Healthie History: 5 Mistakes We Made During Our Early Days
The truth about scaling a Digital Health Startup
This year we’ll see digital health take a real deep breath for the first time post-COVID. It’ll be a time for us to reflect on the funding madness, the business models, and frankly our collective attitudes and approach to growth.
In line with that reflection, we wanted to write a post about some of the struggles and learnings from the early days of our company - our goal is to be transparent in the hopes that others can avoid these same mistakes.
Healthie has been building for 7.5 years. During this time we’ve operated both profitably📈 and unprofitably📉. We’ve hired the right people and the wrong people. We’ve made a ton of mistakes along the way, but we also learned quickly from them.
- Teaser: We probably wasted roughly $1M of the $1.9M seed we raised in 2017, but those experiences have taught us invaluable lessons on business-building that today is core to our DNA. We clamored back from those mistakes and ended up with more money in our bank account than capital raised to date when we went out to raise our Series A.
We are sharing this because Healthie, along with the hundreds of founders that we work with, share a common mission: to forward the digital health movement. Together, we are part of the same ecosystem. 🌐 We want our ecosystem to learn together, and the best way to do this is by fostering a conversation on personal growth.
We also know that no founder experience is always up and to the right, and that there are lessons to be learned from the Healthie story for other founders. Things have been going really well for us at this moment in time, but that isn’t the full story. The truth is, we grinded it out for 5.5 years before we saw real traction in the business. Our company and our story are still just getting started, but we have picked up many lessons along the way.
🔎 5 Mistakes from Healthie’s Early Days, and How We Addressed Them
💸 We Believed We Could Build and Ship Overnight
In 2016 we dropped out of school, raised our Seed round 🌱 after Techstars NYC, and we were off to the races. Our early traction and numbers was the stuff of SaaS fairytales, and we reached the product market fit ARR benchmarks very quickly. Customers loved our product, so after operating very lean, we quickly expanded our sales and marketing team.
A moment of reckoning came in early 2018 when we realized that we had over-invested in sales and marketing, and underinvested in our tech and product teams, and that we’d need to substantially re-orient the company for our long-term success. Thus began a multi-year endeavor to re-build Healthie as a product-first company (more on that later).
⌛ It was during this period that we realized we needed time on our side - that building out our vision for the Healthie product would take years, independent of how much money we raised.
Speaking from experience, our biggest piece of advice for many SaaS founders is to wait as long as possible between seed and series A rounds. We look at MindBody as a successful case study, who waited 4 years between early rounds. It is during this time that founders can focus on building, understanding the intricacies of their customer needs, and make mistakes to learn lessons on a small scale.
⚙️ Healthie MO today: We’re here to build a long-term company, and believe that operating with a long-term mentality and independence is core to this. We can only make an impact for our customers if we are alive. This experience has also shaped our belief around raising venture capital. There is certainly a role and place for Venture Capital (we’ve raised $18M to date) but it’s important for founders to jump on (and accelerate) the VC treadmill only when their company is ready for what rapid company growth actually entails. Mis-timing this can lead to mismatched expectations across founders, customers, employees, and investors alike.
📉 We Lacked Financial Discipline
We operated very lean in the earliest of days, but then in a classic first-time founder mistake, started burning cash incorrectly when we got some money for the first time. A root cause for that was our belief that we would “figure it out” when we raised our Series A. That incorrect belief gave us false comfort in our spending habits.
In our early days, we probably wasted $1M of the $1.9M seed we raised in 2017. This waste came from loose spending on social media ad budgets, sales, and team ‘culture’ We were also new founders - it’s okay to make some of these mistakes! We didn’t yet have the “every penny counts” mindset. This is a mindset we learned to adopt over time.
We began to closely review every dollar 💵that went out the door and drive cost decisions to value. We also gave up the notion that it was common for startups to lose money in favor of a high-growth trajectory (i.e., “grow at all costs”).
⚙️ Healthie’s MO today: We treat Healthie money like our own money, and every dollar matters. Money in the bank buys us time to continue improving our product and operating with efficiency, and believe that many multiple years of runway will contribute to our ability to be around in 5 years. Even today, the conversations around budgets at Healthie are not about the “total cost” but rather what is the cost relative to value. We operate with a fervent mentality that as a SaaS platform, we should invest as much as possible in product and engineering.
📳 We Over-Invested in Sales
In our early days, as soon as we saw initial signs of product-market-fit, we did what we thought was the classic thing and hired a bunch of SDRs. We hired these sales reps (which cost a bunch of money!) and didn’t have the proper training or management infrastructure in place. Not only was this motion not working well, but it put a bad taste in our customer’s mouths because we came across as “sales-y”, which is antithetical to Healthie.
In our rush to hire, we also brought on some team members that did not represent Healthie’s internal culture, and in the end, had to be let go due to performance issues. Our painful learning: Don’t bring on sales reps until you have at least a semi-repeatable sales motion and know you have the time to hire and train them correctly. Only then will you see the results you want from a Sales Team. (Shout out to our awesome team today!)
⚙️ Healthie MO Today: Today, ~85% of our growth stems from word-of-mouth and customer referrals. It is our genuine belief that as a SaaS company, the best product wins - our customers live in our product all day, and will be fierce advocates for our company if we deliver. We have a small sales team, but take a genuinely consultative approach with our customers, and will not sign a contract if we do not believe it’s a good, long-term fit.
💻 We Accumulated Too Much Technical Debt
As early-stage founders, we believed above all else that speed was king. Shipping product over the weekend was a feature of our company culture, not a bug. While that’s true in maybe the very earliest days of a company, after you’ve accumulated a corpus of customers and $2M in ARR, operating with discipline (e.g., a culture of code quality, robust QA processes) is key. We learned this the hard way.
We accumulated so much technical debt that our product usability and functionality suffered. So much so that in 2018, we performed a ground-up rebuild 🚧 of our entire product. This rebuild and migration was extremely difficult and painful - ultimately worth it because it has served as the scalable foundation of Healthie today! It also instilled in us a product discipline that we maintain today.
⚙️ Healthie MO Today: Slow down to speed up. In engineering, adding features has an iceberg effect on complexity. It’s important to get all the pieces right below the surface of shiny new features.
🔀 We Waited Too Long to Bring in a Product Leader
We as founders love talking to customers, selling, creating roadmaps and building product. However at a certain point, that love got us in trouble. Because product features and control were so near and dear to our hearts, we as founders played the role of Head of Product for too long. It caused bottlenecks not just in processes but in thinking - which resulted in customer complaints and no framework to triage and prioritize customer requests.
This mistake is in line with our early-days mistake of over-investing in Sales and under-investing in Product. We’ve learned over the years that bringing on good people that you trust 🤝is a multiplier to the company’s efforts. Delegating is a superpower that is developed over time. We brought on a Head of Product (who still leads our Product Team today!) and to this day have a robust (and growing!) product team; this team is core to how we operate and make decisions as a company.
⚙️ Healthie MO Today: We take a product-first approach to our company, and have built robust systems to collect and track every piece of customer feedback we receive, and leverage ProductBoard to turn that feedback into our quarterly roadmaps. To provide transparency with our customers, and allow them to plan for what’s forthcoming at Healthie, we also publish our Product Roadmap.
🚀 What We’ve Learned Along the Way
A lot of where Healthie is today is because of luck, timing, and strong beliefs we’ve held since 2015 as to where healthcare needed to go. We’d been building for five years when COVID-19 spurred massive VC investment in digital health. Enterprise-grade tech takes years to build, so when the market needed software like ours, we already had a fairly mature product. The core takeaway of the Healthie story is that we stayed alive long enough to be able to thrive when the market demanded it of us.
Healthcare infrastructure companies - defined as orgs without which their customers cannot go one single day without full functionality - bear a different level of responsibility. We regularly say that Healthie offers “business critical, healthcare critical” software; our customers, and their customers, spend all day on our platform.
We hold ourselves to a higher standard because patient lives depend on us. Our baseline obligation is to be here 5 years from now, as many say. We just entered our 8th year 🙌, and we can say with confidence that we’ll be here not just for five years but for many more.
Digital Health: let’s keep building, pushing each other forward and being honest about our struggles. Let’s not hide these tough decisions - let’s open them up for the world to see. It’s the only way we can have staying power and truly change how healthcare is delivered.