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HOW ZOMBIE START-UPS ARE REVIVING HEALTHCARE

Failing digital health start-ups are fueling innovation and growth

Overview

How can zombies be part of an organization’s digital health success?

More than half of digital health start-ups funded between 2008 and 2013 are not likely to survive longer than 20 months according to Accenture projections. Some traditional and non-traditional companies will look to buy these “zombie start-ups” to drive growth by infusing top talent, fueling innovation and bolstering existing solutions.

In a period of disruption, leading organizations understand that they cannot keep doing the same things and expect to succeed. Discover why healthcare players will increasingly turn to failing digital health start-ups to accelerate and launch aggressive business strategies. 

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"More than half of digital health start-ups funded between 2008 and 2013 are not likely to survive longer than 20 months."

Background

The US healthcare market has been—and will continue to be—disrupted by digital start-ups that combine Social, Mobile, Analytics, Cloud and Sensors technologies to improve clinical and administrative functions.

Accenture estimates that digital health start-up funding will reach $6.5 billion by 2017, with investment spanning engagement (25 percent), treatment (25 percent), diagnosis (21 percent), and infrastructure (29 percent.)

From wearables/nearables and telehealth to remote monitoring and on-demand services, innovative market offerings are diverse and potentially game changing for healthcare providers, payers, patients and even non-traditional healthcare stakeholders.

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Key Findings

An era of innovation in healthcare has begun in earnest. This is in response to the convergence of digital technologies, new business models, the rise of the healthcare consumer and pressure to reduce healthcare costs and deliver better health outcomes.

While digital health and healthcare IT start-up funding is accelerating, the reality is that few start-ups will stand out. Even fewer will survive.

Of the nearly 900 digital health start-ups that Accenture studied, 51 percent are zombie start-ups, at risk to die.

These are companies that each received less than $50 million in total funding between 2008 and 2013 and have not received funding in 20 months or more. This rate of failure is just shy of cross-industry standards.

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"Of the nearly 900 digital health start-ups that Accenture studied, 51 percent are zombie start-ups, at risk to die."

Analysis

There are three significant benefits to swooping in on zombie digital health start-ups to capture relevant and at-the-ready resources:

  1. Infuse top talent

    As the healthcare IT industry evolves, there is a diminishing pool of qualified technical talent with capabilities in emerging areas. Buying digital health zombies for specific talent can build a bench of top talent quickly.

  2. Fuel innovation

    In an industry where innovation and competitive differentiation now go hand in hand, leading healthcare organizations value a more agile and iterative product development cycle. Buying zombie start-ups can initiate and accelerate R&D efforts by capturing intellectual property and patents.

  1. Bolster existing solutions

    Organizations want to enhance and scale existing healthcare IT market offerings to provide more complete solutions that attract or retain business. By shopping for a natural fit with a digital health zombie’s products and services, companies can extend asset and capability integration.

DOWNLOAD THE FULL REPORT [PDF]

"There are three significant benefits to swooping in on zombie digital health start-ups."

Recommendations

A single idea, a single technology or a single organization are no longer the key to success in healthcare.

High performers of the future will be those who position themselves at the center of digital ecosystems. These organizations will stretch their boundaries by tapping into a broad array of other digital businesses, digital customers and even digital devices at the edge of their networks.

Those that pursue this strategy should establish a clear vision and conduct the due diligence to identify the right zombies to target.

DOWNLOAD THE FULL REPORT [PDF]

Zombie Start-Up Funding - Chart

Even promising, highly-funded digital health start-ups can become zombies

Once-promising digital health start-ups represent big investment—nearly $4B in total funding spent 2008-2013, with median funding at $3.6M.

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