What is Product10x?
Product 10x, simply put, is a startup co-creator and operators in residence, and this is a culmination of our previous and past experiences with startups and enterprises where we've seen that if founders get a little more help from day one, the startup trajectory can be totally different in a positive way. And that's really where the whole of Product 10X, a product led accelerator, came together with that co-creation model for startups and entrepreneurs.
Why do we need another accelerator?
There are a lot of accelerators. We do want to recognize that many do really well, where they bring in cohorts, then they talk about the high level view of what the startups are, the pricing models, the business models, SaaS, and everything, which is really great. But what we have seen is that once the startups come out of these accelerator programs, that's really when the day-to-day challenges begin. From contracts, to monthly subscription models, or pricing a particular product, there are many circumstances that the founders have to handle on a daily basis, and clearly, many of these startups who got started with accelerators don't have that kind of daily support. That’s exactly where we really thought through the fundamentals of the first principles as Product 10x, a product led accelerator, to talk about is the problem? How do you deconstruct this problem and then how do you provide the solution, whether it is about the startup pricing model, your business models, or whatever it is? We seriously think about these first principles from day one of a startup.
How does Product 10x evaluate these startups?
In the last couple of years, we went through about 180+ startups. We talked to them at least three hours in depth about their ideas, product, technology, business models, and everything. As a result, there are three fundamental core ideas that we are always looking for. The first one is really about the founders themselves because, in the startup world, we keep talking about the market fit, the product market fit, or the sales market fit, and whatnot. But we want to take a step back and say, is the founder market fit right? That's super important because at the end of the day, as a founder, do you have the right amount of domain and energy to really get into a particular vertical or a platform product? The second is about the opportunity space because there are a lot of startups that come up in whatever vertical or horizontal, and when we say horizontal, it's really like a platform product; think of it that way. But we need to be looking at a growing market. For many of the growth stage venture capital or private equity funds, even if a particular industry is not growing, they have the money and the ability to support them. But when we really look at the seed stage and seed startups, we want to make sure that there is pretty good growth in that particular industry.
And all the clients are looking toward the directional improvement in the overall product and the growth in the market. The last one really is, why now? I think we always have to ask the question whether from a founder's point of view or for us as co-creators. In some cases, we also, of course, lead with some initial seed funding. But that's super important for us to understand; why now? Why is this the right time for us to start your business? And that really comes in a mix of various forms. There are some professionals who have had decades of experience and then they say, you know what? We have seen this problem constantly in this industry and we want to solve it. So that's a great way for them to have a startup because they understand the problem space. At the same time, there are other trends, for example, Web 3.0 where people keep talking about the metaverse or decentralized finance (DeFi), and the blockchain-oriented marketplaces. We want to make sure that there are these trends falling in alignment for a particular startup to be able to grow and be successful. In summary, it's really about the founders and the founder's fit. The second one is the opportunity, and the third one is, why now?
When you talk about those areas specifically from your background, and your industry experience, what are some of the trends that you see in, let's say, the future of work? Why is it important for founders to embrace it now?
So the future of work, I think, probably came in the last five years or so, but the usage of the vertical industry has accelerated with the whole COVID era in a way. And again, I just want to define what we mean at product 10x by the future of work because there are multiple versions of it. When people talk about the future of work, it's really about how do we bring in the remote hybrid work cultures together and then improve the productivity within the organization? But we think of it slightly different, while of course bringing in the remote hybrid kind of work cultures is super important without a question, but it has to go a little beyond improving productivity and collaboration within not just within the organization but across the organizations, and then make it industry vertical specific. That's really the value of the future of work when we talk about this because we really want to take a human centric approach rather than an organization centric approach. And what it means for us is to say, previously we have all these platforms that got built and the platform strategy still works. For example, the likes of Microsoft and Salesforce. For them, platform play is the right thing without a question.
They want to maximize the customer penetration and then upsell and cross sell. So the platform still makes sense. But if you are a startup really starting with a particular idea in improving the productivity or a process improvement, or how the companies do the collaboration across or within the organization, it's very important for you to look at one particular use case within the industry. It is easy to say that you want to become a platform company within a space, but take a step back and ask what is the one specific problem that you are solving? Then focus on solving one single use case. Within our portfolio, we have seen several cases, for example, in the latest exit that we've seen in the industry, that's really a video analytics platform, really looking at one particular or a couple of use cases of the worker safety in the construction space and within five or six years, they've seen tremendous growth and exit. This is really where you see this trend of radicalizing the industry and your startup, and the growth and multiples are super high in that space.
Given that you have a deep focus on technology and in terms of the newer tech that we continue to see, why do you think every company should be an AI company first?
That comes up all the time. Let me take a step back. There has been a lot talked about when it comes to artificial intelligence. Everybody is embracing it. The way that I put it is it's automation at scale, right? So for any company to be competitive and scale, they've got to embrace automation. Artificial intelligence is an important aspect of how you can actually take all the data that you're collecting (and every company today is a software company, regardless of which industry you are in) and that data translates into insights and value over time for any given company. So the way that I look at it is artificial intelligence is automation at scale and the way that companies can become extremely competitive I would say against their competitors and also bring value to their customers and their industry and stakeholders is embracing it at scale. If you look at the companies that have been successful in a lot of ways, they have in fact put the time and effort into putting that data into real use. And that is the key aspect of how artificial intelligence has really been the game changer.
Can every company do that? Probably not. This is where startups are actually innovating at a much faster cycle. They are able to do that at a faster rate. If you really look at it, the amount of startups that are bringing artificial intelligence to use for any enterprise, small business, and medium sized business is growing significantly over the past few years, and the investments are following that as well because there is a huge value that is being delivered from these startups that bring artificial intelligence to life and doing that automation at scale. So that is one reason why if you look at the trend in the industry for the past five to six years, AI has been a foundational element of any company. In the future, when we talk about AI-first companies where software is integrated now they want to be AI first in the sense that automation at scale is important for them to be remaining competitive and growing at the rate that they want to grow.
What are the common pitfalls from startups that you have seen over the past two years advising at Product 10X?
Any given startup is unique in their own problems and in their own success stories. Not everybody has the same flavor of pitfalls. Let me try to generalize what we have come up as an approach to solving common pitfalls. We have developed a journey map as to how startups need to think about scale and maturity and being relevant in the market, and of course growing in a constant, healthy, resource constrained situation. So let's start with one: launch. Product is not everything, right? This is why we have to look at what product we are working on and how we establish the product market fit. Pick one problem that you're trying to solve. Why does it need to be solved and why you and why now? That is the fundamental way of how we have started advising founders. A common pitfall is that every founder wants to solve every problem that is in every industry. That is a key thing that we have tried to narrow down and bring focus.
The second aspect is acceleration. Once you have the product, what do you do with it? How do you actually get that feedback into your product roadmap? How do you actually get the product market fit now that you are trying to establish with the right sales readiness? The right market in a marketing readiness. How do you actually go after these pilot customers that you want to validate your idea? That's kind of the second phase of it. The common pitfall that comes with this is for example, Hey, these customers are loving it. So I'm good with it. I'm just going to go after this market. But that's not how it works. You really have to establish a pattern of what the customers are asking for and also really listen to the market itself. Customers might not know everything that they want, but the idea here is, are your solutions driving the value that they are expecting from something that they want to invest in? That's the number two pitfall. The other one is also from a scale perspective. Founders Have a lot of issues when it comes to sizing teams (CTO, CPO, etc.).
What is the right fit for you at this point in time? And how do you map out that journey as you grow? How do you build that culture? How do you build that kind of foundation for you to build those future state that you want to be in? Number four, every startup wants to raise funds. That's where we bring in a multifaceted approach to measuring KPIs that are important for any given startup and every given stage, and also how we actually work with them on developing that legal framework, the IP framework, the cap table advice that we provide and also advisory boards that are important as they build their executive team. Having one customer with some revenue is not going to get you traction. That's basically the framework that we have built as part of the Co-Creation Journey Map.
You have spent a lot of time in the health tech space. Why do you think that this is the right time to innovate within this space? What is happening in the industry as we continue to see a lot of capital?
In 2020, health care funding was a whopping 14.6 billion dollars. At the end of Q3 of 2021, according to ROC Health, there is a 20 billion dollar investment already funneled into digital health, so this is cutting across all digital health areas including research and development, on demand health care, treatment of disease, fitness, and prevention related startups, and then non-clinical workflows, and also consumer health related information like population health. It's becoming big. But if you focus on just the whole idea of disease prevention and disease diagnosis and cure, it's a huge, huge opportunity for any aspiring founded or startup to actually get in on this because there are real problems to be solved. There's a huge go to market opportunity for health care to be modern. It is a great way to bring passion into the equation.
These are problems that every community and geographical area faces, like mental health, cardiovascular disease, diabetes prevention, primary care, oncology, and substance use disorders. These are all areas that our society faces today. We are all in it and part of the equation. So if I look at health tech itself, it is growing significantly. AI is driving a lot of these value propositions into health tech because ideally in about five years from now, we will be talking about how advancements have actually impacted health care. By 2023, it is projected that they will be in every single aspect of health care as we move forward in terms of diagnosis, treatment, prevention, and cure.
Can you share some perspective on why startups are taking that leap of faith, especially when enterprises say something can't be done, and then a tiny, very innovative startup comes along and challenges the enterprises saying it can be done?
Historically healthcare has been hard. The volume and the amount of regulations that are involved within any large corporation are challenging and hinder them from innovating at the pace that they would wish to. The idea here is that startups have a different speed. They have a different mentality. They don't take the past into a lot of consideration. They want to say, Hey, how do I solve this? What is the one problem that I want to solve? What is that one specific area I would like to solve? And then, they go solve that specific area. That differentiation is what is working for these smart startups right now. Of course, there are partnerships that are huge in this process because without data, AI, or any of the new concepts are not going to be very useful. So those partnerships that these startups are establishing are basically kind of a game changer in this because when you're small and you go to a specific health care clinic or an institution, they say, Hey, I have this problem can you solve it for us? That is a much better conversation than, Hey, I have this big solution. How can I implement this for you? That's basically the key difference in how startups are able to kind of bring that value to the health care institutions and also the fact that they operate at a speed that is quite different. Speed, agility, and really understanding the problem statement and addressing that is at the core something that startups have been pretty successful at in recent times.
Also, in terms of EdTech, a lot of technologies and platforms have been built, where do you see the intersection of all these things in these industries?
What we continue to see due to the influx of technology, AI, and other deep tech related technologies we have seen in the past few years how the megatrends that we continue to see around these industries continue to change because of what is happening. Scale is critical. We have seen the likes of 2U and other forms, which continue to scale at a different level altogether. For them to deploy the new technologies, whether in delivery, whether in the acquisition, whether in terms of how they continue to innovate has been very important. This relates to what is happening at colleges and universities. We continue to see that higher ED is going through massive change at this time and how the tech industry has taken over, either exploiting the gaps or creating new categories within this space is something that we notice a lot. We will see more and more changes because certainly as we learned over the pandemic, industries are getting disrupted right now, and that's impacting both the tech and recruiting industry as well. Whether it is candidate lifecycle management, whether it is the application of AI, the recruiting models are changing quite a bit right now.
At some point in time, people thought, Oh my goodness, Udemy and Coursera are taking over the world and no other innovation is possible. But we still keep seeing that there are many startups that are really looking at improving the quality of education. How do I really make sure that this is the right course to be taught for my students, for example? Scale is super important because it's very easy to say that that I have this product, and then there are these two universities or colleges that have adopted it.
When is it the right time to really pursue partnerships?
Great question. One of the key things that over twenty five years of the entrepreneurial journey we have noticed is that partnerships have to be part of their overall growth strategy because you have only limited access to funds or capital. Especially as a startup, for you to leverage the network that is out there it is important whether it is technology partnerships, whether it is institutional partnerships, whether it is community partnerships, for you to be able to drive that partner ecosystem is critical to look at, to begin with. It never takes away the emphasis from building your own sales teams, but the sales teams also need to be equipped, understanding the strategy behind why partnerships are important. They are the ones who are out there building, driving, and building growth and channels and also sales. It's important that most of their growth can come through partners if they have a robust plan in place. That's one thing. And how do you go about it? Every company or every founder needs to make it the cornerstone of their scale and acceleration; it has to be part of their overall strategy, similar to how they have access to capital or how they bring in leaders. It's important that they look at this in an extremely minute way of driving every aspect of sales or growth that can come through partnerships.
What does it really mean for founders to be able to start selling? And from your point of view, what do you really see in a founder to be able to say, yes, we can work with this founder?
A few things that I found over our journey and also over the years is it's extremely critical that we find passionate founders. I think whether somebody coming from a business, technology, or other backgrounds, at the end of the day only have so much impact. But the key thing is, is somebody truly out there and passionate every day, whether there is success or failure or through his failures or through his successes, how he continues to drive bigger possibilities? That's one thing that we continue to see. So the biggest quality is passion. And what kind of problems are you trying to solve? The key is that there is a need that you are solving or that there is a problem that you are solving. It's important to drive your passion towards something that you are able to solve, assess, and provide a solution. It is also important that the founder or the startup co-creator kind of entrepreneur understands what are the other things that now impact certain business or startup. It's about bringing in leaders. It's about access to capital. It's about sales, and marketing. It's about driving partnerships. It's about the high touch that would be important.
You can't look at it in a silo. I think you've got to be that complete package. And the biggest question that we all talk about is, are you coachable at the end of the day? Are you willing to learn? Are you willing to just try something, make mistakes, and know how to pivot from there and be able to correct course or just watch the trends? So much is out there today to absorb. Are you constantly listening and trying to make sense of that and see how you can work for your startup? Importantly, though, what we continue to see is that you are hungry. You're driven, you're passionate, and you continue to keep your teams motivated because in a startup co-creator there are a lot of challenges. We continue to notice that some founders are highly passionate and extremely hard working and ready for the grind. And then there are others who may not always come with those qualities, but then they have other qualities. The key thing is, how do you balance everything? At the end of the day are you bringing value to yourself, to your organization and to your investors and to the larger partners?
There are two things that we always see. One is personal growth, and then there's the start up growth. One thing that is common is the ability for somebody to learn continuously on a daily basis. Sometimes people think they will learn when they make mistakes, but that's not the wisest approach. You can also learn from other people's mistakes and then not repeat them.