Once Upon a Time…
BioMer — a startup I worked on over the past 15 months, started off as a course project at Saint Mary’s University, Sobey School of Business and quickly turned into a full-blown startup. Within a few months we had about 5 people working on developing a solution for an invasive crustacean species in the Atlantic Ocean, called Green Crab.
This invasive species is also a waste species, in that fishermen are catching these critters as by-catch and have no current use for them.
Why not just throw them back into the ocean?
- It’s technically illegal.
- It would be detrimental to their livelihood — Green crabs eat the bait from fisher’s traps and reduce their catches.
- Green crabs are destroying marine ecosystems and displacing indigenous species.
Needless to say, we set out to fix the situation as it represented both a relevant environmental issue and an economic opportunity.
What we landed on for the business model — after several trial and error attempts at different models or ‘pivots’, was to extract a biocompatible polymer from their shells — called chitosan, and refine it to be used as an effective replacement for synthetic additives/ingredients used in pharmaceutical, cosmeceutical and nutraceutical products.
Over the course of these 15 months we raised a little over $30,000 in seed capital to fund the company, establish a working process and ship product samples to research institutes across Canada for testing and market validation.
Now, you’re probably asking yourself…
How did you employ 5 people for a little over a year with such little money?
Because in the grand scheme of things, $30,000 is peanuts.
To answer it, below are 6 principles I’ve developed from the learning process that one goes through in building their first startup company.
6 Principles of
Lessons Learned Launching a Startup as a Student
Principle 1: Organize & execute around priorities.
In launching a biotech startup with 3 founders all coming from the same background — being Commerce, it wasn’t exactly your ideal team to found a company that was so inherently technical. So we had to be very pragmatic in our approach of addressing the startup’s needs.
You know: How do we do this? Who can do this? Where can we find these people?
Food for thought:
When solving a puzzle, what is the most important piece? Scroll to bottom for the answer ☺.
In order to get somewhere, you must first know where you want to go, then figure out how you’re going to get there. The best way to do this is to know the difference between…
By focusing on what’s really important (testing our assumptions on being able to establish an extraction process) we were better able to segment and delegate our roles, responsibilities and overall strategy of building the company.
We focused on being proactive to business development, rather thanreactive to day-to-day events.
One of the things we did, was establish a “no touchy” rule. Where each of us had a very specific role within the company and no other person was allowed to intervene. This allowed us to hold each other accountable (note: it also required a great deal of trust).
Had we all attacked the problems that arose at any given time… essentially run around putting out fires — we would’ve certainly wasted time and money — which we clearly had very little of. Thank-you George Costanza.
Which leads to the second principle…
Principle 2: Focus on your area of influence.
Once we had figured out what the startup needed to complete the team, we set out to attack our problem by focusing on our area of influence.
Instead attending all of the biotech conferences in the area or contacting manufacturing facilities, we first spoke with professors within the university and mentors within the entrepreneurial ecosystem. They in turn put us in touch with others, who put us in touch with others.
The aim was to get an introduction to someone who could help piece together the puzzle we were working on. After-all, and as you’d likely agree, a referral or introduction to someone is a much better way of building a connection than a cold call or cold email (both options we used as well).
Which quickly lead us to the realization that…
It’s not so much what you know…
And it’s not even so much who you know.
Its really about…
who knows you.
The key takeaway to focusing on your area of influence is to be self-aware enough to know what you’re good at and what you’re not so good at.
Why not leverage the strengths of others to achieve more, with less?
Some of the questions you can ask yourself here are:
- Where can I enact the most change?
- What value do I really bring to the table within this team?
- What/who can I influence?
- Who in my network knows someone, who knows someone, who knows someone?
Principle 3: Be stupid. Be smart.
After we established the basis of an advisory board and raised enough funding to begin small-scale development, we needed to bring in some serious technical expertise. Obviously it wasn’t a good idea to send 3 commerce students into a chemistry laboratory to cook up some green crabs… Likely not going to fly.
But also, we were all pretty ‘green’ in the startup world ourselves, so we needed a strong support network to fall back on for advice and guidance.
in other words…
Surround yourself with smart people
…preferably smarter than yourself.
As a result we made it a continuous effort to surround ourselves with people who were more experienced, and quite frankly, smarter than us.
Which leads to our 4th principle.
Principle 4: Leverage strategic partnerships.
Once we established a team and network of advisors to determine the concept’s feasibility at a small scale, what did we need next?
Crabs… Lots of crabs.
Fortunately enough, a professor at Saint Mary’s University was taking a group of MBA students to the Bedford Institute of Oceanography — near Halifax, to learn about the research going on there.
Once we heard this was happening, we made sure to tag along.
As it turned out, the invasive species department had been doing research on green crabs, but stopped because other projects took priority.
As opposed to walking out the door with our tails between our legs, we offered to collect information on catch sizes and locations for them, if they gave us the means to do so. As a result, they gave us traps, permits, hip-waders, maps. Everything we needed to catch crabs.
They got their data.
We got our crabs.
The key takeaway within this principle is to…
understand and communicate empathetically.
Wouldn’t you agree that more value is created when you go for win-win scenarios?
Principle 5: Nail the business model.
Probably the most important principle in bootstrapping a startup. And to be honest, we missed the boat on this one.
Up to this point we had established that:
Green crabs were a serious environmental problem that needed solving. We would create a value-added product for the medtech industry, using a raw material (green crab) that contains higher purity chitosan, compared to other sources.
We had established a network of early adopters and channels to them.
When it came to the point where these early adopters needed significantly more product to continue testing (I’m talking an increase of 10x) — we realized that… we didn’t have any real customers interested in purchasing our product…? We hadn’t established product/market fit.
And in fact, what we had done was created a solution that was now looking for a problem to solve.
In the end we determined the model we had established was neither viable nor scalable.
Which brings us to our final principle.
Principle 6: Cash is king.
Without a doubt, the most important financials to be on top of within a startup is cash flow. It’s the best tool to get a real-time understanding of where the company sits financially.
But to really be a self-sufficient, bootstrapped startup, the most important metrics to know are:
- Life-time value of a customer.
- Customer Acquisition cost.
LTV is essentially the total value a customer would bring to a company. Calculated by taking the monthly revenue you’d receive from a potential customer, multiplied by the gross profit % from those revenues, then multiplied by the # of months that customer will remain using your product or service.
Customer Acquisition Cost includes all of the expenses that go into acquiring customers, divided by the number of new customers brought in over that period of time, usually a month.
The ratio between these two metrics is what really provides insight into how profitable and or self-sufficient your startup can be.
When a company’s LTV/CAC ratio is greater than one, they are in balance and your company is likely in a profitable position.
On the flip side, if a company’s cost of acquiring customers is higher than the lifetime value of that customer, then the business is not likely to succeed.
Key takeaway here is to know the level of cash coming in and cash going out, and to be aware of the relationship between your LTV and CAC.
6 Principles of
Lessons Learned Launching a Startup as a Student
1. Organize & Execute Around Priorities.
2. Focus on Your Area of Influence.
3. Be Stupid. Be Smart.
4. Leverage Strategic Relationships.
5. Nail The Business Model.
6. Cash Is King.
Answer: The most important piece in solving a puzzle = The picture on the box.
Danny J. Williams
Venture For Canada | Fellow