From Hospitals to Homes: AppliedVR’s B2B2C Distribution Strategy

Most healthtech startups choose between selling to institutions or going direct to consumers. In a recent Category Visionaries episode, AppliedVR founder Matthew Stoudt revealed how they crafted a hybrid approach that turned institutional relationships into a pathway to home use.

The Hospital-First Strategy

When AppliedVR launched in 2015, they had a clear vision: “For too long, I believe in America, we have forced patients to go and find care versus bringing the care to where they are,” Matthew explains. But technology limitations meant they couldn’t go straight to consumers.

“The headsets at that point in time, on the one hand, you either had a headset that was the oculus, that was the quest that was connected to a laptop, was completely unscalable, or the other extreme was Google cardboard, where you’d put your phone in this little cardboard thing and be like a viewfinder and you’d want to throw up after about 30 seconds,” Matthew recalls.

Building Institutional Credibility

Their solution was to start with top hospitals. “We literally picked out the top 20 hospitals in America and said, we’re going to do something with each and every one of those hospitals,” Matthew shares. This wasn’t just about sales – it was about “building credibility, building our body of evidence, driving innovation, and building our brand.”

The Evolution to Home Use

The hospital relationships provided crucial insights that shaped their eventual home strategy. “All of that work that we did helped inform everything from user experience, what worked from a patient perspective, for engagement, what worked for HCPs, what do they care about, how do we continue to build our name and brand,” Matthew explains.

Finding the Right Distribution Model

Today, their distribution model has evolved significantly. “Now we are very squarely focused on going the prescription route where you get a doctor to write a script, it’s covered by insurance, and then we send it to the patient in their home,” Matthew notes.

This shift wasn’t without challenges. As Matthew points out, “When you’re thinking about building a novel product like this into the marketplace, we talk about the three E’s of design. Number one is it’s got to be easy to use… if there’s friction in the equation, the patient’s never going to use it.”

The VA as Strategic Bridge

The VA has proven to be an ideal bridge between institutional and home use. “When I think about what your product market fit is, the VA for the world of this idea of immersive therapeutics or immersive medicine, I couldn’t think of a better entry channel for us,” Matthew explains.

The numbers support this strategy: “There’s about 6 million vets that are suffering from some form of pain. 1.5 million of them are deemed to be moderate to severe pain sufferers.” Moreover, the VA was culturally ready, with “over 100 and 2170 facilities that are actually using some form of VR as medicine.”

Looking Ahead

The ultimate vision remains making VR “a healthcare hub in the home” – though Matthew acknowledges this is “probably more in the eight to ten year time frame.” The goal is to make VR therapeutics “part of standard of care… where this becomes one of the first things that a doctor prescribes versus one of the last things.”

For founders navigating B2B2C distribution in healthcare, AppliedVR’s journey offers valuable lessons. Sometimes the path to reaching consumers directly requires first building strong institutional relationships and credibility. The key is viewing these institutional partnerships not just as revenue sources, but as learning opportunities that inform your eventual consumer strategy.