Proving the Business Case for the Internet of Things

Silicon Valley startup accelerators on the hunt for health-tech talent

Christina Farr
August 27, 2014
(Reuters) - What do Dropbox, Stripe, Airbnb and Reddit have in common? These technology firms all received mentorship and money from Silicon Valley's so-called startup machine, Y Combinator.

Now, for the first time in its nine-year history, the accelerator program is actively recruiting health-technology startups. To attract top talent in healthcare and biotech, Y Combinator (Mountain View, CA, USA) recently tapped medical executive Elizabeth Iorns as a part-time partner.

Sam Altman, Y Combinator's president, told Reuters he expects to see a growing number of venture capitalists investing in early-stage biotech and digital health companies.
"When we move into a new area, the venture capitalists usually don't like it," he said. "It takes them a couple years to come around."

But increasingly, Silicon Valley is opening its checkbook to health startups. Digital health, a particularly trendy area that includes wearable technology and electronic health records, received $1.9 billion in 2013, a 39 percent jump from the previous year, according to data collected by venture fund Rock Health (San Francisco, CA, USA).

Y Combinator's interest in health-tech echoes some of the largest technology firms – Google (Mountain View, CA, USA), Apple (Cupertino, CA, USA) and Samsung (Seoul, South Korea). Similarly to these firms, Y Combinator is hoping to corner a sliver of the American healthcare market, which accounts for an estimated 20 percent of U.S. gross domestic product.

"It's the right time for us to try health care," Altman said, as the "cost and cycle time" have dramatically decreased in recent years.

About a dozen health startups showcased their products and services to a roomful of press and venture capitalists at Y Combinator's demo day. This marked the largest number of health-related startups in Y Combinator's history, Altman said. The companies that presented on Tuesday included The Immunity Project (San Francisco, CA, USA), which is developing an HIV vaccine, and Boston-based Gingko Bioworks, which is working on a project to treat antibiotic-resistant germs.

Other digital health funds, including Rock Health, say they hope Y Combinator's interest in the space will open the floodgates to new sources of funding.

Y Combinator offers funding and advice, in exchange for about 6 percent of each startup's equity. It was founded by Paul Graham, a notable programmer and venture capitalist.
(Reporting by Christina Farr; Editing by Leslie Adler)
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