Healthcare IT · Hospitals

Can you share an LOI for a SAAS for a healthcare system?

Jim Lahren VP Marketing – Brand Development, Strategic Marketing, Innovation, Digital Marketing, Customer Experience

April 8th, 2016

We just received a verbal commitment for a first proof of concept with a large public healthcare system. Our product is a SaaS. Here are my questions:
1- Can you share an LOI?
2- Any advice on transitioning from POC to purchase in LOC?
3- What is reasonable for cost sharing? We will provide the software for free for the POC but but is reasonable to ask for outside of software?
4- Any lessons learned that you can share as we move to the next step? 

Anurag Mehta VP, Wireless & New Media at NeuStar, Inc.

April 9th, 2016

I don't believe a generic LOI will do you much good. A lot of customer engagements start with a POC, but if  you don't define the end-game upfront, the engagement likely won't yield the end result you are looking for. 

What do you hope happens after the POC? Define it upfront in the LOI.
Are you seeking a customer testimonial? 
Have you established a baseline which you will be measuring against? 
Have you established success criteria? 
Are they measurable and mutually agreed upon? 
What happens if you meet them? 
Is this a paid POC? If not, consider assigning a value to it and suggest that you'll either waive that fee if they move on with a commercial agreement post pilot, or that they'll need to pay that fee if the pilot is successful and they opt not to move forward. 

Lot of puts and takes that need to be considered - creating the LOI is the easy part. Just remember that you'll rarely get that which you don't ask for! I'd recommend focusing on the end game and mapping out how you get there via this POC. That's what the LOI should represent.

Karl Schulmeisters Founder ExStreamVR

April 9th, 2016

If you are talking to a Hospital for a PoC, I doubt you will bet much cost sharing.  They already are committing to paying for your Dev Costs if the POC goes well.

John Currie ITERATE Ventures - Accelerating Science & Technology Ventures

April 10th, 2016


Anurag provides a great response, for which the items are the "meat" of this LOI template ....

  - Parties (their respective businesses & strenghts)
  - Intent / Objectives (why?)
  - Scope:   Big Co will .....       Venture will ....
  - Structure/Compensation/Metrics
  - Term (expectations - beta into contract?)

Be sure it's in english executive-speak.  This is the document the parties will review if something goes awry - not the 15-page document the lawyers draw up from this term sheet.  Good luck - especially with hospitals, usually a slog   :-)

Jim Lahren VP Marketing – Brand Development, Strategic Marketing, Innovation, Digital Marketing, Customer Experience

April 10th, 2016

Anurag and John: Reading your answers, I misstated my question. Here is some additional background information:

- The health system has said they will be our 'beta site'. They are not calling this a POC.
We built the MVP at our expense. We will need to take our MVP and make it enterprise ready. I anticipate that they will want to make some changes to the functionality.
- We committed to providing the software free for the pilot but they are open to discussing picking up variable costs. They asked for an estimate and my sense is there is some flexibility here. The question is, what should we ask for here?
- If the pilot is successful, the ideal case is for them to rollout the tested module across the health system and then test additional modules.
- My focus on the LOI was to commit them in writing while we make the investment to customize and scale the product. As well, I wanted to use this to help us raise seed financing.

This is an area where we don't have expertise and I want to get up to speed before we start talking to attorneys. This is why I thought sample LOIs would be helpful.

Karl Schulmeisters Founder ExStreamVR

April 10th, 2016

Ok that is a bit different. 

One thing to take into consideration with a non-tech environment like a hospital is Support.  You are going to need to have some form of Support SLA.  Depending on the level of "patient critical" information - this may need to be 24x7.   but whatever it is, there will be costs associated with this. 

That is a variable cost that I would ask to have covered.

I'm not sure what you mean by "outside software".  If you mean the cost of software that tracks Support Incidents and similar tactical OpEx costs, you probably can get them to pay for the Per Support Rep costs which will start at around $50/seat/mo up to $200/seat/mo  - and you probably can get them to pay for the Client Side website.

You could of course Roll Your Own using OpenSource  but the old adage of "outsource everything that is not your core business"  is probably applicable.

You should give then a set of initial training for free, but you should have an agreement that they pay for additional training if they bring on staff or expand the program.

I would also offer them a discount for the first year if after the Betta they opt in - IF they give you a publishable case study

I would also give them a certain number of free feature requests, but then have a chargeback for certain types of customization

John Currie ITERATE Ventures - Accelerating Science & Technology Ventures

April 11th, 2016


Your question about what you ask for all depends on what you believe they REALLY need and want.  Have they not been able to find a system on the market that does what they want?

Remember that an LOI is a non-binding agreement that documents the deal in writing.  It's best that the two lead executives on each side do this and handshake over this document!

It sounds like they are willing to give you a test-run, based on some feature or capability that they really need and can't find. (You've got to know what this is.)

This is not about "price" - it's about "value".  You are giving them a trial to prove out some value in a real-world use case - credibility that a startup desperately needs.  You get all their data and a testimonial out of the deal. You have more insight how to price your launch.  They get a tailored, tuned system.

If they pay you for customization/mods - super great.  If not then what?  Same template - write down what each party is committing to do. 

Karl brings up great points about beta operational support details.

"Term" covers how long, and what happens at the end. Should have wording about expectations to convert over to a contract if metrics are being met.  You and your counterpart should be able to go down this 1-page terms sheet and say, "we have a deal".  As the pilot progresses .... get the lawyers moving so the contract is ready.  Hope this helps.