“You’re on the 10-yard line.” The man said, sitting across from me at the Starbucks in Kenosha, Wisconsin. After many coffees with other executives, I have learned to just listen when they talk because they typically have more experience and insight than I have. Plus interrupting mid thought is never a good idea, so I just sat there nodding my head from time to time and opened my ears. The man continued, “I don’t mean to be harsh, but just giving you my honest read of your situation. You should be proud because you have completed 90 yards, but you are stuck on the 10-yard line. This is the place where so many startups land and hover until their next move. Take it or leave it, but a word of advice is to consider your next move carefully as it will be predictive of your startup’s success.” It took me a few minutes to fully grasp what he was saying. Were we in a good place? Heading down the right direction? Or completely off base? At this point, I was intrigued partly because this was only our 3rd time interacting since I first sent him a cold email and because he spoke with such clarity and understanding on where my startup was and where we were going. As he continued to talk, I started to comprehend what he was saying. The man was laying out the options of how to move the company forward and how he could help.
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Over the past 4 years, I have been working on a startup for people living with dementia who wander and get lost. Most people don’t like to talk about dementia and brush it off saying, “oh that’s just old age” or “memory loss is part of becoming a senior”, but this is just not true. Dementia never seems real to people until some trigger occurs. One of those trigger points is wandering. Once a loved one gets lost 1 time or wanders out of the house in the middle of the night, suddenly this whole old age, memory loss dementia thing becomes real, very real. This is the problem that my startup is focused on.
At the high level, my team and I have invented and patented a wearable device that can be worn by people living with dementia to provide them with freedom and dignity to continue living their lives and to enable caregivers and family members peace of mind. Simply, the device uses new communication technology to provide real-time indoor and outdoor location tracking with automated alerts via text or call to caregivers when an event occurs. Events can be triggered when people with dementia deviate from their normal walking pattern around the block or when they wake up in the middle of the night and go outside the house. These alerts plus the ability to check in on loved ones through a mobile app gives caregivers trust to leave their loved ones at home while they are at work or to allow them to engage their daily walks, providing the person with dementia autonomy and freedom.
Last January, we completed the development of the wearable and over the past year, we have been testing it in various environments. We have done a few pilot tests in Skilled Nursing and Assisted Living Communities as well as in homes for people striving to age in place. The tests have gone moderately well or as well as they could have gone at this stage. Your first tests are never supposed to be perfect anyway, so they served their purpose by teaching us things we had overlooked in the installation process, operation, and support aspects. Fast forward to today, we successfully turned one pilot at a Skilled Nursing Community into a paying customer and have multiple pilots lined up for the coming year.
When assessing our progress and reflecting on where we have come from, I can confidently say we have succeeded in transforming this far off idea 4 years ago into a physical product that has been thoroughly tested and being used by real customers today. According to our advisory board’s advice and the figurative “hardware startup” book, we have reduced the technical risk, the execution risk, and customer risk.
Unfortunately, it hasn’t been enough. With only a few thousand dollars left in the business bank account and an employee who was told, last Wednesday, that next week is the last week he can be paid, we are at a loss; a loss in the valley of death. This stage of the startup lifecycle known as “the valley of death” is common for startups to go through. It is the time when many startups fail due to a $0 bank account and lack of product-market fit. Hardware startups have it especially hard during this time because they are in the valley of death plus they have a chicken or the egg problem. For us, we face this challenge head-on as potential investors see our traction from early pilots, but are uneasy about the appetite of the rest of the customers in the market. Thus the investors are not interested in investing until we go from 1 customer to 5 customers. The challenge that we have as a hardware startup is that we need money or significant expertise or both to manufacture products to then gain more customers to show traction to then receive more investment dollars to keep the company alive.
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The man was right in identifying the exact stage where my company was. We were in the red zone; sitting just 10 yards away from the end zone. In football, statistics prove that this situation results in a touchdown only 53% of the time. Knowing the odds, everyone watching is keenly aware that whatever play is executed next will either result in success or failure.
The man continued by laying out the options, “You could continue to raise the money you need in order to manufacture your next round of products. In doing so though, know that you will further dilute your shareholders. With that money, you can then go out and search, interview, and hire a few engineers to complete your design for manufacturing phase then assist in manufacturing the products needed. There are high risks with this option plus a significant investment of your time is needed and money. You will need time to dedicate to educating yourself on who you need to hire, what they need to do and where to find them. Then going out to look for candidates to hire, interviewing them and ultimately hiring them will cost you time and money. The other big risk is that you have to put your blind trust in this new team and hope that they will work together well. You also have to trust that they are truly experts in their field and can be trusted with manufacturing your baby.” While he was saying all this, I was thinking this option is already in the works. Due to the pressure from current investors to keep moving and making money, I started this process by identifying my needs and starting to look for people who could fill those needs. To date, I have a pretty good industrial and mechanical engineer interested and a firmware engineer but no way to pay these people or any leads to others. Thus, I still have a long way to go if I continue down this path.
The man’s second option was “to find a strategic partner to work with who could contribute value beyond money. The value in expertise by contributing time from the partner’s team in the key areas of engineering, production, and supply chain. With this option, you could continue to move forward with the product and get it to the 5-yard line. Then if you like the relationship we could go all the way to the end zone.” The man stopped and paused. He had just said shared his entire thought for the last 15 minutes. The prologue appeared as if he had rehearsed these options before to another startup founder in another Starbucks who was sitting on the same 10-yard line I was on. Fully listening to every word and processing his options, I paused too. We sat there in the silence for a few minutes until I spoke and said, “I have spoken to over 50 investors and 5 potential partners over the past 6 months, and not many have understood our situation or offered a play that has as much merit as you just did. Thank you.”
The conversation ended and the man and I decided to continue the talks next week. I do not have an ending to the story yet, but I am hopeful that instead of an ending, this is a new beginning.