The Sad Myth of the Direct to Consumer Startup

The Sad Myth of the Direct to Consumer Startup

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Last week I had a startup entrepreneur come to me with an idea about how to “pivot” his company strategy. The company, which had begun as a medical device company but couldn’t quite find it’s market, was considering re-emerging as a consumer-focused digital medical device company in an adjacent market. The idea was to create a device to measure a serious medical condition and market it to consumers directly. Their plan was to target mothers who would be paranoid enough to spend money on medical devices to diagnose an issue in their children.

Imagine my heavy sigh.

Ever the heart-breaker, I had to tell this person that this strategy did not make any sense to me. As his target market representative du jour, I mentioned that there is no world in which I would trust myself to diagnose a major medical problem. Rather, if I even suspected a hangnail I would rush my precious princess straight to the doctor, do not pass Go, do not pay iTunes fees.

In fact, as I sat there explaining this psychology, I could not think of one single digital health company addressing a major medical condition that had successfully created a company by selling directly to consumers. If I am missing one, please do let me know in the comments section below. Please remember I am talking about companies that sell directly to consumers, not to physicians. And I am also talking about companies that address real, hardcore medical conditions, not fitness and not beauty. People will spend all kinds of money on fitness and beauty products even knowing full well they will make them neither fit nor beautiful. But medical products? Not so much. Insurance is supposed to pay for that. Or at least that’s what most consumers think.

Yes, there are some consumer-direct digital health companies that have had minor successes in the market, but none that have been able to achieve any size at all and certainly none that were able to deliver on venture capital return goals, even reasonable ones. And here’s why: if someone has a major medical problem they sure as hell don’t trust themselves to diagnose and treat it; they want their doctor involved, and appropriately so. Consumers might use a digital health medical device type product if their physician recommends it, but buy it off the shelf on their own without physician prescription or recommendation? Nope.

I have written about this issue before (consumer willingness to purchase medical products) and have seen my Digital Health, Destiny and Doritos article literally circle the globe. I think it’s because I talk about guacamole in the article. Everyone loves guacamole. If you don’t like guacamole, I have a digital diagnostic product to sell you that will determine your mental fitness to visit California, where guacamole consumption is mandatory.

So this is a cautionary tale for entrepreneurs, whose passion for their work is always so admirable but who don’t always think through this consumer issue to its logical conclusion (doom). And all too often, when I break their hearts by telling them what I know is the truth, they get even more committed to proving me wrong. I have broken more hearts than George Thorogood. I am pretty sure I’m not through yet.

I love this quote from George Santayana and even have it hanging on the wall of my office decorating a Road Runner & Wile E. Coyote animation piece, “Fanaticism consists of redoubling your effort when you have forgotten your aim.” Way too many entrepreneurs are way too committed to their vision of minting rational and engaged healthcare consumers when they should be thinking about how to influence those who influence consumers instead. And in case you needed further amplification on this issue: the cost of direct to consumer marketing is beyond the realm of nearly every healthcare-focused venture fund’s checkbook limit.

If I had a dollar for every entrepreneur to whom I said, “Dear God, please don’t rely on a direct to consumer strategy or you are doomed” and who later came back to me and said, “you were right.” I wouldn’t have to work anymore. In fact, this may be my new business model. Download my new app and receive a small electric shock whenever you think about going direct to consumer. I know you will thank me. That will be $1.

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