Fear and speculation of a recession (which some analysts believe is already here) has many entrepreneurs and would-be founders worried. Venture capitalists have already warned their portfolio companies that they may need to make their last round of financing last far longer than anticipated.
At the same time, it is important to remember that some of the world’s leading companies were start-ups during previous economic downturns (GE, Microsoft, Google, Netflix, Airbnb etc).
Q2 2022 hedge fund letters, conferences and more
What can entrepreneurs learn from these companies? What are smart founders doing now to position themselves well for a recession? Sprinter Health CEO and Co-Founder Max Cohen offers insights on what the recession might mean for healthcare companies in particular, including his advice on the current climate for start-ups, and perspectives on the outlook for digital health.
Views On Current Climate For Entrepreneurs
- "There will still be plenty of money to go around for the good companies, and innovation won't slow down," (Cohen still receives cold outreach investment e-mails, though he estimates the volume is down about 20% overall.)
- "Rising valuations will be slowed a bit more than they may have been six months ago, but you're still going to see the top-quality companies get the oxygen they need to breathe."
- “There's also something to be said for the room to stand out in an economic downturn. For instance, companies like Uber and Slack were started at or around the time of the 2008 recession."
Perspective On Outlook For Digital Health
- It's not great, but not so bad for Digital Health - While there's been a wave of digital health layoffs this year, including Carbon Health and Ro, the year's full projected venture funding estimate is about $21 billion. That's substantially lower than record-setting 2021, where digital health start-ups hauled in $29.1 billion in funding, according to Rock Health data. But it is still solid: 2022 funding is higher than both 2020 and 2019 totals.
- Cohen is optimistic about Sprinter Health's (and other home-based services providers) prospects because the company helps healthcare providers and systems bridge staffing gaps and bring the last mile of telehealth services to the home affordably. That bodes well for healthcare companies focused on home-based care.
Advice For Business Leaders And Entrepreneurs
- Keep your eye on the long-term view
"Early on, we spoke to our investors about not building a company that was designed to capitalize on current conditions, but rather to last in 2024, 2029, 2036. Be deliberate. Look closely at your PMF (product-market-fit). Healthcare in particular is not something you take a Silicon Valley approach to."
- If you are capitalizing on existing trends like telehealth, make sure you are adding clear value
Sprinter Health is built to take advantage of the growing popularity of telehealth while also making telehealth work better. "Telehealth, plus a provider like us, can capture data and get you [about] 80% of the value of an in-office visit. We help get 20% of a patient health data out of the home. That's much more convenient for the person at home, and it saves money for whoever has to foot the bill."
- Push for growth, but adjust the pace
Before the current economic climate, we were thinking about 100% growth — in terms of headcount — by the end of 2022. We've revised that to about 60%. We're still going to be dramatically larger than what we were, but we did scale back in terms of how many people we want to hire."
