Hustling in healthcare: “go slow and don’t kill anyone”

Despite being advised to stay well away, VCs still think it’s worth investing in healthtech companies that work with the NHS. We caught up with five of them to discuss why the NHS is an attractive market. 

With thanks to Camilla Dolan (Eka VC), Christoph Ruedig (Albion), Gian Seehra (Octopus Ventures), Dr Louise Rix (Forward Partners), Seb Wallace (Triple Point) for their time and honesty.


When we talk about digital health, we are talking about companies that span the breadth of healthcare and use cases for technology: from automating manual processes in hospitals to machine learning driven decision aids for clinicians. When we talk about the market, we are specifically talking about the single payer healthcare system in the UK unless otherwise stated. Trusts are groups of healthcare organisations spanning hospitals, ambulance services, and mental health, amongst others.

The upshot. Why is the NHS such an attractive market?
  1. The NHS has a large addressable market: 7% of UK GDP is spent on the NHS, with £125bn budget to spend on healthcare in UK alone
  2. Data: better data quality, volume and accessibility in the UK compared to China and US.
  3. Low hanging fruit: lots of potential for innovation
  4. Good training ground: great reputation and credibility
  5. Impact: potential impact on the patient as well as returns is exciting
Would you back companies that have the NHS as their primary customer?  

Christoph: we started with a blank sheet of paper where 10 years ago we were asked where do you want to invest? Back then we were advised not to touch anything that sells to the NHS. We decided to go for it, we put our money where our mouth is, now 2 companies out of our portfolio are solely focussed on the NHS.

Louise: Forward Partners are a £60m fund with an applied VC strategy where we support founders to build their companies across operations, technology, HR, PR, product growth. Yes, we would invest but we would need comfort around market size and sales cycle.  

Relationships over ROI. “If a company understands that then the NHS is almost the perfect client. If they don’t understand that then it becomes an impenetrable wall.”

Gian: a good company is a good company. There are some areas in the NHS where we would be less lenient with the company, namely domain expertise of the NHS and understanding of that. You need robust evidence, sales and distribution. Most health companies don’t have as much as they need in sales and distribution.

Seb: Triple Point are an impact fund and B2B fund, healthcare tech would fit in both. Relationships are paramount, even more so than ROI. Once you’re through the procurement gate where ROI matters, then relationships with NHS CEOs, senior level people, STPs, are fundamental. If a company understands that then the NHS is almost the perfect client. If they don’t understand that then it becomes an impenetrable wall.

It doesn’t come down to whether the NHS is the customer or not, it comes down to whether the company knows how to sell to their customer. That goes across all companies in all sectors. It’s not a benefit or a detriment to having the NHS as your primary client. If you understand the relationships, then you end up with a lot of customers that are sticky, you start to get network effects at the 30-40 Trust level and customer acquisition costs are lowered. One company went from 0 – 150 provider Trusts in a year which is a lot quicker than traditional businesses. On the flip side, another company is trying to get into journals via clinicians. Let’s just say they’ve had one year of learning and they’re going slower.

“Will most health start ups grow 2-3x a year like a consumer business? Probably not.”

Gian: It’s also really understanding what you’re comparing it to. Will most health start ups grow 2-3x a year like a consumer business? Probably not. You can build big businesses by growing slower. These companies will also need to develop their software within regulatory environments, get robust evidence and research, which is slower meaning you can’t expect them to get 2-3x revenues a year. My advice is: focus on the specific market of that healthcare startup, will they grow it to a point, and if it takes a little longer, will they grow to be a £bn+ company?

Christoph: There was a time when life sciences, biotechnology, technology, software investors were under one roof. Most of them split up because tech investors were able to generate pretty good returns whereas most biotech investors couldn’t. That gives you a bit of a flavour of healthcare investing versus technology investing.

In fact, the NHS is just another government agency and I can imagine selling to other government agencies can be equally hard. Albion has invested in service-based businesses and care businesses for some time, we’ve gone out of it now, but I think selling to the NHS is much better than selling to local authorities because local authorities have more acute cash problems.

“It’s just another b2b market, with its ups and downs but if you have a really good product that fulfils a need then it’s going to be successful.”

Camilla: We’ve had mixed experiences; you can make fantastic returns but if you’re selling to the NHS on a traditional structure that can take a little longer. We did see 15x return at MMC but it did take a lot longer. I’m excited about consumer technology which enables much faster adoption, especially if it is facilitated and supported by the NHS. I’m looking to companies coming out of Scandinavian countries such as KRY and Natural Cycles who have fantastic adoption and we’re even starting to see UK based Babylon gain traction.  

“We’re beginning to get consumer behaviour typical of non-health sectors in healthcare and we think that’s when you’ll start to see better outcomes, more consistently.”

 What makes the NHS such an attractive market?

Gian: artificial intelligence. 90% of data is from medical imaging but this is changing, we should start to see paradigm shifts in predictive health. Data volume and quality is the key. I’ve had feedback from UK companies that are in big data and AI saying the volume and quality is so much better in the UK compared to US and China. This means better specificity and sensitivity when you train algorithms. China is trying to build companies with massive amounts of funding, but companies are having issues with bad quality data and lack of a longitudinal linkage across that data.

“The NHS has centralised data allowing UK companies to have a much better competitive advantage.”

Christoph: size. 7% of GDP spent on healthcare in the UK. This is below average compared to the rest of Europe and US. It’s a massive market but incredibly hard to penetrate. We haven’t seen much of the centralisation of the NHS, most companies end up selling Trust by Trust, CCG by CCG. The NHS is a highly fragmented customer. I remember our digital health chairman saying, “all roads lead to pharma”. A lot of cash is available in pharma, these companies don’t know how to deploy this cash, they don’t want to put it in R&D as that’s high risk and they’re happy to pay for it. Successful exits have really been to pharma. Having said that the NHS is a great training ground, it clearly has reputation and credibility, and acts as a stamp of approval which will help companies.

Louise: potential for innovation, there’s a lot of low hanging fruit in the NHS which has a high potential impact. It’s hard to get excited about net a porter for pets (even though it could be highly profitable).  

Seb: budget. £125bn is spent on healthcare but the detriment of the NHS is a highly fragmented sell. The benefit is that once you’re able to connect with a STP/CCG/Trust at a senior level you often get inbound sales. The NHS is the largest single payer healthcare system in the world, if the digital push continues, we might hopefully see decreased aversion to profit being made in healthcare. What if there was a digital sandbox affiliated with the NHS that leverages the connections across all CCGs and Trusts?

“Health tech could be the fintech of the next decade in the UK if government is able to push the NHS to procure digital goods in a more efficient way.”

I invest in health tech with the thinking that it is inevitable that healthcare will become more digital. There’s a chronic lack of radiologists and there are companies like Kheiron is helping with diagnosis of breast cancer, and Skin Analytics working on melanoma detection. There are all these opportunities in the UK where the healthcare system is feeling the cost pressure.

Once we’ve got a system where digital procurement is more efficient, then the NHS becomes the best market in the world, even compared to the US where they’re quick to adopt but highly fragmented.