Startup founders, forget about money
Don’t freak out. It’s temporary.
The health of any startup ecosystem can often be reflected by the zeroes that follow the rounds of investment money or the valuation of the startup during a successful exit.
Money is why most startups from Middle East and South Asia will flock to Silicon Valley outside of their own local startup ecosystems in order to raise money to be able to keeping making some more money.
A little taste of startups
I work at a little product lab called Inovio, where our team and I build out minimum viable products for individuals or startups that have raised some form of seed investment or are paying out of their own pockets. We expedite the need for an in-house development team due to the uncertainty of building traction and locking in further seed and/or growth stage investment.
When we started off last year, we have taken on some projects that were sometimes part cash, part equity deals. We allocated dedicated teams for building and product managing the technology of those startups.
After all the excitement of building ‘disruptive’ products, there came times when we were bleeding money both on our end and our client-turned-partner’s end and monetization has not been enough to pay the bills. All startups are looking for some kind of an exit just as much as investors are.
Walking into a pitch at an accelerator program or a VC firm, you are going to have to run down on your revenue run rate, growth rate, customer acquisition cost, life-time value, etc. while investors look you dead in the eye and whip out a gladiator style thumbs up or thumbs down. And it’s all part of the process.
A few words of advice
Money is important, you will know this better than anybody when you’re trying to make ends meet to keep the lights on at your startup. But there are other times when money should be left out of the equation (temporarily):
1. When you just had your epiphany
Focus on solving problems, not how you plan to make money out of it. Most organic startups (term coined by Paul Graham, read the awesome article here) come from examples like two people trying to solve their own problems, working out of a garage.
The success rate of startups has little to do with founders being inside of rodent infested garages or sitting at quarterly meetings held at major conglomerates looking for new verticals to spend money on. It’s always about solving problems. You can brainstorm possible scenarios of what your revenue streams are (which by the way are bound to change — I know, shocker!), but don’t be married to the concept of creating income over being in the shoes of your target users.
2. When you pitch to your family/friends, hackathon judges, seed accelerator partners in the early stages
Sometime it’s too early to for anyone to tell including yourself whether you are building a multi-million dollar empire unless you go out validating your business model and gain some serious traction from the market . I say business model and not revenue for good reason. Have you ever seen the Business Model Canvas or the Lean Canvas? It’s no surprise that parts of the canvas dedicated to financials don’t take up all the room.
People often give up when their startup idea is met with criticisms revolving the lack of a thorough revenue model. Don’t let that determine the future of your startup.
3. When you decide to pivot
Is your app suffering major churn rates? Your hypothesis of a business model has been invalidated. See point 1.
A story that ties all of it together
Just a little over a year ago, a few university friends and I built an app called Heroes of Cancer which was aimed toward bringing the local cancer community in United Arab Emirates together and be able to share positive content about their day to day activities. We wanted people to share posts about being grateful, mindful, giving back to their community as well sharing their medical updates about treatments they were undergoing.
The aim was to help fight depression as mental health was one of the primary enemies of battling cancer. Backed by a few medical journal articles about the advantages of cognitive therapy and positive psychology, a university counselor and a brave breast cancer patient, we thought we were on the right track.
We took our app to Microsoft Imagine Cup, which is a competition that takes place worldwide among students. Given it was Microsoft, we built the app on the Windows Phone platform to earn some brownie points (By the way, the U.A.E. population is about 14 million or so, with 5 % or less Windows Phone users, then you have the unlikely probability of cancer patients, survivors, caregivers being a part of that 5 %). This was pretty much a double edge sword for what followed.
We won an award and then a few more. Dubai’s startup ecosystem in it’s infancy, celebrated as much as the word could go around. We were featured on Entrepreneur as well as Arabian Business (which is a pretty reputable news platform in the Middle East) among other media channels. All of that, yet there were less than 20 sign ups on the app, half of which were dummy accounts and supportive family and friends.
We spent most of that year looking for angel investors and companies to raise enough money to bring in other developers to build Android and iOS versions. Needless to say, everyone backed out because:
- We didn’t have enough users
- We didn’t want to give up ownership to outside parties
- We weren’t a registered/licensed institution
- They didn’t have access to our proof of concept because it was not on other platforms
- We did not have the skills or the street cred to pull it off
I can go on and on with the list.
What we did eventually realize was that all of this was just a mere distraction from doing the things that really mattered.
I’m usually of the opinion, if you can’t build an app yourself, go ahead and learn to do so with some help. If you do build it, spend all your time iterating your app with early adopters as much as you can and scale. Are you seeing little to no traffic, conversion and serious churn rate on your app/website? Go figure out what problem you should rather be solving and go to your target users instead of expecting them to come to you — For us it has been finding them at meet ups, workshops, support groups, cancer treatment hospitals, etc.
We approached people with a prototype of our app, conversed with them at different events, scheduled Skype calls with them, which allowed us to uncover a plethora of unaddressed day to day practical problems. Now we’re back to the drawing board, finally pivoting. Money talk has been the least of our concerns.
“Focus on solving problems, not how you plan to make money out of it.”
The money landscape in cancer initiatives and health tech startups
Most cancer initiatives run on donations around the world. The donations are mostly monetary and sometimes gestures like shaving your hair for human wigs that are created for cancer patients (unless it’s just to raise awareness for fundraising). The money is usually funneled into cancer research in prevention, detection or treatments (see Stand Up To Cancer) or to perform simple activities like sending gifts to patients or entertainment for the children’s ward.
In health tech startups, it’s more or less data at the core of revenue models — PatientsLikeMe share information related to patients’ experiences of diseases and drugs to pharmaceuticals that research ways to administer effective drugs whereas one of Inovio’s projects AlemHealth provides understaffed hospitals in developing countries send medical imaging like X-rays to a global network of specialists for consultations.
The pathway to sustaining Heroes of Cancer as a digital experience by default clusters the app with other health tech innovators to employ data oriented revenue models. As much our knowledge in the domain helps us gauge a few methods to monetize our services, we will never be able to tell for certain until we gain statistically significant usage and feedback on our app.
If our iterations force us to adopt a subscription-box style SaaS product similar to London Sock Company, then be it. We will never know unless we stay the course. Until then our mission in life is to identify and solve problems and you should be doing the same.
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