Accenture predicts 51 percent of digital health startups will fail within two years

By Aditi Pai
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PrintAbout half of all US digital health startups will fail within two years of launching, according to an Accenture report that analyzed 900 healthcare IT start-ups.

(Correction: The original lead and headline of this article incorrectly implied Accenture had conducted a retrospective study of health startups that failed rather than a study that mostly relies on historical funding data to make predictions about future health startup failure.)

For comparison, a Bureau of Labor Statistics report shows that between 1994 and 2009, at the two year mark, between 20 percent and 26 percent of startups across all fields failed.

Accenture also found that digital health startups on the brink of failure, which they call "zombie" startups, raised nearly $4 billion in funding between 2008 and 2013 and that there are 1,700 patents between the 900 startups analyzed. The report explains that these startups are often "aqui-hired" for top talent, patents, and technologies.

“Rather than discard the investment that has been made in getting sputtering start-ups off the ground, it often makes sense for healthcare stakeholders to acquire them, salvage their best people and technologies and awaken them from a zombie-like existence,” Kaveh Safavi, managing director for Accenture's global healthcare business, said in a statement. “Many digital start-ups that are dying or in danger of failure have developed solutions that can help traditional and non-traditional healthcare companies achieve their goals.”

Accenture predicts that in the next two years, another $2.5 billion will be invested in digital health startups. Almost 30 percent of these funds will be invested infrastructure, while 25 percent will be invested in engagement, 25 percent will be invested in treatment, and 21 percent will be invested in diagnosis.