Part II: Go Edupunk - When Incubators MIGHT Work in Healthcare

Today let's take a look at when incubators MIGHT work in healthcare.

Remember, an incubator is not the same thing as a collaborative, but a collaborative can act as an incubator, and vice versa.

But an idea or networking collaborative does not automatically qualify as an incubator, especially if you're not talking business model, output, and exit strategy.

As a result, throughout the series coverage on incubators, I'll also include some examples of healthcare collaboratives that are (or are close to) incubator status, or, for the goal of healthcare startups and new initiatives, achieving 'success.'

First, a common frame of reference...

Although it's dangerous to assume there's a 'typical' startup tech incubator, let's look at one fairly 'standard' successful group with features similar to many in the space.

Meet Curious Office. I discovered them reading TechCrunch (skim their enewsletter daily for tech ideas that may translate well in healthcare). They're a tech business incubator in Seattle with several productive exits for investors (acquisitions).

This is a tricky issue to cover - there's not a whole lot of data out there (that I've been able to find) comparing successful incubators in healthcare.

Perhaps some of the difficulty arises from the different way incubators tend to qualify success:

1. Startup tech? Acquisition baby.
2. Startup health? A product/service line innovation is born.


There's even less coverage connecting incubators in various health subsectors, including academic, government, foundation, association, and corporate/startup.

For instance, TechStars has a health/wellness company, Gyminee, in their most recent 'class,' but I don't think it would do them justice to label them a 'healthcare' incubator - they support all types of startup tech.

Also, focusing on the healthcare side for the last few years, I might have missed something (or several somethings) in the startup tech world that's cultivating health/ehealth/mhealth startups - if you know of additional resources, dear readers, please leave a comment.

As a result, we're going to need to employ some mental elasticity when we look for examples of what's working and what's not working.

A bit later this week we'll take a look at some specific examples, but for now, let's think about some overall guidelines for what works.

So, incubators in health might work IF:

1. Incubation in healthcare works IF you have a party like RWJF, in concert with the California Healthcare Foundation, who are willing to fork over substantial amounts of time and capital to develop goods that may or may not work.

• Obviously, everyone's hoping they work, because we do want to improve healthcare delivery.
  
• But incubators are about risk. They take a chance and make an investment - returns aren't guaranteed.
  
• This is why the partnership between CHF and RWJF for PHR development can be considered an incubator, but I wouldn't consider the CHF an incubator per se (again, it'd be selling their overall mission short).
  
• But incubators are also about reward. Selectivity in picking applicants to support, whether in startup tech or startup health, is a big part of hedging your bets for success.

2. Incubation in healthcare works IF and ONLY IF you're completely upfront (internally and externally) about IP and how monetary gains from possible sale of incubator-developed applications (goods, products, user data, etc) will be split.

• Do mentors sign an NDA?
  
• What's the process for protecting companies in 'stealth' mode (or does the incubator wait til firms are out of stealth?)
  
• Who wins when there's a successful exit?
• How many people and or companies get a cut? What's the stake? 5% ownership? etc.
  
• What does the revenue breakdown look like?
  
• Who's involved in the final business model decision (license tech? Sell it? Sell whole company/product?)
  
• And what is the goal? Is the goal to birth babies that will be adopted by larger papa PHR companies?
  
• If so, who banks the adoption fee?

3. Incubation in healthcare works IF and ONLY IF you're completely upfront about who's footing the bills (and how sponsorship or 'ownership' of incubator firms is reflected) and EXACTLY what's expected in return.

• Are there any fees involved for participating companies, or does the incubator give them seed money? If so how much? For what period? Is it a lump sum or an 'allowance'?
  
• What *exactly* is provided to incubator member organizations? Capital? Mentorship? Office space? Internet connection? Skype? A cell?
  
• Do they have to wear sponsor tees in media/press/speaking appearances?
  
• Does the incubator program have rights to *share* the experience of incubator members?
  
• Is this carte blanche access to finances, strategic plans, etc? Be specific. Be quantitative.

4. However, incubation in healthcare works IF and ONLY IF you are big-picture, thinking beyond just the specific expected output. You have to think about the overall market space, and where the firm/product will survive, thrive, or die in that ecosystem.

• So what if a collaborative develops a new PHA?
  
• It only matters if you can DO something big with it, which means integration into the current world. Which means coherence - are you thinking partnerships, collaborations from the get go? Is the incubator candidate thinking big picture?
  
• Got revenue? You better look at a way to monetize before you ever enter the incubator space, unless you're providing a completely open-source PUBLIC good from which you DO NOT expect to generate revenue (a charity case).
  
• What's the way incubator candidates plan to wrangle revenues? If a company is 'self-funded' and plans to be 'ad revenue based' but hasn't researched SEO or signed up for Adwords, run the other way in most cases - or at least exercise extreme caution.
  
• Be aware - there are more revenue drivers and business models present in the Health 2.0 space than many people are aware of, including licensing, ad revenues, DTC consumer fees a la IPhone apps, or 'freemium' models for online health tools...we hope to illuminate some of the variety at the upcoming Health 2.0 conference (I've been working with speakers on how to address the 'business model' question).
  
• New businesses are businesses in flux. Does the revenue sharing or ownership model (options, etc) for the incubator change if the incubatee's business model changes?
  
• At some point you're going to hit the wall, literally - when you intersect with the brick and mortar healthcare delivery world - are thoughts on expansion (incubator, incubatee) mutually compatible?
  

5. Incubation in healthcare works IF and ONLY IF you're working from a user-centric design platform that integrates consumer principles and is 'customer' directed.

• REMEMBER: There is no single monolithic 'customer' or user in health; sometimes the 'customer' is a person who is also a patient, sometimes they are a doc, sometimes they are a joint academic/research partnership looking for a way to cure breast cancer.
• This intersection, especially when it involves virtual/web-based healthtech and the real-world brick and mortar system, can get messy. We're not at the point where healthcare goods and services accessed online won't at some point have real-world relevance to daily life, and usually we're using online knowledge to augment, not completely replace, offline care. So you need users on your side.
• Which means surveying your potential users and integrating service-design principles from germination onwards.
• Whoever your user is? Yeah. You need one of them on your design team. On your Board of Black Swans. If you're designing a PHA for people living with diabetes, guess what - you'd better have a person living with diabetes advising you on UI, functionality, flow, etc.
• If you're a healthcare incubator supporting the development of patient-directed tech, or want to be - why not consider a patient testing panel? Like the judging panels on shows like American Idol - let them hash out how they feel about a service, and why they'd find it valuable, or not. Even the harshest criticism from a potential user can be more worthwhile than an entire room full of yes-men (and women).
  

Tune in tomorrow for a look at when incubators won't work in healthcare.