I'd say that the potential digital health startups that do their due diligence end up picking another industry. So it's only the guys who failed to do it who end up starting companies.
The VC startup model relies on finding white space and occupying it. Heavily regulated industries (like health care) tend not to have a lot of white space because the boundaries are rigidly defined by law. It's not a good fit for health care.
I guess that depends on how you define it. If by "digital health" companies you mean medical industry companies, you may have a point. But part of what is wrong with American health care is that health care is a polite euphemism for medical care. Grocery stores do not get defined as being in "health care," though eating healthy is clearly a cornerstone of good health.
But I think it is possible to want to do something health related, conclude that the medical industry is a nightmare, and find another approach.
They are largely one and the same; because as soon as you start claiming your product or service can improve a user's health, you're subject to the regulatory scope of the FDA.
I mean, you can claim that things like MyFitnessPal are health apps, but it's still a fine line you have to walk where you can't give any advice, all you can do is observe and report. Try to go any further than that and you're providing diagnostic services, which makes you subject to all sorts of laws. The FDA and DHHS are very aggressive in protecting their regulatory scope.
That does not mean HIPAA impacts grocery stores, restaurants, etc.
Though if you search for "HIPAA and grocery stores" it does pull up Von's page on HIPAA related to the fact that stores can have a pharmacy window in them:
So, yes, while anyone selling food will be regulated by existing food safety rules/organizations -- including the FDA -- that does not prevent someone from saying (to themselves) "I would like to make the world healthier. I don't think becoming a doctor is The Answer. I think The Answer is running an organic restaurant."
And please don't argue with me that how you conceptualize it does not matter. You cannot tell me that Chipotle, with its "Food with integrity" concept and supporting policies, is the same as any other fast food taco joint.
(I ate there consistently for a long time to get well after doctors wrote me off for dead. That did not cause Chipotle to suddenly have to comply with HIPAA.)
Well that's because a grocery store isn't a health care company: it's a retailer. You can also buy very unhealthy things at the grocery store.
What you describe is absolutely the wrong way to start a business: you should look at the type of business you want to open (in this case, a restaurant) and look for white spaces. Opening an organic restaurant is only a sensible idea if the market would respond to an organic restaurant and the category isn't already over-served. If that overlaps with your passion, then great!
Never mind there is no scientific evidence saying organic food is better for you - this is where "health" delves into pseudoscience, and the entire reason the FDA exists.
What you describe is absolutely the wrong way to start a business
It seems to me that what I am describing is exactly what (at least some) disruptive businesses -- like AirBnB -- do: Redefine the problem in order to find a white space because the thing they are doing did not exist until they did it, so there isn't really any competition.
Right; but that doesn't work in health care because of the regulatory environment (which in this case, is absolutely necessary). It's not like the hotel business where if you have a bad experience, Airbnb can just solve the problem with money. There is a long history of misleading health claims on products that has existed for almost all of human history; so any product you claim improves the health of the user has to be backed up by data.
"Redefining the problem" is marketing speak for finding a way to trick consumers into using your business model. It's fine in the case of something like Uber where you're short-circuiting a bunch of disparate and protectionist taxi laws, but federal regulatory agencies are rarely fooled by such tactics, and aren't shy about labeling you and your company as scam artists while sending a federal prosecutor at you if you try.
Basically, if you're gonna fuck with the government, make sure you fuck with municipal and state governments. The feds don't take crap, and will steamroll you if you threaten to circumvent their jurisdiction or deceive them in any way. This happens to hundreds of companies a year (just look at Theranos and 23andme for some high-profile examples), so they're definitely not bluffing.
The VC startup model relies on finding white space and occupying it. Heavily regulated industries (like health care) tend not to have a lot of white space because the boundaries are rigidly defined by law. It's not a good fit for health care.