Would You Participate in a Healthcare Accelerator?

Last year the California HealthCare Foundation (CHCF) put out a report on healthcare accelerator programs that we covered at the time. It is still the best summary of the health accelerator space. CHCF also created an infographic on how healthcare accelerators can maximize their value. The report focused on Rock Health, Startup Health, Blueprint Health, HealthBox, StartX Med, and TigerLabs.

Since that report was published, other health accelerators have launched and had classes, DreamIt and Wildcatters being the largest ones that come to mind. The accelerator landscape is getting attention right now with SXSW going on and accelerators are active at and around conferences. I thought it was time to revisit the subject.

I have a mixed history with accelerators. I’ve been rejected by health accelerators, turned down health accelerators that offered my company a place, and have participated in a non-healthcare accelerator. I also have friends who have participated in accelerators, both inside and outside of healthcare.

Startup health accelerators seem to confuse people because a definition of "accelerator" doesn’t exist. YCombinator (YC) is the prototypical accelerator, offering:

  • A defined time period, say 3-5 months;
  • A small cash investment;
  • Mentorship (that’s not really the case with YC);
  • Office space or office hours;
  • A big finish with a demo or launch day.

Rock Health, Blueprint, Wildcatters, Healthbox, Dreamit, and I’m sure a few others I’m forgetting fit this model. Others, like StartupHealth and the NY Digital Health Accelerator, don’t. Some don’t offer money, but provide assistance in the form of strategy and introductions to potential customers. They may not require a defined timeline or provide office space, but run as ongoing or extended programs.

The barriers to creating an accelerator are lowered if you don’t offer money or office space, and because of that, more accelerators are forming. StartupHealth has always called itself a startup academy, but it gets lumped in with other accelerators. What other term can we use for all of these new accelerators?

The value in a YC-like accelerator is threefold: 1) providing public relations; 2) arranging qualified introductions; and 3) forcing an accelerated timeline. The amount of PR and marketing value is largely variable from program to program. The larger health accelerators, like Rock Health and StartupHealth, provide great press for their companies. They host their own conferences and are active at large conferences, like we’re seeing this week at SXSW. Rock Health, in particular, has also been producing quality content for a while now.

I question the value of PR with some of the newer, local, and unknown accelerators. Tracking website traffic and inbound leads is a good way to assess PR. The value of PR can vary significantly depending on the customers a startup is targeting. An argument against health accelerators, and it has merit, is that they are not well followed in the healthcare industry.

Introductions are a big part of what startups get from accelerators. Every accelerator, big or small, gives introductions. However, the real value is in qualified introductions, those that involve someone who has the budget and power to sign a pilot or contract with a startup. This alone provides enough value to jump into an accelerator.

The challenge is that healthcare is broad and requires an accelerator to have a significant network if it is going to provide qualified introductions to a large, varied class of startups that might be selling to hospitals, pharma trials groups, or payer marketing departments.

The last variable, and the one I personally put a lot of value in, is that accelerators force a timeline on startups. If you’ve been in an accelerator, you know this is a completely arbitrary timeline. The milestones are different for every company. But at least being in an accelerator lights a fire under companies. It is motivating to know you’re on the hook to tell a crowd what you’ve been able to accomplish in the last 3-5 months. The value of this timeline is lost on the more extended programs.

I don’t include funding on the list because I don’t value an accelerator for that even though it’s often seen as startup’s success metric. Getting access to customers and signing a pilot, ideally through a qualified introduction, will get you to funding. Funding should be a secondary goal anyway – you may plan for it, but but you should focus on the primary steps required to get you to the necessary funding milestones. If you need to close a Series A to scale and you need revenue to close a Series A, you should focus on revenue in the precious little time you have.

The decision to do an accelerator is largely stage dependent. The ideal startup to join an accelerator program — at least the traditional, time-constricted ones – is when the startup that has something it can sell. It doesn’t matter if that’s an MVP or an EVP or just mockups as long as it’s enough to sell, even as a pilot.

If that’s the case, a startup can take advantage of the PR and qualified introductions and not do tons of meetings that provide few productive outcomes. If there is something that can be sold, it means that something of value, namely booking revenue, can be accomplished before launch or demo day. If revenue is not a realistic target, then an accelerator isn’t a great choice.

Some early, idea-stage companies will disagree and some of them have probably had great outcomes from being in an accelerator. But I think being too early to an accelerator is risky. Giving up a chunk of your company before you can take advantage of the accelerator experience is not a great use of equity, especially since you’re likely to still need a seed round before your Series A.

The other risk of being too early is that you will lack a good set of filters for all of the bad advice you get from mentors and other people you are introduced to through an accelerator. Most advice and feedback is worth getting, but you shouldn’t listen to everything people tell you. Everybody you meet will bring their own perception and interpretation of what you should be doing. Even bad advice is probably not bad if you’re sitting in the mentor’s shoes with their own experience and biases.

You need to know your company better than anybody else. You need to know your market niche better than anybody else. That’s your job as a founder. Figuring that out should be the starting point before an accelerator. That doesn’t mean you have every answer, but you should know enough to have an opinion and to be able to filter advice and feedback. You should be open to input, and you should definitely be open to pivoting when you’ve tested and failed at certain things. That’s different from bouncing around from mentor to mentor.

If the stage of your venture is right and you need an extra push to jumpstart your company (and there’s nothing wrong with that), a health accelerator may be the right choice. An accelerator is like a partner. You should feel comfortable with it because you’ll likely be linked to it for a long time.

There are good health accelerators, I like the people I’ve met who worked with them, and companies have had good success with them. The experience is largely what you make of it.

TGphoto

Travis Good is an MD/MBA and co-founder of Catalyze. More about me.

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