Why Direct-to-Employer is a GTM Trap in 2025 (And What to Run Instead)
Why “go direct to employers” still seduces founders—and how to know when it’s a strategic GTM wedge vs. a multi-million-dollar trap.
A friend called me this morning. She’s whip-smart; we’ve worked together, and I know her background: success with jumbos in enterprise environments. Success leading GTM for a condition-focused startup as the first commercial hire on the board.
She’s being recruited to lead commercial at a health tech startup that pairs a device with a fairly broad, condition-based care model.
VCs are funding this play (device + care wraparound) a lot these days. Corp dev teams, too.
The GTM motion is (you guessed it): hit self-funded employers, get jumbos in the pipe this year, close one next year.
On paper? This, and many companies like them, are interesting. They check the box clinically. The better ones have ops that can support jumbos.
But in reality? This is the biggest GTM buzzsaw in #healthtech in 2025.
Look, that motion used to work. And technically…it still can. But only in very specific cases. And this? Wasn’t one of them.
What do I expect? At best, win for the VCs that they can flip to PE. For the founders and execs? Not so much. And at worst, LPs will be left holding the bag, too.
Let’s break it down.
Why the Direct-to-Employer Playbook Is a Trap (For Most)
It’s not that direct to employer (DTE) is impossible these days. It’s that the odds are stacked against you now, unless you fit a precise profile.
Self-funded employers TODAY:
Are oversaturated with point solutions
Have trusted incumbent vendors under multi-year contracts
Have spent the implementation dollars and have some level of trust in the data they already have
In other words: your path in is blocked unless you’re frictionless and politically valuable. That means 10x better, not just different.
The real trap? Almost nobody tells startups this. Founders get encouraged to run the play because it worked two years ago. VCs nod because it looks scalable, and it’s how their healthcare LPs made THEIR money justa few years ago. CROs accept it because it feels familiar. It’s what our industry has been doing since 2015…2016.
But familiarity is not strategy. It’s just comfort.
When DTE Still Works (Rarely)
Now, to be fair: I’m not a purist about this. The play absolutely still works in specific conditions:
Tech-enabled care delivery with narrow clinical scope? Maybe…but only if you’re wildly well-funded, hiring high-trust sellers, and moving fast. I’d name names but you can figure out who they are. Which teams have CCOs/CROs who are ex brokers? Ran national or regional books for the Blues? Already have two exits under their belts? If you’ve got the capital and real support for that, go nuts.
Full-stack condition care (think metabolic, or something that rhymes with Spanscarent)? Possibly. But you’ll be competing on both price and ROI against entrenched solutions. If you’re set up for that (or your name is Glenn), yep. Green light DTE.
Infrastructure-style plays. ICHRAs or direct contracting in a box type deals? Oh yeah: you’ve got room to run and high alignment.
Large health systems or PE-backed aggregators with leverage? Yes, but I think those who have the most success will run it like a search fund, not the current chuck a couple of million in from the corp dev fund VC style innovation pilot plays we’ve seen for years.
But most startups in 2025? Still selling (or trying to sell) point solutions. And most advisors are still telling them to run this.
This is now a legacy GTM motion.
That’s the disconnect.
What I’d Run Instead (for This Company)
For this specific startup (a device paired with condition-based care) I would not touch direct-to-employer.
Here’s what I’d run:
1. Group MA (Medicare Advantage) with Taft-Hartley as the primary wedge
It’s structurally aligned, under-optimized, and built for bundled solutions. There’s budget, compliance pathways, and sales motion maturity. Plus, the care burden is high enough that there’s real appetite for enablement. Longer-term thinking than most employers. This condition HITS this market hard.
2. Supplemental carriers in Years 2-3 parallel motion
The under-the-radar gem. Supplemental life and ancillary insurance players are increasingly looking for differentiators and engagement tools. Given the sales cycle and calendar year planning, now (Q2) is the perfect time to get slotted for deals that activate in 2026–2027—just in time to get the data for….
3. Medicare Advantage in Year 4+
You’ve got solid data at population level by this point, enterprise readiness demonstrated, familiarity with a subsegment of MA, and now (because the device and tech literacy AND the boomers’ already declining health will have been a challenge) the earliest Gen X Medicare Advantage enrollees.
This motion gives you:
Room to prove value
Repeatable sales motion
Path to margin and scale
And once you’ve earned leverage, then (and only then) do you push into employers, DTC, or other segments. Shoot, by 2030, I expect the most successful ICHRA companies to be as attractive a target, if not moreso, than UHC.
The Work Most Teams Skip (and Why They Flame Out)
If this were a client, not a friend, I’d walk her through the math. Show her the opportunity cost of chasing the wrong segment. Run the margin model. Map out the sales cycle economics.
But she already knows how I work. We did this before.
So, here’s a takeaway:
Do market selection first
Align the revenue model to your buyer’s P&L and incentives/buying process
Design the ops model to actually deliver what you’re selling
This is what separates repeatable success from companies that get stuck. Companies where the founding team walks away with peanuts, or a torched reputation.
Don’t reenact. Model the market architecture.
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