Small Business

The Year of the Health Tech Start-up

Christina DesMarais, Inc
Tom Grill | Getty Images

It’s shaping up to be the year of the health tech start-up.

When I came up with the list of entrepreneurs for my recent Women to Watch in Tech list, a full one-third of the chosen ladies came from the health sector. One of them, Halle Tecco, is playing a big role in helping to spawn more digital health-related start-ups — that's the exclusive focus of her seed accelerator Rock Health. Last year 13 new companies went through its program. Nearly half of them have received VC funding and one—Skimble, which makes fitness apps — is already profitable.

What’s with the focus on health? Given that the system in the U.S. is more or less a train wreck, there are simply a lot of problems that technology can fix — or at least that's what a new crop of entrepreneurs are hoping.

Think about it, Americans are as fat and unhealthy as ever. What might help, if the masses can be persuaded to try them out, are the scads of gadgets that let people monitor body metrics. They were everywhere at CES last month.

Another problem: More people are suffering from chronic diseases such as diabetes and cancer. These patients might benefit from health platforms like the newly launched Careverge, which uses an intelligent engine to provide personalized news, forums, and rewards for healthy living, as well as places to set health goals and compete and connect with others who are living with the same conditions.

Then there's health insurance, which is not only exorbitantly expensive for self-employed people and business owners, but it’s also a machine seemingly pitted against people who actually need to use it. How much of your deductible have you used? Which of the many bills arriving in your mailbox should you pay? Are you getting overbilled by your doctor? Is there a cheaper plan you could be paying for?

Cake Health is a Web platform designed to answer such bothersome questions. It took part in the TechCrunch Disrupt competition in September during which co-founder and CEO Rebecca Woodcock explained Cake Health’s mission of helping people better understand and manage their health costs.

The judges ate it up.

"This is the best presentation," said judge Brad Garlinghouse, who was then an executive at AOL and is now an angel investor. "[It's] the most viable business, the biggest market. I think this is meant for this space. [Healthcare] is a disaster currently. I try not to deal with it when I get those [bills] in the mail. I have no idea what they say."

He’s right — many aspects of healthcare in America are in shambles, and have been for some time. Health tech start-ups that fill a real need may do very well right now, in spite of a report from the National Venture Capital Association that the future of VC investment in med-tech start-ups is grim, largely due to the costly and slow process of getting approval from the U.S. Food and Drug Administration.

That report focuses mostly on the outlook for biotech and medical device companies. But entrepreneurs who are trying to solve problems in the healthcare system with software aren't convinced the outlook is so dour.

According to Frank Moss, director of new media medicine at MIT’s Media Lab, told the audience at a GigaOm conference in November that now is a great time for health start-ups for three main reasons.

First, young doctors are much more comfortable with technology than their older counterparts. “Now if you go to Harvard Medical School, it looks like a cafe in Silicon Valley or Austin. Everyone’s got an iPad,” he said. It stands to reason, then, that as more start-ups seek to get patients and doctors using their platforms and devices, there may be less push back.

He also said start-ups can benefit from the fact that employers can’t afford for their employees to be sick. As a result, business-to-business health tech start-ups can have an edge if they can show the business sector their products or services keep employees healthier.

Moss also said that a business-to-consumer window will be opening soon.

Which health tech start-ups are you watching?