Over the years I’ve learned a lot about startup companies. I love startup companies and I love working with people who can start with nothing and create something interesting. We need more of that in healthcare.
I recently realized how important it is that a health startup company realizes who they are and what’s in their DNA. As a startup company you don’t have the money or resources to be able to attack multiple markets, multiple product lines and see what works. So, it’s extremely important that you know who you are and don’t try and be something you’re not.
A great example of this is reflected in this questions: Are you an enterprise company or a slow and steady bootstrapper?
This question explains a totally different mentality when it comes to a startup company. Both of them can work, but these two types of startup companies will act very different. You shouldn’t mix the two or you’ll waste your limited resources in the process.
Let me explain a little better. A health startup company that is an “enterprise company” has to create an enterprise product. This means including enterprise features. This also means that you’ll need to prepare for the enterprise sales process. It’s much more involved and much more difficult. However, when you make a sale, they are for half a million dollars minimum. It’s a high risk, high reward way to approach building a product, but can work really well if you can solve an enterprise problem or are working in a space where the enterprise has allocated money. The enterprise approach takes quite a bit of up front capital to build the enterprise features and enterprise sales force required to be a success. While this has a high bar to participate it also means you won’t have nearly as many competitors.
On the other hand is the slow and steady bootstrapped approach. Instead of going after the big enterprise customers, this startup focuses on creating the simplest product possible that provides value to a company or even an individual. Instead of building an entire salesforce, they can rely on direct customer sales using social media, advertising, and other direct to consumer marketing techniques. They have to focus on user acquisition, user churn, and user referrals to grow the business. Instead of trying to build an enterprise product they focus on a very specific piece of value and deliver just that one thing. Over time this may eventually lead to an enterprise product and they may use the initial small customers to get them into the larger customers, but that’s not the focus of the growth of the business. That’s a long range plan.
What I’ve found is that many startups don’t know what type of company they are and so they waste a lot of resources trying both sides. This is a mistake that can be easily avoided. Figure out which type of company you want to be and build a culture around that approach. That doesn’t mean that you might not adjust course and try something different later. However, in the beginning it’s a mistake for most companies to try and be a direct to consumer product and an enterprise product at the same time.
Hi – Great suggestion to companies that are at the crossroads of trying to sell both to consumers and businesses at the same time.
Do you have suggestions for how to address the potential catch 22 that it creates; unless we have consumers it might be difficult to sign up businesses and vice versa.
Maybe that could be the follow-up article?
I’d be happy to share my story,
Hari
I’d love to hear your story. What you describe can be a challenge, but it’s a little different when your “consumers” are doctors” and the businesses are hospitals where many of the doctors work.