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150 meetings, then 200 more
Testing the market
Its early sales strategy focused on a part of the market where the product could prove it worked and where the founders could test assumptions they couldn't yet back up. Would an older adult in a community-based organization text with the company? Would they pick up the phone, join a Zoom call for care adherence, or take part in more of the organization's activities through technology, even without an iPhone?
The investor passes
After the first check went in, the founders took another 200 meetings and nobody wanted to get engaged, because they hated the sales strategy. Investors wanted the company selling to big organizations and large healthcare institutions, and told the team it would never get big enough. One investor friend, who claims to be the first check in company after company, gave a flat no.
The payoff
Eighteen months later, that same investor led the seed round and took credit on LinkedIn for being the first check. Eighteen months after that, Insight Partners led a $26 million Series A. The company is growing, and the founders paid themselves nothing for two years to get it there.
Why do investors demand huge markets from startups?
Venture funds rely on a small number of companies to return most of what a fund earns, a pattern known as the power law. Because the biggest winners dwarf everything else, investors screen for markets large enough to produce a company worth billions. A startup that sells first to a narrow niche can look too small by that measure, even when the niche is where it learns the most. Amazon began with books and Facebook began on college campuses.
Why do founders skip salaries early on?
Payroll is typically the largest expense for an early startup, since there is little else to spend on. Every salary a founder skips adds months before the company needs to raise again. Early rounds are often sized by how many months of operation they buy, and eighteen to twenty-four months is a commonly cited target.
How does an investor's view change after traction?
Seed investors fund uncertainty, so each new fact, such as revenue or a respected lead investor, removes part of it. Once a company has a track record, investors can compare its growth against other companies instead of judging the team's pitch alone. Series A rounds are typically priced on that evidence. A Series A is commonly led by a firm that writes larger checks than the seed investors before it.
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