standalone opportunities—products like Fitbits or a smart pill bottle that reminds you to take your meds, or a variety of apps on your phone. Whatever the case, says Callow, “The retention rate falls off after about 90 to 120 days.”
Callow is looking to invest in companies that will change this paradigm. He doesn’t think success will come from some breakthrough device. Rather, he thinks it is about mastering the psychological or social skills of getting people to stick to the plan. In short, he says, “We have concluded it probably is a service business, not a product business.”
One company in Callow’s portfolio that addressed at least a piece of the compliance issue was Boston-based PHT Corp., which sold in early 2015 to ERT of Philadelphia. Among other things, PHT developed software and apps that let patients self-report on the outcomes of their treatment—an important component of the Affordable Care Act that figures into how hospitals, drug companies, and others are reimbursed.
Underserved Customers and Weird and Wonderful Spaces in Unusual Places – Eric Paley, Founder Collective
One of the more eclectic approaches to venture investing likely comes from Founder Collective. As Eric Paley puts it, “we’re stage focused and sector agnostic—we love seed stage deals, no matter if they’re trying to build “Keurig for Wine” (Kuvee), a new kind of propulsion system for micro-satellites (Accion Systems ), or a service that connects publishers, authors, and book lovers” (BookBub).
But that doesn’t mean there isn’t a plan or philosophy. Here are a few of the thematic principles guiding the firm in 2016.
Underserved Customers—In the past year or so, says Paley, “We’ve backed companies bringing the Internet of Things to pharma labs, a plus-sized fashion ecommerce company, and a food delivery service that targets second-tier cities.”
The common element behind all these companies, says Paley: “The founders are obsessed with the idea of serving customers that no one else cares about.” In fact, he says, none of these companies have real competitors to speak of, even though their target markets are worth nearly $200 billion dollars. And that is not an unusual circumstance, he says. “There are entire industries that are being ignored and we want to back founders who disrupt them.”
Weird and Wonderful Spaces in Unusual Places—I had to save this one for last. Here is how Paley describes the idea:
“While Uber is the dominant company in tech right now, when we invested in 2009 it was more of a curiosity. It has no relationship to our other portfolio company, BuzzFeed, which is nothing like PillPack’s robotic pharmacies, both of which are completely different from Coupang, which is the largest ecommerce company in South Korea (and one of only 5 startups to raise a billion dollars in a single round of funding).
“Basically, if what you’re working on scares other VCs, we’d love to learn more.”
