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Hospitals Still Make the Worst Customers

Analyzing Project Ronin’s $10M failure.

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Today’s edition is brought to you by Ignite Digital, Failory’s recommended SEO agency.

Here’s what I got today:

  • An analysis of Larry Ellison’s Project Ronin’s shutdown 🔥

  • An opportunity to build a business on top of failed startups 📈

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Project Ronin: A Familiar Tale

Two weeks ago, I wrote about Astarte Medical’s failure and analyzed the difficulties of creating a business in the HealthTech industry.

Project Ronin, a startup specializing in cancer-related software co-founded by Larry Ellison (founder of Oracle), announced it was shutting down last week. This case gives us new insight into the current state of the HealthTech sector and underscores the formidable challenges startups face in this complex industry.

The Product

Project Ronin was founded in 2018 with the goal of creating software that would help oncologists access critical data in less time. That same year, they raised $10M in one single round of funding.

They developed an app tailored for cancer patients with custom surveys that gave doctors more data on the patient's symptoms.

They also developed the Longitudinal Timeline, a dashboard that presented the patient overview comprehensively and in an easily understandable manner. According to their white paper, this dashboard helped doctors by reducing the 45-minute task of gathering patient data from different sources, to just 5 minutes.

Last year, Ellison said that their systems “reduce hospital admissions and readmissions by 30%”. Moreover, according to their own surveys, around 90% of patients and doctors were satisfied with Project Ronin’s software.

So, if customers were satisfied, and using the app actually seems to be helping both hospitals and patients, why are they shutting down?

Reasons for Failure

None of the founders have discussed the failure thus far, leaving many aspects of the shutdown undisclosed. 

However, thanks to a Bloomberg article, we know that Ronin was “struggling to get paying customers and didn’t have the finances to continue operating”.

This is starting to sound familiar. When I analyzed Astarte Medical’s failure, I said that the main reason for failure was a lack of product-market fit

Both companies had products that demonstrably helped hospitals and patients, but they both struggled to get hospitals to buy and implement them.

This is further evidence of something we discussed in the Astarte newsletter: hospitals do not have incentives to innovate, so selling to them is a painful process.

One might assume that creating a product that undeniably benefits your customers would simplify the selling process. Yet, in certain sectors such as HealthTech, this assumption doesn't always hold true.

Therefore, validating your idea and confirming the existence of a market for it becomes especially crucial.

Willingness to Pay

So, how do you validate that your idea is suitable for the market?

Both Project Ronin and Astarte identified a problem in an industry and built a solution that successfully solved the issue. Both were pretty scientific about it, too. They tested and measured their solutions extensively to make sure that they would help the hospitals cut costs and that it would also improve the patient's health.

Does this mean that they validated the idea? Unfortunately no.

I have written extensively about MVP validation, explaining what PMF is, how to measure it, and strategies for achieving it.

I do not want to repeat myself, so I will give you the quick explanation: it does not matter if your product solves the customer's problems in the most efficient way. If the customer is not willing to pay then you lack PMF.

But, how do we measure this willingness to pay?

Well, if you have not built your product yet, then trying to get pre-sales is an amazing way to know if you should invest in developing your idea fully. If you can get people to spend money on your product even before you have built it, then you have one of the strongest indicators that your idea has a solid PMF.

In the case of Project Ronin, it would have been a good idea for them to develop an MVP and try to see if any hospitals would be interested in buying in. This approach would have enabled them to discern the lack of interest from hospitals before fully committing to the development of the product.

Go Deeper

Trend Radar

Helping Startups to Shut Down

Anyone who reads this newsletter knows that closing a business isn't simple. I've looked into the psychological, legal, and economic sides of shutting down businesses before. I've also spoken with startup founders who've had to close their companies, and they all agree that the process is really tough.

Because of this, VCs have been funding new startups that assist businesses in their closure.

It might seem ironic that a new industry has emerged from other startups' failures, but it makes perfect sense when you remember that 90% of startups fail.

Failed startups are not a niche market. There are thousands of them every year, so there's a real business opportunity in helping failed companies on their final days.

Some Examples

  • Sunset is a tool that helps you create a personalized plan to shut down your business. Their experts in legal and accounting help ensure that everything is compliant. They also store all of your company records permanently, even after your corporation is gone. They recently raised $1.45M in funding last month.

  • SimpleClosure assists you throughout the entire shutdown process, from initiating closure procedures to resolving remaining obligations to customers or team members and managing the company’s intellectual property and financial commitments. Last week, they announced a $4M funding round, bringing their total funding to $5.5M.

  • Carta Conclusions, a new startup founded by the creators of Carta, aims to assist failed founders by guiding them through the shutdown process and handling all administrative tasks, as outlined in their recent announcement.

Is There an Opportunity?

Dori Yona, CEO of SimpleClosure, believes that there is a big opportunity in this sector:

“It’s simple. This is a $0 market. The opportunity is so big and there is so much left to solve that it’s impossible to put a dollar figure on it.” 

I agree. Over the past few years, there have been increasing discussions surrounding startup failure and its prevalence. This shift helps to destigmatize failure and encourages founders to perceive it as a natural aspect of the business journey.

Recognizing shutdowns as a part of this journey also means acknowledging the potential to create services and products that support businesses through such challenges.

This extends not only to shutdowns but also to assisting businesses in being acquired (or acqui-hired) or to auction their assets.

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That's all of this edition.

I’m traveling to SF this Saturday. Let me know if you’re interested in grabbing a coffee!