This is the the second part of an interview with Steve Krein and Unity Stoakes, co-founders of OrganizedWisdom and StartUp Health. You can catch the first part here, and even more about StartUp Health when Steve joins us onstage for the incubators panel at the 2012 Spring Fling Matchpoint Boston.

Indu: Tell me about how things transitioned; where and when did the idea for StartUp come from, and then talk about how you launched the initiative.

Steve: Interestingly enough, they’re all tied together.  One of the first things that Esther Dyson asked us back in 2007, when she first made the investment and joined our advisory board was, “How can I help you guys?”  The board of advisors know that Esther travels in very interesting circles.  She knows a lot of interesting people.

One of the things that Unity and I had both wanted to do with OrganizedWisdom was we to get a board together with not only incredible people, but with what we’ve learned is called the billion dollar board member.  A billion dollar board member is actually a concept out of a book called Blueprint to a Billion, which was written by a guy who just jotted down the characteristics of all companies that made a billion dollar sales in revenue.  Each one of those 300 companies that had achieved that number all had a board member that had themselves built a billion dollar business or multiple billion dollar businesses.

So we mentioned this to Esther that in her travels, if she ever comes across not only a  billion dollar business, but more importantly, one that is passionate is about the healthcare space entrepreneurship, we’d love to meet them.  That was many years ago but in early 2010, we got a call from Esther and she had breakfast with Jerry Levin and his partner Bill West.  The punch line was that she asked if we would be interested in having lunch with her and Jerry. She thought he might be a potentially great addition to our board.  So, that introduction came from her, and one of the things that struck both Unity and I was something Jerry asked us, ”What would be needed to transform the healthcare sector over the next decade?” It was an open-ended question, but it really gave us a lot of discussion and Jerry ended up spending a lot of time with us and in the summer he made an investment and joined our board.  So it all ended up happening very organically from that lunch in early 2010 and that really raised the heat for StartUp Health.

Indu: When you started Startup Health, was it the incarnation that it is today? Tell us a little bit about what need you were bridging in the marketplace with the concept, and then, how did you get to where you are today?

Unity: It really started as a strategic initiative first out of what we were doing to try to build an ecosystem and be a support infrastructure, if you will, for the whole community. The basic premise was that we had experienced all these challenges along the way in the process of building OrganizedWisdom and we thought to ourselves, “What if we could share all of the lessons learned, all of the wisdom and create this community, to make it easier for new entrepreneurs to come in to the sector, to create a way that would inspire more developers and more designers from other sectors to come over?” So it really started out as the strategic initiative and then we formally launched StartUp Health on June 9 at the White House.  And it started, it took off from there.

Indu: Anything to add to that, Steve?

Steve: I think that as entrepreneurs for almost 20 years, and for most of them up until five years ago outside of the healthcare sector, it’s a completely different experience being an entrepreneur in that sector. Being an entrepreneur everywhere is difficult obviously, but inside this sector, it seems as though much more is stacked into entrepreneur. Whether it’s the regulatory issues, whether it is the long sale cycles, whether it’s the stagnant and resistant to change, bureaucratic organizations that are preventing startups and other innovative things from actually getting piloted, it just seemed like so much was against us as entrepreneurs in this space.

So this notion that you could create a system that would combine, as Unity mentioned, a community of all the stakeholders including hospitals, academic institutions, doctors, and the large insurance companies like Aetna, United and other large organizations that historically have not been viewed as innovative and systems. What if we could all work together over the next decade to transform the sector? If you layer it on with a academy or a school that takes all of our lesson and puts it in to a curriculum that would really bring together. The idea of community collaboration and curriculum all tied together helped shape the notion of StartUp Health as an academy for health and wellness entrepreneurship that would help a whole new generation of entrepreneurs come in to this sector. They would have all the stakeholders helping them navigate their business from an idea to startup, to ramp up and to a speed up.

Indu: I love that you’re doing that and I think a lot of people have been talking about how we provide the foundation for people, especially those coming in from outside of healthcare. The need is now, more than ever, to recruit the best and brightest into the space.  I think that is spot on, without us as a community, priming the adoption end of this curve, any startup can come out and will have little prospect to succeed without the education.

Steve: We had our sixth roundtable a couple of weeks ago in New York.  We had Brad Weinberg from Blueprint Health and we had Mo from West Health and Maria Gotsch from New York City Ventures, Todd Pietri for Milestone and Dave Whitman from New York City of Collaborative. Somebody raised their hand and asked the question about an how you get an introduction to them, and at some of the answers given, we’re like, “If you know somebody, you get a referral.”

What I think about customers or investors or any of these relationships, the introductions are only a small piece of what you need. Getting the meeting is just the part where you actually show up and now you got to perform.  If you go to these meetings unprepared, and if you don’t know exactly what these companies need, if you don’t know what kind of answers to have prepared before doing that. Often, you’re going to have the meeting, but it’s not going to result in anything after that meeting because it’s not been properly set up to become a meaningful relation.  Not because you screwed up in your meeting, but because it’s just not a connection between what you can do for that company and what they can do for you.  It happens oftentimes in a lot of customer meetings, investor meetings is that entrepreneurs go in excited about the meeting, and what they end up with is a whole pipeline of meetings with very little result in things afterwards.

So, we’d like to believe that the focus on the right companies, the right startups and entrepreneurs having the right meetings and both sides preparing properly for that meeting, with a good sense of what they can do for each other, to create value for each other.  In many cases, the value of creation would come from a pilot program, comes from something in a form of a real opportunity to set your foot in the door, to these large organizations.

Unity: The other advantage to having a collective or a group or a peer network, if you will, is you can go in with force.  You can go in as a group and get into institutions or corporations or customers in a way that you may not be able to do on your own as a small, little startup. We think there’s a great power in being a collective sort of working together, to support one another. By focusing on the customers, the investors will come because you’re building a real business. We always tell other entrepreneurs the best way to get the best investor is actually your customer.

There’s something I think going on now where there’s a critical mass emerging.  We’re seeing this a lot in New York City right now because now. It’s really magical with the collaboration going on, and I’m hearing the same thing from other cities.  So I hear like there’s the real opportunity going on now for these startups to bond together and get access to customers in a new way.

Indu: I was actually going to ask you about New York City and why you think it’s so hot these days?

Steve: Ironically enough, New York used to be the most uncool place to be an entrepreneur.  Back in the ’90s, when we were building Webstakes, I can’t tell you how many investors had a requirement and referrals to actually get an investment from them.  It would be a requirement to move to San Francisco to build our business.  So we resisted that. We’re New Yorkers obviously, raising our families here and loving being an entrepreneur here.

Now, we’re meeting people everyday who are moving here from not only San Francisco, but other parts of the country or moving here from Israel to build their business. Not only because of how great New York is but it’s now great to be an entrepreneur. Layering that on with healthcare and wellness, I think it’s a great place to be a health and wellness entrepreneur. In New York City, the EDC, New York State, the eHealth Collaborative, has made it incredibly rewarding to be a part of a community that feels connected. It’s finally a place that you can build your business and get access to talent, customers and thought leaders that you couldn’t have connected with in any other part of the country.

Indu: It’s kind of counterintuitive, because the reputation that New York has is big and really expensive. I think this message of it being a good place to build a company from scratch is really important for people to hear.

Steve: Everyone’s got a story for why they are passionate about building a business or working on a solution in the sector.  A mother or a father or a sister or brother, themselves, that have been impacted by healthcare in some way. So it seems as though that’s one thing.  Being an entrepreneur in the space is fun, which is that it’s not just people who are entrepreneurs because they want to be entrepreneurs.  Actually, they are entrepreneurs because they want to change healthcare.  They want to lower the cost to healthcare.  They want to improve the outcome.  They want to do something because they had a bad experience, or they realize health cost were out of control, or they watched their mother or father, sister or brother engage with a system that is broken.

Indu:  That’s really exciting.  So, who’s in the class of StarUp Health now?  What types of company, something that you’re seeing?

Steve: So we haven’t announced our first class yet.  We’re doing that actually next week in Austin on March 12. We just finished making the final selections, and the question to ask is actually not what kind of startups are part of StartUp Health academy, but it’s who are the entrepreneurs that are in the first class. I think that the idea that the people behind these startups are going to be the transformers in this sector and the focus needs to be on what they and their teams can do.

Unity: I wouldn’t even call them startups.  It’s really an amazing collection of companies and many have already done some amazing things or have created groundbreaking technologies, or a new type of service. But they are all doing things that either lower the cost of care or something that is really going to improve the healthcare system and make a dent in the healthcare universe. We’re excited by the group because in many ways, we think it’s going to be a showcase to inspire a lot of other companies, entrepreneurs and startups to come into the space and be an example, if you will, of what’s possible.

Steve: Four of the ten entrepreneurs are serial entrepreneurs whose previous companies were acquired.  Most of these entrepreneurs already raised angel or series A rounds for their companies.  I think what everyone should be inspired by is I think some of the potential coming out of these individuals and their teams. The startups the companies that are participating are going to be the types of companies that over the next several years are the kind that are going to be in the industry for the long haul, with multiple businesses and making multiple, impactful changes here.

Indu: The relationship is with the individual not the company, so is there any equity taken by StartUp Health in these companies that come in?

Steve: For our first class and likely for our first several batches, we are not taking equity.  In fact, it doesn’t call for the entrepreneurs anything to be a part of StartUp Health.  We have scholarship partners who provide the tuition for the entrepreneurs and their teams to participate StartUp Health Academy.  This is a long term program because it’s going to take a long time for the entrepreneurs and their teams to navigate the life cycle of their startup business.  So, we expect relationships and participation at the Academy will last several years, and the goal is obviously to help take these entrepreneurs and their start-up from start-up to ramp-up.

Indu: That’s really exciting. Thinking about the federal level, from your perspective, are you seeing the impact of the administration on the ecosystem and on the people that you’re seeing coming in to StartUp Health?

Steve: Yes, and the individuals, like Todd Park, who are making a difference. Like we were saying that t’s not about the startups, it’s about the entrepreneurs.  This is not about the administration, but individuals who are transforming the sector and giving entrepreneurs a reason to roll up their sleeves and look at open data and challenges. To look at these things that we couldn’t have ever imagined a few years ago.  What they have accomplished with the open data, with the challenges now with this CMS brand.  I mean, just money flowing into entrepreneurs and entrepreneurial ventures. Todd Park’s famous line that there’s never been a better time to be a healthcare entrepreneur - totally because of these guys. There is a culture that they’ve built that will hopefully be there long after they’ve served their time.

Indu: I couldn’t agree more. I think we’ve definitely felt the impact of their enthusiasm and active support here at Health 2.0.  It’s been really great to catch up with you guys and I personally feel like I’ve learned a lot in terms of your thoughts on entrepreneurship.  I think that will really be helpful to people reading this interview.