Kevin Ryan, dubbed the Godfather of NYC Tech by Fortune, has founded a stable of successful technology startups, including online retailer Gilt and database company MongoDB. But these days he's focusing on what might seem like an unsexy business—temporary medical staffing—with Manhattan startup Nomad Health, an online job marketplace for doctors.
“The reason digital health is the biggest opportunity for New York City is that 15 years ago, you would have said the city has talented people but no successful technology companies. Now people would laugh that you'd move a company to Boston,” said Ryan, who sold advertising-tech startup DoubleClick Media for $1.1 billion in 2005.
The city has emerged as a major hub for health care technology companies because they can take advantage of the area's renowned academic medical centers as potential investors and testing grounds, according to a new report from the Center for an Urban Future, a nonprofit research group.
The city is second only to the San Francisco Bay Area in terms of venture capital investment in digital health and is home to companies with billion-dollar valuations, such as Zocdoc, Flatiron and Oscar.
New York City–based digital health companies received $908 million in venture funding last year, a nearly tenfold increase from 2010, when 15 companies raised $93 million, according to CB Insights data in the center's report.
There are almost 100 city companies in the sector, with at least eight of them employing 50 or more workers.
Their objectives range from optimizing appointment scheduling (Zocdoc) to organizing data on cancer patients (Flatiron).
Given the industry's growth potential, digital health should be part of the mayor's plan to create 100,000 jobs that pay more than $50,000 a year during the next decade, said Jonathan Bowles, executive director of the center. Bowles recommends that the city help create a more centralized digital health ecosystem by forming campuses with affordable office space and hosting networking events.
“The city needs to be looking at where we are creating good-paying jobs in the years ahead,” Bowles said.
“Jobs in restaurants, in retail and as home health aides have low-paying salaries.”
Health care jobs in the city are projected to grow 22.5% in the 10-year period through 2022, but many of those jobs will be low-paying ones in home care.
Nomad Health has 14 employees and has raised $4.85 million in financing. The company plans to nearly double its headcount by the end of the year following “explosive” growth in the number of users, said Dr. Alexi Nazem, the company's chief executive, who practices at NewYork-Presbyterian/ Weill Cornell Medical Center.
Nomad Health isn't alone in its hiring spree. For example, Flatiron, the oncology data company, grew from 30 employees in May 2014 to 375 by the end of last year, according to the report.
As companies age—Zocdoc is now 10 years old—their founders and senior executives often break off to create new companies. “The seminal companies in the beginning are the Adams and Eves,” said Ryan.
What's still unclear is whether New York's health care unicorns will bring returns to investors. Oscar, a health insurance company founded by Joshua Kushner, Kevin Nazemi and Mario Schlosser, lost more than $200 million last year.
“There's still a lot of proving that needs to be done,” Bowles said, but the sector has “already created thousands of good-paying jobs. That's a huge benefit for the city's economy.”
"Digital health is helping to fuel the city's economy" originally appeared in Crain's New York Business.