What could Philly have done to keep this DreamIt Health startup from leaving? - Technical.ly Philly

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Feb. 23, 2015 12:37 pm

What could Philly have done to keep this DreamIt Health startup from leaving?

The three young founders of Drop Diagnostics left for San Francisco last month. If officials really want Philadelphia to be “the Silicon Valley of health IT,” the startup's departure offers some key lessons.

Drop Diagnostics founders, left to right: Peter Bacas, Nishant Neel and Max Lamb.

(Photo courtesy of Drop Diagnostics)

Startups leave Philadelphia for family reasons or for industry reasons (and that churn is fine), but sometimes Philly loses a startup that seems like it could have flourished here.

Drop Diagnostics, a health IT company founded by recent Penn grads, left Philadelphia for San Francisco last month, shortly after graduating from DreamIt Ventures’ DreamIt Health accelerator.

Here’s why, according to an email from cofounder Max Lamb:

The week before Thanksgiving ’14, our team was flown out to San Francisco to interview at [accelerator] Y-Combinator. It was a great opportunity to meet Sam Altman as well as some of the other YC partners and get their feedback. A common comment was “You guys need to be out here.” It is the typical Silicon Valley entrepreneur’s line, but we thought we should explore.

All within the week after our YC interview, we were able to meet with representatives from J&J, Stanford, QB3, UCSF, and a handful of local biotech startups. This was the tipping point in our decision. The ecosystem [in San Francisco] is built to help startups break through the doldrums of seed funding to Series A that plagues almost all young life science companies. [Emphasis added.] And everyone in the system is more than willing to help, even a potential competitor. After our visit, we decided to make the move, but we’ll miss Philadelphia and the great and growing entrepreneurial community it offers.

Drop Diagnostics was unique among most other DreamIt Health companies because it is developing a medical device that must get approved by the Food and Drug Administration before it gets to market. That process, the team said, will take at least three to four years and millions of dollars. So early-stage capital was a big sticking point for them. During DreamIt Health’s demo day, the team said it was raising $500,000.

Of course, this is just one startup.

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It wouldn’t be wise to read too far into Drop Diagnostics leaving. There’s also the fact that, relative to DreamIt Ventures, DreamIt Health has had a stellar retention rate when it comes to startups staying in Philadelphia. But if health IT is to be one of the region’s strengths — DreamIt Health leaders and others have said that Philadelphia should be “the Silicon Valley of health IT” — it’s worth paying attention to the reasons why Drop Diagnostics left: early-stage funding and strength of community.

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Juliana Reyes

Juliana Reyes became Technical.ly's editorial product lead after reporting on the Philadelphia tech scene for four years. She's co-president of the Asian American Journalists Association Philadelphia chapter and a two-time Philadelphia News Award winner for "Community Reporting of the Year." The Bryn Mawr College grad lives in West Philly, likes her food spicy and wears jumpsuits often.

  • thegreengrass

    So who’s in a position to do something that would make a company like this stay next time?

    • I think there are plenty of local initiatives as well as VCs/Angels (individuals and firms) trying to find ways to increase the likelihood of retention. However, Philly will never bat 1.000 and keep them all here. Momentum is huge for any startup so startups are going to choose the path of least resistance when opportunities present themselves. To me, this is just one of those opportunities. Not reading too much into this one as Juliana suggests.

      • thegreengrass

        Hey Steve! Thanks for the insightful post.

  • pops07

    The problem is that we have a city administration still mired in the 1930s.

  • Jack

    To the best of my knowledge, they didn’t try to raise money with our investors at Keirstsu Forum Mid-Atlantic.

  • Stephen Williams

    Great series of articles Juliana! In talking with many young biotech entrepreneurs in the region they echo similar frustrations with raising capital, the environment, and a ‘silo’ mentality in the region. Very interesting how fast the large corporate connections were established for this company in the Silicon Valley environment. The exposure is very important.

  • nobody

    Always looking for an excuse and somebody else to blame. What can you expect from people who don’t actually pay for anything?

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