Health Accelerator Landscape 3/1/13

I’ve written a lot about the health accelerators, in particular Rock, Blueprint, Healthbox, and StartupHealth. To be honest, it’s been hard to keep up with all of them recently as new accelerators (or incubators or whatever you want to call them) seem to be launching in new geographies every few weeks. Some are health-specific branches of existing accelerators, some are just new geographies, and some are new and independent.

I feel like every week I have conversations with people about accelerators. If I’m talking to startups thinking about applying to accelerators, they are usually very positive and excited about the accelerators. It seems to be the opposite if I’m talking to people in healthcare (consultants, informaticists, etc), where the impression I get is that accelerators are entertaining, but not really doing anything that is going to impact healthcare.

I guess it depends where you fall on the spectrum of internal vs. external disruption in healthcare. I think real disruption will come from a combination of both internal industry knowledge and external, innovative naivety with a dash of reform thrown into the mix. It will happen when new and fresh ideas are combined with knowledge of how the system works and how to incrementally move from A to B to C to eventually, maybe Z.

A new report funded by the California HealthCare Foundation (CHCF) comes to a similar conclusion, but the report is based on a more scientific — or at least more rigorous — method. The report is excellent if you’re interested in a complete picture of the health accelerator landscape, the evolution of the industry, and the opinions of startups, accelerators, and healthcare insiders.

The report walks through the growth of health accelerators and the factors that led to their development. It discusses YCombinator (YC) and TechStars and several other factors (Facebook, App Stores, even ONC) that made the industry ripe for health-specific startup programs. It goes through the major risks of incubators focused exclusively on health, like the fact that direct-to-consumer is an unproven model in healthcare. It also has very nice summaries of the incubators and is good reading for startups that want to learn more about accelerators.

There were a couple of interesting points in the report. The first was an analysis of the accelerator model pioneered by YC. YC places lots of bets (I think its biggest accelerator class last summer had 85 companies), is very well established and supported with strong alumni and partners, and has created significant returns to date, even if just on paper. The YC portfolio includes companies like Dropbox, AirBnb, Heroku (acquired by Salesforce), and several other high-value startups that help account for the YC portfolio valuation of $8 billion.

In comparing this to health, it is really unlikely to have a couple of $1 billion health startups after only a few years. Things move slower in health, and while we may see some $1 billion health startups eventually, it’s going to take time to get there and won’t mirror the same way consumer-side accelerators like YC succeed.

The pace of heathcare being slower than consumer tech was the focus of much of the report. Accelerators need more time to help health startups succeed. Just like the report, I think it’s is pretty telling that some health startups seem to be accelerator-jumping from YC to Rock Health or Blueprint to the NY Digital Health Accelerator or from any accelerator to StartupHealth. I guess that points to the value of something like Startup Health, which is a three-year program and not focused on 3-5 months of intense work to get to demo day and raise a seed or small series A round of financing.

GreenhouseSeedingDigitalHealthInfographic

The final section — and CHCF has a very nice infographic on this—contains recommendations for accelerators to maximize their chances of success:

  • Bring health experts in house. This is probably the best advice. Accelerators could all use a health expert in residence, somebody who is full time to help companies with day-to-day issues. Different than mentors, I think this would be hugely valuable for companies. This may be a hard position to fill.
  • Confront difficult questions. Another good point and I think something that doesn’t necessarily happen because of pressure to "graduate", meaning get a pilot or some funding. There are different pathways to success and failure at an early stage isn’t so bad.  I’m not sure how open the current accelerator model is to these.
  • Create market synergies. This seems to suggest having even more specific accelerators and classes that focus on one area of health. I think TigerLabs in NJ is doing this with a focus on pharma, but I’m not really sure this is necessary.
  • Define clear end points. In talking to startups in accelerators, it seems they have clear end points. Maybe this is startup-specific and not at a program level, but I think most of the accelerators have specific goals and ways to access success in meeting those goals.
  • Tailor programs for stage of development. I’m not sure I agree with this approach for all accelerators, but I think the NY Digital Health Accelerator increases the chances of success by choosing companies that are further along in stage.

Check out the report and tell me what you think. Do you think accelerators are purely for entertainment value or do you think they are going to drive disruption in healthcare?

TGphoto

Travis Good is an MD/MBA involved with health IT startups. More about me.

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