Angela Hong briefs the Seattle Telehealth Forum on the Location Attractiveness Survey, March 5 2015.
We, Angela Hong and Ed Butler, are co-founders of separate early-stage digital health startups and as a project of the Seattle Health Innovation meetup group, we are conducting a “location attractiveness” study to help determine where our new companies will be based. Yes, we love Seattle, but we want to be objective about it.
This is an exciting time to be in this field. The decision as to where to locate our early stage operations is not easy. We would like to take a systematic look at the most attractive metropolitan areas in the US for establishing and growing a new digital health startup. We have just begun this process and will provide updates via this blog on our progress. Where do you think the hottest health innovation cities are? We intend to find out.
With digital health investments reaching $4.1 billion in 2014, there is no question that the healthcare sector is ripe with opportunity. Unlike the glacial pace of change in health reimbursement and big-iron electronic health record systems, the 2014 spike in digital health investment is new and it is rapid. The top six categories, representing 44% of 2014 digital health investment are analytics/big data, healthcare consumer engagement, digital medical devices, telemedicine, personalized medicine, and population health management.
This study is being conducted from the standpoint of early stage digital health startup entrepreneurs. While we have worked within large healthcare organizations, consulting firms, and health IT vendors, we’ve learned to appreciate the difference between what is relevant for a big company and a startup. One of the first tasks we set for ourselves was to identify the criteria to use for assessing whether a city would be a good place to start a digital health venture.
Angela Hong, Chelsea Steinborn, Ed Butler at the Seattle Health Innovation Forum on Telehealth
The criteria we have decided to use to objectively assess different metro areas for suitability are as follows: regulatory environment, talent, financial capital, institutions and the regional culture.
Regulatory Environment: In order for entrepreneurs to want to incorporate or even set up shop in a particular location, the ease of forming the business is important. How hard and expensive is it to form a company? Are there any state or local laws that make it easier or harder to build a digital health product? Is this a location where we have to spend more of our precious startup funds on lawyers?
Talent: Startups cannot compete head to head with large companies on salaries, benefits, and, arguably, job security. It takes a certain mindset to offset the risks and low salaries of startups with the opportunities to work on something truly meaningful, and to have a chance of a windfall when the successful exit event occurs. It takes a certain population density to create a critical mass of skilled designers, engineers, health professionals, behavioral and life science researchers, marketing, sales professionals who are ready for this kind of a ride. Diversity is also crucially important in building cohesive and productive teams.
Financial Capital: Like most other types of startups, having access to financial capital whether it’s via venture capital or the angel community is extremely important. Unlike other industries, healthcare administration is inherently a harder industry to understand due to complex regulation and legacy institutions. The accessibility of investors whose investment strategies include the health industry is a rare resource and could make a difference in startup location attractiveness. It’s not just the money- we need savvy investors with whom we can gain market insights and key connections. Being 30 minutes away from a face to face meeting reduces friction and accelerates progress and accountability.
Institutions: Most healthcare startups need to form development partnerships and early adopter agreements with large health organizations for testing or piloting their product. Such institutions may include hospitals, payer organizations, pharmaceuticals, and life science research institutions. This is a big opportunity but also can be a pain point for many startups because of the predilections of too many institutional decision-makers to work only with “safe” name-brand corporate suppliers.
Regional Culture: Perhaps one of the more important criteria is a startup-friendly culture. Being in a location where startups thrive and can support each other can be a powerful advantage. How open and friendly is the startup culture in the metro area? Is it cut-throat competitive? How likely is it that other companies will poach your team? Typically startup entrepreneurs need help or advice when building their company and what better way to get help or advice if your neighbor sitting next to you at the coffee shop can provide that guidance. Quality of life for our teams is critical to being able to recruit the best people. Despite the hype around startups, it is not all about late night sprints and cold pizza. Living in a beautiful area with diverse cultural resources (museums, concerts, parks) and the ability to maintain a healthy lifestyle and to build relationships all contribute to building a sustainable team and an amazing company.
We are interested in what you think. What do you consider important when determining what city you want to live in? What do you think are the top health innovation cities in the US?