Could Austin be the next health IT hub?

'Access to capital is always a hot issue'
By Michelle Ronan Noteboom
09:43 PM
students taking a test

Healthcare IT enthusiasts in Austin, Texas are bullish on their city's prospects for becoming one of the country's next major hubs for healthcare technology and innovation. Thanks to a new medical school, an established high-tech community, and support from a couple of strong flagship IT companies, Austin's healthcare technology community appears poised for solid growth.

"In the last five years we have seen a huge growth in the technology community in general," said Jason Bornhorst, CEO and co-founder of the Austin start-up PatientIO, which offers a collaborative care platform for providers. "The health IT ecosystem is also up and coming, particularly in the last year. Austin has been a great place to build a business, particularly from a recruiting standpoint and all our employees have been sourced from our network here in Austin."

Kyle Cox, an investor and mentor with the non-profit, believes the city's health technology ecosystem is "still in very early innings," yet has "the ability to play a bigger role nationally and internationally in support of health technology startups.

"There is still an issue of scale and having a truly massive set of resources with tons of entrepreneurial experience in health technology," said Cox. "But that situation is changing. We now have two major anchor tenants, athenahealth and The Advisory Board, that have set up shop and are providing resources to help the next generation of startups."

Athenahealth, which invested $13 million to convert a defunct power plant to 110,000 square feet of office space, opened its new downtown Austin facility in February of this year. "We believe Austin is at an inflection point," said Mandira Singh, director of the company's More Disruption Please initiative, which includes an accelerator program for early stage companies.

"We see Austin as an early version of both Boston and the Silicon Valley. The Dell Medical School is a huge addition to healthcare innovation, there are great schools in the area, the cost of living is lower, there is a lot of untapped talent, and the energy there is infectious."

The Dell Medical School at the University of Texas, which is scheduled to welcome its inaugural class of students next summer, is the first medical school in almost 50 years to be built at a top tier research institute in North America. Maninder Kahlon, MD, Dell Medical's vice dean for strategy and partnership, believes the school's mission to redesign care at the population level and measurably improve health in the region requires technology that is innovative.

"To create Austin as a model healthy city requires a very different approach to data technology," said Kahlon. "If we want to lead in making Austin a demonstration in population health, we have to lead in advancing what health IT and data infrastructure look like to support population health goals."

The medical school intends to lend both financial support and domain expertise to advance local technology innovation. "We are designing a new kind of accelerator," explain Kahlon. "We will make an investment to push the development of the right kinds of startups and bring the right partners together. As new opportunities arise we want to open the doors so that startups can pitch in and participate."

eClinicalworks is the most recent health IT company to open an Austin office, announcing its new location there in late September.

"eClinicalWorks has been growing at a rapid pace in all areas of the country," said Girish Navani, CEO and co-founder of the ambulatory-focused developer. "Before this opening, we had offices on both coasts and Chicago. With a large number of customers in Texas, we felt it was beneficial to have a local office. Austin has a strong technology culture that lends itself well as a new location for our company and will provide the opportunity to for us become more involved with healthcare providers located in this region."

Despite the growing network of supporters, Austin-based health tech startups may struggle to secure local funding sources. "The weakest aspect of our community is the lack of deep pockets when it comes to funding," noted Zac Jiwa, CEO of MI7, a start-up that provides connectivity between healthcare apps and patient data. "We can find angels and seed money locally, but to raise more money than that you have to go to the east or west coast."

Cox agrees. "Access to capital is always a hot issue," said Cox. "For the early entrepreneurs just getting started there are plenty of viable funding sources. The biggest gap in the market right now is for the slightly more established companies that could benefit from experienced venture capitalists or disciplined investors."

Despite the possible shortage of local funding options, members of the health IT community appear enthusiastic about Austin and its potential for continued health IT growth.

"It is a super exciting to be an entrepreneur in this space," said Bornhorst. "People want to live here and it is creating an ecosystem of people that will ultimately want to create new start-ups like ours.

"In short, it is a really awesome time for Austin as a health IT community."