Healthcare startup hub MATTER was founded on the idea that healthcare revolves around people.
One physician who works with MATTER, faced with the loss of his hearing, decided to quit his full-time job and become an entrepreneur developing a better hearing aid. Another entrepreneur who applied was a former football player who wanted to develop technology to help athletes better manager their concussion risk and prevent future injuries. The highly personal connections struck Steven Collens, an entrepreneur himself who in 2015 launched MATTER in Chicago.
Two months after its launch, Matter now boasts 70 member startup companies, 30 industry partners, seven health systems and three universities. Chicago's blooming tech scene began with the introduction of 1871, a tech accelerator. Several healthcare entrepreneurs moved to Chicago to take part in 1871 and founded what would be the basis for Matter. The city boasts several large medical associations and several large health systems, so Chicago made sense as a host for healthcare innovation, Mr. Collens says. 1871 hosts shared space to for entrepreneurs to network, share ideas and connect with industry partners.
"The theory of innovation that we're built around is that the most meaningful solutions in healthcare will come when entrepreneurs work with the established entities," Mr. Collens says.
However, being a technology entrepreneur in healthcare is often challenging — the combination of expense, lack of expertise and complex regulation leads to a high rate of failure. Here are five key thoughts about healthcare tech startups from Mr. Collens.
1. Startups need expert help. Most entrepreneurs in healthcare tech don't have the decades of experience that someone in the medical industry does, but the medical professionals often don't want to devote the time to quit their full-time job to start a tech business. Traditionally, connecting entrepreneurs with experts has been difficult, but that is one of the functions of MATTER — to facilitate those connections.
2. The capital layout is often daunting. Startups by nature depend on venture capital investments, which can fluctuate. Some companies rake in millions while others barely make it over $100,000 even all their ideas are innovative. Connecting with an industry partner as support can lend a startup some legitimacy and help stabilize it as it continues to develop its product.
3. The industry is becoming more accepting to startups. Corporations and health systems are beginning to establish venture capital arms to make strategic investments and evolve their business models, such as Rex Health Ventures, an investment venture founded by Raleigh, N.C.-based Rex Health Care. The pressure on insurance companies and providers to improve their efficiency and outcomes will likely drive them to look for innovation through technology, and startups often drive that innovation.
4. Healthcare executives should be cautious when approaching startups. Investing in any company is always a risk, and because of the high failure rate, hospital executives should approach relationships with startup companies with caution. Preparing a list of questions related to data security and product architecture as well as about the company's business plan can provide potential investors with a better idea of whether a partnership is a good idea. A healthy level of skepticism, even during the pilot of the software, can help the hospital or health system get an idea of what it needs from the startup and what adjustments need to be made to the product to best serve the organization's needs.
5. Startups are always looking for feedback. Throughout the development of a product, through a pilot and even into a launch, startups will need communication about how their business plan is working and whether something needs tweaking. If a healthcare organization has partnered with a startup, it will usually work with the startup company's leaders on recalibrating the implementation plan to what works, and if that works better, it could change their business policies. Communication in the community is critical for improvement.