By Yen Duong
While suit jackets and briefcases still outnumber hoodies and backpacks in downtown Charlotte, a startup scene is blossoming in the bank-heavy city. Many startups revolve around “fintech,” or financial technologies, to support the local banking businesses, but health care businesses have been popping up as well.
“Because of the schools acting as feeders you’re going to get a lot of technology and biotech […] in RTP and that’s great. But here in Charlotte it’s going to be a little bit different,” said Juan Garzón, who runs a support hub for entrepreneurs, StartCharlotte. “Look at the big industries that we have here: financial services, health care, energy manufacturing. A lot of our startups support those industries.”
Health care offers unique challenges for startups which need to keep in mind patient privacy, HIPAA regulations and electronic health records, said Matt Yagey, whose company MedChat offers a secure text-based chat system for providers in Boston, San Francisco and Raleigh.
“You can’t build a general tool and think that it’s going to plug into health care; it very rarely works like that,” said Yagey, who founded his Charlotte-based company in 2015. “If you’re going to work in the health care space, your solution needs to be designed specifically for the industry itself.”
Charlotte Douglas Airport- the key to success
Globally, the health care industry is projected to grow from around $7 trillion in 2017 to about $10 trillion of business by 2022, according to a report by consulting firm Deloitte. Entrepreneurs, who often aim for larger markets, are trying to take advantage of that growth.
“You have to be mobile. It’s a global economy,” Yagey said. “Even though Charlotte’s not known as a huge health care hub, the proximity to Raleigh is great and we’re willing to get on a plane and travel to where our customers are.”
For Lisa Tweardy, who is building a factory for 3-D printed orthotic braces and runs a local team for the San Francisco-based international company Unyq, Charlotte was the right choice for an East Coast location. The Charlotte-Douglas airport ranked seventh busiest in the world for takeoffs and landings in 2016, according to the Airports Council International.
“There was a natural fit to build the team here versus San Francisco because the East Coast has a higher number of hospital centers and treatment centers as well as patient population,” said Tweardy, who in 2017 opened the office, which sometimes brings in patients to try on and tweak their personalized braces. “We can be accessible to the majority of the population in a very short travel distance.”
Yagey also said Charlotte’s more affordable than the West Coast, and has other elements for startup growth. For instance, with the presence of labs from many universities at the Kannapolis North Carolina Research Campus, which opened in 2008 and has grown steadily since, the research gap between the Charlotte area and the Triangle is starting to close.
“Charlotte in the last couple years has definitely evolved as a tech hub,” Yagey said. “You’re seeing a lot more engineering talent become available and come through [the universities]. I actually think it’s a prime location to build a startup, and a health care startup specifically.”
The story of one startup
Five years ago, Dr. Waseem Ghannan and Dr. Jason Perlman, who met at Atrium Health, combined their own funds to found The Hospitalist Solution. Local hospital organizations such as Atrium Health, Duke and Baptist Health contracted with them to temporarily staff local doctors to care for patients in hospitals during leaves or staff changes, Perlman said.[sponsor]
In 2017, they founded their second company, a tech startup called TeleHealth Solution, growing their pool of 40 doctors to virtually staff telemedicine modules. Their machines include a tablet for video chatting with a doctor, cameras and diagnostic tools such as an electrocardiogram, stethoscope and a spirometer. After a 45-day test run at a Boone nursing home, the readmission rate to the local hospital plummeted from over 80 percent to less than 10 percent, Perlman said.
The company has expanded to 13 states, where nursing homes and rural hospitals pay a monthly fee for evening and weekend staffing. Instead of paying an in-person hospitalist to admit a few patients per night, rural hospitals can use a telemedicine hospitalist, who can cover four or five small hospitals in one night, Perlman said.
“I think the reason for a lot of our success is because our approach to this industry is very different,” Perlman said. “We don’t approach it as, ‘Here’s a technology solution to solve this problem.’ Because at the end of the day, the doctor in that patient interaction is what drives the outcomes and the impact.”
Challenges in the Queen City
While fintech has a thriving organization of mentorship, capital and conferences in Charlotte, no such field-specific “vertical” yet exists for healthtech in Charlotte, said Garzón, who runs a monthly event for startups to pitch their ideas to the public and to investors. He said it will be a few years until Charlotte healthtech builds its own such structure.
“The biggest challenge that we’re going to have is if these companies find support elsewhere, then they’re going to go elsewhere,” Garzón said. “A few years ago, [a few companies] went up to New York City and found a whole ecosystem around health care technology, and they ended up moving over there because they were able to join Blueprint Health and they were able to get in front of health care executives easier than they could here.”
While access to health care leaders and entrepreneurial mentors is one part of the equation, money is one of the biggest driving factors. While TeleHealth Solution was self-funded by founders who made money in previous ventures and MedChat was funded by friends of Yagey, a Charlotte native, other businesses must pitch themselves to investors for startup capital.
Brandon Shelton, who in 2016 founded a venture capital firm to invest in veteran-led businesses, said that Charlotteans are less willing to invest in software startups which are “90 percent likely” to fail.
“There’s a lot of wealth here in Charlotte,” Shelton said. “But if you made your money off of textiles, real estate, cash flow businesses, you almost feel like it’s a foreign language to look at a startup, especially a software startup.”
The Carolinas have two angel funds, which are groups of investors who seek to invest “in their own backyard,” Shelton explained. Two of the 14 companies listed on the Charlotte Angel Fund site and three of the 40 listed on the Venture South site are in Charlotte.
“Charlotte is still establishing itself as a city where people want to build companies, especially technology companies,” Yagey said. “I think Raleigh is still a little ahead in some ways, [but…] I think it’s only a matter of time before the investors start to recognize Charlotte as a bigger tech hub.”