It's been a common complaint among healthcare providers: while digital health is finally coming of age, many of the young, tech-focused entrepreneurs don't necessarily understand the unique needs of the healthcare industry.
That's why one venture fund is hoping to take the new energy that's coming into healthcare and channel it into solving actual business problems of some of the country's largest healthcare companies.
Nashville-based Jumpstart Foundry—located in the heart of the country's healthcare belt—has launched a new healthcare innovation fund that plans to make as many as 20 investments this year.
But instead of getting pitched by entrepreneurs to fund the projects they want to work on, Jumpstart is taking pitches from would-be clients like HCA, Walgreens and the Blues and then matching them with the developers that can turn those ideas into reality.
“We're calling it an innovation fund to signal that it's a little different from a traditional venture capital fund,” said Vic Gatto, Jumpstart's founder and CEO. “We start with the industry first.”
The fund already has more than 75 qualified ideas from its healthcare industry partners. For a system like Vanderbilt Health, there may be interest around telemedicine; for another company, it might be preventing fraud and abuse in pain management, Gatto said.
As part of the move, Jumpstart will stop operating as an accelerator in order to focus on the venture fund. It plans to invest $150,000 in seed capital and take a 7.5% equity stake in the startups. It also will help with recruitment as well as sales and marketing in each venture's initial stages. Its healthcare industry partners are actively involved as pilot customers but won't invest their own funds, Gatto said.
Most of the ideas from the industry fall into three key areas, Gatto noted: data analytics and interoperability, patients taking greater ownership of their care, and how technology can increase hospital efficiency.
Other healthcare venture funds have also tried to make it easier for technology entrepreneurs to navigate the complex healthcare system. That was the mission of New York-based StartUp Health when it launched five years ago.
The firm now claims to have the largest portfolio of digital health companies, with 122 startups. One-third of its portfolio hails from Silicon Valley—far from the old-school healthcare hub of Nashville, said Unity Stoakes, StartUp Health's president and co-founder.
“They're either going to find a way to work with the system or they're going to find a way to work around it,” he said. “I do think there's going to be friction taking place. It's going to take years for some of these things to work themselves out.”
In the halls of healthcare technology conferences, many developers talk about Uber-izing healthcare—the way Uber ushered in a new transportation model that completely circumvented the taxi industry.
But the Uber model may not work in an industry that has very entrenched interests and high hurdles to entry, Gatto said.
“When I use Uber, the worst thing that happens is I get a rude driver, but I still get home,” he said. “When I'm going to get heart surgery, there's much more at stake.”
Even companies that are the darlings of Silicon Valley can run into roadblocks when they hit regulatory snags. Last year, San Francisco-based Zenefits was one of the fastest-growing startups in tech. It offers free cloud-based services for human resources, including acting as a broker for health insurance purchases. But a November Buzzfeed News investigation revealed that many of its salespeople had not obtained the necessary state licenses to sell insurance, ultimately prompting its CEO and founder, Parker Conrad, to resign this week.
In addition, the people who have the greatest healthcare needs—the elderly and the poor—don't exactly overlap with the Uber and AirBNB crowd.
“It can be hard to disrupt the healthcare system very quickly without having the buy-in from the doctor,” Gatto said. “A lot of the users of healthcare are older, less tech-savvy. And there are incredible regulatory challenges that (startups) have to get through.”
