From getting turned down by 186 investors, to being acquired by the market leader: Honest Health’s tale of resilience
From getting turned down by 186 investors, to being acquired by the market leader: Honest Health’s tale of resilience
Words Pavlo Maherovsky & Sam Gluck
July 26th 2021 / 8 min read
Telehealth startup and Founders Factory alumni company Honest Health has just announced its acquisition by Hims & Hers - the multi-specialty NYSE-listed telehealth platform - just two and a half years since its inception. Honest Health co-founders Pavlo Maherovsky and Sam Gluck tell us the secrets behind building and scaling a company with limited funding and scarce resources.
Behind every successful startup, there’s a story of struggle, rejection, determination, and perseverance. Success is never instant: at Honest Health, we know that all too well.
In 2019, the year we launched Freshman, our next generation hair loss virtual clinic for men, we had conversations with 186 investors. Every single one turned us down. Yet in the face of disappointment, we believed in the product, we believed in the market, and for us that was key.
In 2020, everything changed: suddenly telehealth became a necessity, then a norm. The company grew by 800% over the course of 2020 alone. By early 2021, we had thousands of men around the country using our treatments each day.
And now we’re proud to say that we have just been acquired by Hims & Hers, the pioneering US-based telehealth platform. This acquisition will allow us to scale up our operations and accelerate our growth in the UK and beyond.
Here’s the story of how we built and exited a startup with almost no funding and resources, in just 30 months.
From idea to product: the Honest Health story
Honest Health first emerged when the two of us met during our MBA at London Business School. Conversations around the healthcare market soon grew into conversations about starting our own business together.
Pavlo came to the table from the patient's perspective. As a customer of a hair loss clinic in London, he witnessed first hand the tedium, inefficiency, and cost of treatment. They would use pressure tactics to make you purchase more expensive treatments, and once every few months he’d have to go back into a pharmacy to pick up prescriptions.
Sam came from the provider perspective. Before Honest Health, he’d already built two healthcare businesses with his mother: a primary care clinic and a pharmacy. He’d always been taken aback by how old-fashioned people’s attitudes were when it comes to healthcare. Pre-pandemic, fewer than 1% of medical appointments took place online. You’ll buy your food online, you’ll buy clothes online: but you won’t buy healthcare?
We were looking for solutions, and that’s when we recognised the emergence of the direct-to-consumer (D2C) healthcare category in the US, with companies like Hims & Hers, Curology, Nurx and others, and it clicked. They were offering a variety of telemedicine solutions for medical issues including erectile dysfunction, birth control, and dermatology. The solution to inefficiencies and high cost of health provision suddenly became clear, and this led us to launch our original product, Freshman: a D2C subscription platform offering remote treatment for hair loss.
Advice from our agile growth playbook
The product and the vision in our heads were sound: so happily ever after, right? Not exactly.
In the early days, we struggled to find any investment and bootstrapped the business with our limited savings. Pile this on top of the fact that we’d both just taken two years out to study MBAs—and taking on the significant student debt associated with that—we were really operating the business as agilely and scrappily as possible.
We came to the Founders Factory accelerator before we even had a finished product. We were looking for help in two key areas: marketing and fundraising, both of which we felt we were underprepared in and where we felt the Founders Factory team could really help us.
1. Marketing on a limited budget
On the marketing side, we were helped tremendously by the support from the Founders Factory team.
Our two main goals were: first, acquire customers, and secondly, retain them. We knew that these were the main pillars of any successful subscription business. We received a great deal of guidance from Founders Factory, through regular check-ins, workshops, email exchanges, and hands-on support.
Here were some of our biggest takeaways from marketing on a limited budget:
Use the information available to you. The internet allows you to access pretty much any information you want. Take the Facebook Ad Library for example, where you can look up almost any company in the world and see the ads they are running. If you analyse this data in detail, you can derive tremendous insights into a company’s advertising strategy. There are similar resources on Google for analysing organic search traffic, which can help you see what your competitors are doing and the keywords they are targeting.
Make sure your story remains consistent. Every touch point on your consumer journey has to be engaging, accessible, and in-keeping with the story you’re telling.
Each change, however incremental, can add up to make a big difference. Marketing involves trying and testing different ways of doing things. Tweak the language you use for your call-to-action; move the button a customer needs to click to subscribe; change the timing between follow-up emails. Each change can lead to a small improvement, and a combination of these small improvements is how you can build a powerful conversion and retention engine.
Don’t try to reinvent the wheel. If you see other successful businesses doing something a certain way, it’s likely that it’s the result of hours and hours of rigorous A/B testing. Try to think through every decision they’ve made and ask yourself - why? Then try to determine whether a similar strategy makes sense for your company.
2. Important lessons in fundraising
Fundraising was consistently the biggest challenge we faced early on in the business. Having been turned down by 186 investors, we built and launched the original product, Freshman, on a tight budget of around £35,000, which came entirely out of our own pockets.
Joining Founders Factory, we knew we had to improve our fundraising story. The Founders Factory team put us in front of several investors who might be interested in funding our company; more importantly, they gave us the tools and skills to properly engage with those investors.
Here are some of the best lessons we learned about fundraising:
You have to optimise your story. One thing we hadn’t really polished before we joined Founders Factory was what exactly our company’s story was, and where we saw it going. This needs to be clearly thought through, and framed correctly, in order to resonate with investors.
Understand where you fit in the ecosystem. One of the best quotes we heard at Founders Factory was that ‘VC is fractal’. There are big investors and there are small investors. There are Series A investors and there are SEIS investors. There are VC funds and there are angels. Each one has a different mandate, different risk appetite and different expected returns. There’s no point aiming for the top investors that everyone goes for: that’s the mistake we made. Knowing where you fit in the fundraising landscape and therefore knowing which kinds of investors to approach is key to getting funded.
Investors prefer lines to dots. The honest truth is that almost no entrepreneurs secure investment after just one meeting. Don’t get disheartened after an investor tells you: “we need to see more traction”. Stay on their radar and demonstrate that you’re heading in the right direction. Add this investor to an email distribution list, and start sending out regular, monthly updates, for example. You’ll be surprised how many investors will start following your progress and reaching out with meeting requests. Read more about lines versus dots on Mark Suster’s blog.
Momentum is everything. Getting the first cheque is hard. But once you get that, everyone else falls into place. By the end of our seed round, we were turning away investors. So think about who is going to be the investor to give you your first cheque, and hone in on them.
Ultimately, the hard work all paid off. We closed our seed round in November 2020, which included investment from VGC Partners, and Fagron, the leading global pharmaceutical compounding company.
This seed round helped us hire our first employee, Head of Growth, build further momentum in the market and ultimately led to our acquisition. As soon as we started talking to the Hims & Hers team, it became clear that we shared a vision for the future of healthcare, and even more importantly, we knew right away that there was a great cultural fit too. Now, without the stress of having to think about our next funding round, we can focus on what we do best: building our business, broadening our range of products and finding new ways to delight our customers.
What’s crucial to remember through the fundraising process is not to give up. Getting rejected many times is part of the game when it comes to raising investment: look at any successful company, and no doubt they’ve been rejected by investors at some point.
Other tips from our agile growth playbook
DIY wherever possible. When you’ve got no money to hire agencies, you have to get your hands dirty and do stuff yourself. In a way, this has really helped us engage with the product we were building on a deep level: something we may not have done if we’d had a large VC investment at the start.
Get your product into the market. When we had the bare bones of the company, we launched our product into the market, and we believe there’s tremendous value in this. First, customer revenue will fund the product, which you can then reinvest in your marketing budget. Secondly, we saw how favourable conditions (e.g. a societal shift towards telehealth) can reward products if they’re available and in market.
Gather as much data as possible. There’s a lot you can do with little money: find a designer on Behance to design your brand identity, find a developer on Upwork to build your website, launch a test Facebook ads campaign, start an email database. Do anything you can to test your product and gather data on its success—investors will love this.
The future of telehealth
Freshman offered a solution to a specific problem, but the vision was always much larger.
The main problem healthcare faces is affordability and access. That’s partly due to the fact that at the centre of healthcare you need clinicians or practitioners, which are harder to scale up. Moreover, the patient healthcare journey has barely changed in over 50 years: you call up your doctor, make an appointment, wait a few weeks before going into the clinic, wait in the queue. Depending on your condition, you may get referred to a specialist, wait another few weeks or even months to see them, and then pick up your medicine at a pharmacy.
Direct-to-consumer telehealth, meanwhile, allows patients to become their own advocates in the healthcare system. We saw the possibility that this could decrease the cost of provision, and could reduce, or eliminate, waiting times where possible.
The COVID-19 pandemic triggered a rapid acceleration of the trends that we predicted back when we started 2018. Out of necessity, healthcare provision became remote where possible, and consumers began to see the possibilities that technology could provide. Compared to the 1% who had used telehealth before the pandemic, in May 2020, around 37% of medical appointments took place online. We witnessed over a decade-worth of growth and adoption in the space of six months.
We’re still in the early days of the digital transformation of healthcare. The next 5-to-10 years will see technology massively improve the patient experience. It’s a huge opportunity, and we’re excited for what we’ll be able to do together with Hims & Hers.
Why we invested in Honest Health
A big market ready for disruption. The way people access healthcare treatments, such as hair loss, hadn’t evolved in over 50 years.
Huge operational advantage via their exclusive partnership with Specialist Pharmacy, the UK’s first and largest compounding pharmacy enabling Honest Health to offer personalised, prescription-strength medicine at scale and at high margins.
Impressive founders with experience across pharma, primary care, remote prescribing, investment banking, and private equity.
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