As an entrepreneur and investor, I am used to being pitched to. My team reviews 40-50 requests for funding, business plans or investor decks each week. It is impossible that so many ideas are ‘good’ ideas, even less possible that there are so many problems worth solving. Yet, entrepreneurs keep coming. Individuals are so convinced of their idea that they fall in love with their solution. I have done it myself; missing vital clues about the business model, condemning one of my first start-ups to almost certain failure because the unit economics simply did not stack up.
Sometimes my role as prospective investor is to help entrepreneurs take a step back and review their proposition impartially and with their personal bias removed. A favourite story of my colleague is when he was pitched to from a passionate and committed entrepreneur who had spent tens of thousands of pounds and invented… curtains! This entrepreneur’s passion and bias had taken control and he just could not see that there was a centuries-old solution already in existence.
So, when Lloyd asked me to write a blog on health tech, I thought I would write a call to arms for User driven development (UDD); it has been used in the broader software industry for 20 years yet it is still rarer than a unicorn in health-tech. What is it about health-tech that makes otherwise exceptionally smart people just roll the dice without testing? I am hoping the tried and tested process I describe below, with iterative product development at the heart of it, will help Doctorpreneurs get their ideas off the ground as efficiently as possible. Importantly, at the centre of the process I describe is the stripping down of ‘ego’, which in turn nullifies the risk of solution bias.
Getting a company off the ground is hard. Ideas are ten-a-penny and the execution is the only thing that sets aside those likely to succeed. Faced with big ‘hairy’ problems and complex invalidated solutions, most entrepreneurs rush out to get a ‘team’. Often undercapitalised, ‘vapour stage’ companies do not need the burden of managing human capital. Yet investors always tell you they invest in teams. So you go out there, beg, steal and borrow to find a ‘team’. Often such a team is only tenuously linked and very rarely connected by a tangible execution plan. Investors have a sixth-sense when a team is not real. Do not do it!
If you are honest with yourself, an execution plan must always start with the objective assessment of the perceived problem you are trying to solve. Without an honest, strenuous and often pain staking interrogation of the problem, you cannot reach a clear value proposition. Now is not the time to reach out for post-it notes and certainly not the time to populate your Business Model Canvas.
Instead, start by asking yourself some tough questions and set yourself some of the following goals:
Are you a domain expert in the area you are trying to innovate in? Or, do you have a strong connection with someone who does and is willing to work with you?
Prove that a real unmet need or problem in the world has been identified. If the problem doesn’t affect people directly, they will not change their behaviour to use your product.
Identify initial customers who will help you develop the product and provide ongoing feedback on iterations.
Only when you have truly nailed these three deliverables should you look to develop a concise business plan. Yes, the Business Model Canvas (or the Lean Canvas if you want to go down a different route) is a good way to do that and, yes, now find those post-it notes and thick whiteboard marker pens.
So how do you go about validating the problem you are trying to solve? An obvious place would be by talking to your prospective customers or users. If you want the fancy term from Silicon Valley, they call it ‘Customer Development’ and it is this concept that needs mastering to increase your probability of success.
You need feedback quickly; you need to know why a certain customer segment (who is already proven to get your problem) likes or does not like your product/offering, so that you know where to focus your efforts.
Where else can you get objective feedback? Only by building a community of real users and providing value.
As an entrepreneur, you could have the best ever tech solution to an existing problem, you could even get positive feedback from the funding community (Juicero). But without engaged users who love your solution, you will fail miserably.
The reality is that you do not necessarily get paid for the value of the thing you are creating. You get paid for the value that the market assigns to it.
Mostly entrepreneurs don't talk enough to their customers and their end-users. They don't work deep enough on the reality of their value proposition. They are not willing to truly challenge their bias and accept feedback. Their focus is to raise money ASAP, to become big ASAP, to distance a hypothetic competition (existing or supposed) ASAP etc.
And then…they fail.
Prototyping and fast iterative development
Aim to go into fast prototyping as soon as possible and testing them with your user panels. A prototype can be a simple sketch on a piece of paper that you use to test with users, it might not be an expensive over-engineered app.
Do not write a line of code unless you have validated the problem! The natural progression to that would be to try and develop commercial products. However, engineering a product before you know what you are doing and what your customers value could be costly, so do not be surprised if you have to rip things up and start again. When you are truly working with users, your first ideas will never become the end product and research has proven that only 20% of features are needed to deliver value.
If you are a loss about what to talk about with customers, perhaps this is not your calling in life! Ask yourself if you are truly well equipped for this role? The conversation with customers could be the 'make or break' of your entire venture. Choose an assumption that puts your whole business at the greatest risk and examine it thoroughly. (Silicon Valley calls this experiment Riskiest Assumption Tested; RAT).
Define the flow of the conversation and the trigger questions that you will use in the customer interviews.
Schedule 5 to 10 conversations with the customer segment you want to validate your hypothesis. It is very important that all of them belong to the same segment; it is not the same having a conversation with a GP from a public hospital and with the director of innovation of a private hospital.
Following collation of real user feedback and data, then look at the business model and start to understand how you can turn the original idea into both a scalable and sustainable company.
Start-up is nothing but a process built around a perpetual connection with end-users and customers. If you don’t know where to start, we have developed a co-foundery concept with our colleagues at Acorn Partners (acorn-partners.co.uk). Get in touch (firstname.lastname@example.org) and I am sure our start-up consultants can mentor your early steps.
That said, innovation can happen without iterative product development. After all, the light bulb was not discovered through continuous iterative improvement of the candle.
Such ‘moon shot’ innovations are very high risk. Remember, big problems require big solutions and sometimes you need to be a little bit crazy to push something through to completion. But the process I outlined above facilitates taking huge risks in a low risk and controlled environment. Go for it.
Dr Savvas Neophytou
Partner, Head of Life Sciences
Deepbridge Capital LLP
Savvas is the Head of Life Sciences at Deepbridge. Prior to joining Deepridge, Savvas enjoyed a 15 year career in the City, working as an investment banker at JP Morgan, Bear Stearns, Shore Capital, Cantor Fitzgerald, and Panmure Gordon. Savvas was also CEO of telemedicine business Now Healthcare Group and founder of analytics business Torafugu Tech.