Request for Startups — October 2018
I’ve been sitting on these ideas for a while and would love to get more feedback and thoughts.
A Payments Network for Insurance
In the following post, Doug Nelson lays out the benefits of a vertically-focused business model: sales/marketing efficiency, product focus, and unique data capabilities.
Nelson argues that similar to the way a shift of attention from horizontal SaaS to vertical SaaS poked at significant market opportunity and attracted investment capital (vertical or “end to end” SaaS companies are the darlings of growth equity firms!), such an opportunity exists in payments as well. In my eyes, one area where a technology-driven payments company makes sense is in the insurance space, primarily focusing on consumer (homeowner’s, auto, life, etc.)
The idea would be to layer on a payments network that ultimately connects consumers, brokers, and insurers. For consumers, the value proposition would be targeted, easy-to-use, and digitally focused (lots of checks in the mail right now) premium payment options and receivable claims. Brokers could strengthen customer relationships or trust, and insurers continue to need ways to process complex payment streams. There are a few companies working on similar or adjacent products like ACI Worldwide and Guidewire. However, what I envision is more in the veins of Cedar or Flywire (which started in the education space).
For a primer on how payments companies work, I’d recommend the Square S-1 and focus on the “Business” section starting on page 107.
Picks and Shovels for D2C Healthcare
At this point, I’ve certainly exhausted the subject, but this particular idea or paradigm has been on my mind recently. One way of viewing direct-to-consumer healthcare is through the lens of an “application” layer and an “infrastructure” layer. The application layer is comprised of the brand that’s being created and the vertical being chased — it’s the consumer or patient touchpoint. Gastroenterology (digestive system), allergies, and medication for pets/animals are all areas I can see startups emerging in.
But, one company could build the rails and infrastructure for all this activity. You have to buy the thesis that parts of healthcare are moving to a D2C model and strategy to make this bet, but I see it being probable. Most backend operations of D2C healthcare companies include setting up manufacturing, telemedicine, physician, and marketing networks. There might be some companies working on parts of this stack like telemedicine or connecting companies with generic drug manufacturers, but an integrated approach a-la AWS is more interesting, in my opinion. Furthermore, one concept to dive deeper into here is the friendly PC model.
Kickstarter for Enterprise
In my eyes, the primary value proposition of the Kickstarter crowdfunding model is providing pre-sale capital for physical goods, mostly targeted at consumers. There’s a whole world of physical assets targeted at enterprises from medical devices to office furniture to industrial manufacturing equipment that could make use of a crowdfunding platform. Kickstarter and Indiegogo’s product marketing targets consumers, so many enterprise concepts wouldn’t fare well on those platforms.
Businesses that make physical assets, hardware, or durable goods for other businesses still struggle with the inventory financing issues that bring Kickstarter projects to the site. There are invoice factoring or purchase ordering financing companies like Kabbage and Bluevine, but there are some concerns about those types of SMB lending businesses and whether their capital can be competitive against big banks in the long run. A crowdfunding concept doesn’t dilute equity or put debt on the balance sheet, and can actually drive customer growth if executed well. One issue I see arising is distribution across verticals and business segments i.e. efficiently getting a hold of medical device buyers at hospitals and manufacturers who need new equipment.
In fairness, some have been critical of Kickstarter’s model. It’s not perfect by any means. There’s rumors of slow growth, but I can’t tell if that’s a result of product direction or the company’s overall strategic direction and ambitions.
Productizing Corporate Moving
In my last RFS, I talked about home buying and renting templates — productizing a to-do list when moving into a new home. In the commercial world, office moves are a whole beast of their own. Managed by Q has an awesome office moving guide that sheds a lot of insight into the steps involved in the corporate relocation (or location!) process.
Some include scheduling HVAC/electrical/IT setup, vetting architects and interior designers, confirming logistics with a new property manager, and installing furniture. I could see a local marketplace that connects these fragmented service providers to a new tenant. Additionally, the managed marketplace concept comes into the fray here. In the following post, venture capitalist Josh Nussbaum outlines the distinct characteristics of this paradigm.
The features are a fragmented industry, profit to be had by aggregating suppliers, low frequency purchases, high transaction cost, and sale dependent on a complex task. I need to do more research to see how these would come into effect. This concept could also be a SaaS product sold to a commercial real estate landlord or listing brokerage with the idea of building long-term customer lifetime value.
An additional resource to explore this subject is the Fit Out Guide from JLL.
The Vendor Passport
Integrating into a big company as a smaller vendor sucks. From SLAs (service labor agreements) to invoicing to on-boarding and off-boarding, there are often a host of complex steps that face small companies when working with larger ones. Since large organizations don’t have easy ways to manage these vendor relationships, they often lock in the same business for a long time. Unlocking these relationships could make the economy at large more dynamic and fluid.
To make the idea more concrete, I prefer the framework of the “passport.” Envoy, known for its visitor management and registration tool, rolled out a product called Envoy Passport, which allows visitors to easily check into any Envoy location. In the apartment rental world, where background checks and references are the norms for every move, some large portfolio owners are allowing tenants to move seamlessly across their properties without much hassle.
What if this type of passport network which easily allowed for different types of vendors (software providers, suppliers, etc.) to plug in and out of large organizations? It could work in two ways. Once a vendor has been vetted and certain agreements are made into templates, this type of network could exist within large companies (for movements between units) or across companies operating in the same market.
Capital Markets Platform for Biomedical Projects
There’s a plethora of software companies that provide investment access to alternative assets like real estate (Yieldstreet, Cadre, Fundrise) and private companies (WeFunder, SeedInvest) either to institutional or retail investors. Working with institutional investors is generally wiser due to a higher level of sophistication on their end. There are very few (if any!) focused on life sciences companies and drug assets specifically. If you believe drug discovery and development is important to society, and I certainly hope you do, there should be more innovative capital offerings targeted at drug assets and biomedical projects besides venture capital and corporate development.
I don’t know if the answer is an investment marketplace similar to the ones described before or a different sort of financial instrument. Andrew Lo, a professor at MIT, is notable for developing the concept of the megafund, a hypothetical large investment structure that pools together many risky drug assets funded through debt. You can learn more about it here.
I’m interested in the future stack of the lab and life sciences, and I believe capital strategy is one part of that equation.
If any of these areas excited you or you're working on a solution in one in of these spaces, feel free to get in touch with me at aashaysanghvi[at]gmail.com.
