Shradha Agarwal is an entrepreneur, operator and investor who builds alignment of profit and purpose. Her company, ContextMedia, delivers health information to 20M patients each month when and where it improves patient outcomes - at healthcare provider locations nationwide. Most recently, ContextMedia won the Chicago Innovation Award for its interactive exam room education tablet. Shradha is focused on product innovation, scaling operations and talent development to cultivate ContextMedia's award-winning culture and industry leadership in technology entrepreneurship.
Now is one of the best times in recent memory to start a business. 2015 has been heralded as the "Year of the Unicorn," with over 140 private companies surpassing a $1B valuation. Still, we hear allusions to the dot-com bubble.
As a founder, it can be difficult to decide what to make of these conversations. But these huge valuations aren't necessarily a bad thing. As Peter Thiel said in his book Zero to One, "It's hard to blame people for dancing when the music [is] playing."
Through the 40-plus investments I've made through my venture fund, Jumpstart Ventures, I've seen that the music is still playing, and have witnessed the impact that this good news has had on entrepreneurs. They are optimistic. The volume of these valuations indicates that people are highly motivated to create meaningful and scalable businesses, and investors are eager to support them. It's an amazing time to build a company, but the tactics for building them are changing.
So what's in store? Here are three things that will shape entrepreneurship in 2016.
The Rise of the "Unsexy Business"
While the plight of entrepreneurship has become more "sexy," the industries that have the highest potential for innovation aren't quite there yet. When we started ContextMedia, we took a critical look at the needs of those closest to us. We had family members who struggled with diabetes and we knew that this condition could be better managed if patients and physicians could have more collaborative and holistic conversations. Our minimum viable product validated that market need. In 2008, only three percent of physicians were effectively emailing with patients. Today, more than 80 percent of physicians are utilizing Electronic Health Records.
In 2016, we can expect an increased focus on tech-enabled businesses that revolutionize industries such as healthcare, education, energy and B2B. Today, entrepreneurs understand that they do not need to start the next "sexy" e-commerce or social media company in order to achieve success. Investors are excited to invest in industries that have historically been resistant to innovation. Within healthcare, there are members of the "Unicorn Club" that found revolutionary ways to improve the lives of millions of patients. The Center for Disease Control estimates that 86 percent of our country's healthcare costs are in chronic care management, which creates enormous opportunities for technology that improves the quality of care.
Within the Jumpstart Ventures portfolio, we have health-related startups such as Healthfinch and Swipesense, which are taking on one of the biggest areas for opportunity within healthcare: compliance. Education firms such as Learncore and Right at School are rethinking training and education. There are over 100 accelerators in the U.S. focused on healthcare, such as MATTER in Chicago and Blueprint Health in New York City, and hundreds more focused on energy and education, including 1776 in Washington, D.C. and Impact Engine in Chicago. Now that's sexy.
Hyper-Focus on Early Revenue
When we started ContextMedia in 2006, we were college students looking to transform an industry notorious for slow technology adoption. It was difficult to convince investors to lend an ear, let alone a dollar. By default, we bootstrapped. In 2008, we kissed any chance of raising venture dollars goodbye. However, we not only survived through these dire circumstances -- we also thrived. Today, we're tracking to $200M in 2016 revenue. Our early experiences taught us the importance of a scalable business model.
There are many pre-revenue startups that have success raising money; however, their valuations are the outcome of a negotiation. Startups are realizing the value of driving early revenue, which creates tangible metrics for potential investors to measure. If you focus on creating real value for your customers, your growth numbers speak for themselves. Fundraising is a stepping stone; not a finish line.
Recent news reinforces this. This year, mutual funds reduced the value of initial investments in some high-profile unicorns, in what is likely a sign of things to come. While some see this shift as a reason to panic, this is actually good news: it indicates that the distance between valuations on the private and public market will continue to reduce, which will encourage entrepreneurs to generate tangible and sustainable value.
Great Product and Sales Execution
The "build it and they'll come" strategy no longer suffices. Entrepreneurs today have to build a useful product, sell it AND engage in a feedback loop to iterate features. One of our most popular features, which allows physicians to customize practice information on their education platforms, was the result of many conversations with the end user. Testing is cost-effective and data-driven, so there's no excuse to get stuck in R&D for too long.
Meanwhile, the barrier for entry to learn skills needed to create an excellent product has lowered. Coding schools like DevBootCamp are graduating skilled students en masse after a few months of training. Courses on design, business and marketing are readily available for anyone who is committed to learning. Building a great product isn't the competitive advantage anymore -- it's a given.
What this means is that startups must focus on their go-to-market strategy. Despite minimal experience in the retail industry, Bucketfeet, a company that creates community through artist-designed shoes, has taken this in stride: just three years from launch, Bucketfeet is selling its shoes globally, partnering with renowned retailers to tell their story and thoughtfully scaling while improving their product line. They are proof that it can be done.
Keep dancing, entrepreneurs. The music is still playing, it's just a different song.