Health Wildcatters is now open for business. The digital health accelerator began accepting applications for its first class of entrepreneurs yesterday. Executive Director Hubert Zajicek, MD, co-founder of the accelerator, previously was medical technology director at the Frisco technology incubator NTEC.
Health Wildcatters provides health startups with up to $35,000 in seed money in exchange for 8 percent of equity. It is modeled after the highly successful Tech Wildcatters program and housed in the Tech Church in Uptown Dallas.
Fifteen startups will be selected out of what Zajicek predicts will be at least 100 applicants to participate in a 90-day program beginning in August. Zajicek expects that about half of those selected will be from the Dallas-Fort Worth or Texas. The accelerator is likely to bring jobs to the area, although that is not necessarily the intent.
“We don’t know whether they will remain here,” Zajicek said. “For some (startups), it would make sense for them to stay because we connect them with local resources, but it is not evil if they leave. Some will expect to stay and some will already be here.”
So far, the organization has raised $1 million from about 30 investors, several of whom will also act as mentors to the startups.
“We have to believe we can make a difference in their trajectory,” Zajicek said. “This is a mentor-driven program. We fill in their knowledge gaps and make them presentable. We want mentors who are proven healthcare executives with entrepreneurial experience. As a mentor, you give back through your time and wisdom. This effort is bigger than its parts. We can do more together than we could individually. (Startups) will be working with people who know the system.”
Digital health accelerators assist with capital, advice, and strategic guidance. Most are on the east and west coasts. Health Wildcatters is believed to be the first in the Southwest. According to the California Healthcare Foundation (CHF), there may be 20 digital health accelerators worldwide by the end of 2013.
Many healthcare startups are initiated by people with no healthcare experience. CHF points out in a whitepaper on accelerators, “The entrenched channels, long sales cycles and significant regulatory burden in healthcare are at odds with the volume-driven model of rapid startup and development found in technology accelerators. The risk-averse culture of healthcare and a lack of proven revenue models for direct-to-consumer businesses can make pilots and early revenue difficult to obtain.”
Zajicek said there are thousands of U.S. health-technology startups that could use accelerator assistance. Healthcare IT has been booming since the 2009 passage of the American Recovery and Reinvestment Act created billions in funding. Demand was fueled further by the passage of the Affordable Care Act the following year.
A Healthcare Movement Toward Consumerism
Venture capital funding of digital health grew by nearly half in 2012 to more than $1.4 billion, according to California accelerator Rock Health. By comparison, venture-capital investment in biotechnology and medical devices declined. An estimated 134 digital health companies each raised more than $2 million in 2012. Electronic health records startup investment was dwarfed by health consumer engagement products and tools and tracking for personal health.
The most active hubs for digital health investment have been the San Francisco Bay Area and Boston. Dallas and Chicago represent the next tier, followed by Seattle, Nashville and South Florida.
Zajicek said the Dallas accelerator has several competitive advantages. He said he believes it is the only one headed by a physician. He was an instructor and researcher at UT Southwestern who earned his master’s in business administration from Southern Methodist University in 2006. Clay Heighten, MD, who helped build MedicalEdge Physician Group before it was sold to Texas Health Resources in 2011, also will be heavily involved. Carl Soderstrom, who also was involved with MedicalEdge, is a cofounder along with Tech Wildcatters co-founder Gabriella Draney.
Zajicek also cites DFW’s central location and the competitive nature of the healthcare market as strengths. He believes healthcare is moving more toward consumerism, where patients have more information about procedures and healthcare solutions.
“With vertical integration and accountable care organizations, systems are branding themselves as one-stop health solutions rather than just treating the sick,” he said. “They have more ability to reach you at home inside your own four walls. In that context, systems are trying to provide better services.”
“Those who come from the technology side don’t appreciate how complex, slow, formal, and archaic healthcare is,” Zajicek said. “We don’t dampen their enthusiasm, but we help them set reasonable expectations. They need to pick the right pitch.”
Steve Jacob is editor of D Healthcare Daily and author of the book Health Care in 2020: Where Uncertain Reform, Bad Habits, Too Few Doctors and Skyrocketing Costs Are Taking Us. He can be reached at [email protected]