The hidden potential of UK health innovation
My initial observations of the healthcare startup scene on returning to the UK
After a decade living in California, I’ve moved back to the UK. The most common reaction when I tell people I meet here is an incredulous “why?”. But we’re loving it: the food is great, the landscape is more beautiful than I remember, and it’s a joy to be close to family and friends again. My wife, who is from southern California, is even enjoying the rain - “it’s such a relief to not be in a drought!”
With the benefit of ten years of distance, it’s also clear to me that the UK has huge untapped potential. The familiar British self-deprecation has been noticeably (and understandably) amplified by years of grind, from Brexit to lockdowns to relentless political turmoil. At the best of times we’re guilty of talking ourselves down as an increasingly irrelevant rainy island. But now we seem at risk of becoming fully blind to the quality we have on these shores, and our potential to carve out a new leading role for ourselves on the world stage.
One area that’s particularly salient to me is healthcare. The NHS is known and respected globally, as a model for equitable healthcare delivery. For my wife, who has always lived in the US, it’s borderline magical. However, it’s clear to all that the NHS is in a perilous state. Rather than a reason to be disheartened, I believe that this consensus across the political spectrum presents us with a generational opportunity: to make the radical changes necessary to safeguard the NHS for the next 75 years, and reestablish the UK as a global leader in healthcare.
A key component of this will be the effective adoption of innovation, fueled in part by a thriving domestic startup ecosystem. Since I’ve been back I’ve spoken with thirty or so UK healthcare startup founders, and here are my initial observations on the state of play today:
1. We have no shortage of fired-up entrepreneurs
Compared to ten years ago, the number of founders tackling healthcare is an order of scale larger. Their passion is apparent and infectious: I’ve met clinicians stepping up to fill gaps they’ve seen in care, ex-patients channelling their frustrations into building better solutions, and passionate outsiders taking an optimistic leap into the unknown. This groundswell of entrepreneurial energy is an exciting asset, and will be a crucial ingredient of our future success.
2. Our startups skew early stage
There are very few UK healthcare startups that have achieved impact at scale. The overwhelming majority I’ve met are early stage, still seeking true product market fit.
The main driver of this is the lack of a clear path to reimbursement by the NHS for the majority of innovations. Leading innovation ecosystems like Silicon Valley benefit from a virtuous cycle: as startups scale up into mature businesses, operational knowledge and capital is generated that then seeds the next generation of startups. Without a clear and timely route to market, in a sector dominated by a (notional) single buyer like the NHS, it’s very challenging for early stage startups to find a viable commercial model and grow, so this cycle never gets going. One effect of this is a systemic deficit of operational knowledge on how to scale innovation.
3. The US market looms large
Due to this lack of a clear domestic route to market, almost every UK startup I’ve spoken with intends to enter the US market. There is an apparent consensus between founders and investors that the US is a critical step in building a sizable and impactful business, and a planned US market entry is often a necessary condition of VC funding. However, it’s also clear that the average level of knowledge of the US market, across both founders and investors, is low.
This creates a precarious situation: increasing numbers of UK-founded, VC-backed healthcare startups being drawn to the US, but without the knowledge and networks they would need to maximise their chances of success.
So the overall picture is one of huge potential, not yet fully realised. Let me know if I’m missing anything, or you disagree. I’m developing a perspective on what we need to do to address the challenges above, and believe it’s within our power to establish the UK as a leading exporter of healthcare innovation. But that’s a topic for another post.
Welcome back Peter . Your enthusiasm and drive was infectious when we were NIA fellows together … and glad to see nothing has changed 😎 catch up soon Neil G