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Northrop Grumman, Hopkins partner on new healthcare start-up accelerator

WASHINGTON, DC - DECEMBER 02: Northrop Grumman Corporation Chairman, CEO and President Wes Bush speaks during a discussion December 2, 2013 in Washington, DC. The American Association for the Advancement of Science (AAAS) held a discussion on "Sequestration and the American Workforce." (Alex Wong/Getty Images)

Defense and government contracting giant Northrop Grumman is making a bet on young start-ups by supporting a business accelerator for healthcare-related ventures.

The Falls Church-based company partnered with Johns Hopkins University, Rockville-based nonprofit BioHealth Innovation, which helps bioscience research projects in Maryland find funding, and Philadelphia venture capital firm DreamIt Ventures to start the new accelerator, to be based in Baltimore. DreamIt has operated similar programs for start-ups across other industries in several cities nationwide.

Starting in mid-January, up to 10 selected start-ups will join the four-month program, receiving $50,000 in early-stage funding, introductions to potential customers, legal support, and mentorship from participants, among other rewards. DreamIt has already selected participating start-ups but has not yet publicly disclosed their names.

For Northrop, the accelerator creates an opportunity to discover technologies that could be useful to the company, said Amy Caro, vice president of health IT programs. Northrop is primarily funding day-to-day operations at the program.

“With the Affordable Care Act, it’s created an opportunity with the adoption of electronic health records. There’s a better demand and better understanding of what is needed to take care of this data.”

Though it can be difficult for start-ups to break into a highly regulated healthcare system, “you see commercial companies more willing to take on these smaller companies, and you’re starting to see federal government [doing so] as well. You’re looking at them not only for their ideas, but what partners they can bring to the table as well,” she added.

Healthcare ventures may need special guidance to navigate the complexity of today’s healthcare system, said Elliot Menschik, managing partner for healthcare at DreamIt.

Having a few years of experience in some aspect of healthcare “generally gives you enough domain knowledge to strike out on your own, but there’s still a lot to learn” in a system in which incentives aren’t always aligned between players, he said. “It’s possible your product will ultimately be a product for payers, but how do you understand how payers are organized?”

When deciding which ventures to accept, “we focused very heavily on the team,” Menschick said, noting that the board favored teams who have complementary skills, and a history of past successes.

“But ideally we like to see beyond the team, there’s obviously a good idea and a real problem in the market. Often people have great technology — they’re a hammer looking for the nail.”

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