The Rise & Role of Venture Studios in Healthcare Innovation Session # 195, August 12, 2021
Le s Wilkins on Chief Operating Officer, Hashed Health
DISCLAIMER: The views and opinions expressed in this presentation are solely those of the author/presenter and do not necessarily represent any policy or position of HIMSS. 1 Welcome
Le s Wilkins on Chief Operating Officer, Hashed Health
#HIMSS21 2 Conflict of Interest
Les Wilkinson, COO, Hashed Health
Has no real or apparent conflicts of interest to report.
#HIMSS21 3 Agenda
• Current State of Innovation.
• Studios are innovating innovation.
• Studio value proposition.
• Studio characteristics and structure.
• Studio results.
#HIMSS21 4 Learning Objectives – By the end of this session, the audience will be able to:
• State common reasons healthcare startups fail and how new innovation models can de-risk the innovation process.
• Describe traditional corporate innovation challenges in her/his own words.
• Design a venture studio process for moving ideas to commercialization.
• Apply the principles of a venture studio process to their own innovation efforts.
• Identify how to differentiate between accelerators, incubators, corporate innovation programs and new venture studio models.
• Recognize whether a venture studio model could be a fit for their organization.
#HIMSS21 5 Startup Mythology
The Garage
6 Startup Reality
>90% 75% 1%
Percentage of Venture Backed Startup Failure Rate Companies that NEVER Return Cash Odds of achieving Unicorn Status to Investors Source: Startup Genome, 2019 Source: CBInsights Report Source: Failory
#HIMSS21 7 No Market Need Ran Out of Cash
Poor User Experience Why Not the Right Team Startups Fail
Pricing and COGS Competition
Source: CBInsights
#HIMSS21 8 Innovation is a Priority for Enterprise . . .
U.S. federal Innovation is listed Corporate government and as a top 5 venture capital businesses spent priority among invested $73.1B $680B on R&D in directors and in 2020 executives 2018
Source: Cheng, J. Yo-Jud, Innovation Should be a Top Priority for Boards, Harvard Business Review, September 21, 2018.
#HIMSS21 9 Half of all S&P 500 companies will be replaced in the next 10 years.
While corporations are highly Yet Most active in working with startups, the vast majority see less than Struggle to 25% of their initial pilots with startups scale into solutions Innovate. that can be taken to market.
71% of entrepreneurs admit to sourcing their startup idea from their previous job.
#HIMSS21 10 Innovation Now. More than Ever.
Especially in Healthcare. Urgent imperatives are changing the basis of “ “competition —driving all stakeholders to develop new strategies, business models, and innovation capabilities. Clayton Christiansen Spring 2017
#HIMSS21 11 Venture Studios – Innovating Innovation
12 What is a Venture Studio?
• Studios take qualified ideas (problem + solution)and turn them into sustainable, scalable, valuable companies
• Studios partner with individual and enterprise cofounders
• Studios bring resources (human, capital, domain expertise, market, technology) to the very beginning of the product development lifecycle
• Studios use a disciplined and proven process for developing new businesses
• AKA “Startup Studio,” “Startup Factory,” Venture Builder.”
#HIMSS21 13 Venture Studio – A History
Source: Collider, State of the Digital Nation 2020
#HIMSS21 14 The Proliferation of Venture Studios
446 500
400
201 300
200
100 49 22 13 0 1995-99 2000-04 2005-09 2010-14 2015-21
Source: Enhance Ventures research. #HIMSS21 15 Notable Enterprise Sponsored Studios . . .
Source: Startup Studios – Innovating Innovation. Enhance Ventures, Dec. 2019.
#HIMSS21 16 Studios are Attracting Investors . . .
#HIMSS21 17 Elite Entrepreneurs are Starting and Funding Studios
Studio Super Angel Studio Investment Founder Company Studio Peter Thiel Atomic Garret Camp Uber Co-Founder Expa Richard Branson Expa Mike Jones Myspace, CEO Science Marissa LumiLab Jeff Bezos Pioneer Square Labs Mayer Yahoo, CEO s Marc Andreessen Atomic ExactTarget, Co- High Scott Dorsey Founder Alpha Chris Sacca Human Ventures Henrik Werdelin BarkBox, Co-Founder PreHype
Source: GSSN, Disrupting the Venture Landscape. Dec. 2020. #HIMSS21 18 Venture Studios and Studio Born Companies in Healthcare
#HIMSS21 19 Incubators, Acclerators , Studios
Incubator Acclerator Studio Initial Forcus Entrepreneur Co m p a n y Id e a Description Offers office space, basic Fixe d-term, cohort- Sig nifica nt re s ource s in resources and community. Often based p rog ra ms . Culmina t e order to best position sponsored by a city/state, a in a p ub lic p it ch event the venture for success corporation of venture firm or demo day
Stage Very early to pre-seed Pre-seed to seed Idea to exit Community A community of other Other cohort participants, The studio, its network entrepreneurs the accelator a nd it s and co-founder network Resources Office space, internet, Sma ll a mount s of ca p it a l, Pre-seed capital, a d mins it ra t ive support, programing, pitch or demo business development, networking opportunities, day HR, technology, design, mentorship ma rke t ing , le g a l s t ra t e g y (IP, re g ula t ory), ca p it a l formation Business Model Pa rt icipa t ion fe e s a nd / or e q uit y Eq uit y Equity, fees for services Examples Na s hville Ent re p re ne ur Ce nt e r Y Combinator, TechStars, Hig h Alp ha , At omic, 500 Startups Has hed Health
#HIMSS21 20 What Problem(s) Does Your Studio Solve For?
• Emerging Markets • Emerging Technology • Emerging Business Models • Domain Expertise • Networks and Distribution • Talent • Unique Regulatory Issues • Funding
#HIMSS21 21 Studio Design Continuum
Source: Startup Studios – Innovating Innovation. Enhance Ventures, Dec. 2019.
#HIMSS21 22 Studio Process - Overview
Source: Hashed Health
#HIMSS21 23 Studio Process – Spinoff and Post -Spinoff • The process of some studios cumulates with the closing of an external seed round at which point the venture is “spun off” – a fully funded, self-sufficient organization with a product in production and market traction.
• Other studios spin off ventures as late as Series B.
• Post spin off activities of the studio include continued strategy, ad hoc assistance, fundraising. As a co-founder and significant equity holder, the studio usually retains a board seat and participation rights.
#HIMSS21 24 The Entrepreneur’s Perspective
• Studios de-risk startups for entrepreneurs.
• Greater resources at the earliest stages that most founders cannot create on their own.
• Instant co-founders that take away the “loneliness” factor.
• Process drives success.
#HIMSS21 25 The Investor’s Perspective
Source: Hashed Health
#HIMSS21 26 Studio Organizational Structure – Single Fund Single Fund. The studio itself is a fund with above market fees to cover studio operations . All equity (founder and investment) is held within the fund. To reduce fund fees, services can be billed to ventures created by the fund .
#HIMSS21 27 Source: Carbrey, J., Understanding Startup Studio Structures. March 10, 2021. Studio Organizational Structure – Single Studio
Single Studio. The studio takes founder equity for services and conducts separate fundraising efforts for each of its ventures.
#HIMSS21 28 Source: Carbrey, J., Understanding Startup Studio Structures. March 10, 2021. Studio Organizational Structure – Dual Entity
Dual Entity . Studio and fund are separate entities. Studio manages all operations and holds all founder equity. Fund programmatically makes pre -seed investments in Studio ventures.
#HIMSS21 29 Source: Carbrey, J., Understanding Startup Studio Structures. March 10, 2021. Studio Results
Idealab Venture Results Capital Benchmarks Company Success Rate 70% 33% IPO or Acquisition 35% 28% Unicorn 5% 1%
Source: GSSN, Disrupting the Venture Landscape. Dec. 2020.
#HIMSS21 30 Studio Results
Source: GSSN, Disrupting the Venture Landscape. Dec. 2020. #HIMSS21 31 Studio Results
32 Source: GSSN, Disrupting the Venture Landscape. Dec. 2020. #HIMSS21 Studio Results
33 Source: GSSN, Disrupting the Venture Landscape. Dec. 2020. #HIMSS21 Studio v Venture Returns – The Power of Founder Equity
Seed Investors Studio Co Founder
Initial Capitalization 0% 50% 50%
Pre Seed Cash Contributions - 300,000 -
Seed Investment 2,000,000 - -
Post Seed Ownership 20% 40% 40%
Implied Valuation 2,000,000 4,000,000 4,000,000
Return on Invested Capital 13x
34 Source: GSSN, Disrupting the Venture Landscape. Dec. 2020. #HIMSS21 Parting thought . . .
“The U.S. healthcare system is on a dangerous path, with a toxic combination of high costs, uneven quality, frequent errors, and limited access to care.” Michael E. Porter wrote this in 2006.
In 15 years, how much have we veered from this “dangerous path”?
#HIMSS21 35 Questions . . .
#HIMSS21 36 Thank you!
Les Wilkinson Chief Operating Officer, Hashed Health [email protected] Twitter: @LesWilkinson1 LinkedIn: https://www.linkedin.com/in/leswilkinson/
#HIMSS21 37