Funding has not been in short supply for healthcare startups in 2021.
Private funding broke record after record in the first nine months of the year, with fourth-quarter numbers poised to be some of the highest the industry has ever seen. And now that healthcare startups have war chests readily at their disposal, they’ll need to grow just as quickly to meet their newly hungry investors’ expectations.
For most companies, that translates into hiring sprees. They have plenty of cash available to offer competitive salaries and benefits to prospective employees or lure them away from other industries like technology. It’s relatively common for startups to start with small teams and wait until after they’ve raised large outside funding rounds to hire more aggressively.
That has created what investors are calling healthcare “talent wars.” Since so many companies raised so much money this year and have had to calibrate their growth projections for 2022, companies are frantically trying to hire many of the same people.
“It’s a challenge for every single one of our companies,” January Ventures cofounder and managing partner Maren Bannon told Insider.
Although startups have enough money to throw at highly skilled employees, particularly engineers, the industry’s reputation as slow-moving and not necessarily cutting edge on the tech side of things has substantially limited the pool of engineers from which many digital health companies can hire. Although the move toward remote work has expanded that pool slightly beyond where a company is based, it has only added to the overall competitive hiring market, according to 7wire Ventures partner Alyssa Jaffee.
“Recruitment has been really something that is unbelievable because you can hire someone from anywhere, but it also makes the war on talent incredibly fierce,” Jaffee told Insider. “It’s a blessing and a curse.”
Startups can’t grow quickly without hiring new employees
Investors told Insider that companies that fail to hire quickly enough for key roles like sales, engineering, and executives risk stalling out after a record-breaking period of growth.
Any slowdown in the industry could eventually lead to longer-term contractions in private funding if investors are getting the types of returns they expected from
healthcare companies
. Some tech firms like SoftBank and Tiger Global Management may slow down the pace at which they invest in healthcare companies, digital health or otherwise.
To get ahead of that scenario, healthcare firms like Oak HC/FT are expanding their own teams dedicated to helping portfolio companies hire new employees.
Cofounder and managing partner Annie Lamont said the firm now has four professionals on the dedicated recruiting team, up from none just a few years ago. It helps the firm pitch itself to companies but also ensures that those investments may have fewer roadblocks when they go to raise additional funding down the road.
“They’re used to people coming to them and but now it’s like us in venture, you have to sell them. I almost don’t care what level somebody you’re trying to attract is, you really have to sell them and you have to move quickly,” Lamont said.
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