When a Merger Makes
the Most Sense
We had a great plan.
We had a great app.
What we needed was
a great partner
products to their patients. The model is fairly
simple: The more patients use our products, the
more we get paid. All we had to do was convert
those commitments into paying contracts.
That was the plan. But sales cycles are notori
ously slow in health care. We knew this going
in, but knowing it and living it are very diferent
things. Letters of intent would be drafted and
then disappear for months, lost in corporate legal
departments. Software security reviews would
be scheduled and then postponed for a month,
and then two. The process was taking much longer
than even our more pessimistic forecast.
As weeks turned into months, it became appar
ent that we weren’t following a road map so much
as trying to machete our way through an impene
trable thicket. That isn’t progress—that’s a slog.
Meanwhile, back in product land, things were
still humming along. More and more people were
fnding our website—and fnding it useful. Then
Apple invited us into a (nonpaying) partnership.
Three years of efort were fnally bearing fruit.
But nobody was actually buying the fruit.
And without paying customers, we couldn’t
raise outside capital. And without new capital,
we couldn’t add to our team to speed up our
sales efort. In time, we’d be out of capital alto
gether. Running out of money is never in any
startup’s plan either.
At this point, my cofounder and I realized we
needed to fnd a diferent sort of partner. Not one
part of the equation easier. Perhaps the best way
to grow was to merge with a company that could work with us to capitalize on the products—
and the team—that we had successfully built. We realized we didn’t need a Series A round.
Or a B or C round. What we needed was M&A.
This wasn’t an easy realization. It’s meant detouring from our map—that carefully crafted
document, with its wellarticulated quarterly targets and nicely charted growth models—and
plotting a new course. It’s also a notoriously lonely place to be. Luckily, I have a few friends
who have sailed their startups through similar waters.
Their advice coalesced into three points. First, talk to every possible partner. There’s no
telling who might be interested in a deal, so it’s essential to cast the net far and wide. Second,
run a process. Track every conversation, set deadlines for interested parties, and establish
SOME WHERE ALONG the way, most founders realize things aren’t going according to plan. This shouldn’t be a surprise—a startup is basically a double scoop of hopes and dreams, drizzled with uncer tainty. You might update your road map hourly, but eventually you end up some where you never expected to be. A year ago, the plans for Iodine—my startup—were carefully scripted. We
began 2016 with two great products: a website and a mobile app.
Both were growing in popularity with consumers, and we had
begun trying to translate that appeal into actual revenue. This isn’t
a straightforward proposition, though, because in the health care
industry, consumers don’t generally pay directly for things like apps
and websites. To make money, we needed to pull of a bank shot that
would turn consumer traction into enterprise revenue. Fortunately,
we were able to quickly line up commitments with big partners—
health insurers and hospital systems—that allowed us to ofer our
Thomas Goetz is a co-founder
of Iodine, a digital health startup
based in San Francisco. He is also
the author of TheRemedy. Follow
him on Twitter: @tgoetz.