Gamification Hits Healthcare as Startups Vie for Cash and Partners

Would working out at the gym be easier if you earned cash every time you hopped on the treadmill? Boston-based startup GymPact is betting that millions of Americans will answer that question with a resounding “yes,” and at least some members of the VC community agree. The startup uses GPS to track how much time its users spend at the gym, then gives them cash for fulfilling their workout goals—money that comes from GymPact members who pay the company if they fail to exercise as promised. GymPact just closed an $850,000 seed round led by, an early-stage investment fund founded by Polaris Venture Partners veteran Mike Hirshland.

GymPact is one of dozens of startups seeking to capitalize on the gamification of healthcare—the explosion of interest in using technology and social media to make adopting healthy habits fun for consumers. And it’s not just small, independent companies that want to get in on the action. Virtually every major health insurer, including UnitedHealth Group (NYSE: UNH) and BlueCross BlueShield, has some sort of initiative under way to incorporate game-based programs into its offerings.

“It’s about taking the concepts that have made the gaming industry extremely successful and using them to engage consumers differently,” says Bob Plourde, VP of innovation and R&D for United.

The trend is being driven by a growing enthusiasm for games in general. In May, United released a survey in which 70 percent of respondents said video games that require body movements to control activity on the screen can complement traditional exercise. More than 50 percent said physically demanding games would encourage them to be more active. A March survey by Towers Watson and the National Business Group on Health revealed that 60 percent of employers plan to include online games as part of their health initiatives for employees by the end of 2013. And the University of California at San Diego has a major effort underway to research the use of social media and mobile technology to improve health behaviors.

As the entrants into this growing field increase, however, so does the challenge of finding a business model that works. Several startups in health gamification are still trying to figure out how to bring in sustainable revenue streams. Others have forged early partnerships with health insurers—a strategy that some experts say can give them a leg up over their rivals. “A partnership can be a huge boost for a startup, not only to get revenue up front, but to get users fast,” says Halle Tecco, CEO of Rock Health, a San Francisco- and Boston-based healthcare accelerator, which has incubated several gamification startups.

Virtually every player in the health gamification field has a strong focus on fitness—and all of the companies are trying different methods for making exercise fun. Rock Health portfolio company HealthRally, for example lets users collect financial rewards from friends and family if they meet certain goals, such as … Next Page »

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