Prebacked partners with Wellmark Blue Cross Blue Shield to facilitate real innovation in med-tech

By Michael Carney , written on April 3, 2013

From The News Desk

Healthcare technology is a challenging category. Entrepreneurs and investors regularly find themselves hamstrung by bureaucracy and limited information, not to mention the sheer magnitude of many of the problems being tackled.

There’s a new organization in Silicon Valley called Prebacked which is tackling these issues with an entirely new take on the hackathon and accelerator model operated in partnership with members of industry. The company has signed a three year enterprise contract with Wellmark Blue Cross Blue Shield (BCBS), an Iowa-based insurance provider, to help the healthcare organization access technical talent to solve its most pressing problems.

Prebacked hosts a series of “reverse hackathon” events in which members of industry pitch participants on the problems they’re encountering, with their initial focus being in the healthcare vertical. The company has hosted two such “Ignition” events to date, with over 100 attendees at each, and has its next upcoming event on May 4 in Palo Alto.

Over a 48 hour period, pre-idea teams meet with healthcare executives, physicians, insurance companies, and strategy consultants to iterate through preliminary ideas. Once a product concept is crystallized, teams depart for a week to continue building an initial prototype which will then be pitched and demoed to Wellmark – and any additional partners added in the future – with the hope of earning a services contract, typically in the six figure range.

“Most incubators’ goal is to get a company funded, but our goal at Prebacked is to get startups revenue generating clients,” co-founder Chris Edell says.

Prebacked’s role doesn’t end once a relationship is formalized between Wellmark and a startup. Rather, it takes on an ongoing strategy consulting role – on the dime of the healthcare company – to facilitate product development and implementation.

The company’s initial two Ignition hackathons have led to multiple ongoing startups. Edell highlights Benevolent Technologies for Health which makes low-cost prosthetic devices using coffee grounds, and Winged Food, a wearable health monitoring device that alerts the family and physicians of elderly patients to changes in their condition, as the two early standouts.

In between ignition events, the company also hosts a series of regular community events called MedHack in which it invites existing medical technology startups to collaborate with industry leaders with the goal of driving further innovation.

The strength of Prebacked lays in its ability to connect and facilitate business between two worlds that desperately need each other, but have no ability to interact effectively on their own.

Edell provides the healthcare and enterprise credibility as a former healthcare strategy consultant with Booz & Company and Deloitte Consulting, and a Harvard MPA and Yale MBA – in other words he’s a massive overachiever. His co-founder Garrett Dunham couldn’t be more different, or complementary, as a developer evangelist and EIR at software consulting firm Originate, and the operator of a Hacker House in the Valley. Together the two have access to a wealth of entrepreneurial talent and industry relationships, as well as the foresight to connect the two.

Prebacked has also established a VC advisory board to help guide its company forming efforts, with this group consisting of Pivot North Capital founder Tim Connors, Band of Angels founder Ian Sobieski, and Mohr David Ventures partner Erik Straser.

For all its innovation, the prebacked model raises a number of questions. As we’ve discussed before, entrepreneurs routinely resist project-for-hire work in search of a project or problem that they’re passionate about solving. Otherwise it’s difficult to put in the 18 hour days and make the years of commitment required to turn a startup into something meaningful.

Dunham believes that Prebacked addresses the dreaded “code monkey” issue by recruiting technical talent that also has a passion for the med-tech space. His team also works closely with its industry partners, namely Wellmark at this stage, to develop problem statements that are “narrow enough to make a solution possible, but broad enough to allow for innovation.”

VC firms have historically shied away from startups that outsource key functions of their business, such development or sales. With Prebacked’s role in advising both the startup and the enterprise client around product development and integration, this is a genuine concern. But according to Edell, discussions with the company’s VC advisory board and third-party investors have left the very opposite impression. Namely, the healthcare industry is such a massive opportunity ripe for disruption, but startups routinely struggle to break through. Investors therefore consider Prebacked’s guidance and experience to be an advantage, further de-risking the situation.

Wellmark is one of 38 insurance companies under the Blue Cross umbrella, and Prebacked has plans to expand throughout this network as well as to other large institutions within the industry. Eventually, it hopes to host Ignition and MedHack events outside of Silicon Valley, both domestically and internationally.

And while the Prebacked model is rooted in healthcare initially – largely due to Edell’s relationships and experience – the company plans to eventually expand into additional industries. Edell and Dunham say they’re currently in discussions with several Fortune 100 companies in the consumer goods, financial services, and energy sectors about establishing similar relationships as the one it’s entered with Wellmark. The ability to access elite technical talent and build bridges between entrepreneurs and enterprises is a universal problem. Similarly, many of the problems being raised in the healthcare space are industry agnostic, such as process automation and billing.

Prebacked is entirely bootstrapped and has turned down offers for outside investment. With just two full-time employees currently, the young company is profitable and while there are plans to grow the team, its founders don’t anticipate the need to fundraise any time soon.

The model is a bit atypical in the accelerator and hackathon sector in that Prebacked’s revenue will come largely from consulting agreements with its enterprise clients. That notwithstanding, Prebacked will take nominal advisory stakes in each startup that enters a formal agreement with Wellmark or any future partner. The founders have considered forming an investment fund or creating their own technology solutions, but will keep these ideas on the backburner for the foreseeable future.

The consulting-based model certainly limits Prebacked’s upside potential, and raises questions about scalability, but Edell and Dunham have developed an innovative approach toward helping cutting edge technology succeed in legacy industries is huge. The potential to facilitate real innovation is huge.