Structuring Your Digital Health Startup: The Key to Success

"Proper legal and financial structures are the foundation of a successful fundraising campaign."

Structuring your company correctly from the start is crucial for protecting your business, attracting investors, and ensuring compliance with regulatory requirements. Here’s a brief guide to getting it right.

Incorporating Your Company: Incorporate your business as a Delaware C-Corp, which offers significant benefits such as business-friendly laws, tax advantages, and investor preference. This structure provides a solid foundation for attracting investment and scaling your operations.

Corporate Practice of Medicine: Healthcare ventures must comply with corporate practice of medicine regulations, which restrict ownership and control of medical practices to licensed physicians. To navigate these regulations, create a professional corporation (PC) for delivering patient services and a parent company (Delaware C-Corp) for managing investments and non-clinical operations.

Equity Management: Understanding and managing equity is essential. Issuing common shares to founders and employees and preferred shares to investors helps maintain control and incentivize your team. Instruments like SAFEs and convertible notes can be used to raise early-stage capital while minimizing dilution.

Parent Company and Professional Corporation: A dual-structure approach ensures compliance and attracts investment. The parent company handles non-clinical operations and investment activities, while the professional corporation delivers patient services. This setup allows efficient operations and regulatory compliance.

Proper structuring not only facilitates compliance with regulations but also enhances your ability to attract and manage investments. By aligning your corporate structure with your strategic goals, you can successfully navigate the complexities of the healthcare industry and bring your innovative solutions to market.

Interested in Learning More?

This blog post is just the beginning. For a comprehensive guide on structuring your digital health startup, download our free review book. It covers everything from fundraising stages and investor relations to managing equity and balancing clinical practice with entrepreneurship. Take the first step towards transforming your innovative ideas into reality.