My 3 Day Startup Experience

My friend and founder of 3 Day Startup (3DS), Cam Houser, called me a few weeks ago. He offered me an opportunity to fly out to Boston for a weekend to support 40 Brandeis University students in launching a startup over the course of 3 days. I invested that time because so many folks at Pristine helped me along the way that I couldn’t compensate. So I chose to pay it forward since I couldn’t pay it back.

If you’re an entrepreneur or VC, please help facilitate a 3DS program. It’s an incredibly satisfying experience. You know lots of people have helped you out. So please pay it forward.

3DS is not new. It’s been around for 5–6 years and they’ve done hundreds of programs at schools and companies. They provided all of the training, coaching, and content for me to jump right into the process.

The premise of 3DS is simple: help students validate all of the assumptions of their business idea as quickly and cost effectively as possible, and consolidate all of the learnings and pitch the startup in 5 minutes. It’s a way to learn the Lean Startup process by practicing the lean startup process in one weekend. Rather than just walking through students through the canvas, 3DS forces students to go out and talk to customers, test assumptions, and refine. Students have to commit the entire weekend to the process, and as a result of intense focus, they can actually recognize that assumptions are much more difficult to recognize than they originally thought.

Day 1 is about idea formation and team selection. Students come with some ideas, and then we mandate that they brainstorm individually and as groups to come up with as many ideas as possible. The class I facilitated came up with about 25 ideas. Students then vote on which ideas they prefer through a few rounds of voting until there’s 5–8 ideas left. Then students select into groups based on what they want to focus on for the weekend.

Day 2 is all about customer validation. Students are supposed to go out and talk to literally talk to customers on campus. If the target customers aren’t on campus, then they have to find customers online and message them. My class of students cold-called at least 100 people over the course of the weekend. Students have to validate that the pain they want to solve is real and attempt to quantify the cost of the pain. Then they do some research to size the market, and identify channels to systematically find and activate customers.

Day 3 is about pitch practice. The whole day is spent refining the pitch. This is the most challenging part for most of the students since most of them have never had to give a real startup pitch before. It forces them to determine what’s actually important and what’s not. It teaches them the value of clarity.

I had a blast teaching the program, Most importantly, I could tell students were actually learning. I wish I had gone through a similar program when I first started Pristine. It would have helped me in so many ways in the early days. The best part of the experience was the end, after pitches. Over a dozen students came up and gave me a hug and thanked me for pushing them through the process. I’ve never felt that feeling before.

But the best part of the program for me was this email I received one hour after pitches. To put this in context, this girl is an international student. English is her second language. I am easily 2x her size, and for those who know me, I’m a bulldozer personality. She couldn’t be more dainty. And I probably dropped 40 f-bombs in front of her during the 3–4 hours we worked together. I never expected her to extract this much value from me or the 3DS program. There’s really no feeling like it in the world.

“Hey Kyle! Don’t know if you still remember me, but it’s _____ from the ________ group at 3 day startup. After our discussion, we figured that we are not gonna let this idea sink back to the ocean again. Therefore, we will keep working on it, and we might ask for your advice in the future. So, be prepared (Haha)!

I know us, and probably a lot of people had already said thank you to you, but I still want to thank you again, not only for the knowledge that you have shared with us, but also for your support, your confidence, and your trust in us.

I was writing my journal, but then I realized that without your help, our group might still be clueless and frustrated. So thank you for showing us direction and bringing energy and motivation to our group, and thank you for being one of the best mentors ever. Before 3DS, I was confused, and didn’t even know what value I can bring to this group. So I went to career consultation, even though it didn’t really help me. But after this event, even though I mess up on the presentation, I still feel confident about our project, and I know that this confidence will start to become part of my life now.

So thank you again, for everything you have done for our group, for other groups, and for 3DS. Thank you for spending your birthday with this event. And HAPPY BIRTHDAY again! Hope you are having a great one!”

If you’re an entrepreneur or VC, please help facilitate a 3DS program. It’s an incredibly satisfying experience. You know lots of people have helped you out. So please pay it forward.

Computers Commiditize Knowledge

30 years ago, the highest paid person in the room typically made most of the operational decisions. A CMO or Creative Director would determine the final language in an ad. A VP Sales would determine the exact language sales development reps (SDRs) would use when calling prospects. HR directors would set employee policies without much employee input.

Today, things couldn’t be more different. CMOs and Creative Directors may set high-level themes for a marketing campaign, but copywriters and junior marketers generate many unique sets of copy and split-test those messages on a small scale first. The best received messages will then be reproduced on a larger scale. Similarly, a VP Sales no longer needs to claim to know any best-practices about cold calling. She can split-test every variable using a tool like SalesLoft.

30 years ago, a VP Sales would never claim to offer a useful opinion regarding visual direction and ad-copy. And a CMO would never claim to guide SDRs through cold-call scripts. The processes outlined 2 paragraphs above couldn’t be more different. But the process outlined in the paragraph immediately preceding this one are identical. In both cases outlined above, the VP doesn’t need to claim expertise in much of anything beyond managing the experiment. The VP can and should defer to what the data says.

CEOs used to rely on expert VPs to make these kinds of decisions. The VPs had decades of experience. The VPs would synthesize all of their learnings and experiences and offer an answer. This process was not unlike the split-testing process outlined above. The only difference was that humans were responsible for processing the results of the experiments rather than computers. Computers are by definition orders of magnitude better at understanding, normalizing, and comparing data than humans.

Now that we have the tools to split-test and measure almost every action we take through computers, VPs no longer need to do this. In fact, they explicitly shouldn’t because they are inferior to computers.

I’m not suggesting that the experience that many VPs bring to the table is worthless. There will always be questions that computers cannot answer: will this person jump ship if they receive an offer for $5K more elsewhere? how can we structure our pricing proposal and presentation to maximize revenue on this $500K deal?

Rather, VPs are moving up to higher levels of thinking and operation. Without the need to worry about as many tiny operational details, VPs can focus on higher level issues to accelerate firm performance.

Each functional area still requires plenty of nuance that is not easily computable. But a lot of the basic questions can be answered by computers. Thus, VPs should be increasingly valued not on their willingness to dictate what should be done, but how they structure and manage experiments to make the best decisions from data. This isn’t to say that data commoditizes all knowledge, but that many facets of what were once knowledge have indeed by commoditized by data. I suspect that in 20 years, the most efficient management teams will operate in ways that we can’t fathom today. As computers offload more of the busy work that today is in the realm of, management, managers will focus on ever higher-order issues and accelerate firm performance even more.

The real question is: when will computers move further up the chain and commoditize wisdom? Is this possible before we achieve general-purpose artificial intelligence?

Why Is It So Much More Difficult For Healthcare Providers To Adopt Health IT Than Medtech?

Medicine has made great strides over the last 50 years. Modern medicine looks a lot different than the medicine of 1966. Today providers are 3d printing bones, replacing organs, and conducting minimally invasive surgery.

Yet healthcare operations of 2016 are remarkably similar to healthcare operations of 1966. Why haven’t the delivery systems of healthcare changed? Why haven’t core provider operations changed much in the last 50 years, and why do providers struggle to adopt health IT even though they’ve adopted so many medical innovations?

The Innovation Has Been In The Tech, Not The Process

In short, because it’s much easier to adopt new medical treatments than to adjust the operations of a healthcare delivery system. The former is an incremental improvement. The latter requires business model changes, changing job roles, and more.

The R&D burden for the vast majority of medical innovation is extremely high. Achieving FDA clearance is incredibly difficult and expensive: tens of millions of dollars, and in the case of pharmaceuticals, hundreds of millions.

But once a new pill, cream, device, test, or treatment has been invented, the healthcare system can “adopt” it pretty easily. All of the existing infrastructure is in place — pharmacies, labs, ORs, physicians, surgeons, etc. A few examples:

The only cost to healthcare providers to prescribe a new pill is educating the physicians. Physicians are mandated to earn Continuing Medical Education (CME) credits, and many are active in their respective specialty-specific communities. Pharmaceutical companies know this and market to physicians through these channels. Once a physician has learned about a new treatment and is convinced of its clinical benefit, her organization — a solo practice or hospital — doesn’t need to do anything else in order to prescribe the new medication to the patient. The physician prescribes the treatment, and the patient will receive a prescription and a nearby pharmacy will dispense the pills. This process happens identically if the treatment is brand new or if it’s penicillin. The medication prescription process is remarkably unchanged in the last 50 years. Even moving from paper to e-prescribing hasn’t really changed the workflow around prescriptions. The pharma company will work with medical distributors like McKesson to ensure the treatment makes its way to pharmacies in every geography. Providers don’t need to worry about where the pill came from or how it got there.

Similarly, the only cost to a healthcare organization to adopt a new piece of lab equipment is the cost of the equipment itself. A hospital already has an ASCP-certified lab (the ASCP certifies labs for quality and safety standards), lab technicians, etc. The only additional costs to the hospital of adopting a new medical diagnostic tool is the device itself, and few hours of training per lab technician. The hospital doesn’t need to build any new physical or virtual infrastructure, or define new processes. Once the new device has arrived, physicians are educated, and can then place orders that will utilize that machine. The process change required is minimal.

A significant majority of medical innovations are “black boxes.” Physicians don’t need to understand every chemical reaction that will occur in the body after a pill is taken. The pill is effectively magic — the patient consumes it and gets better. The same is true of the latest diagnostic tools. Put the blood in, get an answer out.

There are certain medical innovations that require some operational changes. For example, let’s examine robotic surgery. Surgical robots are a “black box” like other physical devices — surgeons don’t need to understand the control systems in the robot that guarantee millimeter precision. But surgeons and surgical staff need to be trained and certified to conduct robotic surgery. The training program for daVinci, the leading surgical robot, typically takes a few months to complete. However, surgical robots don’t change the operational processes around surgery. Patients are still referred to surgeons by more general physicians, surgeons still consult patients before surgery, patients still come to the hospital, staff still prep and sterilize the OR, the patient is still anesthetized, and the patient is still prescribed bedrest, antibiotics, and perhaps other medications afterwards. Although the technical implementation of surgery is vastly different, the broader process around surgery hasn’t really changed.

Health IT Requires Material Process Change

Health IT innovations couldn’t be more different than medical innovations. Health IT solutions by definition are not medicine. Health IT solutions do not directly impact the health of the patient at all, even if the patient logs in and uses an app. No It solution will magically make a patient better, and no IT solution will diagnose. Medical diagnostics and treatments require chemistry. IT is not chemistry.

It’s important to note that all health IT solutions require some level of organizational workflow change. The change may be relatively trivial, but a workflow change is required. Many of the greatest opportunities to improve outcomes and reduce cost to be gained from adopting health IT require massive organizational changes. Omada Health is a great example of a radically different diabetes management service. In fact, Omada’s technology and service is so unique that the company chose not to sell the software to existing providers, but to act as providers themselves and contract directly with self-insured employers, payors, and in some cases, at-risk providers. Omada determined that their clinical service would be more effective if they built it themselves, rather than helping hundreds of organizations modify their existing operations. Their success indicates that this was probably the right decision.

Information technology can do four fundamental things: collect, process, store, and share information. IT will never do anything more. When a provider organization adopts a novel health IT solution, there is an implicit acknowledgement that the organization was organized sub-optimally. When an organization adopts a novel piece of health IT software, the organization needs to rethink existing workflows and processes. Let’s use Patient IO as an example.

First, a quick primer on Patient IO. Patient IO is a cloud based care management platform that’s sold to large healthcare provider organizations. When hospitals discharge a patient after surgery, the discharge nurse typically provides the patient a few one-pagers that inform the patient on dietary restrictions, medication requirements, how to gradually get back into sports and athletics, etc. The patient is left to manage the entire post-discharge process herself. Using Patient IO, providers prescribe patients the app. The app sends regular reminders to patients using push notifications. For example, if the patient is supposed to walk .5 mile per day for the first week, then 1 mile a day for the 2nd week, the app will track activity on the user’s smartphone, and send the patient reminders throughout the day to increase activity. That data is reported back to the provider, and providers follow up with patients and their families as necessary to encourage activity. The same concept can be applied broadly for any care plan for any disease or procedure.

Adopting Patient IO is a big change for provider organizations. Previously, the organization may have staffed a few people to call patients and follow up after surgery. If the patient answered the phone, the caller may have asked a few questions about physical activity. The patient may have lied about the truth out of embarrassment. With Patient IO, nurses engage with dynamic dashboards based on hard data. These dashboards show compliance of patients based on time (eg all patients seen last week), by disease state (eg all diabetes patients), procedure (eg all patients who had knee replacement), and other factors that the nurse determines to be useful. The nurse then engages non-compliant patients with much greater rigor than the organization otherwise would have since the organization can devote energy and effort to help the patients most in need.

Patient IO is just an information arbitrage tool. Previously, healthcare organizations had no ability to track or understand this data. Now they do. As a result, it’s logical for them to rethink how they care for patients using this new tool. The tool itself does not make the patient better. Instead, the tool helps patients take better care of themselves, and helps providers engage with patients who are struggling with compliance.

Building Patient IO’s tech required 1/100th the financial resources that it took to develop a drug, but requires 1000x the organizational change. The same is true for most IT solutions. They are orders of magnitude more capitally efficient than traditional medtech, but require huge organizational changes to reap the benefits.

Over the last 50 years, providers haven’t developed the organizational capability to change their fundamental processes. They simply didn’t have a reason to. Although medicine was advancing rapidly, the advancement was literally contained to just the medicine. No one other than the vendor and the FDA really needed to understand the inner workings of the black boxes that were being invented. Healthcare delivery broadly remained unchanged until recently. Information technology is breaking old assumptions in healthcare delivery processes. This, coupled with the rapid succession of government mandates (meaningful use, ICD 10, managing lives at-risk, etc), has strained healthcare delivery systems. They are still learning how to adopt technology at the pace at which technology moves.

The future is incredibly exciting. As processes and medicine evolve together, we will be able to achieve results that were never before possible.

How To Cultivate “I like you, but…”

As a startup CEO, you’re going to meet a lot of people that you want to get involved in your company, but that you ultimately can’t. Examples:

1) Investors who like you personally and your business, but don’t yet invest.

2) Candidates and advisors you like you and the opportunity, but don’t yet join.

3) Prospects who like you and your solution, but who don’t become paying customers.

You will meet hundreds of them in the first couple of years of your startup. Most startup CEOs don’t do a good job cultivating these relationships. Here’s the quick and simple guide on how to do this in a few hours per month.

The first step is to track all of these people: use a CRM! You can use a personal CRM like StreakContactually, or an SMB-focused CRM likeRelateIQ. Manage the different classes of stakeholders with different tags or lists in the CRM. I wouldn’t recommend SalesForce for this purpose as SalesForce is overkill for the scope of effort here. The key attribute you will want is easy Gmail integration so you can add a contact to a list directly from your inbox to minimize workflow disruption.

The second step is to set aside 2–4 hours each month to do this. Just create a recurring calendar invite. If you schedule it now, it will be a priority. You will have time.

Cultivating Investor Relationships

In almost every blog post ever written about fundraising, one of the commonly repeated recommendations is to stay in touch with investors even when you’re not actively raising. The reasoning behind this is simple. Investors invest in lines, not data points. They want to see how a company progresses over time, and if the company can hit its stated goals. This also gives investors a chance to get to know you better to make sure there is a personality fit.

A common way CEOs manage this process is with regular investor updates and 10–20 minute follow up phone calls. A staggered quarterly cadence is best. Conducting 20–40 investor updates in a few-week span is too burdensome for CEOs. But spreading those 20–40 calls over 3 months into buckets of 6–13 per month is much more manageable. During each of those calls, CEOs should come prepared with one ask of each investor. Asking doesn’t hurt. The better the ask, even if the investor can’t help, the more the investor will like you for thinking strategically about the biggest sources of leverage. The best investors will help you even if they’re not invested. Cultivates the relationship per the Benjamin Franklin effect.

Don’t prepare fresh new content for these investor updates. No one is expecting a formal pitch deck. Instead, just share a handful of KPIs and graphs that they’re already using to run the business. You are probably already including these KPIs in your board meetings. The result is that the time burden of preparing these investor updates should be minimal.

Although this science is relatively known for managing investors, few CEOs do this well for other key stakeholders: candidates and customers.

Cultivating Candidate and Advisor Relationships

The process for cultivating relationships with candidates and advisors is remarkably similar. Candidates want to know the same basic things that VCs want to know: Are you growing? Is your business working? What are the key milestones you need to hit over the next 6 months? What are the risks? What roles are you hiring for?

Most of the investor update can be repurposed to be shared with candidates. As you grow, the diversity of your candidate base will increase. So you’ll want to add in content to appeal to technical types and not just business people. You won’t however want to hop on a phone call with each candidate. There will simply be too many who aren’t ready to leave their current jobs. Your candidate hot-list will swell to over a 100 quickly. There’s simply no way to have that many conversations on a regular basis. However, it’s probably worth it to hop on the phone with your top 3 favorite candidates. You want to stay top of mind.

As your startup grows and you hire capable VPs, you’ll want to pass this responsibility onto each VP. VPs can cater the content to be geared towards their respective audiences. The VP content should include a general note from the CEO as it will make the candidate feel good.

If you have 5 VPs — Sales, Marketing, Engineering, Product, Customer Success — who each own a hot-list of 30–50 candidates, that means you’re actively engaging 200 candidates each quarter. That’s a big deal. Hiring even just a few of them will make a huge difference in your business. And even bigger deal will be that those VPs will engage the 3 best candidates in their respective areas. Hiring even one of those top 15 will be a huge boost.

Cultivating Customer Relationships

CEOs should own this function for all relationships she personally establishes even past $10M ARR. In the early days, the CEO will lead every customer phone call. You’ll build relationships with lots of early potential customers. There will be a select few — typically the most sophisticated, the one’s that “get” your product almost instantly, but that aren’t interested in becoming customers today for one reason or another. Those are some of the best people to stay in touch with. They probably like you and want to see you succeed, but just can’t engage as a customer just yet. These can be some of your best advocates other than paying customers.

The message to potential customers should be very different than the messages to investors and candidates. Customers care far less about the state of your business and much more so about how you can help them. Give them some general information about the state of the business: e.g. “We grew 25% last quarter” even if they don’t know the base from which you grew. Or “We made 2 key hires: Joe and Bob.” But more importantly, highlight, if you can, customer success stories! And share new features thatmatter and explain how they will extract value from those features. Make sure this email doesn’t feel like a newsletter. It’s not. It’s a personal note from the CEO to a really important prospect.

It’s likely that this list of customers isn’t that large. So this may be something you want to individualize on a per customer basis. If you really really really wanted that person to be a customer, they are worth an extra 5–10 minutes of your attention each quarter to deliver a personalized message. And of course, ask for a 5–10 minute phone call to catch up.

That’s it! Cultivating existing relationships is one of the lowest-hanging fruits that you can pick. It’s not hard, but something that most forget to do when they’re caught up in the daily grind.

Why Are Tech Giants Investing in AR and VR?

All of the tech giants are investing at virtual reality (VR) and augmented reality (AR). For players like Apple, the target business model is obvious: sell high-end, polished consumer experiences at healthy margins. The same generally true of other hardware players such as Samsung and HTC. Sony and Microsoft are investing not to profit on hardware, but to profit on the ecosystem around the hardware.

But why are advertising companies like Facebook and Google investing in AR and VR? And how will direct response (Google’s dominant revenue stream) and brand advertising (Facebook’s dominant revenue stream) work in AR and VR?

Facebook and Google are investing in AR/VR as defense. The historical precedent is clear: Google bought Android as a defense mechanism to reduce the risk that Microsoft would dominate mobile. Although Android itself isn’t directly materially profitable to Google, Google leverages Android as a source of control over the technology ecosystem to ensure unfettered access to Google’s revenue engine: search.

Mark Zuckerberg has stated that he wishes that Facebook controlled a mobile OS. Why? Because he would prefer that the OS support social sharing through Facebook’s social networks as effortlessly as possible. Zuckerberg wants to create a social OS. This would make Facebook’s products even stickier, draw more engagement to Facebook properties, and ultimately generate more profit.

Given the power that Apple and Google exert over their respective mobile ecosystems, it’s natural that both advertising-based tech giants are investing heavily to control the AR and VR ecosystems of the future. What revenue opportunities do VR and AR offer Google and Facebook?

AR and VR present the greatest advertising canvases conceivable. AR and VR UXs will offer, on a per person basis, orders of magnitude more ad inventory that can be hyper targeted more precisely than ever before. That is the perfect combo for advertisers: scale, precision, and context.

OS makers dictate the rules of the game for their respective hardware form factors. The OS explicitly allows and disallows certain actions by 3rd party apps. Beyond supporting modal, foreground applications, iOS and Android define how apps can interact with the lock screen, home screen, notifications, hardware controls, and silicon components. Android is far more extensible than iOS, but even Android places explicit limits on developers. For example, 3rd party developers can’t replace the notification engine.

Mobile has eaten the world because smartphones have come to consume the white spaces in our lives: people turn to their phones to tweet, SnapChat, and check Instagram/Facebook while waiting at traffic lights and subway stations, at restaurants while waiting for a friend, and even in the bathroom. This has created an enormous opportunity to profit: attention is the world’s most valuable commodity. This is why Facebook has absolutely crushed it on mobile. Facebook controls a significant majority of attention for most users in a new advertising canvas (white space of people’s lives), and Facebook is selling access to that attention for enormous profit.

But mobile has, on a relative basis, hardly touched the active moments of our consumer lives: driving, eating, playing sports, watching movies, socializing with friends, etc. Yes, people play with their phones intermittently while doing all of the above, but one cannot read an actor’s bio and watch a movie at the exact same moment in time. Although Google Maps and Uber have transformed how all of us get around, none of us need to actually interact with our phones while we’re driving or Ubering (and in fact, we shouldn’t as a safety precaution). Audio cues are sufficient. No one uses their phone while playing sports.

AR and VR present an opportunity to layer in ads contextually into active parts of our lives. I’ll cover VR first, then AR.

Technically, VR is a modal activity. You can’t be doing something in VR and the physical world concurrently. But there will be virtual worlds that people can explore for hours on end with all kinds of virtual activities — games, Major League Drone Racing, virtual white boarding spaces, movies, porn, etc. These virtual environments will represent the ultimate advertising canvas for brand and direct response advertising.

For example, between drone races, Facebook/Google will present ads to buy similar drones and register for drone racing lessons. This represents the perfect combination of brand advertising — knowing who you are and creating purchase intent — with direct response advertising — efficiently finding and buying what you know you want.

Or while you’re drawing out the next UI in a VR whiteboarding space with a colleague who lives 500 miles away, you’ll see an ad for an app that helps you build better wireframes. The ad will show how you can literally drag and drop wireframe elements with your hands in virtual space, and interact intelligently with your whiteboard.

AR presents myriad awesome advertising opportunities. As you drive down the highway at 3PM, Google/Facebook will show you an ad to pull into McDonald’s in the next 15 seconds for a 15% discount on chicken salad. Google/Facebook know you haven’t eaten lunch today based on some health tracking, that you’re on a low-carb diet, and McDonald’s knows its slow time between lunch and dinner and will be glad to generate lower margin revenue during off-peak hours. AR is the perfect advertising medium for the physical world. AR presents the ultimate medium for gaming human psychology around scarcity. The opportunities for limited time offers are infinite!

Despite the huge opportunity mobile has presented, AR and VR represent advertising canvases that are orders of magnitude larger. The limitations that iOS and Android impose on 3rd party developers will be insignificant to advertisers relative the limitations that AR/VR OSes will impose on 3rd party apps and advertisers. There will no longer be a lock screen or home screen. Literally the entire world, virtual or physical, will be the “home screen.” The advertising opportunities are nearly infinite, and as such Facebook, Google, and the other tech giants are going to duke it out to dictate the rules of that experience.