New York city / state probably doesn’t have the best reputation for nurturing tech startups. General consensus is that it falls way behind Boston – tech hub of the East Coast -, let alone Silicon Valley. And there are many reasons that contribute to this situation, such as a different business – ie the world’s finance capital amongst many other things -, and education focus – NY schools are just not famous for engineering.- However, NY seems eager to turn this around and taking bold steps towards making tech thrive, such as creating tax-free zones across the state for high-tech startups.
That being said, the reason I want to focus on NY today is that it has been doing surprisingly well when it comes to health tech start-ups. Almost half a billion dollars raised by health care startup companies, for about 100 deals since 2010? That’s nearly as good as Silicon Valley! So let’s look at a few frontrunners from a spectrum covering startups to VC / incubator / accelerators that ignited this growth, and discuss what made NY unique in this particular case and what an entrepreneur might want to pay attention to in that regard when launching his venture.
- Startup: Avado
Before it was acquired by WebMD for roughly US$ 20-30 million, Avado, through its patient relationship management (PRM) system, aimed to emulate Salesforce.com for physicians and patients, allowing for real-time communication and engagement between the two parties when they do not see each other – that is 99% of the time! – to improve health outcomes. On top of a modern website experience and social features for physicians and patients, the biggest differentiating quality of an Avado website is it gave the physicians access to his patients’ health records, pulled from NY state’s pool of Electronic Health Records (EHRs). Based on those records, the physician was able to ‘segment’ his patients, deliver them educational content that would appeal to each specific segment, and set up different event trackers for a more efficient follow-up of his patients. Although founded by Microsoft veterans and based in Seattle, how Avado relates to this story is because they mostly raised money from and expanded in NY, and its strong connections with below firms since inception.
- Startup / Incubator: MedStartr
As its name implies, MedStartr is to healthcare innovations what KickStarter is to creative projects in general. In its first six months, MedStartr raised more than US$ 300k in online funding at a 70% success rate for its first 25 projects. But that’s just the tip of the iceberg. What makes MedStartr unique is the fact that it is a showcase for the edgiest innovations in healthcare, and its network of industry mentors within the industry. In addition, Alex Fair, founder of MedStartr, also leads New York Health Innovation Group, the biggest meet-up group of its kind with about 5000 members, gathering every few weeks in NY.
That’s how the crowdfunding on the site snowballed to a whopping US$ 6.2 million in offline funding and 51 partnerships in the same six month period. And Avado was a great proof of concept for them with US$ 5k only on MedStartr vs. US$ 1.3 mn in total funding.
- VC / Incubator: New York Digital Health Accelerator
Also Avado’s main incubator and already featured on Forbes on TechCrunch, New York Digital Health Accelerator, is probably the most relevant incubator in the scene given its name and focus on Health IT only. They do not only provide up to $ 300k in funding to startups over a year-long mentorship period but also access to a loyal user base – one of the biggest challenges in health startups face against adoption – thanks to its network of healthcare providers who support the program and are willing to use its technologies and statewide digital health records. The Accelerator program leverages the $840 million investment made in New York to adopt Electronic Health Records (EHRs), and the investment made by the New York eHealth Collaborative to create the SHIN-NY, which connects these EHRs across the state.
Avado’s definitely not the only Health IT / digital health startup on the block, trying to engage the healthcare provider with patients for better healthcare outcomes. What made it stand out among the flock of similar ventures though presents a great learning opportunity for those who are interested in being in their position one day. Summarized below in a few bullets for you, they are:
- Target Audience (ie, who to bill): If you are a new player in a niche field, it might be wiser to go after the small fish vs. the big fish, and then gain access to the big fish. In healthcare, this is particularly true and Avado did a tremendous job there. Instead of going for the digital / online patient space where the big guys can crush you with their marketing dollars, your entrepreneurial effort would be spent much more effectively if you targeted the healthcare providers which will take you to patients eventually.
- Value Proposition (ie, what to sell) : Your product needs to really stand out and bring a unique value add to your target audience’s lives. In Avado’s case, if it wasn’t for its ability to leverage NY state wide EHRs, it would probably just be perceived as yet another website builder for physicians, which even I’m approached by those seeking sponsorship on a regular basis.
- Location (where to thrive): It is tempting to pack your things and go rent a garage in Silicon Valley to start your venture, but before you do so, make sure to pay attention to the dynamics of your industry. If Avado relied on its own network and went after Pacific Northwest and / or West Coast VCs, it might arguably be much worse off now. But instead, it was able to penetrate into a location with a growing network keen on investing in their cause and authorities / legislative bodies that facilitated an ideal business environment for their growth.