Startup School 3: How poor timing & bad luck killed my healthtech startup
Kiteline Health has closed its doors. This is a series exploring what I’ve learnt over the past three years as CEO. Kiteline provided B2B2C health coaching to people with long-term health conditions, helping them improve their lifestyle habits and increase longevity.
As much as we did wrong (see the other pieces in this series!), there were a lot of things that were unfortunately completely out of our control. I’ve found it helpful to reflect on the circumstances and context that made things tough for us, while still acknowledging our mistakes. It was hard going, and in hindsight there were different ways we could have responded to what was in front of us.
Building during a pandemic — tragedy and opportunity
I quit my stable, well-paid, fulfilling role as an Investment Director at Big Society Capital in February 2020. Yep, you read that right. I joined Antler on Monday 2 March 2020, a programme built on high pressure networking. Two weeks later we were all trying to build rapport with each other over zoom calls, all whilst the world was on its knees from such an unprecedented and tragic event.
Elements of launching during the pandemic were beneficial. We built remote-first as standard, not having to morph an existing business with set processes, procedures and culture into something it wasn’t designed for. Awareness of mental health and wellbeing issues in the workplace skyrocketed during this time, and what we were offering was striking a chord everywhere.
It became a bit of a land grab to reach companies that needed to support their burning-out employees. As two non-tech cofounders, it took us 18 months to build an MVP. What we did do was cobble together a WordPress website and some plugins that enabled us to deliver one-to-one health coaching for our clients. This actually worked well, but we couldn’t scale it if needed. We weren’t ready when we needed to be, as I’ve spoken about in my Product piece, and so couldn’t take advantage of this spike in demand.
The war and cost of living crisis spooked both clients and investors
Once we started to emerge from the pandemic, the horrific war in Ukraine broke out and the ensuing cost of living crisis hit families across the country. No one knew what would happen, or how long it would last. Our clients tightened their budgets, and our services were easily cut. We were a vitamin, not a pain killer.
Things on the investor side were just as bad. Over the course of its life, Kiteline raised a total of £368k, something I’m really proud of. As we were approaching the launch of our seed round, Y-Combinator released a letter to its portfolio companies in May 2022 telling them they wouldn’t be able to raise for the next 18–24 months and to batten down the hatches.
“If your plan is to raise money in the next 6–12 months, you might be raising at the peak of the downturn. Remember that your chances of success are extremely low even if your company is doing well. We recommend you change your plan.” — Y-Combinator
Many other VC firms followed suit and published their own market warnings, like Sequoia, Andreessen Horowitz, and Lightspeed Venture Partners. And they were generally right. VC funding at seed stage in November 2022 dropped by a third compared to November 2021.
We didn’t adapt quick enough to the macroeconomic environment.
If we had listened to the advice in those letters, we would have made staff cuts immediately and revisited our spending. It was very hard at the time to know what to do because we had a plan to raise imminently, coupled with a strong pipeline and high hopes for sales.
We had a number of very advanced conversations in train which we were convinced would result in at least a few chunky contracts. What the VC letters didn’t address was that not only raising money, but selling would be made much more difficult by the conditions.
By the time we realised we couldn’t raise what we needed (around October 2022), we made redundancies but it was too late and we tried to ride it out on fumes. It’s very hard to take decisive action in the moment, but we should have listened more closely to the experts around us and not fallen prey to optimism bias.
Timing is everything.
There was definitely an element of bad luck in our timing — if we had started one year earlier we might have done much better. We may have had a product ready to take advantage of the pandemic wellbeing gold rush, and we may have been raising our seed round between the two VC market slumps: the Sep 2020-Mar 2021 pandemic slump, and then the ongoing cost of living crisis slump that started in May 2022.
On the other hand, we may not have built such a remote-first organisation, and may not have been able to deal with changes to ways of working as easily as we did. It’s so hard to know.
What we definitely should have done is purposefully consider the timing of bringing our specific product to market. What made it special within the context of the pandemic and existing competition? Was it really what our clients needed right then? What would they need in a years’ time? In three years’ time? We should’ve focused on building and selling that.
Personal disasters struck left, right and centre
As I have spoken about previously, I sadly lost two of my triplets in April 2021. Out of that disaster our beautiful daughter, Holly, was born and is now a chatty, cheeky and wonderfully exhausting two-year old. We spent four months in the Neonatal Intensive Care Unit, and two more months at home recovering. I am beyond grateful to the teams at our hospitals for saving her life, as well as for my team at Kiteline for keeping everything going without a full-time me. It truly was a once-in-a-lifetime disaster.
That period of time, however, was critical for Kiteline. Our MVP was being designed, built and marketed. I was away at exactly the wrong 6 months when everything fundamental was happening. I returned to a built platform and first content course which were difficult to change. As a new tech founder, I wasn’t confident enough at the time to intervene anyway (stay tuned for the 8th instalment of this series for more on founder confidence). I also didn’t know what, if anything, needed changing because there had been little user input into the platform design.
Having got used to the idea of a family of five, we decided to have another baby. We had no choice on timing because I still have to go back on my anti-cancer medication as soon as possible, so it was literally now or never. Thankfully this time everything went smoothly and Aidan was born at the end of November 2022.
This coincided exactly with our seed raise. At first, I thought it would be a good thing to have a really strict end date in order to kickstart investors into gear. Given the market conditions explained above, it was actually another disaster in timing as no one was investing. It meant we couldn’t postpone the raise as long as the market needed us to.
“VC investment levels into UK businesses fell by almost a quarter (23 percent) in 2022 as the global economic turmoil forced investors to take a more cautious approach. The first half of 2022 continued to see high levels of investment, with more than £14.7 ($18) billion raised. However, levels started to tail off in the latter half of the year ending with £22.7 ($27.7) billion being raised by UK businesses in 2022” — KPMG Venture Pulse Report 2022
It wasn’t just me with personal circumstances on the team — others went through their own turmoil which, with such a small team, meant turmoil for the business too. There’s not much a small business can do to deal with personal tragedies, other than support its people and create a culture of empathy where others happily pick up slack for a short period.
All in all, we had some good luck (aka hard work!) and we had some bad luck, which is standard for every startup. We often responded well, but we should’ve been quicker and more decisive in responding to macroeconomic events, and thinking more through the timing of what we were bringing to market. All things to tuck away in the brain bank for next time around.
Read Startup School 1: Product here.
Read Startup School 2: People here.
Read Startup School 4: Sales here.
Read Startup School 5: USP here.
Read Startup School 6: Funding here.
