An Ecosystem Where Start-Ups Help Other Start-Ups
Shradha
Agarwal and Rishi Shah are co-founders of ContextMedia, a health care media
company in Chicago. They made a point of financing and mentoring other
start-ups. Whitten Sabbatini for The New York Times
When start-ups begin their sojourn, it’s akin to Joseph Campbell’s mythical
hero’s journey. Instead of battling hydras and gorgons alone, entrepreneurs
often help each other face obstacles like entrenched markets, financing and
abject fear of failure.
It is a symbiotic relationship that makes sense to Shradha Agarwal and Rishi
Shah, both 31 and co-founders of
ContextMedia,
a health care media company in Chicago. The two entrepreneurs are expanding
their 10-year-old company, which they started when they were students at
Northwestern University. They have made a point of supporting other start-ups
by financing an angel fund called Jumpstart Ventures. The fund has backed more
than 45 businesses, giving $20 million since 2011.
Although there are no precise estimates on how many such ecosystems exist,
the Kauffman Foundation, a research organization focusing on entrepreneurship,
found that nearly every one of the more than 360 major metropolitan areas in
the United States had such a network in place.
ContextMedia provides customized health care information on screens at
doctors’ offices and other sites. Doctors can show patients digital 3-D
anatomical diagrams of procedures using ContextMedia “wallboards” or tablets.
Their material is now viewed by more than six million patients a month at
25,000 medical practices or health care locations.
The company is also working with the Mayo Clinic to bring their media
content directly to hospitals and physician offices.
More than 400 people work at the company, whose revenue last year was $63.5
million. It hopes to add more than 200 workers by the end of the year.
Although ContextMedia has made inroads into a notoriously difficult market
to crack — doctors’ waiting and examination rooms — it was done without venture
capitalists, who weren’t willing to take a risk, Ms. Agarwal said. Support from
the Chicago entrepreneurial community not only got her company started, but it
also helped the company clear some high hurdles.
Professors at Northwestern first helped Mr. Shah and Ms. Agarwal. And the
founders “bootstrapped,” or self-funded, their enterprise during the recession.
“In 2008-2009, we slowed down,” Ms. Agarwal said, “so we had to reconnect to
our journey, which was our passion for changing health care.” With the
Jumpstart fund, she says she now wants to “pay it forward” to other
entrepreneurs.
These support systems need to be diverse to be effective, though.
According
to the World Economic Forum, which surveyed more than a thousand
entrepreneurs around the world, what start-ups value most are accessible
markets, funding, regulatory framework, an educated work force and major
universities. That doesn’t mean, however, that the network always provides
robust financial backing from big-money players like large venture capital
firms.
An ecosystem also offers social and psychological support. What fuels
entrepreneurial success, Ms. Agarwal noted, are passion and purpose. When she
started her company, she wanted an enterprise that would have a positive social
and personal impact. She started with
diabetes
education, a disease that affected both her and Mr. Shah’s relatives in India.
When Ms. Agarwal interviews candidates for the Jumpstart Ventures portfolio,
she wants to find like-minded people who are “passionate about their mission.”
Mert Iseri, co-founder and chief executive of SwipeSense, a company focused
on reducing hospital infections, was someone who fit the bill. Also a former
Northwestern student, he met Ms. Agarwal in 2012.
Mr. Iseri, 28, was focused on providing
a
digital
hand hygiene solution to combat the 100,000 annual deaths in the United
States from hospital-acquired infections. Such infections cost $28 billion a
year in related health care expenses.
“Shradha became our first investor and gave us our first check for $25,000
and employed ‘radical candor,’” in her mentoring, Mr. Iseri said. That included
discussions about tough decisions that had to be made when building a business,
such as hiring, firing and determining long-term goals.
“It is always difficult to fire someone,” Mr. Iseri said. He described one
situation where a sales representative was a high performer but didn’t fit the
culture at SwipeSense. “Shradha was very clear; her direct feedback was to part
ways right then and there, and she highlighted that no amount of short-term
results can justify holding on to folks who won’t be long-term members of the
team.”
SwipeSense’s initial presentation at Healthbox, a Chicago-based incubator,
raised $1 million in 2011 after one of its first demonstrations. Mr. Iseri
credited Ms. Agarwal’s continuing support with helping his company
secure
more than $12 million through several rounds of financing.
Mr. Iseri would not disclose his company’s sales but said it had “annual
revenues in the seven figures” and was “experiencing significant
month-over-month growth” with its customers.
Ms. Agarwal, her employees, co-investors and angel investors have also
bolstered entrepreneurs by simply being nearby and giving direct guidance.
For instance, ContextMedia provided office space to Packback, which
offers online
learning communities and digital textbooks for college students. Ms.
Agarwal and ContextMedia employees often interacted with the firm’s workers to
offer advice.
“We’ve been in seven office spaces since we were founded four years ago,”
said Jessica Tenuta, a co-founder and head of design of Packback. “Shradha
showed us how to hire and incorporate our values while mentoring us. We made
great connections while being in their space.”
Packback now has 24 employees and a $250,000 investment from Mark Cuban,
who
took a 20 percent stake in the company after the co-founders presented on
the reality show “Shark Tank” two years ago.
Ms. Tenuta and Packback’s co-founders — Kasey Gandham, Nick Currier and Mike
Shannon — have also garnered support in other ways. The company works with
1871, a business incubator in Chicago that offers classes, co-working spaces
and access to venture capitalists.
Ms. Tenuta did not disclose her company’s sales revenue but said the firm
expects to have 30,000 students using Packback in the 2016-17 school year, up
from 10,000 students in the previous year.
For their part, Mr. Iseri and Ms. Tenuta were inspired by their experiences
to mentor other start-ups. These may be at university-based or private
incubators and accelerators, in co-working environments or through other angel
investors and venture capitalists.
Ms. Agarwal characterized the payoff as “the communal support through
learning, wellness and volunteer opportunities.”
She added that her enterprise and those she backs have “a bias toward action
and scaling to the market.” That means an entrepreneur’s vision must eventually
translate into revenues, profit, growth and a commitment to giving back to the
community and other entrepreneurs.
The network of support offered by start-up ecosystems, though, won’t get
entrepreneurs entirely past the fear of failure and rejection. A plunge into
the unknown is part of making it past those perilous first years.
“When I was a girl, my mother pushed me into the deep end of a pool to get
me to swim,” recalled Ms. Agarwal, who grew up in India. “She said it was the
only way to learn. She was one of four daughters in her family, all of whom
were pushed to earn college degrees by my grandmother.”
If Ms. Agarwal and her peers succeed, their companies will also contribute
to social good such as better medical education and improved health outcomes.
They will, in her words, be “solving problems worth solving.”
