Three Rock Health case studies in navigating the startup-enterprise relationship

Wildflower, Omada and Welkin Health have lessons to share about working with large enterprises.
By Jonah Comstock
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Healthcare enterprises and digital health startups have a symbiotic relationship: startups need enterprise partners to test and validate their technology, and enterprises turn to startups to bolster innovation efforts beyond what they’re equipped to do in-house.

According to Rock Health Director of Research Megan Zweig, speaking this week at a Rock Health event in Cambridge, Massachusetts, this relationship shows up in the funding data about the space, with corporate investors involved in a third of all deals in digital health, compared to only about 15 percent in the larger investment world.

“I think for the most part the future of digital health startups really relies on enterprise leaders and I think it’s a pretty profound point,” she said. “Because if enterprise leaders can figure out how to adopt these tools, how to integrate them into what they’re doing, and can scale them, that’s a real boost for the startup ecosystem. And if we can’t, that can actually have a really crushing effect on the digital health startup ecosystem.”

But despite the shared desire for mutually beneficial relationships, when the rubber hits the road those relationships can go sour in a number of ways. Zweig said that according to a Rock Health survey, 40 percent of free pilots don’t convert, which is a worse rate than paid pilots.

“There’s a sense from entrepreneurs that they want to enter into partnerships where there is commitment on both sides. They also told us that 60 percent of digital health CEOs think enterprise companies are a bit too conservative, not strategic enough. But when you cross the aisle, the sentiment is similar. [What] enterprise leaders [are] essentially saying is ‘Countless startups are showing up at our door, they don’t necessarily understand the therapeutic areas that they’re in, they don’t really understand our business model or how they’re going to plug in, and that’s equally frustrating to us.’ … There’s a sense of talking past each other, and similar frustrations throughout the sales process and then also through implementation and scale.”

Learning from successful case studies: Wildflower and Omada

Zweig shared stories from three Rock Health portfolio companies that offer broader lessons around how to make the startup-enterprise relationship work.

The first example was Wildflower Health’s relationship with Dignity Health, which offers an alternative to the traditional pilot. Wildflower and Dignity set milestones ahead of time and committed to trigger wider rollouts when those were met.

“It worked really effectively,” Zweig said. “They launched the maternity application in a single market. By year two they had fully scaled across all 29 hospitals, and they did that two months ahead of schedule.”

The companies also benefited from strong project management on both sides and a focused mission, Zweig said, but the strongest takeaway was the commitment to scale.

“Think about how you can structure a pilot with the intention to scale and have those clear trigger points along the way ,so when you get to those outcomes it isn’t a question mark as to what’s next,” she said.

Another example was Omada’s long-term relationship with Cigna Health, which Zweig put forward as an illustration of how committing to a good partner can set up a startup and an enterprise to grow together. Omada and Cigna started out with small partnerships but, as the technology showed positive outcomes and ROIs, expanded them, to the point where Omada serves tens of thousands of Cigna members, with the goal of serving them all.

And Cigna backed up that relationship with a major investment in Omada, leading its $50 million round in 2017.

“This is a really good example of how investment can accelerate and deepen a partnership, especially when you have that foundation of trust from some of those early wins,” she said.

Welkin’s warning: Balance your priorities

Finally, Zweig highlighted a partnership between Welkin Health and a large medical device company that opted not to be identified. That story was actually a cautionary tale, as that relationship almost fell apart early on, Zweig said.

“At the outset of the relationship, Welkin just went all in,” she said. “They put all their engineering resources on this partnership and after six months they realized it was unsustainable.”

The issue was that Welkin was committing all its resources to one partner’s implementation, rather than building up a core product that could be applicable and scalable to future customers. So the company re-organized into separate engineering teams for the core product and for custom requests.

“For all of you who are in the room that are thinking about how they manage their contracts with these startups, I think it’s important to have the conversation about ‘Yes, what is the custom work we need you to do in order to make this work, but also how do we not overtax your team so you’re unable to serve your other partners and build your own financial sustainability?” Zweig said. “[Because that’s] ultimately going to be important for you to be able to serve all of your customers.”