Sure, no matter where you are, you have to have an idea, get some money for it, and grind it out. But what that looks like is different from region to region. Different investors and different amounts of money require different strategies from startups trying to get their businesses off the ground.
The South provides a particularly interesting case of this. There’s less capital available to startups, and what is available is pretty conservative money. As a result, startups can’t afford to spend 8 years building a user base before earning a profit. So how do companies survive and thrive in an environment with scarce resources?
It all starts with a business plan built with the knowledge that capital is scarce, and you can’t rely on million dollar seed rounds. It’s not enough to have an idea; founders must build on that to create a strong, viable plan to get profitability, not just ubiquity. Usually, this comes from iterating on a scaleable minimum viable product as quickly as possible to provide value from the start, placing the company in excellent position to capitalize on early revenue potential. Such a plan involves pivot points with opportunities to fail early and iterate in order to succeed.
We call this Southern style of entrepreneurship the Jumpstart Way. It leads to fundamentally sound businesses, and gives founders the opportunity to own more of their company if it succeeds.
ChangeHealthcare provides an excellent example of the Jumpstart Way. ChangeHealthcare, a Nashville company, provides price transparency services to consumers and employers in order to reduce healthcare costs. Castlight Health in San Francisco provides similar services.
ChangeHealthcare raised 1 million dollars to start and immediately built the first version of their product, working in close collaboration with the healthcare companies that would be its ideal users. Adjusting as they went, they were able to build a truly valuable minimum viable product from the start. This visible progress from the outset and the promise of early revenue traction was enough to convince angels to invest another 3 million in the company.
In contrast Castlight Health raised 20 million dollars in their first round and built a user base first, and a board of directors shortly after. By now, both companies have products on the market, but ChangeHealthcare is losing significantly less money on comparable levels of revenue.
This is not to disparage entrepreneurship on the West Coast; we love and admire the grit and grind it takes to get a company off the ground, no matter where it is. The South just happens to need a minimum viable product earlier, and a plan has to be in place to accelerate that as a priority. You have to take what you can get and make something great from it.
Isn’t that what entrepreneurship is about?
Chris Poole is a managing director at Jumpstart Foundry, a Nashville-based accelerator. Jumpstart Foundry is the southeast’s premier accelerator and exists to empower innovators in the South to succeed in creating products, jobs, wealth & economic growth for themselves and the region. Find out more about Jumpstart Foundry at jsf.co.