Part III: Go Edupunk - Healthcare Incubators: Time to Burn or Become Steel

Blogger's Note: Today I'm skipping around a bit during our week-long look at healthcare incubators.

Before we look at when incubators in healthcare/startup health WON'T work, let's take a look at what's working from the business end of startup tech incubation.

Part of the problem with incubation in startup health is that startup tech has been playing this game for at least 2 decades.

As a result, they've got a cast of characters - expected players who will scoop in and pick off any smaller firms whose products and services they want to integrate.

Want the ultimate exit? Look for acquisition by Google, Microsoft, Yahoo, etc.

But it wasn't until earlier this year that Microsoft and Google's health interests pushed them into releasing PHRs. In health, we couldn't look to the big boys for adoption. But that's changing as we move towards consumer-centric care.

So who might we expect to see adopting healthtech incubators' grads? Of course the same cast of characters is now attending to our space, so you might go after Google, MS, Yahoo.

But what about other firms?

Of course you could look to big pharma if you've got biotech grit, or one of the DTC genomics firms like 23andme if you're working in genetics/medtech equipment or processing.

But what about hospitals? Are big brick and mortar healthcare factories looking at investment in startup health?

Sure, but probably not at the level of a total acquisition - they're much more likely to cough up cash for partnerships or to pay for leasing/subscription/installation/service/support fees.

Wait a hot second...That's AT LEAST 4 big potential markets for health startups (big tech, pharma, biotech/genomics, hospitals).

So why aren't we seeing more incubators birthed to take advantage of a group of buyers with big wallets in a space that's, as Unity Stoakes puts it in this Organized Wisdom interview with Esther Dyson, "under-focused on and under-funded?"

It's crucible time for consumer-centric healthcare tech; as a recent issue of SmartBrief Leadership e-newsletter put it, time to "burn or become steel."

The Health 2.0 movement is at a precarious turning point ("the terrible 2s") - we've got companies with some very interesting traction, large community strength numbers, and even a few with some revenues in the black (a very few).

But the cyclical boom/bust nature of tech movements, including startup tech in health, opens wide the doors of opportunity for investors and larger big money sector leaders to fund incubation.

For goodness sake - we're dealing with people's most precious asset (even above financial security) - if you don't have life and limb intact it'll be hard to enjoy the fruits of the post-bailout economy.

You'd think more companies and individuals would be flocking to the space to look at incubation and VC/mentoring networks. But it's still a pretty insular world.

If startup tech can be THIS creative - with an online artisan food marketplace I love, Foodzie, birthed in the 2008 TechStars incubator, blogging about a "Magic of Mole" cooking class (warning: 'gastroporn' alert - do not look at the Foodzie page while hungry!) at La Cocina, an incubator for food entrepreneurs - SO CAN STARTUP HEALTH.

Want to see more examples of startup tech incubatees? Here's a look at some of the firms in the Y Combinator stable.

If you want more startup tech ed, check out this short video interview with VC investor Brad Feld, who reminds us that incubators are NOT the same as angel investing. But angels are a series for another time...

ADDITION: Just to really get your bloomers in a bunch, here's an irreverent panel at CommunityNext moderated by Guy Kawasaki that blows business model and 'standard' VC value benchmarks right out of the water.

The point? We need more innovation in HIT, eHealth and mHealth, not less.

I'd like to see increasing design-consciousness among medical equipment manufacturers in particular - haven't they learned anything from Amy Tenderich's open letter to Steve Jobs and the Diabetes Mine Design Challenge?

Need examples of the kind of innovation I'm talking about, and how it might be specifically translated to healthcare incubator selection?

• Reserve a spot in an incubator for a medical equipment maker looking to integrate biomimicry.

• Recruit a company, or university team, looking at bringing a product to market related to accessibility and gaming.
  

• A no brainer? A startup team designing a fitness game for the Nintendo Wii or for wiihabilitation.

Startup health incubator. Steel health. Steal Health? Crucible? Hmmm. I like it.

I like it alot.

Any investors want to do a startup health incubator?

Tune in tomorrow for when incubators in health WON'T work, and a discussion of the elephants in the room, including IP.

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.

Biggest Hospital Marketing Idea of the Year: Startup in a Hospital - Riffing on Startup Plane

So anyone know a really, REALLY innovative, freewheeling hospital executive in Las Vegas?

We're talking an absolute maverick here...

One who would let two crazy healthcare entrepreneurs and firestarters from Holland camp out in a room for 3-4 days leading up to SWWS 2008 (July 14-17th)? (Note: We don't care if it's the resident on-call room or a patient room, as long as it's not the morgue).

Nexthealth co-organizer Maarten den Braber and I (to our great surprise), had a paper accepted a WORLDCOMP's SWWS 2008 (International Conference on Semantic Web and Web Services).

This is where the creme-de-la-creme of web tech academia and brainiacs of the semantic web meet up and geek out for 4 days. It is way, way out of our league (and that's putting it mildly).

Somehow, the organizers and review panel saw our stuff and mistakenly qualified it as a "Regular Research Paper (RRP)."

This means at the show we have 20 whole minutes to fumble about and try not to make complete idiots of ourselves while we present our paper, ambitiously titled "The Semantic Web Sparks Health 2.0 Evolution: A Roadmap to Consumer Centric Care."

On the way home from a Nexthealth organizational meeting last night, we were sitting on the train throwing around ideas about how to prepare for our presentation (other than imbibing on copious amounts of sugar, caffeine and tranquilizers, a la any college all-nighter or typical weeknight for a tech entreprenuer).

Nexthealth itself started in the same wacky, offhand, organic way.

Maarten den Braber, Martijn Hulst and I 'met' up via the online community at Hospital Impact (thanks Tony Chen) just before my move to Holland.

We were all blogging about healthcare and working in the sector. We decided an informal offline meetup over coffee might kickstart an interesting conversation about global healthcare delivery and innovation.

Three weeks later, with the additional work and devotion of Jeroen Kuipers, Jacqueline Fackeldey, and Niels Schuddeboom, that series of emails and online chat morphed into the first Health 2.0 Unconference in Holland, with 50 people attending.

Here's the real kicker - in true Web 2.0 fashion, before arranging the actual Unconference, neither Martijn, Maarten, nor I had met in person (Martijn Hulst and I didn't ACTUALLY meet until the day of the Unconference).

We just connected the dots and provided a place for online contacts to meet in the brick and mortar world, and the whole thing took off. Luckily, none of the three of us were bots, so we all showed up too.

Pretty soon (meaning during the beer and conversation period immediately after the Unconference) people started asking 'what's next?'

We all went home, sat down at our computers, threw up some Powerpoints on Slideshare, answered questions at the Ning community, did some reading, and thought hard about the answer to that question.

Within a few days, we were writing, blogging, Tweeting, and Skyping about how Health 2.0 will evolve and shape 'what's next,' or "Nexthealth."

From its birth at the Unconference, Nexthealth, which started out as an idea Maarten and I geekily whiteboarded one night, grew into a website, Open Hospital sessions, and a bunch of other applications.

From that nerdy brainstorm around the whiteboard, and via countless cocktail napkin, flipchart, and Post-It evolutionary stages, Maarten and I developed something a bit more in-depth - the graph and research we're launching, called Nexthealth, the model 'roadmap,' at SWWS.

We knew any tools built would need to be both top-down and bottom-up, connecting individual 'firestarter' innovators with existing implementors (the "gray suits" of the current hospital and healthcare world). We also firmly believe they have to be 'open-source,' available to all, freely, and released into the wild as quickly as possible.

So we drew out a way to help them get from where they are, to plot a course to where they want to be (working from a base of the Health 2.0 movement in the US, defined/founded by Matthew Holt and Indu Subaiya) - a map to figure out 'what's next' for healthcare in Holland.

Nexthealth lets existing healthcare stakeholders plot an evolutionary course to consumer-centric strategy and delivery (using existing constituencies, structures, and service lines), and the model is all about encouraging a platform of collaboration, rather than competition.

So that's all great. But here's the kicker.

Maarten and I need time and a healthcare-friendly, always-on environment to launch, videoblog, conference in, Tweet, Plurk and all other manner of unmentionable Web 2.0 activities with our Nexthealth folks in Holland, and our friends sparking healthcare change worldwide, prior to the presentation.

Last night we were trying to decide when and where to stay in Vegas before the conference (being bootstrapping entrepreneurs, bloggers, and a grad student in Maarten's case, our options were a bit, ahem, limited).

Plus, a hotel room is boring and a bit too typical for the kind of things we get fired up doing...

Joking around, and probably still buzzing on the energy we always generate during nexthealth meetups and mindstorms, I blurted out "Startup in a Hospital."

To an infinitely embarrassing degree, this shows how obsessed I am with the TechStars community and the amazing stuff those guys and gals are doing (fast, and with frighteningly small amounts of cash but a stable of connections that I'm sure makes even Marc Andreeson salivate).

Both Maarten and I have been following the startup, tech, and venture capital worlds separately as a hobby.

So we're both huge fans of "Startup Plane," with Andrew Hyde, which resulted in the creation of VCwear.com. (Watch the video here).

I don't have a nifty videophone here in Holland (long story, it's difficult to get a phone with a contract as an expat) I whipped out my old-school GE voice recorder and we jokingly recorded the concept for "Startup in a Hospital."

Here's the pitch:

• For 3 days bed and board, you get 2 hyperconnected, witty (we think), personable healthcare innovators, firestarters, bloggers, authors, and consultants.
  

• We will, literally, be blogging, planning the startup Nexthealth.NL and corresponding with our colleagues in Holland (Martijn Hulst, Jeroen Kuipers, Jacqueline Fackeldey, and Niels Schuddeboom), and preparing for our SWWS 2008 presentation from our hospital beds.

• We want to be wearing branded scrubs with our sponsors logos. Hospitalstartupwear.com it is. We're happy to wear your hospital logo, in any means/manner short of a permanent tattoo.
  

• We'll be coming and going and gearing up for our presentation, so we won't get in the way. Too much. But we will be our normal, startingly forthright and bitingly sarcastic selves (how we are when we're not busy being cheerleaders for global healthcare change), so if your food sucks, we may blog about it.
  

• Think of us as your test patients. Have a new wing? New hospital design? Did you just implement Planetree? The Disney Be Our Guest program? Want to test noise, lighting, odor and other atmospheric impacts on rest and relaxation levels of patients and guests? We're willing to be your guinea pigs. Please, no pharma testing, though that might make for a VERY interesting SWWS presentation...
  

Here's the fine print:

• Some people will be grossly offended by Startup in a Hospital. Two beds? Wasted for people who aren't sick? The US hospital system is wrecked and you're doing some crazy Startup in a Hospital gag, giving rooms to people who don't NEED our care? (Well, that point is debatable - a psych room might be particularly fitting).

• Your hospital lawyers and General Counsel may tell you this is a really. really. bad idea. Without the proper release forms in place, they'd probably be right. Which is why we'll put our John and Jen Hancocks on just about anything. Ask yourself one question - what would Dr. House do?

• We will adhere to HIPAA. We realize the incredible seriousness of privacy in the hospital setting. We will not videotape or blog about ANY hospital patients or physicians. Although if we encounter a hot doctor we may in fact create a McDreamy-esque nickname, we will not post his/her photo on hotornot.com.
  

• We will videoblog ONLY from our hospital room, where the Startup in a Hospital magic is happening. We will not videoblog ANY hospital employees, unless your CEO wants some face time, in which case we're thrilled to oblige. We will not interfere in any way, shape, or form, with hospital operations and care delivery.
  

• We will sign any and all release forms your team of legal eagles may require.
  

• We realize this has to be arranged incredibly fast. That's just the way we roll. You should probably email your Board right now. You should look at our LinkedIn profiles (Jen McCabe Gorman, Maarten den Braber). We are happy to provide credit card and Passport info, our life stories, and submit to background checks (about that one time in San Juan...).

In all seriousness, if we come stay in your hospital, we will behave. We think this is actually an amazing opportunity for a hospital to do something really innovative and newsworthy, with very little risk.

I've been an inpatient following ortho surgeries 6 times. My mom is an RN. I know what it's like to be sick, in pain, and scared in a hospital.

I'd like to know what it feels like to build something amazing there - a recovery tool for the entire system.

Come back tomorrow for the transcript of the "Startup in a Hospital" recording. (Yeah, we're old school like that...)