What Makes a Successful Startup?

According to a new extensive report by CB Insights, a successful startup it takes (1) time; (2) lots and lots of capital; and 3) a business model selling to enterprises, not consumers. That’s interesting to me, especially as we see and report on all of the consumer health companies getting off the ground. Consumer health doesn’t’ mean non-B2B, and I’ll have some examples below on this.

The report, which is general rather than health focused, looked at the 432 startups CB Insights could find that have valuations of over $100 million and that haven’t gone public. I don’t have $6,000+ to pony up for the actual report, so I can’t see a list of the companies, but I imagine a small minority are health related.

Off the top of my head, in the health space this would include:

  • Castlight. There is no way it could raise $85 million and not have a valuation over $100 million.
  • ZocDoc. The rumored valuation that investors gave ZocDoc when it raised its last round of financing was $700 million, which seems absurd to me, but I’m not an investor.
  • PracticeFusion. Another company with investments high enough and good enough traction that it would have to be justified to have a nine-digit valuation.
  • AirStrip. AirStrip raised several strategic rounds of investment this year and has had impressive customer and product growth.
  • Doximity. My assumption here is solely based on raising $30 million. The valuation for Doximity may be less, though.
  • Kinnser Software. Based on raising $40 million.
  • GoHealth. Based on raising $50 million.

Even though the report is not health focused, I think there are good lessons to be learned from it and applied to health. Investments in health technology have increased considerably over the last few years because of the government interest, reform, and infusion of public money. It’s somewhat telling to look at what has been working in other industries to see where health tech might be in a few years.

Timing. Many of the companies on the list have been around for five years or so, and some longer. It takes time to grow and that’s even more true in healthcare, whether companies are building products for consumers or for enterprises. Healthcare does not have any overnight success stories, but if it did, iTriage would probably be the poster child. Its timing was perfect in launching and riding the growth of smartphones and Internet search for health information. Having companies like Aetna looking to expand its patient engagement offerings certainly helped speed up the timeline to acquisition for iTriage.


Funding. I was floored by how much money companies had to raise to get onto this list and into this report. The average amount raised from this group of companies was $85 million. That seems astounding to me, but maybe that’s because we hear more about the few overnight successes (like Instagram and Pinterest) than we do about the majority of companies that need time and money to grow.


Business Models. The overwhelming majority (at 80 percent) of companies in this report are B2B. Of the remaining 20 percent, about 40 percent are e-commerce companies. The rest, about 6 percent of the companies on the list, are pure consumer companies that make money selling direct to consumers or through advertising. Despite the success of companies like Twitter, Facebook, and, to a lesser extent LinkedIn, that is not a model that is easily duplicated. This is more true in health, where engaged users and large numbers of users upon which the success of Twitter and Facebook is based upon are a lot harder to find.

Investors obviously pay attention to this stuff. I think most of them knew all of this without this report putting numbers behind it. It’s important for founders to keep these facts in mind if they are looking to raise money because investors will certainly want to understand how a new, pre-revenue company is going to make money and give the investor a return. Having an offering hospitals, payers, pharmacies, or pharma will pay for is certainly an advantage.

Some consumer facing companies like ZocDoc and iTriage are really B2B. ZocDoc’s public face — its website — is all about consumers and helping them find providers, yet the company makes money by charging providers (not consumers) $250 per month (is this still the cost per provider?) to have schedules listed. iTriage charges health systems for premium listings, integration of patient registration, and listing of wait times, but consumers are the ones that download and use the app.

Rock Health published a good report last summer on the state of investment in health tech companies. It’s not as detailed as the one from CB Insights, but it does break out investments by B2B and B2C, finding that B2B represents about 60 percent of investments in terms of dollars invested. This number is not as high as the B2B proportion in the CB Insights report, but that’s likely a matter of stage of the companies.

My bet is that Rock’s report has more seed- and growth-stage companies on the B2C side that are going to fail well before they raise more money and get to a valuation above $100 million. Another advantage of the Rock report is that it’s free.

Travis Good is an MD/MBA involved with health IT startups. More about me.

  • Chris Wasden

    I think you are getting some of your numbers mixed up. For example the Zocdoc number is their valuation, not the amount of capital raised. Also, I think you need to look at a lot of others that have had more modest capital raises, like Ginger.io, or what iTriage did prior to being sold to Aetna. You will find that these were much more modest capital raises and they are achieving meaningful and in some cases significant milestones in the classic fast, frequent, frugal, failure models.

  • Travis Good

    I agree Chris. You definitely don’t need a $100 million valuation to be successful.

    Re ZocDoc, the $700 million is the rumored valuation, not how much the company raised. I said that in my post but my run-on sentence might not have been the most clear.

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