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Bio & Life Sciences Healthcare

63 Companies Bent on Transforming Healthcare

StartUp Health co-founder Unity Stoakes.

StartUp Health co-founder Unity Stoakes.

Serial entrepreneurs Unity Stoakes and Steven Krein were bit by the Health 2.0 bug after successfully launching dot-coms and Internet technology companies for more than a decade. But when they set out to build a digital health company, they quickly discovered that “being an entrepreneur in the healthcare sector is different than being an entrepreneur in any other sector,” Krein says in an online video.

Their idea was to create digital offices for health professionals. But their venture, Organized Wisdom, faced daunting regulations, privacy challenges, long sales cycles, and industry-wide resistance to change. The process that was necessary to create pilot programs, establish partnerships, and raise capital was painfully slow compared to their dot-com past. “We discovered that it’s incredibly difficult to innovate and build a modern health tech company,” Stoakes says.

Four years into the endeavor, board chairman Jerry Levin, the former Time Warner CEO, “challenged us with a big question,” Stoakes says. It was “How could we be much more disruptive and help the whole healthcare ecosystem evolve?”

He and Krein proposed building for other startups something they would have liked to have had access to themselves. It would be a platform that would have let them innovate more easily when they came to the healthcare industry as new entrepreneurs. The model that incubators and accelerators use to help other tech startups doesn’t work in health tech, Stoakes says: “Those are all short-term programs offering low levels of capital.” Here, he says, startups require much more funding and support to survive a longer sales cycle.

With support from Levin and other high-powered investors including Esther Dyson and Mark Cuban, in partnership with Steve Case’s Startup America, and with applause from the U.S. Department of Health and Human Services, they established StartUp Health in 2011. Stoakes describes the private company as part community, part knowledge base, and part academy offering a structured curriculum to help CEOs and founders. He calls his audience “Healthcare Transformers.”

The long-term coaching program now helps enrollees scale their businesses, develop leadership skills, and gain access to investors, customers, talent, and partners committed to healthcare innovation. Up to 20 applicants are accepted each quarter to the 3-year program and StartUp Health takes between 2 and 10 percent equity in each company it accepts.

Declares the StartUp Health website: “The best way to improve healthcare in America is to provide health and wellness entrepreneurs with ongoing inspiration, education, and access to customers, capital, and other critical resources so that startups can innovate more quickly.” The goal? “To help 1,000 Health Transformers build sustainable-growth businesses over the next decade,” the statement continues.

The first 3-year term is still underway, but of 63 companies in the portfolio, Stoakes says 75 percent have raised seed funding of at least $500,000. That’s a total of $130 million. And three have already been acquired. Gene by Gene bought genome sequence analysis startup Arpeggi a few months after it became one of the first 13 StartUp Health enrollees; WebMD bought patient management software company Avado in November 2013; and last month Intel acquired Basis Science, maker of a $200 wearable fitness tracker, for a rumored $100 million. Now, Basis’s newly wealthy and unoccupied founder, Nadeem Kassam, is serving as StartUp Health’s first Healthcare Transformer in Residence. “We’re seeing early signs that the model is working,” says Stoakes proudly.

What did it take for those 63 to win entry to the program, when more than 2,000 applicants from 22 countries tried? Stoakes says StartUp Health seeks out innovative teams as much as ideas. “We want entrepreneurs who have the passion and perseverance to make it through the months and years it takes to build” a healthcare company, he says.

Among the 16-member class announced on April 10 is StartUp Health’s first India-based enrollee—SmartRx, a customer-relationship management platform for healthcare businesses; Galway, Ireland, startup Pocket Anatomy, which offers visual patient education software; Toronto-based Shift Health, in the “low literacy healthcare communication” sub-sector; and 13 U.S. companies offering everything from wearable sensors to cloud-based genome analysis.

Stoakes says the program accelerates theses companies’ growth in part by enabling them to cross-pollinate globally. “We partner with industry, government, and key stakeholders in healthcare to give access to young companies and help them find partners and great investors early,” he says. Member companies who have been out for Series A or B rounds of financing share what they’ve seen, what terms they’re being offered, and which investors are most helpful. “Everyone in the network helps each other. It becomes really powerful to share this information as a group,” Stoakes says.

StartUp Health also gives its entrepreneurs access to a database that tracks $8 billion in digital health funding. A 24-person staff maintains it, categorizing every investment by sector and investor.

Though StartUp Health was born of the challenges he and Krein faced just four years ago, “the game has changed since then,” Stoakes says. He points to four “macro conditions” that are creating a global phenomenon, and that make his investors confident the next decade is going to be huge: “Health reform is changing business models; high costs and an aging population are creating demand; a digital revolution means that iPads, sensors, genetics, and big data are making things possible that once were not; and a new golden age of entrepreneurship is drawing the best entrepreneurs into healthcare.” That is good news for all of us, given how much room there is for improvement in the sector.

Learn more about the 16 healthcare companies accepted this week into the StartUp Health program here.

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