Although funding for digital health start-ups is far from going down, a new report from Accenture forecasts that one out of every two of these new companies will likely fail within two years of launch. However, this will allow big companies to mine these “zombie” start-ups for talent or innovative technologies.
“Rather than discard the investment that has been made in getting sputtering start-ups off the ground, it often makes sense for healthcare stakeholders to acquire them, salvage their best people and technologies and awaken them from a zombie-like existence,” said Kaveh Safavi, managing director for Accenture’s global healthcare business. “Many digital start-ups that are dying or in danger of failure have developed solutions that can help traditional and non-traditional healthcare companies achieve their goals.”
Accenture estimates $2.5 billion will be invested in health technology start-ups in the next two years across four key segments: engagement (25%), treatment (25%), diagnosis (21%) and infrastructure (29%).Based on an analysis of 900 healthcare IT start-ups, the report has found that 51% were in danger of failing within 20 months of their launch. These “zombie” start-ups received nearly $4 billion in start-up funding between 2008 and 2013 to develop new technologies and acquire talent.
Accenture estimates $2.5 billion will be invested in health technology start-ups in the next two years across four key segments: engagement (25%), treatment (25%), diagnosis (21%) and infrastructure (29%).
Accenture’s research focused on companies with solutions across social, mobile, analytics, cloud and sensors (SMACS), technologies, which improve clinical and administrative functions and support the development and marketing of innovative offerings, from wearables/nearables and telehealth to remote monitoring and on-demand services.
There were 1,700 patents between the 900 start-ups that Accenture analyzed.Beyond getting top engineers, the Accenture research shows that acquiring failing start-ups enables healthcare players to acquire patents — there were 1,700 patents between the 900 start-ups that Accenture analyzed. Also, startups could help bigger companies bolster existing solutions with new products and services.
“In a period of disruption, leading organizations understand that they cannot keep doing the same things and expect to succeed,” Safavi said. “They must become disruptors instead of being disrupted. Acquiring a failing health IT start-up with excellent people and promising intellectual capital could be just the prescription for achieving that goal.”