Generally speaking, compliance is a barrier for a healthcare startup. Regulations may increase the costs to develop a new product a lot in order to satisfy its requirements and, in addition to this, slow down the release of the product until an authority approves.
However, now that I work on compliance, such as HIPAA, FDA Part 11, and ISO, I have a different impression about it. Regulatory compliance can actually drive product development and mitigate risks of startup.
What is the biggest risk of startup? I would say it is product-market fit. When a startup invents a new product to solve a problem, there must be a potential customer who finds that the problem is worth being solved and the solution is attractive to pay for. Additionally, , the number of customers and the total budget should be big enough to make the startup grow.
Building a startup is all about finding a product-market fit. However, even a customer cannot define the requirement of the product because the product is completely new. For example, people couldn’t know how iPhone was before it was born.
One popular method to find a product-market fit is a lean approach. The approach is an incremental process to develop product in a small chunk of functions to frequently get feedback. You avoid investing too much time and money in functions that customers don’t need.
The lean approach is great, but still entrepreneurs struggle with the product-market fit and many startups fail. They wish somebody would define the list of requirements for a new product.
Here comes regulatory compliance! For example, HIPAA (Health Insurance Portability and Accountability Act) is an American regulation that provides data privacy and security. It mandates to have administrative, physical and technical actions to protect customer’s data. Another example is FDA Title 21 Part 11 for electronic records and electronic signature. It defines testing process or approval procedures. In addition, there are a lot of regulations and standards to comply with for healthcare startups such as ISO, GDPR (EU General Data Protection Regulation), EU-US Privacy Shield and many others.
When we talk to customers after being compliant with regulations, their reactions were positive. Why? Because they can trust even a small startup as they trust the regulations. Compliance can be the one final push for customers at the end of a sales process. Regulations bring more benefits than harms to healthcare startups.
This nevertheless cannot happen in an industry without strong regulatory compliance. Imagine a calendar app, a dating app, or any other service. There are no guidelines. Entrepreneurs have to try every single specification of the product until they find a product-market fit. This causes a high chance of failure for startups.
My idea to consider regulatory compliance as a driver of product development may be applied to funded startups only. Compliance does accelerate product-market fit, but startups still need some time and cost to wait for the approval of authority or auditors. Startups at pre-seed round stage have to find a customer who doesn’t require compliance and seek any help from healthcare accelerators or industry mentors.
Fortunately, Mint Labs closed its seed round and can spend time and money to comply with some regulations. I hope that the compliance tasks will drive a product-market fit and make more customers happy with our product.