Funding, Coaching, and Data: StartUp Health Wants to Transform Healthcare
By Meredith Salisbury
A New York-based organization aims to be a growth engine for digital health, spurring disruption in the healthcare system with big data and novel approaches to industry problems. It’s a claim made by health-focused incubators around the world, but StartUp Health says its approach is unique — and uniquely effective. With about 150 companies now in its portfolio, the group has plenty of opportunity to prove its theories.
StartUp Health is undeniably different from other incubators in one obvious way: how hard it is to define. Part incubator, part venture fund, part mentorship program, the organization was designed to provide an entire ecosystem for digital health entrepreneurs. Already backed by the likes of Steve Case, Mark Cuban, Jerry Levin, and Esther Dyson, as well as corporate funders such as GE Ventures, the five-year-old StartUp Health is in the midst of a financing round targeted at raising $30 million.
Since the digital era began to break down and reinvent entire industries, there’s been rampant speculation about when medicine’s turn would come. The field seems ripe for innovation, with significant consumer demand for better solutions to everything from making appointments to tracking symptoms to billing. But U.S. medicine has shown monolithic resistance to change. Innovators trying to disrupt healthcare have been stymied by government regulations, unclear direction from the federal Food and Drug Administration, data privacy concerns, recalcitrant physicians, and much more. But StartUp Health cofounders Steven Krein and Unity Stoakes, successful entrepreneurs in the dotcom era, believe their vision for working with young companies will finally make a dent.
Stoakes, president of StartUp Health, says healthcare is about where the internet was in 1994, and argues that key conditions are now converging to make a healthcare revolution finally possible. Those conditions include opportunity created by government health reform; increasing chronic diseases in an aging population; a new influx of entrepreneurial talent to the field; and the push for better health solutions on a global level. “That’s really created … a fertile ground for completely changing the future of what’s possible in healthcare,” he adds. Fertile, indeed: StartUp Health’s own research calculates that $1.8 billion was invested in digital health just in the first quarter of 2016.
Stoakes and Krein, the organization’s CEO, hope to build on that momentum with a more holistic method for growing companies. “Being an entrepreneur in this sector is different,” Krein says. “In any other sector there’s no need to collaborate with the big incumbents [or] to care about the government. Entrepreneurs don’t ask for permission, they just go for it.” But success in healthcare, he argues, requires a much more collaborative approach — along with a lot more help navigating the industry. Short bootcamps for startups that work so well in other fields simply don’t provide enough support in digital health, Krein says. “How long you need to be committed is not in quarters, it’s in years,” he adds, pointing to StartUp Health’s “lifetime” coaching program as one example of how they’re responding to the different needs of healthcare innovators. “We launched this as a 25-year mission to transform healthcare by helping build…1,000 companies over the next decade,” Krein says. He believes education and persistence will eventually shift the mindset of medical professionals, which in his view will open the doors for more change than any government regulation or reform effort could ever achieve.
The duo contends that peer networking is a critical component to what they do. Members of StartUp Health’s portfolio companies in a dozen countries routinely get together (virtually or in person) to share advice, ask questions, and provide each other moral support. Krein and Stoakes line up experts to run frequent coaching sessions as well. And it’s no surprise that data plays a critical role in StartUp Health too. One of the group’s most valuable assets is a database of funding opportunities and industry contacts, with detailed annotation about whether those people have proven open to change, how useful their advice has been, and other helpful information.
“We see ourselves as building this army of healthcare transformers,” Stoakes says. There’s no shortage of people enlisting: more than 3,800 companies have applied for StartUp Health membership, which comes at a price — all portfolio companies give up some equity to the organization. Many of those companies have already hit major milestones, such as closing funding rounds; at least seven have been acquired.
Corporate funding has been essential to many of those successes. Stoakes characterizes some of the organization’s investors as “corporate leaders who are trying to figure out how to disrupt themselves before someone else does.” GE Ventures, for example, has invested in more than 20 of the StartUp Health portfolio companies. Sue Siegel, CEO of GE Ventures and healthymagination, says her company shares StartUp Health’s vision “in transforming the health industry through both technology and new business models.”
Stoakes and Krein are now five years into their 25-year plan for StartUp Health, with two decades ahead of them to prove the effectiveness of their model. But no doubt many who are counting on innovation to improve healthcare are hoping it takes a lot less time than that.