Originally published in the OBSERVER
On Monday, January 13, like a swarm of honey bees, thousands of health tech entrepreneurs, health care execs, venture capitalists, bankers, regulators and business media will descend upon downtown San Francisco as the 38th Annual J.P. Morgan Healthcare Conference gets under way. And, as is the case with any multi-day industry gathering worth its salt, an entire ecosystem of satellite events has popped up around the main attraction, which has created a seemingly endless circuit of networking events, summits and other health care-related shindigs—all offering ample excuses to down lattes during the day and throw back a shot or two at night.
Even though only a select few are invited to attend the official main stage, marking one’s presence at J.P. Morgan is paramount, as the four-day confab has positioned itself as not only the first, but perhaps the most important event of the global health care conference calendar year.
Ahead of last year’s J.P. Morgan gathering, Observer was among the first to point out a trend that was beginning to emerge across the health industry—the rise in interest from both large health care players, as well as hungry venture capitalists, for health tech plays originating in cities not typically associated with startup culture, places like Minneapolis, Nashville and Chicago. Observer even coined a new term for these disruptors from Middle America: Flyover Tech.
And, judging by the pre-conference buzz, by all accounts, last year was not a fluke; many of the entries from the 2019 list have emerged as some of the biggest and most important players in their respective sectors over the past 12 months. Some of them have even carved out completely new niches within the vast health care ecosystem that didn’t exist a year ago.
As some informed observers of the high-flying health tech space quipped, “Flannel is the New Black,” when it comes to innovation in health care and big bets in health tech.
Take for example Bind, a Minneapolis-based startup health plan that has already raised a jaw-dropping $82 million. After occupying last year’s top position on the list for its ability to use data science and artificial intelligence (AI) to analyze existing claims data, Bind had a banner year. The company has been expanding its services across multiple new areas of coverage, while empowering customers to understand what they are really paying for with their health plans, which makes it easy to compare treatment options, prices and quality. Bind, along with fellow Minnesota wunderkind health insurance startup Bright Health—which just announced the closing of $635 million in Series D financing in December, on top of over $400 million of funding in previous rounds (putting its total raise now over the billion dollar mark)—have chiseled out completely new offerings in the health insurance space, a sector that, less than a decade ago, was considered nearly impenetrable due to the vast resources needed to scale a business of that nature.
“It still amazes me the number of investors that haven’t taken full advantage of the ‘flyover tech’ ecosystem,” observed Jodi Hubler, managing director of Lemhi Ventures, a venture capital firm that invests primarily in early- to mid-stage health companies in the Midwest and Rocky Mountain regions. “Many places in Middle America are actually centers of innovation and deep domain knowledge not only in health care, but in medtech device and services as well,” added Hubler, referring to the largest players in health care and medtech, like UnitedHealth Group, Medtronic, Cardinal Health, Humana and Anthem—all of which have main bases of operations in between the coasts.
“It’s common sense economics—every dollar of capital goes further in these locations, and the access to talent from developers to board members comes with differentiated experience and knowledge,” Hubler told Observer. “In places like the Midwest, people don’t play in health care, they’ve lived it… that experience and intuition is invaluable.”
Another big winner from last year’s list was Nashville-based SmileDirectClub, a tele-dentistry startup that produces direct-to-consumer 3D-printed clear aligners. In September, the teeth-straightening startup went public, raising more than $1.3 billion at an initial market cap of roughly $10 billion, more than three times its most recent private valuation. And although the stock price has since clawed back some of those ebullient IPO gains, it’s yet another shining example of a flyover tech success story.
For serial health care entrepreneur and founder of San Francisco-based Roam Analytics Alex Turkeltaub, there is gold to be mined in Middle America. “Hubs like Raleigh, Columbus and Nashville, just to name a few, are quickly becoming known as exciting centers of innovation in health care. With strong legacy technology and health care systems, it’s only natural that these local ecosystems will fuel the next generation of disruptors in digital health,” observed Turkeltaub, who recently stepped down as CEO of Roam and is setting up a venture fund that focuses on the intersection of AI and health care. The fund will look to make strategic investments in major health tech hubs across the country, as well as in emerging overseas markets like Brazil.
“The term ‘flyover’ used to be somewhat derogatory, but now it’s a badge of honor in health tech. Entrepreneurs in the middle of the country know that technology can’t exist for its own sake; it has to be combined with functional business models to deliver real value to patients and investors alike,” added Turkeltaub. “Any serious health care VC who isn’t making monthly visits to places like Minneapolis or Chicago is completely missing the boat.”
Although there are entries on this year’s list from a wide swath of cities across the country, experts and insiders repeatedly point to the surfeit of companies emerging from three major hubs of innovation in health care from Middle America: Nashville, Chicago and the Twin Cities of Minneapolis and St. Paul.
“With a diverse set of headquartered legacy companies spanning the entire spectrum of health care, regional hubs such as Nashville, Chicago and Minneapolis will continue to produce industry-leading innovation and transformation in the sector. These are the new hotbeds in health care,” noted Sara Ratner, a veteran health care industry insider who is one of the nation’s foremost experts on government-run Medicare and Medicaid programs.
Observer spoke with health care experts from across the U.S. to offer their thoughts about the biggest emerging trends at the 2020 J.P. Morgan Healthcare Conference and the sector’s continued interest in flyover tech. They were also asked to highlight some of the hottest companies in between the two coasts that will be feted in San Francisco this week. Like last year, the current list is not a ranking in the traditional sense—the companies singled out are in different stages of development and growth and, for the most part, are positioned in non-competing verticals; rather, the list is a snapshot of 20 early- to mid-stage startups that have caught the attention of health care insiders from around the globe and have one thing in common: they all hail from what many a New Yorker might describe as ‘flyover country.’
physIQ can detect the smallest, most subtle changes in an individual’s biosensory data and can alert care teams to potential problems far before they would surface during a regular check-up. The technology enables doctors to see around corners by applying sophisticated, FDA-cleared physiological analytics to extract personalized health insights. This Windy City startup uses software that was originally designed for data-tracking on jet engines and nuclear power plants, where the smallest performance deviations can pose immensely profound dangers. Now, physIQ is taking that same approach to performance calibration and applying it to the human body; it tracks data around the clock to capture a patient’s standard bodily rhythms and tempos and packages the data into neat, digestible bundles for clinical teams all around the country. Like several other entries on this year’s list, physIQ is a product of downtown Chicago’s Matter health incubator.