Digital Health Drives Growth of Accelerators, Report Finds

The number of health care accelerators has increased significantly over the past two years, with the majority focusing on digital health, according to a new California HealthCare Foundation report, FierceHealthIT reports (Dvorak, FierceHealthIT, 10/14).

CHCF publishes California Healthline.

An accelerator is an organization that provides resources to help companies grow.

Details of Report

For the report, author Lisa Suennen, a venture capital investor and the managing partner of Venture Valkyrie Consulting, interviewed several accelerator stakeholders, including:

• Entrepreneurs;
• Investors; and
• Sponsors (Comstock, MobiHealthNews, 10/13).

Findings

The report found that there are more than 115 health care accelerators, up from about 24 two years ago. Eighty-seven health care accelerators are located in the U.S., including 31 in California -- more than double the number in any other state.

Of the total accelerators worldwide, 80% focus on digital health.

The growth of accelerators in recent years has been driven in part by:

• Consumer demand for technology to manage their own health care;
• The Affordable Care Act's push toward more innovative and accountable care; and
• The proliferation of low-cost technology, which has made it easier to launch a new firm.

In addition, the report found that while earlier health care accelerators' investments averaged between $10,000 and $25,000, many now are investing or distributing grants of $100,000 to $500,000.

How To Measure Success

In the report, Suennen outlined several metrics that are used to measure the success of accelerators, such as:

• Financial returns from equity;
• How many companies or patients were affected by participation in the accelerator;
• Job creation;
• The amount of awards or publications related to the accelerator;
• The number of companies that are viable or sustainable after leaving the accelerator;
• The number of customer relationships and partnerships developed as a result of the accelerator; and
• Participating companies' ability to fundraise after leaving the accelerator (CHCF report, October 2014).

However, she noted that none of the methods were entirely reliable for measuring success in an accelerator's early stage.

Moving Forward

The report found that many stakeholders believe there are more accelerators than the market or venture capital firms can sustain. As a result, some observers said some of the U.S.-based accelerators likely will go out of business in coming years (MobiHealthNews, 10/13).

In the report, Suennen suggested that health care accelerators that focus on digital health should hone in on a specific area -- such as cancer.

In addition, the report noted that accelerators will be most beneficial for entrepreneurs who have definite prototypes or proofs-of-concept, but not necessarily funding or connections in the health care field (Tahir, "Vital Signs," Modern Healthcare, 10/9).

According to the report, "[I]t has already become clear to many industry observers that accelerators must evolve to respond to market demand and create meaningful results."

Suennen wrote, "In the end, the accelerators that survive will be those that can draw a direct line between their program and a company's positive outcome," adding, "In the next few years there will be enough data to connect exits and failures back to their origins" (CHCF report, October 2014).