This is the transcript of my recent podcast interview with Healthbox CEO Nina Nashif. The company just kicked off its second business accelerator program in Boston with 10 companies, in conjunction with Blue Cross Blue Shield of Massachusetts.
David E. Williams: This is David Williams, president of the Health Business Group and author of the Health Business Blog. I’m speaking today with Nina Nashif, CEO and founder of Healthbox. Nina, thanks for joining me today.
Nina Nashif: Thanks for having me.
Williams: What is Healthbox and what unmet need was Healthbox created to serve?
Nashif: Healthbox was founded in January of last year and was intended initially to support health care entrepreneurs by providing seed capital, mentorship, a rigorous process to help them think about their business and how they grow it, as well as support in raising money at the end of a four-month program.
As we’ve evolved our program Healthbox has also shifted its own business model. We believe that it’s not only important to support health care entrepreneurs, but it’s also important to serve as a catalyst of change within the health care industry by exposing hospitals, payers and pharma and other types of organizations to new and different ways of thinking about how to solve the industry’s greatest challenges.
Williams: Is the process that you’re using generic? Could it be applied within other industries or is there something different about innovation in health care that makes it so that you’ve chosen a particular approach?
Nashif: It’s really important that we develop a process that’s relevant in the health care industry. So as we thought about creating the Healthbox platform we thought about the different nuances involved in building a company in health care. As we know, the health care system is complex. There is often a difference between who’s buying the product or the solution and who’s actually using it. There are so many different stakeholders and different revenue models that make sense depending on the type of organization you’re selling into.
Given all of the dynamics it’s important to work with a company throughout the lifecycle and to think about how are they building their business in the context of the industry that they’re selling into. We’ve refined the process that helps entrepreneurs think about these critical issues and develop a customized product and a business that will scale in the industry.
Williams: You’re based in three cities. If somebody would ask me to guess what those three cities were just based on the description of your business, I would have guessed Boston, New York and San Francisco. But you’re in Chicago, Boston and London.
So tell me how you thought about those three places and also how you incorporate what’s going on in London to what’s happening in the U.S., considering that the US and UK health care markets and health care systems are so different.
Nashif: I’m actually based in Chicago and so is Sandbox Industries, which is the organization that I was working for when I founded Healthbox. Our first program was based in Chicago for that reason and it actually ended up being a great place to start Healthbox, because despite what people may think Chicago does have a very vibrant health care community. There’s the strength of many large hospitals, many associations, and there’s pharma present. Many different dimensions of the health care system do exist.
Our first program was in Chicago. As a result of the success there we were asked by Blue Cross Blue Shield of Massachusetts to consider bringing this program to Boston and the rationale for doing that was their interest in engaging in the broader community. There’s a lot of activity in Boston and a lot of strengths in the health care industry. But a lot of the activity from an entrepreneurial perspective is really revolving around the universities. TechStars has a strong program here in Boston, the MassChallenge and all the resources that you know that exist in the community.
But from a health care perspective, there wasn’t really a single external platform that was tying together all the unique organizations that are interested in innovation in Boston. So we were pleased that our second program launched in Boston just because all of the existing activity that’s going on and we’ve been really well received and very happy to be testing the model in a new environment and to be working across the region.
London was a strategic decision and our presence there probably happened a bit quicker than we initially expected. I lived and worked in London before and so making the transition there was quite easy for us, relatively speaking. But health care is global and we always knew that we wanted to be a global platform. So as a stepping stone to the rest of Europe, London and the UK just made sense for us.
Williams: How does the Healthbox program work?
Nashif: The Healthbox program initially was modeled after the spirit of a traditional tech accelerator program. We took a lot of the same components in terms of the seed capital that’s provided, although we knew that starting a company in health care requires more resources, not because IT companies and health care aren’t capital-efficient businesses, but because the sales cycle takes longer and requires just a little bit more business development time.
We provide $50,000 in exchange for 7% equity. We have a national network of mentors that represent different parts of the health care industry that are available to provide strategic advice, make introductions to their network and other potential customers or experts that can help the entrepreneurs.
We also have a pretty rigorous curriculum or process that we put the companies through. From the very beginning we’re actually going back to my original comment about helping these entrepreneurs understand their business model, refine their business model, think about it in the context of the health care industry. We help them think about who is the buyer, who’s the user, what kind of revenue model would make sense given what they’re trying to develop.
We have a proprietary process that we’ve developed and we put companies through the three –and now expanding to four– month process. At the end we help match entrepreneurs to investors and help them think about the right customers as well as investors that can help them grow their businesses in the long-term.
So those four are the main components that make up the Healthbox program.
Williams: I know that Healthbox is pretty new and you just alluded to the long sale cycles that are inherent in a lot of health care businesses. But with that in mind, can you provide any examples of success stories or organizations that have been launched or accelerated as result of going through the program?
Nashif: Sure. There is a company called SwipeSense that went through our Chicago program. Given that they’re a year out, they’re a really good example because they’ve moved themselves through the product fund-raising and business development cycle in the last year.
They focus on what they call hand-hygiene 2.0. The lack of hand sanitization in hospital environments is a big driver of hospital acquired infections. It results in more than 100,000 deaths per year and adds billion of dollars worth of costs to the broader health care system.
There are two amazing entrepreneurs who are graduates of Northwestern University’s design school. While they were in school came up with a small device that clips on to a nurse’s scrubs. The company is called SwipeSense because as a child we always think that if our hands get dirty we’re going to wipe our hands in a downward motion on our pants in order to get whatever’s on our hands off. This mimics that gesture in terms of a nurse who needs to sanitize his or her hands would swipe their hand down this device that will be clipped on to their scrubs.
They came in to the Healthbox program with a prototype of this product already developed, and throughout the process of going through Healthbox and talking to a number of different experts they were challenged on what business they are really in. They evolved their business to become a software as well as a hardware business and went through a process of getting feedback in the market from focus groups of nurses in different hospital settings.
By the end of the program they were able to secure a couple of new pilot sites. So as they came in to the program with two pilots, they left with six and now as a result of coming out of the program and continuing to network, they have ten pilots that are ready to begin.
Also, as a result of going through some of the focus groups and their initial pilot, they ended up redesigning or streamlining the device that they’ve created because the feedback that they got was that it just needed to be a bit smaller, needed to clip on in a different way.
They also built out their web application and have continued to gain customer traction, and they also raised more than a million dollars at a pretty strong valuation. So they have accomplished more than they had on their own as a result of coming through Healthbox.
Williams: You’ve mentioned before that you had evolved to change the Healthbox business model. Can you talk a little bit about that evolution and what your current business model is?
Nashif: Given that Healthbox makes investments in companies, we’re set up as a venture fund. We are a for-profit model, unlike some of the other accelerators in the industry. As I mentioned before we’re making a $50,000 investment in exchange for 7% of the equity in these companies.
We also have funds available at the end of each program that are used to make follow-on investments in the form of a convertible note. But Healthbox makes money as a result of the companies being successful. We’re incentivized to help these companies grow in the long-term and become sustainable and scalable businesses.
We have an upside in terms of when these companies potentially exit and that’s really how we’re compensated in the long run.
Williams: If you look back in a few years from now, how will you know if Healthbox has succeeded beyond the dollars and cents? Are there other measures that you might look at to say this has really been what you were hoping it would be?
Nashif: As I mentioned before, I think that the traditional accelerator measures their success based on the number of financings immediately after a company leaves the program. The typical metrics are on how many companies have raised X amount of dollars, how many companies have added jobs. There is an economic development aspect of this.
There’s also the metric around how many companies are even in business one year to two years or three years later, given that we know that across any industry there’s just a certain percentage of companies that don’t make it. And so I think for us all of those metrics are really important, but as I mentioned before we’re also trying to be an agent of change in the industry.
We measure our more immediate success also around how many companies get pilots and how many users they are attracting and whether they are actually able to gain attraction in the industry, because if they’re not doing that then the financing is going to be harder to get. Because I think venture investors are traditionally even more risk averse. They tend to like to see the customer attraction and validation of the market before they’ll invest and so I think those are some early metrics for us.
We certainly value the relationships we have with investors and with the broader entrepreneurial community. But for us to really effect change and be successful at supporting our portfolio we need strong relationships in the industry, at all levels of the industry, and we need to gain broader attraction with opening up the industry. I call it “unlocking the knowledge” and unlocking the industry to entrepreneurs so that they can be successful.
We also need to work on the other end of the value chain. So what I would want to say five years from now is that we built a great portfolio of companies. We’ve had one or two exits that we feel proud of and we have really strong relationships across the ecosystem.
Williams: I’ve been speaking today with Nina Nashif. She is CEO and founder of Healthbox. Nina, thank you so much for your time.
Nashif: Thank you for having me.