100health Scraps Incubator, Pursues Redox, a Tool to Build Health Apps

Less than a year after launching healthtech startup incubator 100health in Madison, WI, the three co-founders have abandoned that business in favor of trying to turn one of the incubator’s ideas into a successful company.

Xconomy chronicled 100health’s inception in February. By August, co-founders Niko Skievaski, Luke Bonney, and James Lloyd had decided to stop operating 100health as an incubator. They cut loose six of the companies the incubator had helped form, Skievaski says, and started pouring all their efforts into growing the seventh—Redox.

The Redox technology is a cloud-based API (application programming interface) that makes it easier for software developers creating healthcare applications to securely access and incorporate electronic health records into their apps.

100health’s co-founders—former employees with Epic Systems, the electronic health records software leader based near Madison—have spent the past few months developing Redox’s software, drumming up potential customers, and pitching to investors.

100health recently closed a $350,000 seed funding round from a group of about 10 Madison-area angel investors, including Byron Frenz and Mark Bakken, who is leaving his post as CEO of Epic software consultant Nordic Consulting to start a healthtech venture fund. 100health has also applied for a $70,000 state loan, Bonney says.

With Redox, 100health is trying to solve a problem that vexes virtually everybody building Web-based software that interacts with electronic health records, Bonney says. “It was a problem that kept coming up” while working with the incubator companies, he says.

100health’s “goal has always been to lower barriers that impact healthcare IT entrepreneurs,” Bonney adds. “That’s still very much our vision.”

Meanwhile, some of the entrepreneurs the incubator helped are moving forward with their businesses, while others are “in a holding pattern” or have been scrapped altogether, Skievaski says.

100health’s co-founders struggled to make the economics of their experimental incubator model work, Skievaski says.

The idea was for 100health staff to research and identify healthcare problems that could be solved using technology tools. Then 100health would form startups that would build software to fix the problems. Its staff would serve as founding team members to help entrepreneurs develop the initial product, and the companies would pull from a pool of entrepreneurs in 100health’s network to further staff the startups as they grew.

100health didn’t intend to invest funds in its portfolio companies, instead taking a 5 percent equity stake for every four months that a startup remained in the incubator program, Skievaski says.

One of the problems, Skievaski says, was that 100health was working with companies at the earliest stages, meaning it could take years for 100health to see a return on its equity. “We don’t have a backstop of income to support us during this time period,” Skievaski says. “We thought we could raise money to do that.”

But as 100health started talking to investors, thorny questions were raised about how the investors would get paid when 100health portfolio companies exit, Skievaski says.

100health’s structure also didn’t provide enough incentive for the startups’ founders. “The founders we were bringing on the projects were seeing themselves as teammates on the projects, not leaders,” he says. “We were putting way too much time into” running the companies, “in comparison to a typical accelerator.”

“We realized this model was very fragile and kind of weird,” Skievaski adds.

At the same time, 100health’s leaders saw an opportunity with Redox. “We started seven companies. Five of those companies we realized would need to integrate with electronic medical records at some point in order to be successful, to have some sort of scale,” Skievaski says.

Once 100health decided to focus its attention on building Redox, the plans for the software-as-a-service business model and the strategy for … Next Page »

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Jeff Engel is a senior editor at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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