Health care accelerators in Northern California are developing niches to avoid stepping on each other’s toes, according to the author of new research.
Accelerators — technology-based approaches to traditional health system challenges — are accelerating. In 2012, there were about two dozen efforts that fit the definition. Now there are 115 in the world, 87 of them in the United States, according to the recent report, “Survival of the Fittest: Health Care Accelerators Evolve Toward Specialization.”
The report — commissioned by the California HealthCare Foundation, which publishes California Healthline
— identifies several Northern California accelerators taking different approaches to the entrepreneurial gauntlet.
“Accelerators serve on a continuum with venture capital firms during the pre-seed stage when developers need funding, guidance, resources — when a concept has not yet evolved into a product,” said Lisa Suennen, author of the CHCF report and managing partner of Venture Valkyrie Consulting.
“Some accelerators take equity, although the payoff is long-term (seven to 10 years), some want to sponsor an entrepreneur, others want to engage in creating innovation and some are companies who already have products in the marketplace that want to expand their market opportunity,” she said.
Accelerators are incubators — serving in varying degrees as funder, consultant, mentor, networking guru and sometimes landlord — with the goal of nurturing new technology and ideas designed to speed up the evolution of health care delivery.
The report outlines six models of accelerators, many of which are represented in the Bay Area:
- Independent commercial;
- Enterprise-based innovation;
- Product or sector amplification;
- Economic development;
- University-affiliated; and
- Collaborative platforms.
A Look at Launchpad Digital Health
Fred Toney, founder and CEO of Launchpad Digital Health, an independent accelerator based in San Francisco, said developing a niche and collaborating were keys to finding startups to invite into his yearlong program.
“There are only a handful of accelerators focused on digital health, but so many startups seeking funding that we are not concerned with competition,” he said. “Even if startups go with another accelerator or a venture capital firm, we have developed partnerships with these other sponsoring organizations.”
Launchpad Digital Health targets startups and businesses already off the ground and ready to grow — unlike some other accelerators that get involved before a product gains traction, Toney said. “I think of our company as an ‘early-stage venture capital company.’”
Launchpad Digital Health funds startups for a year within the range of $100,000 to $400,000 and provides them an opportunity to co-locate at Hatch Today (formerly The Hatchery), an open office space South of Market.
“We are able to offer one-on-one mentoring on a daily basis, including advice on hiring, sales, scaling the business, legal issues, intellectual property and risk management. But we do not abandon them after the one-year program ends,” Toney said.
Toney relies on a board of advisors and partnerships with experts in certain disciplines to enhance the company’s mentoring program.
This month, Toney and a team of advisers will judge a group of entrepreneurs who will compete for space at Hatch Today. By February 2015, Launchpad Digital Health will select among the presenters and bring on eight new startups. Based on the success of the startup, Launchpad might take a small equity position.
Toney said most of the startups working with Launchpad seek additional funding from venture capitalists, form a corporate partnership or are acquired.
Kaspar Mossman, director of communications and marketing for QB3, an accelerator founded in 2000 by the University of California-San Francisco, calls competition among accelerators “friendly.”
“Everyone wants to be able to claim they provided services that led to a startup’s success,” he said.
“We are a broad brush accelerator and are considered a UC institute that helps entrepreneurs create successful life sciences projects,” Mossman said. During its first six years, QB3 focused on funding academic research without a charter for commercialization.
In 2009, QB3 received $11.3 million dollars from Mission Bay Capital to provide early-stage funding for startups in its program. It currently has an alliance with Pfizer, which provides $3.5 million in funding annually.
QB3 launched Startup in a Box a few years ago to provide mentoring and expertise to entrepreneurs. The program has developed relationships with legal experts to provide incorporation advice, including selecting a business model, setting up an initial capital structure and intellectual property licensing.
QB3 has added a grant-writing workshop offered three times a year and plans to expand services to include advice on hiring, taxes, funding opportunities and pitching new concepts.
Over the past seven years, QB3’s Bridging the Gap Awards program — which provides three annual awards of $125,000 each — has funded 17 projects, 14 of which have reached the commercialization stage.
UCSF also is involved in another accelerator project, the Catalyst program, which helps UCSF faculty and graduate students bring their technologies beyond the lab.
“Often people in academia make discoveries but have little opportunity to turn them into products to benefit others,” said June Lee, director of early translational research at the Clinical and Translational Science Institute and a professor in the School of Medicine at UCSF.
“We serve as a focused accelerator, as a bridge to commercialization by uniting ideas, know-how and resources. We help these newly developed technologies reach maturation to justify funding,” she said.
Although both QB3 and the Catalyst program are both connected with UCSF, there is not much overlap between the two.
“We often cross paths with the same technologies but usually at a different stage in the lifecycle of the technology,” she said. “We at Catalyst are more involved when the technology is still in the university, while QB3 engages once the technology is out-licensed from the university.”
The Catalyst Awards program supports researchers through funding, one-on-one consultation and partnerships with business consultants. Since its inception in 2010, Catalyst has supported more than 100 technologies with the help of corporate sponsors.
Lean LaunchPad for Life Sciences & Healthcare, a 10-week course offering entrepreneurial training that teaches scientists and clinicians how to assess whether their ideas or technologies can hold up as a business, was developed by the Entrepreneurship Center at UCSF. The NIH is using UCSF curriculum to launch a pilot program in Washington, D.C.
Ambika Bumb — founder and CEO of Bikanta, a Berkeley-based startup — is a graduate of QB3. Bikanta has developed an imaging technique to improve detection of disease — primarily early cancer.
Bumb left her job at NIH last year and transformed herself from an academic into an entrepreneur with the help of QB3’s Startup in a Box program. She selected the Bay Area for its strong technology reputation and entrepreneurial spirit.
She said she joined QB3 with a bit of skepticism but was highly impressed by its efficiency and ability to answer her questions quickly.
“I was trained as an academic so we know how to get answers even if we don’t know the answer, and that’s the same spirit you need for a startup,” she said.
Bumb’s company, registered in October 2013, also took advantage of mentoring, networking and investment opportunities with Y Combinator, a Mountain View-based accelerator that recently entered the life sciences space. According to its website, the accelerator provides seed funding — the earliest stage of venture funding — to startups.
One of Launchpad Digital Health’s protégés is Jason Andrew, co-founder and CEO of Limelight Health based in San Francisco.
The startup launched a beta version of a new product, QuotePad, in mid-November, an idea the Limelight team developed a year ago.
The product is a health insurance mobile quote engine for insurance agencies that integrates data from multiple payers to help small companies determine what kind of insurance to offer their employees.
Limelight Health joined five other companies using Launchpad Digital Health’s entrepreneur-in-residence facilities in October and received funding from the accelerator, which along with three other investors’ contributions totaled $525,000.
Andrew, like Bumb, said he was initially skeptical about using an accelerator but was drawn to Launchpad Digital Health’s extensive experience in supporting startups and its yearlong program providing advice on legal issues, hiring, operations and presentations.
“We needed advisers to help us take our product national,” Andrew said. “Launchpad has a hands-on approach.”
Suennen believes there is a short-term trend toward more accelerators, but in the long term, they will contract or consolidate because of a need for a sustainable business model. “Those who find that will survive and possibly thrive,” she said.
In the report, she mentioned three criteria for sustainability: more capital, professional management and specialization.
Larry Stofko, executive vice president of The Innovation Institute at the St. Joseph Health System in Orange County, said health care accelerators with national brand recognition stand a better chance of survival than those without a reputation. “I think there will be fewer accelerators but the larger ones will continue to expand their footprint,” he said.
He believes success rests on an accelerator’s ability to identify companies that offer something novel instead of having a stable of “me-too” startups.
This article was originally published on Choosing Niche Might Be Key to Success for Health Care Accelerators