Traction is great. But if your unit economics don’t work, you’re just accelerating toward a cliff.
In digital health, where margins can vanish behind compliance costs, clinical onboarding, or sales cycles longer than a Netflix series, VCs want to know: can this business actually make money?
Here’s how to understand—and clearly present—the unit economics that matter when raising capital.
1. What Are Unit Economics (In Plain English)?
Unit economics = what it costs you to serve one customer vs. what you earn from them.
At its simplest:
- CAC (Customer Acquisition Cost): How much it costs to land a customer
- LTV (Lifetime Value): How much that customer brings in over their lifecycle
If LTV isn’t at least 3x CAC? Red flag.
But in digital health, we go deeper.
2. What Makes Unit Economics Harder in Digital Health?
Unlike SaaS:
- Your sales cycle may involve 4+ stakeholders
- Your onboarding may require compliance training or clinical workflow redesign
- Your buyer may not be your user (or even your prescriber)
- Churn is complex—driven by clinical outcomes, not just UX
Translation? CAC is often underestimated. LTV is often overestimated.
3. The Metrics That Matter
a. CAC (Customer Acquisition Cost)
- Paid ads, sales team comp, marketing spend
- Travel + conference costs (yes, those too)
- Pilot programs, onboarding incentives
Break this down by channel. If you don’t know your CAC, say how you’re measuring and reducing it.
b. LTV (Lifetime Value)
- Recurring revenue per user or client
- Retention rates (monthly churn, annual renewal)
- Upsell potential (new features, expanded usage)
In B2B, show logos that have expanded. In B2C, show month 6 and 12 retention.
c. Gross Margin
- Revenue minus COGS (cost of goods sold)
- For digital health: support costs, clinical staff, licenses
Many VCs want to see 60–80% gross margins, especially in software-heavy models.
4. Don’t Just Say “We’ll Figure It Out Later”
Mr. Min-Sung Sean Kim sees this all the time:
- No CAC estimate
- LTV based on 5-year fantasies
- Gross margin buried or ignored
It’s okay to be early. But you must show the framework:
- How are you testing CAC?
- What signals suggest retention will be high?
- What does the margin look like now vs. at scale?
This tells investors: you think like an operator.
5. B2C vs B2B vs Payer Unit Economics
B2C
- CAC can scale quickly—but churn is brutal
- Must show low CAC channels (referrals, SEO, community)
- Retention and habit-forming UX are key
B2B (Hospitals, Clinics, Employers)
- CAC is sales-driven: slow, expensive, high-touch
- But LTV is high with long contracts and expansion
Payer
- CAC = biz dev, consultants, partnerships
- LTV = per member per month (PMPM) revenue, ideally with performance-based upside
Each model has tradeoffs. Your job is to know yours and defend it.
6. When to Show Payback Period
If you’re post-revenue, include payback:
- Payback Period = CAC / monthly gross profit per customer
- VCs want to see payback under 12 months (ideally 6–9)
Don’t fudge it. But if you’re early, show how you’ll improve it.
7. Benchmarking Helps (But Be Realistic)
Benchmark vs similar companies:
- Public comps (Teladoc, Doximity, GoodRx)
- Past funded startups in your niche
Avoid magical thinking. Don’t use Ro as your CAC benchmark if you’re selling to German hospitals.
Final Word: Math Is a Story
Unit economics isn’t just a spreadsheet. It’s proof that your business survives contact with reality.
When you walk into a VC pitch, you want to say:
“Here’s how we make money. Here’s how we keep it. And here’s how that scales.”
And if you don’t have all the answers? Show the map.
To sharpen your narrative, check out:
He has invested in startups including American Well, Neuronation, Mimi, and most notably mySugr – which was recently acquired by Roche. Min-Sung is also a contributing writer for mediums including TechCrunch and Tech.EU and studied Business Economics at Witten/Herdecke, Harvard, St.Gallen, and in Seoul.