Cracking the Entrepreneur Code
[Editor's Note: This article is a lightly edited transcript of a talk delivered by Ryan Howard, founder and CEO of Practice Fusion, at Morgenthaler Ventures' DC to VC Healthcare IT Showcase on September 22, 2011.]
At Practice Fusion, it took us three years to get to our first million dollars in revenue. Electronic health records is a hard market to crack and I was incredibly naïve. But here are seven lessons I learned along the way.
Know your rock bottom and know your pain threshold. I was watching The Wire, and a woman at a Narcotics Anonymous meeting was saying, “I set a rock bottom I would never go below,” but she kept going below it. What I’ve learned in this process is that your company will be an addiction. Think up front about how far you are willing to go. Will you sell your house? Your car? Give up time with your friends? Family? In 2008, we were close to going out of business. I’d sold my house and car and had another house in foreclosure. I was in denial a lot. I’d gotten into a motorcycle accident a few years earlier. The settlement check came and I used the check to make payroll. When we got funded I was four years behind on my taxes and needed two root canals. What are you willing to give to pursue your dream? You will most likely have to go beyond that.
Pitchman. Imagine the world five to 10 years from now. Imagine customers using your thing. It’s a reality. Now, come back into the present and sum it all up in a sentence. Know your pitch. Ours is “free, web-based electronic health records.” That sounds super obvious, but it took us years to master it. One old pitch line was “collaborative healthcare solutions”—which is directly from the Dilbert guide on how not do it. My ability or inability to convey the vision and goals of the company and the product was make-or-break for my abilty to close funding, attract press, and build product. Get comfortable pitching. A lot of people aren’t. My poor director of PR, Emily Peters, has to deal with me before every presentation. I don’t like doing this. It’s so far out of my comfort zone. I have to suck it up.
People want to believe the hype. The Catch-22 of being a founder is that you can’t get funded unless you have a product, and you can’t get a product unless you have funding. It’s a terrible thing. One day a journalist from Healthcare IT News called me up and said ‘”I heard you guys are potentially releasing a free EHR.” We told her about it and she wrote it up, and it got into two more articles, and I realized that the value of having something written is tremendous. Investors started calling me. Partners started calling me. It started leading to other press. When you don’t have any other exposure, press is currency. I would download e-mail spiders, put in @wsj.com, scrape everyone at the Wall Street Journal and the New York Times, and spam them with press releases. I couldn’t afford to put it on the wire. I made 100 phone calls a day. When I finally would get another press hit, that was gold. When another party writes about you, everyone accepts it as the truth, somehow. I’d take that article and blast my other contacts and pretty soon investors would say “For some reason I keep hearing about you guys.” Press is the single best way to attract team members, cash customers, and more press. But it’s not the be-all and end-all—and there can’t be any BS. The stories have to be based on some reality.
You are an athlete. Fake it ’til you make it. Entrepreneurs constantly overlook their personal teams. Yes, you need a chief financial officer, you need a marketing guy. But what you also need around you is a personal circle. You need great coaches and mentors and success models. When you have an employee issue, a question about how to structure an investment, you need sage counsel to reach out to. There is no right or wrong answer. You need input. Not a cheerleader, not a yes man, but someone who is always there to support you. Not your friends or your spouse—hire a professional. You will break down. The pace of a startup is too fast for any one person. Take care of yourself like a professional athlete.
Plan your evolution or go extinct. The most important thing I’ve learned in this journey is that I must evolve. I had dinner with John Dillon, formerly of Salesforce.com, and got two or three hours of his insight. He talked about hull speed. A boat’s hull is only rated to go, say, 40 knots. You can put the biggest engine in the world on that boat, and it will still only go 40 knots. You can get a shitload of cash and the best executive team, but your hull speed, your glass ceiling, your limited beliefs, will still impede your ability to get bigger. I came up with a personal development plan. My personal mission in life. My goals. My wellness plan. I need that to deal with the fact that I won’t go on vacation, because of the addiction that I just confessed to you all. You are the biggest obstacle to your company’s success. If you cannot evolve you will fail, or not be part of your company.
Control your destiny by maintaining control. There is a thing called Founder Syndrome. For guys raising money, you’re at it a long time, and you’re heads-down. You are building your product in solitude. As Dale Carnegie noted in How To Win Friends and Influence People, the human condition is to want to feel appreciated. If you have worked alone for three years, you are like a neglected dog. No one has petted you. You will be dying for attention, and psychologically at your weakest, and you will attract companies who want to do an 80/20 rev share in their favor ,and CEOs who want to take over. It’s hard to calibrate your partners’ intent when you are excited about finally getting traction. Mark Pincus at Zynga has a saying: Don’t throw your baby out the window. Your job is to maintain control of yourself, of your composure, of your company. Don’t get overzealous when someone finally decides to partner with you. Don’t be seduced. If you’re calibrated, controlled, and composed, you will always remain in control of your company.
Erode the system. Healthcare is broken. Insurance companies are innovatively bankrupt. There are huge hurdles to entry. The biggest companies in the world can’t solve this problem: Google can’t build a good personal health record system. Doctors are frugal. Patients are lazy and don’t care about their health. You guys are choosing a very hard path. That said, it can be done. Don’t be afraid to innovate in an autonomous way. If your application is reliant on the current healthcare system, you are driving through a war field. Don’t be afraid to go around it. Be autonomous and innovate without the other entities. Early on at Practice Fusion, it would have been easy to the payers for revenue. We tried it all, and ultimately we went directly to doctors.
Remember what Arthur Schopenhauer said. All truths pass through three stages: First, they’re ridiculed. Second, they’re violently opposed. Third, they are accepted as common knowledge.