Skin in the game: success as an entrepreneur

In my early 20s, I developed a small patch of eczema. At first, it didn’t worry me, but it spread and spread, and by the time I was 27 it covered my entire body. 

 

I spent three years in near-constant pain. My skin regularly got infected, and I couldn’t sleep more than a couple of hours a night. It started to impact my work, and I ultimately had to step back in my role in management consulting at Boston Consulting Group and take an internal role.

 

I saw many doctors and was prescribed many different drugs - from cortisone to antibiotics - but nothing worked. In the end, I did my own research. By training, I am a molecular biologist and pharmaceutical engineer, so this sort of research was firmly in my wheelhouse. I made changes to my lifestyle and what I ate, and within a month, my eczema cleared.

 

When I raised money for my health-tech startup, Alba Health, it was this experience that appealed to investors. I had first-hand experience of the problem that I wanted to solve, and I had found the solution myself. I then gathered the top experts in the world to figure out how I could scale what I had learned. I was - and am - driven by the fact that I was my company’s first customer.

 

Not that it was easy. I pitched 250 investors and went a total of 13 months without a salary before I secured our seed funding. VCs often say that founder market fit is as important as product market fit in investing. Y Combinator’s Paul Graham has spoken of the need to be able to ‘scratch your own itch’. I know exactly what that feels like.

 

Anyone can conduct market research, but it is by its very nature limited. You can commission consumer research on a problem and still fundamentally misunderstand it. There’s a difference between knowing that a health issue is debilitating and knowing — viscerally — what it’s like to be dismissed by doctors while your symptoms worsen.

 

Indeed, according to CB Insights, 42% of startups fail due to a lack of market need: in other words, they built something nobody actually wanted. Founders who have lived the problem are far less likely to fall into this trap.

 

It is particularly problematic in health, but it applies across sectors: fintech founders who’ve been in debt, edtech founders who struggled in traditional schooling, mental health founders with their own experience of the system. All these people are building from a foundation of knowledge that cannot be gleaned from surveys and interviews.

 

Take Sara Blakely at Spanx: Blakely was working as a fax machine salesperson when she got the idea for Spanx. She wanted to wear white trousers but couldn’t get the smooth look she wanted, so she cut the feet off a control-top pantyhose. 

 

With $5,000 in savings and no fashion or business experience, she built what became a $1.2 billion company. "I started Spanx as a frustrated consumer,” she said.

 

Or Brian Chesky, who co-founded Airbnb after struggling to pay rent on his San Francisco apartment. When a design conference came to the city and hotels sold out, he and his co-founder Joe Gebbia turned their living room into a makeshift bed and breakfast — not as a business experiment, but out of necessity.

 

Chesky has said simply that "the reason I do this is because I couldn’t afford to pay rent." What’s striking is that he had no background in hospitality or travel; travel wasn’t even a passion. The problem he solved was the one directly in front of him, and he built a company now worth tens of billions from it.

 

When I was building my company, I called 200 scientists, and I never considered giving up because of my experience as a patient.  I knew the problem was real because I’d felt it, and I was not going to abandon ship when fundraising is hard or early traction is slow. It is harder now than it has been for a long time, and this fact is truer than ever.

 

So if experience really is what separates founders who persist from those who give up, the question for investors isn’t just whether someone has spotted a gap in the market, but whether they’ve ever had to live inside it.

 

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Nora Cavani is CEO and co-founder of child gut health company Alba Health

 

Main image courtesy of iStockPhoto.com and mikkelwilliam