What to Expect as a First Time Founder Entering the Health Startup Playing Field
Being a first-time founder in healthcare can be difficult. There are many decisions that founders must make in areas that they have little to no previous experience with. To help soon-to-be founders feel confident enough to make the leap to start their own venture, JSF portfolio founders Ti Zhao, CEO of Kip, Vik Moharir, CEO of Scribelink, and Yu Suo, CEO of MioTherapy share their thoughts on what to expect as a first-time founder around capital raising, pilots and sales, operations, and strategy.
What surprised you most about raising capital?
Ti: It was surprising to me how much raising capital can feel like a sales process. Just like sales, you make a list of qualified leads, figure out the best ways to reach them, and then sell your company as if you were selling your product. And just like selling your product – it’s a funnel, there is a process; there are the early adopters and there are late adopters. And just like sales, you will need to make sure you talk to the right people – oftentimes, you’re not talking to “a fund” but a particular partner in the fund, one who understands your space and will go along with you for the journey. Taking the time to do your homework and finding the right people can really pay off.
It was surprising to me how much raising capital can feel like a sales process. Just like sales, you make a list of qualified leads, figure out the best ways to reach them, and then sell your company as if you were selling your product.
Vik: The emphasis investors place on metrics, specifically how much revenue a startup is generating. It also did not occur to me that a good time to raise money is even prior to having an MVP or clients as one is only trying to sell a business idea. A lot took me by surprise, and “The Startup J Curve: The Six Steps to Entrepreneurial Success” by Howard Love has been resourceful for raising capital at various stages.
Yu: As someone who’s built several prior small businesses, but never tried going the VC route before, I was pleasantly surprised at the opportunities available to raise capital in today’s world. Most investors we contacted showed at least some interest and it was fairly easy to set up pitches through online meetings. We have a technical team that doesn’t come with a lot of healthcare experience, and being able to raise capital from a source who specializes in such startups was a big plus.
What should Founders know about pilots and sales negotiations?
Ti: Set clear expectations and goals, and don’t undersell yourself. For pilots and early customers, it can be worthwhile to be more accommodating or offer discounts (these are your early customers and are taking a chance on you!) but that doesn’t mean underselling yourself or your product. For pilots especially, be sure to set clear expectations of what they’ll get, define goals, and set timelines and concrete next steps. Don’t get stuck in Pilot Limbo, and make sure you’re both getting value out of this. And as painful as it might be – know that sometimes a customer is not right for you.
It’s hard to let go of a customer, but if you find yourself building too many custom features just to accommodate one specific customer’s needs, maybe they’re not actually the right fit for your product.
With sales negotiations, one of my biggest learnings is to not cave at the first sign of pushback. Customers will often try to negotiate terms and pricing (that’s part of their job), and you, more than anyone else, know the value of your product and should be prepared to defend it. Offer a discount if you think it appropriate, but make sure it’s clearly stated and doesn’t compromise your business.
Vik: Paid pilots are much better than unpaid. This is not just because of the revenue, but because, often, when someone receives something for free, they do not appreciate it or put in the effort to ensure successful use. Per the great advice in “Getting to Yes” by Roger Fisher, good negotiations are not about having a firm position and trying to bargain to get the other party as close as possible to your position. The best negotiators will appreciate the goals of the other party as well as their own and work with them to create terms that allow both parties to achieve success.
How do you balance speed and process?
Ti: It’s easy to try to toss the process aside when you’re feeling an urgency to move quickly, but healthcare especially can be slow and tedious for good reason. And your process is hopefully in place for good reasons too. I sometimes think of “What are the consequences if I jump in too quickly and things don’t go well?” and balance that with “What are the downsides of waiting a bit longer and making sure our t’s are crossed and i’s are dotted?” Unfortunately, there’s no one-size fits all answer. But, it’s also good to keep an open mind and evaluate if your process is helping you build better products or creating unnecessary roadblocks to progress.
Yu: It’s very easy to get into a mode where either: 1) The product development completely drives the business decisions. 2) The business decisions completely drive the product development. In reality, we need to have a continuous flow to this process that allows both ends to drive each other. Since we still have a small team (5 people), we currently set aside two meetings a week to review our operational progress: one for technical tasks and one for business goals. Both technical and non-technical team members are required to be at both meetings and are welcome to challenge existing ideas or plans if they believe something should be done better, more efficiently, or faster.
How do you deal with conflicting mentor advice?
Ti : Trust your users and product and let those guide the way. At the end of the day, your mentors are not the ones talking to your users. They may not even have a deep understanding of your product. While it’s always good to take advice into consideration, ultimately, you’re the one who knows your product and users best. If it’s truly the case that multiple pieces of advice are conflicting and all promising, then devise experiments to try to answer them quickly. Time-box these, and don’t get lost in the weeds.
Vik: Go with the one that is consistent with the goals and mission of your organization. Communicating with everyone on your thought-process in reaching your decision is also very helpful.
Yu: I’ve found that advice from mentors, advisors, and people in other similar roles are rarely completely conflicting. In cases where they do differ, it’s often because they are approaching the same problem from fairly different viewpoints and experiences. For example, when treating a patient who has just gotten a knee replacement, an occupational therapist may focus more on functional movements while a surgeon may focus more on range of motion. In these cases, the founder has to do more first-hand research and critical thinking to decide how to weigh both pieces of information based on his/her own product and business.
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Creating a network of founders who have been through the different strategic and emotional challenges of building a company can help propel a first-time founder forward. At Jumpstart, we created The Jumpstart Refinery as a way to increase the collaborative opportunities available to both our portfolio companies and other healthcare entrepreneurs. If you are launching a healthcare company, we invite you to sign up here to join our community of founders all focused on improving the future of health.
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