Healthcare and medtech research and development were once exclusively the preserve of big pharma and other large healthcare firms. The cost of developing and launching viable technology solutions and healthcare innovations was so high that startups couldn't compete. But that's all changed in the last 10 years.
Startups can now enter the fray and compete in the health sector with simple apps that keep track of what's in your medicine cabinet, for example, and new hardware innovations that let tablet computers diagnose heart disease in the middle of nowhere. Healthcare innovation is present in every part of the system, from using wellness solutions to keep people out of hospitals in the first place to helping healthcare providers with their billing systems.
Now that startups can compete with large corporations, these firms are keen to take advantage of the new ecosystem, and that means finding the best way to work with startups.
In 2004, pharmaceutical giant Bayer started Grants4Apps, which offers dedicated office space and funding to five digital health startups each year in its Berlin headquarters. Each winning startup receives 50,000 euros and access to Bayer's experienced managers as coaches and mentors for 100 days. In return, Bayer gets an option of under 10 percent equity in the startup if it IPOs or sells within 10 years.
Past alumni of the program include the hardware firm Vitameter, which has developed a device that measures people's vitamin levels. As well as winning a place in Bayer's accelerator in 2015, Vitameter also won $35,000 in funding from the Velocity Fund. The device currently uses a drop of blood to track vitamin D and iron levels and hopes to add other markers, such as proteins and electrolytes, in the future.
Johnson & Johnson
Healthcare giant Johnson & Johnson works with startups in a number of different ways, including running accelerators and investing and partnering directly with small firms. All of this comes under the umbrella of J&J Innovation, a dedicated business unit at the corporation. Part of this unit's work is running JLABS, a platform that offers entrepreneurs professional operation management, programming resources and core research facilities. And, rather unusually, Johnson & Johnson doesn't ask for anything back.
"JLABS is a 'no-strings-attached' arrangement. There is no first look, no first right of refusal and no equity assigned to Johnson & Johnson or its subsidiary, Janssen Pharmaceuticals. This allows resident companies to maintain complete entrepreneurial freedom as they focus on scientific innovation," the company says.
Alumni of JLABS include Cognuse Neuroscience, which offers software solutions to hospitals and rehab centers to aid in treating and rehabilitating patients affected by neurological conditions, such as strokes, traumatic brain injury, ADHD, Alzheimer's and multiple sclerosis.
Big pharma firm AstraZeneca runs an Open Innovation policy that aims to collaborate with academic institutions, biotech firms and pharmaceutical companies on drug discovery, from the first idea to early clinical deployment. While this policy is often focused on research papers and academia, it also branches out into work with startups.
In 2015, AstraZeneca partnered with Cambridge University's Judge Business School on an Entrepreneurship Center for British biotech startups. Through the center and work with Accelerate Cambridge and HRH The Duke of York's Pitch@Palace initiative, AstraZeneca offers mentorship and support to biotech startups in return for opportunities for collaboration and partnership.
It's not just big pharma and healthcare firms that are keen to work with startups; the industry is becoming a prime opportunity for accelerators too. One of the largest accelerators in any sector is Blueprint Health, which focuses on mature startups, but also supports early-stage firms. This accelerator takes six percent of founder shares in exchange for participation in its program, which offers a three-month program of mentorship in New York and $20,000 in funding to each of the 20 healthcare IT companies it supports each year. Blueprint says that 80 percent of the companies it has worked with are still in business, and 85 percent of those are generating revenue. More than 10 of its startups have also grown revenue to more than $1 million.
Regardless of exactly how big pharma is choosing to interact with startups, it's clear that the healthcare startup ecosystem is booming. Just as in other fields, thanks to technological advances, small firms can compete with the establishment and come up with innovative solutions to age-old problems. Large corporations ignore these startups at their peril.
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