A new generation of fast-moving, privately-owned digital health providers has sprung up across Europe over the past decade, promising to revolutionise national healthcare systems that are creaking under the strain of ageing populations and surging costs.
But the dramatic fall from grace of Min Doktor, once considered one of Sweden’s hottest healthtech startups, is a striking tale of just how difficult it is for companies to scale their businesses and deliver on that promise in such a highly-personalised and regulated sector.
Founded in 2013 by two general practitioners turned entrepreneurs, Magnus Nyhlén and Martin Dahl, Min Doktor first entered the healthcare market by working with insurance companies. It enabled them to fund their platform development without the need for venture capital finance and soothe the concerns of public health institutions.
Its initial focus on providing cheap and easy-to-use messaging services between patients and doctors proved cheap, effective and popular.
By mid-2015 the company was able to raise €2m from angel investors, including businessman Christian Jansson. Jansson, who together with Nyhlén owned a majority of the company, is mostly known in Sweden as the chairman of postal services PostNord and his previous involvement in the pharmacy chain Apoteket.
Neither of Min Doktor's founders wanted to take on organisational roles so they hired the charming and well-regarded Charlotta Tönsgård as chief operational officer. Less than a year later she took on the role of chief executive.
Tönsgård, a real techy, had previously been working within business development for the Swedish UI developer The Astonishing Tribe in South Korea. After the company was sold to Blackberry she was the chief executive at the biometric company Fingerprint Cards for a short stint before being offered a position at Min Doktor.
The following year Min Doktor raised another €5m, with EQT Ventures acting as the lead investor.
“What we liked with Min Doktor is that it was founded by a practitioner who had seen the problems from that angle, and that it had the most effective way of providing care that solved the issue of reducing the time GPs spent on patients,” said Lars Jörnow, EQT Ventures partner who joined the Min Doktor’s board.
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Bickering and a fired CEO
In spite of the promising start Min Doktor ran into trouble at the end of 2016 when Tönsgård was abruptly forced to step down and immediately left the company.
The official reason was that she was lacking “the necessary qualifications to lead a growth company into the next phase”. But her abrupt departure appears to have been triggered by a personality clash with Jansson, at this time a member of the board, and differences over the direction of the company.
“If they had asked me to stay until they found a replacement I would have. There were no limits to my loyalty to the company and the team back then,” Tönsgård said in an interview with the Swedish tech site Di Digital in 2017.
According to Sifted’s sources the company had not begun a search for a new chief executive before Tönsgård’s departure and it took some time to land a replacement.
In spring 2017 Min Doktor offered the job to Laurens Leurink but he did not join until September because of contractual commitments to his previous employer, travel technology company Amadeus. In the interim, Fredrik Meurling, the well-liked chief finance officer, stepped into the role but lacked the strong leadership that Tönsgård had shown.
“Charlotta was great at getting people on the same track and on her side. Some of that disappeared with her and in the vacuum the organisation sprawled somewhat,” a Min Doktor employee told Sifted.
More “musical chairs”
More uncertainty followed as Jansson was forced to leave the company and sell his shares due to a conflict of interest covered heavily by the Swedish media — Jansson was also chairman of Apoteket, the Swedish pharmaceuticals company, that collaborated with Min Doktor.
Jörnow, the investor from EQT Ventures, stepped in as chairman to provide some stability. But having taken €30m in venture capital the company was growing fast and had more wannabe bosses than workers with a rapid rotation of roles. “It was a bit like the children’s game musical chairs, one had to make sure to have a seat at the table at all times,” says one ex-employee.
Despite the turmoil in the boardroom most employees still considered Min Doktor a good and friendly place to work and hopes rose that it would acquire a new sense of direction when the experienced Leurink joined as chief executive. The company was by then in need of strong leadership. Therefore the decision of Leurink, who at first had intended to relocate to Malmö, to continue living in London and work in Malmö every other week was seen by some employees as a bad move.
The need for physical presence and a promising deal
As the company began to chart a new strategy it quickly became clear that it would need to develop a physical presence to complement its digital business. When it launched Min Doktor was a purely digital company, charging local districts about €180 per patient interaction.
But healthcare regulation, split between national and regional agencies, began to evolve as more services moved online. The rising cost of those services prompted regulators to cut prices to around one-third of their previous level.
This move did not come as a surprise to Min Doktor but it did push it towards building up a physical business. “After being involved in Min Doktor for a couple of years, we could see that the business was in principle developing the way we wanted,” said Jörnow. “The growth in terms of patients was good. But what we realised was that if we wanted to play an important part in the system we needed both a physical and a digital presence.”
Min Doktor had no experience of running physical facilities. But it hit on a promising solution by striking a deal with ICA, one of Sweden’s biggest grocery chains, which also runs its own banking services and pharmacy chain, Apotek Hjärtat.
In September 2018, Apotek Hjärtat acquired 42% of the Swedish operations of Min Doktor for SEK 335m, approximately €35m. The pharmacy had already opened a handful of clinics across the country, valued at €20m, whoes operations were handed over to Min Doktor as part of the deal. The goal of the investment was to accelerate the opening of 80 physical clinics in Sweden. To date, 13 clinics have opened and seven more are planned before the year-end.
As a result Min Doktor secured a strong position in the Swedish healthcare market. But the ambitions of some of Min Doktor’s backers, such as EQT Ventures, were even bigger. They were intent on expanding the business across Europe, but this was not something that Apotek Hjärtat wanted to pay for.
As a result, in August 2018, before signing the deal with the new shareholders, the company was split between a purely Swedish company, which continued to carry the name Min Doktor, and Docly, a tech platform that would provide technical and medical services to Swedish business but also seek to conquer new markets across Europe.
Conquering Europe = really hard
Min Doktor’s staff were split between the two companies, with the chief executive Leurink spearheading Docly’s expansion across Europe, targeting Denmark, the UK, Holland and France.
But Docly was not the only Swedish digital care provider that was scanning the rest of Europe.
Kry, or Livi as it is known abroad, had already expanded into Spain and Norway and it was intent on launching its services in France and the UK.
However, according to founder Magnus Nyhlén, after piloting its services in the UK, France and Holland Docly quickly discovered just how difficult it is to build a pan-European healthcare business. “Healthcare differs from country to country and to create something huge and then to scale it is really hard if not impossible within healthcare, due to the local regulations and traditions,” Nyhlén told Sifted.
Docly concluded that the UK market was the most promising and closed down its pilot projects elsewhere. “We have decided to focus on the UK for now, due to the fact that it is there the income and compensation models are most developed,” Nyhlén said.
But there was also another reason why the focus shifted to only one country – lack of money.
Turned down by investors
To accelerate Docly’s expansion plans, Leurink had been out and about across Europe trying to raise funds. But investors turned him down. Questions about the valuation of the company or the strength of the team may have played their part, but, according to Nyhlén, it had more to do with the lack of compensation models in Holland and France.
“From the investors' point of view, it was too early to say if any of the markets were about to become a huge success. If you look around, it is only in Sweden where there is a working model for compensation,” said Jörnow of EQT, who had been advising on the fundraising.
However, some other healthcare providers have had more success in markets that Docly deemed too difficult. In France, Doctolib has been steadily building a management software and medical teleconsultation business. Since January, it has treated 40,000 patients over the phone and been reimbursed by French social security.
Docly’s Swedish competitor, Kry (Livi), has also had more success in attracting investors to fund its European expansion plans. In the summer of 2018 it raised €53m from investors, including Accel, Creandum and Index Ventures, at a valuation of around $400m.
EQT Ventures declined to make a follow-up investment in Docly because it did not want to turn itself into a private equity buy-out company. “We are not a majority investor and we follow that principle pretty hard. We want to be one of several backers of fast-growing companies. Had we done another round with Docly, I believe we would have become majority owners,” Jörnow said.
“That companies change their strategies according to how much money they can raise is much more common than what is commonly known.”
Despite its restrained pan-European ambitions, Docly is intent on building up its UK business. At the beginning of August the company registered with Care Quality Commission, the UK’s healthcare regulator, and officially launched as a digital healthcare provider a week later.
The startup has also been able to attract some heavy hitters. Andy Williams, former chief executive of NHS Digital, is chairman of its board. But it has less than a dozen employees at its office in the UK and for the moment is only taking on patients registered at selected clinics in the Leicester area.
Cutting down on ambition also meant cutting down on staff
The scaling back of Docly’s ambitions meant it lost one-fifth of its staff, many of them hired for its pilot projects in Holland and France. It also prompted Leurink to quit as chief executive to be replaced by Roger Jansson, the Swedish chief operations officer. According to Nyhlén there was no pressure from the board for Leurink to leave.
“When we decided to focus on the UK, he felt that it was too small a task. That is my understanding of it. His ambitions and earlier roles have been in multinational companies, and suddenly it was a smaller tech company with a focus on one country. It wasn’t challenging enough,” Nyhlén said.
Although Leurink had extensive knowledge of multinational companies like Amadeus and Booking.com he lacked the experience of running a company with tech at the core of the business.
Employees say that he had not given technology the priority the company needed and did not even list the role of chief technical officer (CTO) on its website.
“Docly could be off to a great start but with a weak position of its tech, and that it does not even display the role of the CTO on its website, that surely means that tech is not as highly valued within the company?” said an ex-employee to Sifted.
When Sifted asks Nyhlén, Jörnow and the chief executive about it the answers were conflicted. At the same time, the diminished ambitions of the company have sapped staff morale.
“The vision of the company that I signed off on for a few years ago is gone. I am not sure what the goals are now or that I even agree with them,” one employee told Sifted. “I doubt that I will still be here in six months and I am not the only one thinking in this way.”