Startup lessons learned

There comes a time when we need fresh eyes to resolve intractable problems.

This is the situation with the startup.  Many months of trying to ell an attractive prospect to willing investors has failed to produce results.  I am effective in the presentation: people understand what we are doing and why it matters to patients.  But I fail at the close: Why is it compelling enough to invest?

Their reasons are many.  Market risk, clinical trial risk; the intellectual property may not hold, the manufacturing cost is underestimated, the valuation is too high.  With each rejection, we retool, revise, make the next pitch better.

At this juncture, though, time and resource are tight, and we needed to bring alongside people who could see things differently.  Their four analyses were consistent, it makes me think that I should have engaged a consultant months ago:

• The proposition is too narrow.

I have always believed in Focus.  If we bring one product forward with all of our efforts, we will communicate our business clearly, use resources efficiently, and achieve revenue more quickly.

The may have been misguided: It makes the proposition brittle.  If an investor points to a particular product risk, whether the market adoption, the clinical trial, or the IP, then it puts the whole business at risk.

The alternative is a platform strategy where multiple products flow from fundamental know-how and generative processes.  All of our advisors are recommending creation of a more broadly based prospectus, with a staggered pipeline and multiple markets, a strategy that both reduces risk and stimulates returns.

• Getting out over the tips.

If the company was a new academic spin out it would be perceived as ripe for investment; it has all the ingredients for success and is close to the clinic with a promising medical device that will meet a clear unmet need. Investors would queue up to invest in such a promising start up.

Half way through the development, we switched our technology to adopt a more promising alternative that fit our already established process.  To me, that goosed the performance and should have built value.  Investors focused on money spent on the ‘failed’ alternative, and reset our valuation.

We should have realized, or at least better communicated, the reasons for the change and the benefits to shareholders as well as customers.  The error will likely halve our valuation.

• Drive for commercial partnerships

Nothing validates a market as much as the interest of a commercial partner.  These companies are already selling to customers and understand the needs and the economics. If the proposition is compelling enough to attract their interest, then it must be valuable.

‘Interest’ is not simply a willingness to have a closer look at the technology, it must translate into five-figure co-investment that indicates serious  commitment. 

Of course, any consultant is first going to tell you to stop doing what isn’t working and start doing something else.  And they may simply be echoing what they hear from my story.

But, it’s certainly time to Think Different.

Entrepreneurship is not a science, it is not an art. It is a practice and, as a practice only practice will make you better, writes P.  de Holan in the FT.  Ignoring or underestimating its true level of risk is seldom a good idea. It is reasonable, then, to encourage entrepreneurs, whenever possible. to avoid predictable errors. A good understanding of the ways that entrepreneurship fails, how the process unfolds and why it stops unfolding, increases the chances of success.

Hopefully, its never too late to learn, and to apply, the lessons.