More healthcare startups need to talk about their pivots: the moments when the idea they first started with crumbles and – through sheer force of the marketplace – is changed to what business should have been all along.
Validic, one of the hottest technology startups in medicine right now, pivoted twice. Co-founder Drew Schiller, the company’s chief technology officer, is candid about both changes.
Today, the company counts Mark Cuban as an investor and recently closed a $12.5 million round with Kaiser Permanente thanks to technology that can take data from multiple sources and deliver it cleanly into a company’s database. In an era where analytics is king, that’s been a gold mine.
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What was the original plan? Schiller and co-founder Ryan Beckland wanted to be a corporate wellness company called Motivation Science.
The first version of company sounds like wellness businesses on the market today. It started offering a weight-loss challenge for employers. It was free to corporations but employees paid a $25 entry fee, which was turned into a prize pool (with Motivation Science taking a fee).
“We had about 40 different organizations using the product and the revenue was coming in the right way, but it wasn’t going to scale where we were blowing it out of the water,” Schiller said.
Schiller and Beckland questioned their customers, who liked the weight-loss program but needed more. They wanted one company to do all their wellness programs – from weight loss to smoking cessation and beyond. Also – and this was mid-2012 – customers were struggling with how to take data from different devices and merge it together to better analyze health habits.
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“We didn’t fully understand what that meant” Schiller said of the request for data. “We figured, let’s build a product that has more of these wellness features that they wanted.”
As it pivoted in that direction, the company realized they would never build as part of their programs anything better than FitBit, MyFitnessPal or any other devices that helped encourage wellness.
So instead, they connected to these devices and used them in their wellness programs. The apps got customers and the employers got healthier customers.
They had launched about six wellness programs in the first six months. Then, one of their customers pushed back. It liked the way Motivation Science gathered its data more than how it kept employees healthy.
Schiller said the customer told them: “I don’t care about all the incentives and analytics. That’s kind of what we do. What we’re looking for is how we get the data.”
The Motivation Science co-founders were driving up California’s Highway 101 when Beckland said: “Should you say it or should I?”
Schiller responded: “We need to pivot.”
About year had passed since the last pivot in mid-2012. It seemed like the right thing to do, but this was edging the founders closer to their last chance. The company had some cash and controlled their costs, but its early angel investors said that if this new approach didn’t show quick results they would stop investing.
Soon after, Schiller and Beckland bought the Validic domain for $600. They jury-rigged an upcoming e-mail marketing campaign meant for their old wellness product. Instead it showed a 9-minute slideshow with audio explaining the new company, Validic.
They got 22 leads and closed their first customer in the first 45 days. They closed another investment round in August 2013 and pushed forward.
“Entrepreneurs don’t understand what they’re getting into when you start a company,” Schiller said. “It’s really hard. The hardest thing to say is that I’m a startup founder.
“Everyone was saying they needed better consumer engagement,” Schiller said. “But when we listened more we learned they didn’t need better engagement. They needed more data.
“Our lesson was to listen to customers.”
Photo: Flickr user R/DV/RS
