NYLP: Welcome to the second episode of the New York Launchpod, a podcast highlighting new start-ups, businesses, and openings in the New York City area. In this episode, we’re going to be talking about health start-ups, and I’m very excited to be joined in studio with Mathew Farkash, co-founder of Blueprint Health. Blueprint Health is accelerator based in New York City and was named one of Fast Company’s Top 10 most innovative companies in health. Welcome to the podcast, Mathew.
Mathew: Great to be here. Thanks for having me.
NYLP: So tell me about Blueprint Health.
Mathew: So I’ll give you the quick story of how Blueprint Health came about. I started Blueprint Health along with my co-founder, Brad Weinberg, who is a physician-entrepreneur, about four years ago or so. It was at a time when you had accelerators, the Y Combinators of the world or the TechStars of the world that had proven some early success with that accelerator model and you sort of saw this explosion of accelerators pop up all over the place. But my co-founder Brad made an observation that most of these accelerators were industry agnostic. So in any given accelerator, you may find an ad-tech, health-tech, sports-tech, ed-tech company. He was talking about some of the unique challenges that he had faced in terms of starting up a health care company. So that was the initial seed of the idea, which was, “Why don’t we pool together and aggregate the resources that would be most helpful for health care entrepreneurs to get their businesses started and to grow those businesses?”
NYLP: What are the mechanics of the program?
Mathew: So how Blueprint Health works, Blueprint is a three-month accelerator. We’re effectively investing in each of our companies. It just so happens that the first three months of our investment, the companies will work out of a space that we provide. So taking a step back, we solicit applications from early-stage health care technology companies, both domestically and internationally. We review those applications and we select anywhere from seven to eleven of those companies to participate, to make an investment and to participate in the accelerator. So those companies that are in or around New York will relocate to New York for the duration of those 12 weeks. We’ll provide to them a small amount of capital, the office space in the community, and access to what amounts to be the largest health care specific mentor community of any accelerator in the world. At the conclusion of the three months, there is what is generally referred to as a demo day where we’ll have an audience of around 500 to 600 of folks that are prospective customers, prospective investors, and people that are interested in the health tech innovation community join us for an afternoon, where the companies will share their stories about the businesses that they are building.
NYLP: How many companies apply?
Mathew: So we run two classes every year. In any given year, we probably see between 800 and 900 applications across both those programs.
NYLP: So what do you look for in the companies that you do select?
Mathew: Two pieces that we’re primarily focused on. One is the entrepreneurs themselves and the second is their business or the potential for their business. On the entrepreneur side, we’re focused on finding passionate, resourceful entrepreneurs. It’s our view that you could start a company these days without a whole heck a lot of a capital. On the business side of things, we want to make sure that there is a clear story to how, if they’re pre-revenue company, they’re able to get to a half a million dollar run rate business, understanding who their customer is, what the pain point is, and what the willingness to pay.
NYLP: So what makes health care businesses different, in particular?
Mathew: A couple of different reasons. One is that the industry in it of itself is a challenging industry to sell into. Most of the business models in the health care space are enterprise-focused model. So that means that you’re selling to hospitals, that means that you’re selling to med device companies or insurance companies or provider groups. Those are very challenging places to sell into, very antiquated in many ways. They’re not used to change; they’re not used to technology impacting their business. So it’s a challenging space to sell into for an entrepreneur.
NYLP: So what has Blueprint Health been doing to bridge that gap?
Mathew: One of the big value-adds of an accelerator program, and specifically Blueprint Health, is our community that we’ve pooled together. At the core of that community are the entrepreneurs, but we also have, we’ve built up over the last four years the largest health care specific mentor community of any accelerator in the world. So we’ve got over 150 mentors that are involved in Blueprint Health that are working together with the companies to help speed up their sale cycle. So that means that our mentor community is comprised of everyone from health care entrepreneurs–so the founders of companies like ZocDoc or Phreesia that have been in the trenches that can relate to the start-ups that are in our program and can provide some feedback and help companies make new mistakes instead of old mistakes. It also includes industry executives from the places that they’re potentially selling into. So it’s an opportunity for the start-ups to gain access to prospective decision makers that are also prospective clients.
NYLP: How were you able to get as many mentors as you have involved in your accelerator?
Mathew: When we were originally starting Blueprint, obviously getting the first 30 or 40 mentors has been more challenging than where we’re at right now, where a lot of our mentors come to us through referrals. But in the beginning, we identified people that we thought would be most helpful to the type of companies that we were going to have as part of our program. We reached out to them. Ultimately, we were trying to find people that were excited about the changes that were happening in health care and were excited to work with and to help companies that were trying to do different and innovative things within the health care space.
NYLP: So what do the mentors do for each of the participants in Blueprint Health and how many mentors are there per company?
Mathew: In each of the programs, we try to get as many of our mentors to come to the office to interact with the companies. So during the first month of any program, we will share with our mentor community, “These are the companies that are going to be part of this upcoming program,” and allow them to select which companies that they want to meet with. We refer to those as one-on-ones. Any company in our program will oftentimes have 40 to 50 one-on-one meetings with our mentors during a condensed two to three weeks at the beginning of every program. Those meetings are meant to be introductory in nature, so they’re generally 15 to 20 minutes where the founders have an opportunity to share with the mentors a little bit more about what their vision is, what they’re working on, and a little bit more about their individual backgrounds. The mentors have the opportunity to learn about that, to begin to think, “Are there different ways that I could be helpful to these founders and am I excited about being helpful to these founders?”
NYLP: So aside from being health specific, because it seems as though a few other health care accelerators have entered into the market, what makes Blueprint Health different?
Mathew: I was reading an article the other day that someone sent me that said they are now 140 or so health care accelerators around the world, which is a stark contrast to when we originally started. So I think that there’s a couple of pieces that make Blueprint Health different. One, as I mentioned, we talked about, is our mentor community. That’s really one of the biggest value-adds that a company can get out of any accelerator and that it’s an engaged mentor community, which is a differentiator. A lot of accelerators have pretty pictures of mentors up on their websites, yet the companies in their accelerators will never actually meet those individuals. So with Blueprint, we have a very engaged community of mentors.
We also have a very specific focus, which is that at the end of the day, we believe that it’s our responsibility to pool together and aggregate the resources that will help these companies build sustainable businesses. So if companies are coming to us pre-revenue, then our train of thought is, “Great. How do we help them get to half a million dollar run rate business? If they’re coming in with revenue, how can we help them begin to think about scaling their business?” So, all along the way, we’re very business oriented. Does the company understand who their prospective customer is, what that pain point is, and what the customer’s willingness to pay is? Based upon that focus, our portfolio of now nearly 60 or 60 companies exactly is enterprise focused because that’s just where the business models these days are within health care world.
I think that we’ve always had that focus around helping companies build real businesses, not just apps. So I think that’s a big differentiator. I had mentioned that I started Blueprint with my co-founder Brad Weinberg, who is a physician-entrepreneur. If you look at a lot of the health care accelerators that are out there now, there’s not that many of them that actually have a physician that is part of the founding team. Our view has always been that in order to be able to innovate within the health care world, you need to be able to understand the health care world. You can have the greatest product or service in the world for physicians but if you don’t understand physician workflow or how reimbursement works, you’re not going to have any adoption.
NYLP: When these companies are targeting enterprise, what generally are they looking to do?
Mathew: As I mentioned, we’ve got 60 portfolio companies, and it’s really a broad range in terms of what problems they’re necessarily attacking. Everything from workers comp, billing solutions to analytics, to sales tools for pharma and med device companies. As consumers, it’s very easy to see that our interactions with the health care system, there’s problems that are everywhere. The more you kind of dig in and understand how these health care organizations work, the more that you recognize that it’s not just consumers have problems, but these organizations have problems with the way they’re operating sans-technology, in many cases, is very inefficient. So a lot of our companies are solving problems that, generally speaking, are saving health care organizations money. In some cases, they’re helping them increase their revenues.
NYLP: Health care companies, which you mentioned, are slow to react have been embracing these companies?
Mathew: Health care enterprises have been really thinking about how they can work with early-stage companies and how technology, what technology actually means to their businesses. So separate from Blueprint Health, the accelerator, we recently launched a new business line, which is called Blueprint Health Collective, which is a membership-based consortium of health care executives at different organizations that are learning about and dealing with the challenges of how technology impacts our health care related goals. So we have unique insight into what these different organizations are thinking about as it relates to their challenges, their pain points, and they are interested and open to new ideas.
You have to remember, these are big bureaucratic organizations that have done things in a certain way for a very long time. Innovation is very in vogue these days, so they’re recognizing it; it’s on their radar, and they’re learning how to work with early-stage companies. I wouldn’t say that by any stretch to the imagination that many of these organizations have figured that out, but that’s one of the challenges for health care start-ups. But one of the nice things about health care is that if you are able to eventually get your foot in the door with one of these organizations, then it becomes very sticky.
NYLP: Why is New York a great place for health care start-ups, in particular?
Mathew: In many ways, we believe that New York is sort of the epicenter for health care innovation. That’s for a variety of different reasons. One is there’s a foundation of an entrepreneurial ecosystem that is really growing in New York, and there’s a lot of resources and a great community around that. But specific to health care, New York offers up access to any individual or enterprise that a health care start-up would be interested in selling to. So you have a number of really strong academic medical schools and hospitals. You have Pfizer in the city and pharma companies just across the river. You have payers that are beginning to have part of their innovation teams based in New York. So for example, Aetna is based in Hartford, Connecticut but their innovation team actually is based in the city. In our space, in Blueprint Health co-work, we have an individual from Humana that actually sits in our space. We have hundreds of physicians and millions of patients. So being able to have access to anyone that you may be selling to in your backyard is a huge upside for health care companies being in New York.
NYLP: How successful have your alumni been?
Mathew: So we were actually just running the stats on that recently. We have 60 total portfolio companies now over the course of seven classes and 85% of those portfolio companies are still in operations, which for the stage of a company that we’re working with, we think is pretty good. Ultimately, one of the primary metrics that we are looking at in terms of the health of our portfolio is around revenue. The vast majority of our companies, of our portfolio companies, have revenue. We have a number of companies that will hit a million dollars ARR, we’ll have a company that will probably do 500 million ARR this year. So the fact that these are companies that are able to break through that treacherous sale cycle and are getting people to write them checks, to validate their value proposition hypothesis. That’s exciting to us.
NYLP: You talked a little bit about how Blueprint Health came into being. What is your background and how did you personally get into this field?
Mathew: I actually didn’t have any health care background. I’ve been involved in the early-stage companies and the start-up community in New York for a little while. I mentioned that I started Blueprint with a good friend of mine from undergrad, who is a physician-entrepreneur. My background, from a functional perspective, is business development, sales. We were talking about different ideas as it related to his previous health care start-up. Both of us are pretty passionate about the early-stage of the ramp for companies. At the time, he was involved with an accelerator that was operating in Providence, where his old company was based. We were talking about the unique challenges of starting up a health care company and that’s where the seed of Blueprint came about. I thought it would be an interesting opportunity for me to sort of apply some of my strengths to helping early-stage health care technology companies. All of us have a story about why health is important to them. I had one of those stories and so that’s how I came into the health care world.
NYLP: What is your story?
Mathew: My dad was diagnosed 10 years ago with stage-four cancer, melanoma. Doctors gave him six months to live, and he lived for another eight years. Through those eight years was a painful process of interacting with the health care system. Seeing all of the problems from a patient perspective, from a consumer perspective, and beyond frustrating. So that was one of the reasons why I thought to myself, “I don’t have the health care experience, but I do have some experience. I could be helpful to these companies.”
NYLP: You and Brad meet up, you have this idea. Then what happens?
Mathew: So the first step for us, we thought, was to see if we could begin to build a mentor community or at least the foundation of a mentor community. So we kind of sketched out what our story would be and began to build a prospect list. Essentially, the same things that we would tell to any of our start-ups. Work on your messaging, build a prospect list and try to go out and sell. So I spent several months going through that prospect list, having conversations with folks, and pitching them on what at the time was really air. And while there was precedent with the TechStars and the Y Combinators of the world, a lot of the people in the health care world had no real idea about those organizations. They never heard of them before. But we were fortunate that there is a handful of folks that bought into what we were pitching them and formed the basis of a mentor community. We got to a point with the mentor community where we were like, “If we’re going to do this, the time is now to do it.” So at that point, we began to start raising our fund and began looking for companies to participate in our first accelerator.
NYLP: Who are your investors?
Mathew: Our investors in our very first fund were almost entirely angels. Realistically, at that point, we were, in many ways, Brad and I were selling ourselves as much as we were selling the idea. So the people that were participating in that original fund were people that believed in the idea but also believed in Brad and myself. We have raised a handful of funds since that very first fund, and the makeup, the composition of that, those funds, have evolved over time. So there’s still a number of individual or angel investors that are LP’s in that fund, but we’ve also diversified. There are some strategics and some institutional investors that are also LP’s in our current fund.
NYLP: So based on your experience, where do you see health care going in the future?
Mathew: I think there continue to be a lot of opportunities in the space. We’ve seen a rise in the number of applications that we get for any given program, so there’s a lot of activity in the space. So on the entrepreneurial side of things, there have been a lot of opportunities that have been created by the ACA around payment changes and that creates openings for entrepreneurs to try to wedge themselves into the process. On the other side of this marketplace, as we discussed earlier, are health care organizations. Health care organizations, while this will take some time, are beginning to evolve to understand that it is important, if not requisite, for them to think about how technology can impact their business.
NYLP: It’s interesting these days, I think there’s a lot more individual health data available. Even just you open up your iPhone; there’s Apple Health right there. It tells you how far you’ve walked. It seems like there’s a lot more health data delivered to you individually.
Mathew: Yeah. I think that’s a piece that we haven’t really touched on, but sort of consumer-driven health care is what a lot of people refer to it as. It’s certainly not a piece of health care that we are ignoring at Blueprint. The consumer piece of health care, at least the way that we think about it, is something that will take time to evolve. But in present tense, the payer for products and services in the health care world still tends to be enterprises. In many cases, the user of a product or a service, maybe the consumer, the patient, you can think about ZocDoc for an example, the user of that is the patient but at the end of the day, their business model is on the enterprise side. The payer for that product or service are the physicians, the physician practices, or the hospital systems themselves.
One of the challenges from a consumer perspective is that consumers just simply aren’t used to paying for their health care these days. If you ask someone, frankly including myself, someone that’s in the world, the extent of what they know about the cost of health care, they’ll flip over their insurance card and tell you, “It says here that I have a $30 co-pay.” But beyond that, they have no real idea. As the cost of health care shifts onto the shoulders of consumers, then they’ll pay more attention. As that happens, I think that you’ll start to see more real business models, where the consumer actually is paying for whatever it is, that product or that service.
NYLP: So how can people find out more about your company?
Mathew: They can go to our website, which is blueprinthealth.org. They could reach out to any one of our partners, including myself. Whether it’s entrepreneurs or folks in the industry, we’re always looking to expand our community and to share what we’re doing and learn about how we can involve others in that process of helping these entrepreneurs.
NYLP: Mathew, you talked about some very exciting things in the health care world. It’s great to hear what Blueprint Health is doing, and it really sounds like you’re innovating new things. Thank you for sharing your time with us.
Mathew: Thanks for having me here. It’s a real pleasure to help.
NYLP: If you want to learn more about the New York Launchpod, you can follow us on social media @NYLaunchpod or visit us at nylaunchpod.com.
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