It sure seems you can’t throw a stick without hitting a digital health accelerator these days, and the partnerships are getting interesting. The latest, biggest example is that GE has just partnered with Startup Health to provide a program for entrepreneurs in the consumer health space. It’s way too early to make any predictions, but the GE partnership certainly casts some evidence that the need for new digital health is accelerating, and therefore, so is the need for accelerators.
What is an accelerator? They’ve been called incubators in the past, but the basic idea is to come up with methods, spaces, seed capital and support networks that will lower the risk for startups, making it easier to refine business plans, improve product development and future fundraising while making customer acquisition easier.
Some might think it seems reminiscent of all those biotech incubators we saw 10-15 years ago around the completion of the human genome, and nearly every metropolitan area vying to build a biotech incubator. Most did not do very well. Will this time be different? Is it just hype? Will they wind up the same way?
I do believe accelerators will be different, not because I’m a hopeless optimist (and I am), but because the accelerator business models and methods have had a lot of fine-tuning over the last decade. That, and the timing of the need for digital health and the technology to support it seems right on target.
I also suspect biotech accelerators will have something to learn from the coming success of eHealth accelerators, and I hope some of them will have the foresight to partner with eHealth accelerators. Digital health is an opportunity to connect science with outcomes and some new business models.
Here’s my reasoning on why this time is different:
1. The Market. The landscape of the health care has changed dramatically. As Anuj Desai details in this recent update on the NY Digital Accelrator, the shift of focus from the clinic to at-home care, driven by changing incentives of health care reform and Meaningful Use, opens up big opportunities for new business. Innovation is shifting the center from the clinic to the home, opening up a host of new potential customers.
2. The Technology. The FDA just approved heart monitor equipment anyone can attach to an iPhone. The company, AliveCor hopes to start selling them over the counter in pharmacies this year. Now that the product is approved, AliveCor will begin marketing to physicians “to encourage them to prescribe the monitor to their patients.”
The important thing for this discussion is that we are really building on the shoulders of giants here. Without mobile, the Internet, chips, the cloud and whole host of other technologies that have come together, this kind of device simply would not be possible. The motivation of incentives in the marketplace is hitting the technological ability (in the Fogg Behavior Model) of thousands, possibly millions of entrepreneurs, meaning change will happen.
How many “blockbuster” apps meant to monitor and engage patients will there be in the coming years? How soon until app prescriptions become as commonplace as pharma prescriptions? Are we entering an age of software-enabled health that will surpass chemistry-enabled health? How much will software reduce, or at least fine-tune, the need for medicine? All fascinating questions we’ll soon be answering.
3. The Models. YCombinator and TechStars have led the way, and are a heavy influence on the new crop of digital health incubators. These “rapid-fire” models are proven and are now being applied to healthcare, and each has it’s own twists. Techniques like Lean Startup provide proven methods for reducing the risk of startups by accelerating feedback and learning from potential customers.
I’d like to see these models applied to other types of health care innovation, pulling in those methods that could work across traditional academic research incubators. Certainly some of these methods are meant for low-capital requirement companies that can pivot quickly, but I suspect the familiar startup concepts of open data, online collaboration, customer and platform approaches could apply to many other health care innovation opportunities.
4. The Capital. Because a lot of software can be developed, for the most part, in a home office, there isn’t much capital required to seed these companies and get them started. You don’t need to run a thousand experiments in a lab, you need a workable prototype you can develop on Keynotopia and get it out in front of the customers and start iterating and improving as quickly as possible. The web and cloud computing also reduces many of the barriers to getting a company up and running: virtual meetings, HR, legal, test environments, email servers that you used to need to start a business can all exist in the cloud at very little cost.Meanwhile, many VCs are looking for new models, because smart companies don’t need as much outside financing to scale, either, and perhaps there are fewer exits to be had.
5. The Customers. Possibly the most valuable service these incubators can provide is customer access. Healthcare is a highly risk-averse domain, so having hospitals and other health care customers involved early, as most of the accelerators advertise, is critical to get the necessary traction.
6. The Data. Biotech and bioinformatics were perhaps overzealous investment opportunities following around the time of the human genome project. The fact is, there really wasn’t that much data to work on or ways to link genetic data to patient data and outcomes. Now there is. Now, with opportunities and resources like FOIA requests, data.gov, and the ocean of data that’ll be coming from EHRs, genomics, sensors in the hands of consumers and the opening up (eventually) to data from many medical devices, there is a ton of resources to derive value from. If data really is the new oil, the value is in the refining through analytics and effective ways of presenting it and acting on it, not in finding it, because it is everywhere.
7. The Architecture. As Matthew Holt mentioned in a comment to Travis Good at HISTalk on the GE deal: “2013 is the year when API is open to the extent that business development becomes ‘Open your API + Access your customer base + Store and interface your customers data’. That’s what AT&T, Aetna, Athenhealth, Allscripts et al are starting to do….and it’ll strike the rest of the alphabet too…”
Platforms are a way to connect and transact the new resources: data, development, and customer engagement. These are the new resources for business and wealth in eHealth, and rapidly becoming another “fact of business.” Soon, everyone will have some kind of platform play.
8. Less IP. We should remember that IP exists (as originally intended) to protect an idea that would take large resources to bring to market, thus reducing the risk of investment. These days, software companies can bring an idea to market much faster with far fewer costs, due to technology and methods that substantially reduce risk. That means companies can get going without seeking a lot of capital up front. The risks nowadays are not someone stealing your idea, but getting traction, executing better and learning faster than your competition.
9. Less University Involvement. Incubators of the past were usually attached to a university or a region and several universities. While biotech is reliant on lab equipment and basic research, software is not. Therefore, no university is needed, and that might ultimately speed innovation and certainly changes the risks involved. No need for university broadens the labor market and reduces the need to develop IP in the first place.
With little IP, software ideas that do evolve out of basic research are often out of the domain of tech transfer offices. These ideas wind up in an in-between place, with researchers unable to commit time and resources to a new venture without the support of the university. Tech transfer relies on licensing technology, say, to a medical device company, and they just don’t know how to calculate the risk or recoup their investment for the university if it’s not tied to a patent, even if the software was meant to support a medical device. I suspect this will hurt universities long term unless they find a way to improve on this model and find ways to encourage collaboration and support for software ventures.
I would like to see Universities seek ways to leverage these new accelerators in ways that don’t hold them back. I’d also like to see device makers get into the game of digital health accelerators as they seek software innovation to support devices. GE is a good first step. There’s a unique opportunity to begin to put university researchers and software developers together, but tech transfer will need to adapt.
Another benefit of not having an association with a university frees up the depth of talent available to develop and lead new business within the accelerators. You don’t need a PhD to develop a usable solution for eHealth.
10. The Nature of Innovation. Hyperconnectivity via mobile, social media and web-based collaborative tools has completely changed the nature of innovation, unleashing what Clay Shirky calls the “cognitive surplus.” There are now countless ways to find people who share your passion and the skills you need, no matter where they are, work at a distance to make things happen. That doesn’t mean it will happen fast, relationships still take time to develop, but connectivity does open endless new doors.
Innovation author and expert Steven B. Johnson, describes four quadrants in the final chapter of “Where Good Ideas Come From” to show the changing nature of innovation. Johnson makes a strong case that we have shifted from market-driven (patenting and property) to non-market driven incentives (reputation and working on stuff that matters) and from individuals to networks of innovators (the 4th quadrant where these intersect).
To harness this new reality, we need to take steps to harness the power of networks and reduced capital needs to drive new innovation and new business. Increasing the power of networks comes from enabling sharing at a more granular level. Academic centers will need to heed some of these new principles for new realities or they’ll risk losing out on new opportunities.
Even John Scully is bullish on health care. Deep down, I think we all want to do stuff that matters. That hasn’t changed, but now there appears to be a market for it. We may be entering the beginning of a period where health will be driven as much by software (data, architecture and engagement) as much as by chemistry. This is a unique time creating unique opportunities. With less capital and less legal services needed, and a wealth of health problems to be solved, I suspect innovation will flourish – and at least a few accelerators will succeed.
What do you think? What are the key things these incubators will need to get right to be successful? ♦
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