The California HealthCare Foundation’s state of the union for health accelerators is filled with interesting insights about the strengths and weaknesses of these organizations from the perspective of entrepreneurs that participate in them. New York Digital Health Accelerator, StartUp Health and Rock Health have each had acquisitions among their accelerator companies. Many other portfolio companies have raised funds and created jobs. But two years after its initial report on seeding startups, called the Greenhouse Effect, the “Survival of the Fittest” report raises some critical questions for accelerators from measuring their success to how sustainable the approaches to the accelerator model are going forward. Here are some of the most interesting insights from the report to chew on.
Niko Skievaski, co-founder of 100health, on the challenge of how to measure success: “It is difficult to decide how to measure success. Most use fundraising after the program, but I’m not convinced that’s proof of value. You can look at acquisitions, but I’m not sure that’s right either because there is no guarantee it means there was health care system value created. We tend to use job creation in Madison as our primary measure.”
Elliot Menschik of DreamIt Health: “It is frothy, noisy in this space. There is an element of ‘entrepreneurship is the new black,’ and lots of entities want to tap into that vibe for innovation and economic development. But it will shake out based on who has the long-term financial support and real successes. e are all
competing for a finite set of high-quality applicants and partners.”
Paul McCurry, Axial Healthcare CEO: “To break in with the big boys in healthcare, a startup needs every advantage they can get, every warm introduction they can get. And for the accelerators, like a venture capital firm, they can count on one out seven or 10 companies doing well. But the more they practice, the better they’ll get at predicting success and connecting with partners.”
Anish Sebastian, founder and CEO of 1EQ: “The primary reason why we decided to join was to differentiate ourselves from the 90K+ companies that exist within the ever-growing mobile/digital arena. We calculated that applying to a high-profile accelerator would act as a filtering mechanism to separate ourselves from all the noise.”
JC Simbana, vice president of life science and digital health at Silicon Valley Bank: “They are endeavoring to make targeted connections with investors, which is key to success. But the number of companies outweighs the early-stage funding capacity, and we are seeing a bit of an incubator bubble.” Silicon Valley Bank works with Blueprint Health, HealthXL, StartUp Health, QB3, and Illumina.
Matt Herman of Ascension Health Ventures (which participated in Healthbox and an internally created accelerator group): “I think that the second and third generation programs that bring users, consumers and companies together and become translational in nature have real potential”
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Tom Rodgers, formerly director of strategic investments at Cambia Health Solutions –a sponsor of Aging 2.0.: “There are some diamonds in the rough and some valuable purposes to be served by the accelerators if they weren’t so oversaturated.”
Lynne Chou of Kleiner Perkins Caulfield & Byers Accelerators “help move companies beyond meaningless pilots… This is a good role for accelerators.”
A few of the accelerator sponsors who contributed their insights chose to do so on background:
Too much hype “The accelerators have too much overlap and too many companies vying for too many redundant ideas. They are pumping up these companies with unrealistic expectations about their odds of success and their ability to be transformative, and it is a disservice to the whole industry when the funnel gets overloaded; it is a dilutive of talent and bandwidth and capital.”
A tool for weaker entrepreneurs: “The accelerators have really complicated the early-stage markets by creating lots of companies that are too similar. What they tend to do is help create the best second-quartile companies, attracting young, green entrepreneurs with no network, or older entrepreneurs coming to health care from other fields. The best serial entrepreneurs aren’t attracted to accelerators.”
On accelerators’ relevance: “I wouldn’t necessarily attribute company successes to accelerators. I’m not sure it’s a causative situation. The accelerators increase visibility, but I am not sure whether there are really differences between success and failure as a result.”
