Healthtech is undoubtedly one of the most dynamic industries on the planet.
Groundbreaking start-ups are using technology to drive innovation in every corner of the sector, from scaling up medical device production to improving diagnostic tools with artificial intelligence.
Unsurprisingly, these high-speed innovations are also attracting a huge amount of VC funding for healthtech companies.
While this is great news for ambitious start-ups looking to grow, rapidly increasing funding also comes with its own challenges.
To sustain success, healthtech businesses need to manage their funding correctly. They need to make pivotal decisions based on data-driven forecasts, develop robust long-term strategies, and ensure that every penny is working as hard as possible to drive growth.
This is where an experienced CFO is crucial.
But the role of a modern healthtech CFO is changing.
While ‘traditional’ CFO skills are still vital, the ever-changing healthtech sector demands new expertise to keep up. Agile, future-facing healthtech companies need an equally agile, future-facing CFO - and understanding this is key to success.
In this post, we’ll look at how the CFO role is evolving for modern healthtech businesses - and highlight a few of the fundamental skills needed in this fast-moving industry.
Which traditional CFO skills remain important in healthtech?
Although the role of a healthtech CFO is evolving, it’s important to touch on a few fundamental skills that will always be key for growing businesses.
While healthtech is incredibly exciting, start-ups still need solid financial foundations if they want to sustain long-term growth, develop new products, and expand their offering.
Below are just a few ‘traditional’ skills that any healthtech CFO will need to bring to the table:
1. Accounting
Accurate and reliable accounting is critical for any business, but it’s particularly crucial in the healthtech market - especially when fundraising is ramping up.
Keeping track of finances enables healthtech start-ups to maintain positive cash flow, offer transparency to stakeholders/investors, and allocate funds with confidence.
However, healthtech is a uniquely complex industry with distinct challenges. An effective CFO will need to consider various external partners (e.g. insurance companies, manufacturers, pharmaceutical businesses) when monitoring accounts. They’ll also need to keep precise, organised financial records when dealing with regulators/lawmakers.
2. Budgeting
Effective budgeting allows start-ups to maximise their financial resources and ultimately increase profitability. This is a key responsibility for CFOs in any industry, and healthtech is certainly no exception.
A capable CFO will help healthtech companies to clearly understand their financial situation, manage expenses, prioritise resources, and set aside funds for different scenarios. By putting a clear and informed budget in place, a CFO enables a healthtech company to grow with confidence.
3. Fundraising
Investment is the lifeblood of growing healthtech businesses, and a huge priority for any CFO will be leading fundraising efforts.
CFOs need to be able to secure funding, manage investor relationships, and navigate complex term sheets. They’ll play a pivotal role in helping start-ups attract investment and drive significant growth, and this is a core responsibility for CFOs in every sector.
(As a result, many CFOs will also look to build an extensive network of investors and VC funds. This can be a game-changer for healthtech companies, allowing them to tap into external support for advice, networking, and direct investment.)
New healthtech era = New CFO skills
While the CFO responsibilities we’ve just outlined are still crucial, a new era of healthtech businesses requires a new generation of CFOs.
Modern healthtech companies are constantly pushing for innovation, pursuing aggressive growth, and managing increased VC funding. For these start-ups, a traditional CFO isn’t enough. They need adaptable, dynamic finance leaders who can keep up with a fast-evolving market.
Here are some of the new areas of expertise that CFOs will need to cover in a VC-driven healthtech sector:
1. Financial reporting
Reliable, timely financial reporting is a core skill for CFOs. But in the world of healthtech, CFOs need to deliver reports that are more accurate (and action-oriented) than ever.
Detailed financial reports allow healthtech companies to monitor performance, remain compliant, and identify opportunities/risks. These reports will cover everything from revenue to expenses and liabilities, and are crucial for financial stability.
(Financial reporting is particularly important for SaaS start-ups in the healthtech space, as they’ll need to track key metrics such as customer acquisitions, retention, and churn rate.)
However, modern healthtech CFOs need to take a far more proactive approach to financial reporting. Many healthtech start-ups are expanding at warp speed, and consistent reporting allows them to remain focused on their key objectives and aware of any emerging issues.
To put it simply, accurate financial reports (that lead to effective decision-making) often separate successful healthtech start-ups from those who fail to achieve longevity.
2. Financial modelling & forecasting
With so many healthtech start-ups expanding at frantic speeds, the ability to map out different financial scenarios (and identify opportunities/roadblocks) is vital.
Modern CFOs will be expected to build data-fuelled financial models that enable healthtech founders to analyse their growth trajectory and explore potential exit options.
As such, they’ll need to understand how to:
Use both historical data and fresh insights to identify financial patterns
Create reliable financial models for scenario planning, risk analysis, etc
Leverage multiple pieces of software to build versatile models
Present models/forecasts to key stakeholders in a clear, informative way
3. Data analysis (with a focus on key healthtech metrics)
While CFOs have always been tasked with data analysis to some extent, the new generation needs to take this role a step further.
The healthtech landscape is constantly shifting, meaning CFOs have to remain agile. They need to consistently use data to inform both short-term and long-term thinking.
Modern CFOs should be constantly reviewing key metrics that are essential for healthtech companies. This includes everything from efficiency-led metrics (e.g. ROI, CAC) to any other business metrics (e.g. DAU/MAU, LTV) that paint a picture of performance.
Most importantly, CFOs will need to transform this raw data into actionable insights for healthtech start-ups.
They’ll need to be in-depth data experts who can pull statistics from different sources, make connections between insights, present data in a visually compelling way, and help healthtech companies to boost profitability.
4. Understanding the healthtech landscape
While this may sound obvious, modern healthtech CFOs need to have a deep knowledge of the sector - not just a surface-level understanding.
Healthtech is incredibly complex, and start-ups need an experienced industry professional guiding their financial decisions if they want to succeed.
Effective CFOs have to grasp the intricacies of healthcare regulation, the dynamics between different partners/vendors, and most importantly, the best way to drive growth in an intensely competitive market.
They should be immersed in the world of healthtech, which includes understanding key competitors, macro/micro market trends, and consumer behaviours. Instead of just being a finance function, a healthtech CFO will need to be a core strategic partner for founders.
5. Business leadership and management
Modern CFOs will also be expected to take on more leadership responsibilities in a healthtech start-up.
They’ll be tasked with growing an effective and efficient finance team, which includes:
Identifying hiring needs - and working closely with recruitment partners to meet them
Supporting, training, and encouraging team members to improve performance
Streamlining and optimising internal processes to increase team productivity
Crucially, this means healthtech CFOs don’t just need to bring number-crunching skills to the table. They should also understand how to build a qualified finance team, get the best out of others, and deliver exceptional performance from a leadership perspective.
The healthtech industry is evolving at an astounding speed, and the role of a healthtech CFO is evolving equally quickly.
While traditional CFO skills (e.g. accounting, budgeting, reporting) remain important, the new generation of healthtech start-ups needs a CFO who can spearhead fundraising efforts, leverage complex data, drive consistent growth, and establish a high-performing team.
With this type of modern CFO in place, a healthtech company can take full advantage of increased VC funding to maximise profitability and skyrocket long-term growth.
If your company lies within the health and biotech space and you’re keen to build out your finance team, don’t hesitate to get in touch with James ([email protected]) for expert support.
