identify the elements that only you can provide from walking the long—but rewarding—road. Founders that adopt the camel mentality will be much more prepared for the process of regulatory approvals and clinical trials, and much better positioned to solve stubborn problems like lack of access to prescription drugs, and low adherence to important medical tests.
Thriving in a desert climate also requires forgoing the winner-takes-all mentality and targeting different pain points as a group, while complementing each other through channel partnerships. Given the complex and fragmented health system in the United States, and the hurdles on the way, the ability of a small—or giant—tech company to reshape the system according to its platform is close to nonexistent. Therefore, health tech companies are inherently driven to collaborate and play across the field of their innovation, which can lead to broader adoption and distinctive contributions to the health system’s real needs. More collaborations means more access to health innovation which is better for the industry—and better for society.
The pandemic has left its mark on the world and the global economy, and has taught us that while we can’t always anticipate the obstacles down the road, a long-term plan and delivering real value will help us adapt more easily. Many companies aspired to become unicorns, but to move ahead now, they must become camels.