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Top five factors for health tech start-ups

Creating a “health tech” start-up company can be a very exciting venture, however, there are some considerations that should be thought about from the beginning, here are the top five:

1. The big question, to contract or not to contract

Just like any business, contracts will need to be negotiated (preferably in writing) with each investor, collaborator, supplier, logistics provider, manufacturer and customer.

Establishing who your intended market is at an early stage is paramount when developing and creating your health tech product. Perhaps you intend to sell direct to consumers, to public sector organisations (i.e. the NHS) or to private businesses.

You need to comply with the consumer’s statutory protections in the case of selling direct to consumers. The statutory protections include restrictions on how much you can limit your liability and enhanced cancellation rights. Written in plain English, the consumer terms will need to clearly set out the consumer’s legal rights and obligations.

Where your health tech product is targetting the NHS, a different approach will be needed. Contracts with the NHS and the government are normally very detailed, are on the purchaser’s standard terms and are subject to public procurement regulations. Your product will also need to meet certain criteria, including NHSX’s Digital Technology Assessment Criteria and NICE’s Evidence Standards Framework for Digital Health Technologies.

There are many collaborations in the health tech market, it is common and therefore important to make sure that each party’s rights are clearly set out in the contact. The party responsible for each stage should be considered (parties should play to their experience and strengths). Who will own, or be able to use any resulting rights should also be considered.

2. Intellectual property protection….get protected

You can protect the intellectual property (“IP”) in your products with various different methods, it mostly depends on the section you are protecting. Here are some of the main factors to consider or most health tech companies:

Brands: Having a strong image and brand is paramount, and you should always ensure that a clearance search is conducted when you are considering the brand name. This will confirm that the name isn’t already being used and that you will not infringe any existing trademark. You should also seek to register your logo and brand name to prevent imitators from exploiting any goodwill you have created in your company.

Designs: Registering a product design is a similar process for registering a trademark; these registrations will ensure your design rights are protected to prevent unwanted copycats. Some inventions could meet the criteria to be patentable; for example, they have an inventive step, they are novel, are not too obvious and have an industrial use. It can be a lengthy and expensive process to obtain a patent; however, it allows you the full rights over your invention. Many start-ups rely on confidentiality during the beginning stages because of this. Copyright protection in the UK automatically protects items like the design of your website/app and any source code created within your software.

Data: Reliance is placed on large amounts of data within health tech businesses. As such, it is possible to protect the specific database rights so that the efforts put into your structure are fully covered. The protection could cover anything from algorithms or research data to patient data.

3. Abiding by the law

The health products and health sector regulatory framework can be complex.

Because of its complexity, it is therefore important to figure out whether to apply for the regulations early on. For example, health tech products could be classified as ‘Medical Devices’ and if this is the case, you may need to abide by certain requirements and standards. When a product or app meets the ‘medical purpose’ criteria, the medical device regulations apply. The device usually has to fulfil a particular medical function or impacts the treatment provided (for example, the app is designed to diagnose, treat or prevent any illness or disease).

Understanding the regulatory divide is important for start-ups, they should either:

  1. observe the requirements (which includes the registration process and evidencing its trustworthiness); or
  2. apply a consistent approach to be certain that the business doesn’t accidentally cause the new product to be regulated. E.g. by alleging that the product performs various functions via your website, labelling and other marketing material. Simply by showing a disclaimer that the device is not a ‘medical device’ isn’t enough to escape the regulations.

4. The value of data

We mentioned above that health tech companies usually rely on a huge amount of data. This becomes more complex as normally, in order for the data to be valuable, if generally includes a lot of personal data, including health data and more sensitive information.

Every new start-up developing a health tech product should have personal data protection at the forefront of the mind. The new product should incorporate a ‘privacy by design’ method, which means that personal data protection is a consideration from the beginning, not just an afterthought.

Product developers should think about the kinds of personal data that the product will require, how it will be used and stored and whether it will have to be shared with third parties (such as healthcare professionals). All data protection requirements will need to be adhered to.

5. The money is what matters

One huge consideration for a start-up business is whether they require external funding. This may be from debt or equity. Debt funding will have to be repaid, however, founders remain in control. Whereas, equity funding normally isn’t necessary to repay, but it can mean that the founders may need to relinquish some control over their business. It can often be difficult to secure funding as a start-up business, therefore, it’s worth considering a health tech specialist lender.

If your plan is to use equity funding, the UK government has a funding scheme that supports start-up businesses during the COVID-19 pandemic. There is also the Future Fund, both of which are a great starting point for funding.

The Future Fund offers Government-backed convertible loans that can range between £125,000 – £5 million to early-stage companies. The business must show that the money is matched by private investors and that certain criteria are met.

Other considerations for sources of funding for health tech start-up are:

  1. Coronavirus Business Interruption Loans (CBILS);
  2. Innovation Grants;
  3. Venture capital funds; or
  4. EIS and SEIS investment from angel investors.
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