Europe offers plenty of opportunities for digital health IT start-ups

Does Europe offer a strong environment for digital healthcare companies to flourish? Or should entrepreneurs go to North America instead?

Frank Boermeester, a researcher and partner at the Belgian firm HealthStartup, is bullish on entrepreneurs starting digital health companies in Europe. He explained why in an article published on 15 March on the blog for Rock Health, a San Francisco-based seed-funding accelerator for digital health start-up companies.

From the perspective of venture capitalists, the digital health scene is on a roll, but this phenomenon is "mainly a U.S. story," Boermeester wrote. "In Europe, we don't have enough entrepreneurs," he said.

Citing the Global Entrepreneurship Monitor (GEM), a global study of entrepreneurship by a consortium of universities, an average of 8% of individuals ages 18 to 65 living in the European Union are starting or running new businesses. In Europe and France, the average is 5%. By comparison, the rate in the U.S. is 13%.

A key obstacle to launching digital health start-ups in the EU is the fact that it is composed of 27 member states, each with their own unique healthcare regulations. Diversity of languages is another obstacle. These issues make it difficult to scale a product in Europe, which is a factor that venture capitalists seriously consider.

Another obstacle deals with the socialized nature of medicine in Europe. Healthcare providers, particularly hospitals, simply do not have the level of competition found in the U.S., and thus do not have the need to professionally market their services.

The role of new digital health products is that they can make a healthcare provider seem more advanced or better than competition in their area. An example of this is offering a free-of-charge electronic health record (EHR) to patients, installing biometric patient identification that confirms patient's identities, or providing mobile tablets or kiosks for check-in.

Nevertheless, Europe offers ample opportunity for digital health entrepreneurs.

Europe has well-established technology and healthcare ecosystems. Some of the largest medical device and pharmaceutical companies have their global headquarters in Europe. Many of Europe's most prestigious universities have well-established technology-transfer divisions, which have attracted the interest of local venture capitalists in the fields of biotechnology products and medical devices. The venture divisions of established healthcare companies and many of Europe's larger venture capital firms are taking the potential of Web and mobile technologies seriously, according to Boermeester.

Additionally, in addition to the efforts by EU Commissioner Neelie Kroes to boost technology entrepreneurship in Europe, many governments have initiatives in place to support healthcare innovation. They need to do this, if only from a budgetary perspective. In almost every EU country, populations are aging fast, Boermeester pointed out. This demographic trend is steadily increasing the number of individuals who will require more healthcare services and also reducing the number of existing healthcare professionals who opt to retire.

"Technology is needed, and fast, to bring healthcare costs down to a sustainable level, and to simultaneously continue to improve the quality and effectiveness of healthcare," Boermesster wrote.

He noted that regulatory practices in Europe are more conducive to the cost of bringing a product to market that needs regulatory approval. CE Mark approval certifies that a product is safe, but not necessarily effective. This enables a company to begin to commercialize its product while simultaneously gathering data and conducting the necessary clinical efficiency trials.

By comparison in the U.S., all clinical trials need to be completed before the Food and Drug Administration will clear a product. While many healthcare IT products do not require regulatory clearance, for those that do, Europe offers a more welcoming environment.

Finally, despite economic problems, the European Union's economy is the largest in the world. In 2011, it had a gross domestic product of 12.6 trillion euros ($17.6 trillion U.S.). If potential digital health entrepreneurs have global ambitions, they cannot afford not to be in Europe.

And if entrepreneurs succeed with a digital health product or service in the fragmented market of Europe," the rest of the world should be a breeze," Boermeester concluded.

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