Of the 115 healthcare accelerators in the world, 87 are in the U.S., most of them are geared to digital health and are under two years old. Although many accelerator companies have created jobs and there have been some exits, most have yet to show anything for the investment in them. That’s understandable given the age of the average accelerator and given that it can take seven years before a company can realize a return on capital for investors. But the consensus of a new report published by the California HealthCare Foundation is that we should expect some consolidation soon.
The report, penned by Venture Valkyrie venture capital adviser and healthcare consultant and blogger author Lisa Suennen, highlights four ways that health accelerators need to evolve to produce more successful companies. Most of the accelerators are still in their infancy, with the oldest digital health accelerator program having been around for only three years. However, The Foundry, which launched in 1998 and which employs a more hands-on incubator model focused on medical technology, claims to have generated in excess of $2 billion of value for its founders and investors.”
Greater specialization We should expect to see more accelerators focused on a particular area such as aging, like Aging 2.0 Academy or Livestrong’s program, The Big C. By specializing these programs could inspire more varied approaches to aiding providers and patients overcome challenges associated with a particular condition, and make it easier to avoid duplication.
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Longer, more intensive programs Groups that can secure longterm commitment from companies are seen as better positioned for success. StartUp Health comes to mind, but strictly speaking it’s not an accelerator. It has cultivated an international community of companies that have attracted seed funding. The co-founders Unity Stoakes and Steve Krein don’t describe the three-year program as an accelerator. By providing more flexibility for geographic location and a longer commitment, it has been able to attract a broader range of companies led by mature entrepreneurs.
More collaboration-style models that enable customer/sponsor organizations to co-create solutions with entrepreneurs. New York City Economic Development Corp program NYC Pilot Tech, for example does matchmaking to bring together healthcare organizations that want to solve a specific problem with startups that can deliver the best solution.
Accelerators develop “fund” mentality, raising early-stage and seed funds as some accelerators move upstream to become seed- or early-stage funds, they will likely be judged just as the venture funds are — on the financial returns the companies actually deliver and the cash flows they produce to sustain their businesses over the long term, the report said.
