Definition of the Phoenix : “(in classical mythology) a unique bird that lived for five or six centuries in the Arabian desert, after this time burning itself on a funeral pyre and rising from the ashes with renewed youth to live through another cycle. “
“In case you never get a second chance: don't be afraid!" "And what if you do get a second chance?" "You take it!” C.JoyBell
Details of Crowdfunding campaign:
Investment Target: £499,936
Equity offered: 9.26%
Already funded: £222,055
Pre-money valuation: £4,899,719
It was the irrepressible business guru Tony Robbins who once famously said this about failure – “Start realizing right now that there's no such thing as failure. There are only results. You always produce a result. If it's not the one you desire, you can just change your actions and you'll produce new results. Cross out the word 'failure,' circle the word 'outcome' in this book, and commit yourself to learning from every experience."
We’re fairly sure that the management team behind new crowdfunding campaign Check4Cancer would agree with those sentiments. This is raising money – just under £500k on a pre money valuation of £5m– as a start-up that has the ability to be clean up in the medical testing space. The obvious core market is diagnostic checking for cancer (tick the biscuit tin test) but this Cambridge outfit is also making a tilt at a whole bunch of early testing markets including what sounds like a big push for a product called GynaeCheck.
Yet reading through the investment marketing materials one might be wondering why a business founded back in 2008 is now trying to raise money as a start up?
At this point we encounter the mythic phoenix, rising from the ashes of past failure.
Check4Cancer is indeed an established business but back in 2014 the existing business model seemed to be misfiring. Its focus on corporate health programmes had left it with what seems like an unhealthy (we apologise for the gusher of medical metaphors and similes) reliance on a few big clients and especially Hewlett Packard.
So into voluntary liquidation the firm went, and Check4Cancer re-emerged, newly re-energised and focused on building direct sales leads for patients wanting to check if something is wrong with them. Here’s the business own description of what happened over the last few years.
“In December 2013 Check4Cancer went into voluntary liquidation. The shareholders registry was cleaned up and the company was immediately back in operation and funded. The Directors of Check4Cancer believe that there is a huge untapped market and by ‘taking the foot of the accelerator’ at the end of 2013 and early 2014 momentum was lost. Due to the start-up nature of Check4Cancer the delay of starting large corporate campaigns can have a significant impact on cash flow. Check4Cancer is now back at pre-voluntary liquidation operation levels with a strong pipeline and on target for 2015. “
At this point we have no doubt that many investors, even those with an adventurous nature might consider heading speedily for the exit. Various under the breath comments might also be heard from those exiting the room including “why back a failure”, “what makes you think they can get it right the second time” or even “why trust the management to screw it up again”.
But while these fears might not be entirely misplaced we are by contrast rather drawn to the honesty of the pitch. Clearly the management of the old business thought they had a great model but it didn’t work it. But rather than ditch the idea entirely they decided to refocus and rebuild. Anyone who’s ever seen episodes of the wonderful US comedy series Silicon Valley will realise that many of the greatest brand names of today have in fact performed exquisite early ‘pivots’ which consist of entirely dumping the original business idea and doing something new.
Check4Cancer is a little more modest in its pivot. It’s not going to entirely dump its old model of working with very big firms to offer key staff testing facilities but has a renewed focus on building its internet based business. And here the indications are hopeful. The firm observes that “Since September 2014 Check4Cancer has enjoyed an increase in return on AdWords investments from around £6 to close to £9 per £1 invested.”
Our reading of this is that ordinary consumers like to worry themselves senseless about health risks. Whether we are right to worry in this way – and businesses like this to make money from that concern – is rather beside the point. What matters is that consumers do worry and they need someone to help re-assure them (or reveal some terrible truth). Into this gap steps firms like Check4Cancer.
The firm also tends to lever off its corporate heritage of providing test services for big corporates – one of its product lines “is a tax efficient scheme that will allow Check4Cancer services to be provided with no payment from the employer and the employee will get on average 42% discount from the tax authorities. A typical cost to the employees is between £5 and £17 per month for 12 months.”
In sum, what we think is rather impressive about Check4Cancer is NOT that it can tap an obvious market. Or that its team seems to boast a fairly experienced management which includes leading experts like Prof. Gordon Wishart, as Medical Director (executive director and owns 35% of Check4Cancer) who is described in the company literature as “consultant breast & endocrine surgeon, Professor of Cancer Surgery and former Director of the Cambridge Breast Unit at Cambridge University Hospitals.”
No, we like the fact that mistakes have been made, lessons learnt and you have a battle hardened business model that is already generating revenues (not profits, though these are supposed to come within a few years) and has some big blue chip clients plus a snazzy Direct to consumer business model. In simple terms, this is a comeback kid in an obvious market full of potential, determined to prove that its product set is scalable.
Whether it will succeed, we have no idea. Also we’re not entirely comfortable with the pre money valuation of £5 million (not bad work for just two years of a phoenix like transformation) plus we worry that £500k may not be enough to make it into the big time.
But as an investor in crowdfunding projects, we’d argue that you need to stop constantly thinking “Will this be the new Google” and start worrying “what could go wrong and how will these guys cope”? On this score Check4Cancer might be worth a bit more investigation.