Starting Up Startups: The Road to Health 2.0

By @Spitz

Digital Health Evolution
Emerging, exploratory, and risky, today’s digital health business models are analogous to silicon valley tech innovators of a generation ago: Driven by visionaries and fueled by venture capital, blossoming startups take an idea and make things up as they go along, mutating and evolving in real time, competing within a Darwinian landscape where few survive, and the winners not only get most of the spoils, but redefine the entire ecosystem—and eventually all of healthcare.

Hardly a day doesn’t go by without news of a mobile health company starting up, shutting down, or releasing the latest greatest app. Wonderfully informative sites like mobilehealthnews and imedicalapps provide peer reviews not only about product, but the companies that create them, caught up in a whirlwind of capital investment, big ideas, and filling gaps within a healthcare system struggling to integrate and provide improved outcomes for patients worldwide.

Since the digital health startup habitat seems as fragmented as the solutions they engender, organizations like Rock Health have consolidated best practices, networking, and managerial mettle into meta-startups that incubate these smaller companies and give them the best chance for growth and survival. Their goal is to nurse them and bridge the typically considerable gap between the Big Idea, necessary business expertise, and money required to fuel it all.

Sounds great in principle, but how does it actually play out in practice? Having followed the colorful career of one of the designers of Careverge, an intriguing health and wellness platform with social, mobile, and gamification features, let’s take a look at his latest project—less an innovative product and more a cutting edge business model, one that exemplifies the likely road to Health 2.0, attained via relationship building, corporate innovation, and many, many cups of hotel coffee.

Visit with an Entrepreneur
Thor Ernstsson is a cool Icelandic tech cat who embodies today’s digital health entrepreneur. A software developer and design engineer by trade, at the helm of his own company for over a decade, then Zynga game architect and Chief Technology Officer with Audax Health, he’s recently started his own startup that starts up startups, a self-referential expertise that emerging niches like digital health need in order to gain a toe hold and eventually become a self-sustaining industry.

“Success requires more than venture capital, a good idea, and operational acumen,” says Thor from the courtyard of the Mondrian Soho Hotel in NYC, his new brainstorming digs after Hurricane Sandy washed him and his techy minions out of the Bowery on the Lower East Side. “But that’s tenuous unless the money and ideas are personally connected. That’s why startups are more about relationships than simply identifying the next big thing, especially in health.”

By beginning with a rigorous customer development process, and then following up with product development capabilities and a well-established network, Thor’s Casual Corp focuses on two objectives: 1) To start companies around their founders by solving validated problems; and 2) Help already entrenched corporate entrepreneurs drive innovation from within large enterprises. Both angles of attack invert the traditional model of beginning with tech and wrapping a business development strategy around it post hoc.

“Developers-turned-entrepreneurs like to start with the build and work backwards,” says Thor. “But we quickly discovered that digital is becoming increasingly commoditized, to the point everyone from institutional to corporate players and agencies have their own digital shops. So you can’t offer an app, platform, or even a customized content management system; instead, you have to create a relationship forged on understanding individuals’ needs and then proposing strategic solutions.”

Another challenge is the changing nature of venture capital, these shifts trickling down to the start ups they fund. As Mark Heesen, former head of the National Venture Capital Association has described, digital has become so nimble that the threshold for start ups continues to shrink. Meanwhile, an enormous infusion of foreign capital places increasing demands on quicker, larger returns, making the nascent digital health industry less ripe for those with the big bucks.

“So not only is everyone building digital stuff, but venture capital is becoming more geographically- and industry-specific” continues Thor. “The bottom line: Money is out there, but getting some to fund your digital health startup is tougher and tougher. That’s another reason it all boils down to relationships. You can network at every VC fundraiser event around, but if you don’t forge a meaningful personal connection between investor and founder, nothing will stick.”

So Thor is applying his experience in technology and user experience to help create think tanks and innovation startups within the digital departments of large corporations. Conversely, he’s also exploring the opposite end of the hierarchy through his digital health fellowship program, one that recognizes founders with great ideas in the space, and connects them with the right design, development, deployment, distribution, and monetization expertise.

“But the Devil is always in the details,” smiles Thor, “especially in digital. So let me hook you up with one of my recent digital health startups, and its founder, Daniel Z. Lieberman, M.D., a  professor and clinical director in the Department of Psychiatry and Behavioral Sciences at George Washington University. He’s started an intriguing new company called ‘Good Measure’ to help primary care physicians assess depression.”

Start Something!
Check into Pixels & Pills tomorrow for the case study, follow Thor and Casual Corp on Twitter and read some more press, and visit the Casual Corp site to learn about their approach to Health 2.0, and how you, too, can start something in digital health!