I recently discovered an article authored by two members of a venture capital (VC) firm where they discuss how important it is for med-tech startups to determine their potential ROI. I was encouraged because their take reflected much of what I believe and have talked about previously. The authors are Sofia Guerra and Steve Kraus of the firm Bessemer Venture Partners, and the title of the article is “How to scale a health tech business to $100 ARR million and beyond” (the full article can be found here ).

The article contains a lot of information and discusses several key components for successful scaling, but when they mention ROI, they state their belief in no uncertain terms:

“We encourage portfolio companies to invest early in measuring clinical and financial ROI, regardless of whether they are tech-enabled services or a healthcare SaaS business. Clear proof of these metrics requires time and dollars invested, but will pay future dividends.”

They go on to give examples of how clinical and financial ROI calculations benefited the firms who invested in their development, and they talk about ROI with the same reverence and appeal as they talk about more traditional metrics like Customer Acquisition Cost, Net Dollar Revenue Retention, or Lifetime Value. That tells me that they think highly of what ROI can do for startups as they navigate the early stages of funding and launching.

I’m not particularly concerned with the authors’ delineation between “financial” and “clinical” ROI (for the former they give examples of ER visits prevented and clinician hours saved as well as revenue generated; for the latter they simply indicate that it relates to “clinical outcomes…more broadly” without any additional detail), because it’s really just semantics. I’ve typically considered ROI to be only a financial calculation, but I’ve also pushed for the inclusion of non-monetary costs and benefits to be included as part of the interpretation. This non-monetary component is probably similar to what the authors are referring to when they talk about “clinical ROI,” although my definition includes not just clinical components but also things like quality of life, caregiver burden, health equity, or even hope (yes, hope has value, as shown in these two peer-reviewed articles: Reed 2021 and Lakdawalla 2012).

Notably, when discussing ROI the authors clearly specify their preferred perspective (the customer) and scope (<12 months) for ROI calculations. Those who are familiar with my work know that I suggest that the very FIRST things one should try to ascertain are the scope and perspective, regardless of the type of value assessment one is pursuing. The fact that the authors specify these components indicate that they understand that value in healthcare – ROI or otherwise – cannot be calculated until one is clear about two questions: value to whom? and over what period? The same product, device, or intervention can have different value for patients than it does for providers, payers, or others; and the best improvements are ones that are sustainable, and therefore may produce value for not just months but years, perhaps.

Funding organizations, whether they are VCs, angels, or private equity (PE) firms, obviously consider a myriad of metrics, signposts, and criteria as they consider which opportunities to pursue. But the fact that ROI receives a specific mention in an article about how to scale a health tech start-up to $100 million in annual recurring revenue suggests that it has gained favor as an important metric for at least some of these funding organizations. New organizations should take note: understanding the value of your product, device, or solution is critical for encouraging adoption and securing funding as the entire healthcare industry continues to move toward value-based systems.

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