Europe or the US? Which market should UK HealthTech founders focus on first?

Lloyd Price
5 hours ago
6 min read

Europe or the US? Which market should UK HealthTech founders focus on first?

UK HealthTech founders deciding whether they should target Europe or the US first depends on several factors, including market size, regulatory environment, competition, funding opportunities and strategic fit for the specific product or service.

In terms of when exactly to expand to the US or Europe in their growth life cycle also varies, there is no fixed "when." It is normally a confluence of factors, with the rule of thumb being a UK HealthTech company should consider international expansion only when it has achieved proven product-market fit, robust clinical evidence, financial stability and a clear understanding of the target market's regulatory and commercial landscape.

For many, building a strong base in the UK or a selected European country first provides the necessary evidence and resilience before tackling the larger, more complex, but potentially more rewarding, US market.

The Nelson Advisors team share our thoughts below on the two markets in terms of advantages and disadvantages, feel free to contact us to discuss further, lloyd@nelsonadvisors.co.uk.

US HealthTech Market

UK HealthTech companies have shown strong potential in the US, with successes like Babylon, LumiraDx, Huma, and Peppy demonstrating the appeal of UK innovation. However, challenges like regulatory costs, competition, and financial sustainability have led to high-profile failures.

Founders should prioritise NHS validation, niche markets, and strategic partnerships to maximize success. The US market’s size and investment potential make it a compelling target, but careful planning and resource allocation are critical for sustainable growth

Advantages of the US HealthTech market:

Largest Market: The US is the largest medical device market globally, accounting for approximately 47.2% of the world market. This translates to a massive potential customer base and significant revenue opportunities.
High Investment: The US leads globally in venture capital (VC) investment in HealthTech. In 2021, the US saw $31.9 billion in VC investment, significantly higher than other regions. This suggests a more robust funding landscape and a greater appetite for risk and innovation among investors.
Receptivity to Innovation: The US market is generally highly receptive to new technologies and innovation, particularly those that offer significant improvements in care or cost savings.
Established Programs: Programs like the ABHI US Accelerator have a proven track record of helping UK HealthTech companies enter and scale in the US market, providing valuable networks, mentorship, and strategic guidance.
Higher Reimbursement Rates: Attractive reimbursement rates for certain technologies in the US can lead to higher revenue potential.
Competition among Providers: Competition among healthcare providers to adopt new technologies can drive faster adoption.

Challenges and realities of the US HealthTech market

Complex Regulatory Landscape: The US regulatory environment, particularly with the FDA, can be intricate and time-consuming, with specific requirements for different types of HealthTech products (medical devices, diagnostics, digital health tools).
High Market Entry Costs: Establishing a presence in the US can involve significant costs, including setting up subsidiaries, dedicated technology infrastructure, and navigating the complex insurer/payer landscape.
Tariffs: Recent US tariffs on UK goods (a 10% baseline, with higher rates on specific sectors) could increase costs for physical HealthTech products, potentially impacting demand and squeezing profit margins for UK firms.
Vast and Fragmented System: The US healthcare system is highly fragmented, with numerous payers, providers, and state-specific regulations, making market penetration complex.
Intense Competition: The large market also means intense competition from both domestic and international HealthTech companies.

European HealthTech Market

UK HealthTech companies have a strong track record in Europe, with successes like Babylon Health, Patchwork Health, Mendelian, and Elvie showcasing the UK’s leadership in research, investment, and innovation. The NHS provides a unique validation platform, and proximity to Europe’s USD 41 billion HealthTech market (2021) offers strategic advantages.

However, fragmented markets, competition from local giants, and regulatory complexities pose challenges. Founders should prioritise less competitive markets (e.g., Nordics), localise solutions, and leverage B2B models and M&A to maximise success.

Advantages of the European HealthTech market

Significant Market Size: The European medical technology market is substantial, estimated at approximately €160 billion in 2023, making it the second-largest global market.
Growing HealthTech Investment: Europe is the fastest-growing region globally for HealthTech, with significant investment increases in recent years.
CE Mark Recognition (for now): While the UK has its own regulatory framework, the indefinite recognition of CE marking for HealthTech products in the UK can simplify export processes for UK manufacturers targeting European markets, avoiding duplication of effort.
Closer Proximity and Cultural Affinity: Geographic proximity and a degree of cultural similarity can make market entry and expansion potentially easier for UK companies.
Horizon Europe Funding: UK companies can potentially access funding through Horizon Europe, a significant EU research and innovation program, for health-related projects.
Unified Health Data Space: The European Health Data Space initiative aims to create a "single market" in health data, which could facilitate research and innovation across the UK and EU for companies that meet the data standards.

Challenges and realities of the European HealthTech market

Post-Brexit Regulatory Landscape: While CE mark recognition offers some continuity, the UK's departure from the EU has introduced new complexities. UK agencies and institutions are no longer part of the wider European structure, which can lead to increased regulatory burden and slower market access for some products.
Fragmented Healthcare Systems: While the EU presents a large unified market in some respects, individual member states retain control over their healthcare systems, leading to variations in procurement, reimbursement, and adoption processes across different countries.
NHS Barriers to Innovation: The UK HealthTech sector faces persistent regulatory challenges and NHS procurement barriers that can hinder innovation and delay the adoption of new technologies within the domestic market, making it difficult for UK companies to build a strong local base before expanding to Europe.
Lower Reimbursement Rates (in some areas): Compared to the US, some European markets may offer lower reimbursement rates for certain HealthTech solutions.

Recommendations for UK HealthTech founders

For UK HealthTech founders, the decision often comes down to balancing market opportunity with ease of entry and regulatory complexity.

If your HealthTech product is highly disruptive, has a clear value proposition for cost savings, and can navigate complex reimbursement models, the US market may offer faster and larger returns due to its investment appetite and willingness to adopt cutting-edge solutions. Many UK HealthTech companies have successfully scaled in the US, leveraging accelerators and direct engagement with US partners and investors.However, be prepared for substantial regulatory hurdles and significant upfront investment.
If your product aligns well with existing European healthcare systems, benefits from a more harmonised regulatory pathway (e.g., through continued CE mark recognition), and prioritizes building a strong regional presence, then the European market might be a more accessible initial step. Digital health solutions, which may be less impacted by physical product tariffs, could find a smoother path in Europe. Leveraging programs like Horizon Europe could also provide crucial early funding.

A hybrid or phased approach is often the most pragmatic:

Pilot in the UK/EU: Begin with a pilot in the UK or a selected European country to refine the product, gather real-world evidence, and establish initial traction. This can help de-risk the offering before tackling the larger, more complex US market.
Targeted US Entry: If the product has strong US market potential, engage with US-focused accelerators and advisors early on. Develop a clear US market entry strategy, potentially focusing on specific states or healthcare systems initially.
Strategic Partnerships: In both markets, seeking strategic partnerships with established healthcare providers, distributors, or larger HealthTech companies can significantly de-risk market entry and accelerate adoption.

Ultimately, detailed market research, understanding specific regulatory requirements for your product, and assessing your company's financial and operational capacity are crucial before making a definitive decision.

Nelson Advisors > Healthcare Technology M&A

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