My company developed tech to fight covid19... and lost
After almost sixteen years, my company, Kanteron Systems, has succumbed to Covid19. Sixteen years of epic hours, constant travel and boot-strapping. The roller coaster ride has come to an end. I am proud, but I am also disappointed.
I am proud of my amazing team and all that they have accomplished with very little resources. Our Precision Medicine Platform is, by all accounts, a success. It has managed nearly a billion medical images from customers such as the NHS in the UK, Monticello Health in the USA, IMSS and ISSSTE in Mexico, EsSalud in Peru, or ITMS in Chile. Thousands of doctors from 12 countries used it to diagnose and treat millions of patients. By conservative estimates, we’ve helped save over a million lives. Giants in the industry, like Philips and Roche, were “inspired by us” and “followed our lead”. And yet we still ended up failing as a business.
Business-wise, 2019 was an excellent year for us with millions of dollars in revenue (+510% YoY revenue), and profitable (+113% YoY income), something you don’t often see in self-funded deep-tech startups. Being independent means not having anyone else to reply on in case of a downturn, so we decreased our debt and increased our assets and equity “just in case”. We knew our time had come to expand aggressively, and we started looking for VC investors and M&A opportunities. After all, we had built a $300M sales pipeline, so the future looked bright.
We even diversified our product portfolio. In September 2019 we introduced, at the BioInvestment Asia Forum in Bangkok, a new software solution for “Data integration and processing of Infectious Disease events” to manage epidemics. Then Covid-19 hit.
At first we thought of it as an opportunity. An opportunity to help, with our recently introduced software. We asked two World Health Organization experts, one in Switzerland and one in Singapore, to review the software. They agreed it was excellent and it could be very useful to help manage the pandemic. So we did what was right and contacted several governments to offer the platform for free. That’s when we realized there was a big problem: hospitals, healthcare networks, and ministries of health worldwide were in panic mode. Disorganization at first, shutdown soon after. Everything and anything that was not directly used to treating patients in the ICU was to be postponed. Indefinitely. It has taken over a year for some governments to start realizing the benefits of using our system for Covid19.
It didn’t take a business genius to realize that what could have been an opportunity, quickly turned into a very dark prospect. Business was drying out up for longer than we could survive.
We closed 2020 with a drop of -93% in YoY revenue and -452% in YoY income. Not only that, but our debt increased to $2M, and my personal debt to over $3M. Having invested everything into the business, from the house mortgage to all my savings and even part of my parents retirement funds, the situation was desperate. But there were three very large opportunities, around the corner, that had a very high chance to crystallize. All I had to do was to close one, to go from absolute disaster to spectacular success of the 8 digit kind.
One was an M&A. We were an acquisition target for a technology multinational corporation. A letter of intent was signed, then a term sheet, and then we started the due diligence process. But several months into it, they decided our FLOSS (Free Libre Open Source) GPLv3 software license was not acceptable and pulled out. The final negative came on Christmas Eve.
The second one was a large deal in two phases. The contract for phase one was already signed between the customer and one of my distributors in Asia. We were already making progress on ironing out the details for phase two. Then, out of the blue, our distributor decided to break the contract because a 200% markup was not high enough profit, even though it’s what we agreed on when we started the negotiations over two years prior. They wanted 300%, and instead of negotiating, they decided to break the contract. I felt terrible for my customer, but there was nothing I could do in that situation. I even offered to move to Asia myself and take on the contract directly, but was told that even if that was an option, it would take months. Too late.
The last one was large enough and certain enough… until it wasn’t. After five years of discussions with a Saudi investor, we signed a memorandum of understanding, and started work on a large contract. Every detail of the contract was agreed on, except timing. I thought the difference was a matter of a few weeks (to start before or after Ramadan). So we got on the phone, and that’s when the bomb dropped: they were thinking of delaying it for several months, even years. That day was the end of the road, and also my birthday.
During all that time I tried to secure Venture Capital funding for growth. Many VCs showed interest, but none invested in us. “Too early”. “Too late”. “Too little ARR”. I was even told “too ambitious”, I swear!
Some are surprised that a successful product could fail, but it happens all the time. We met all the regulatory requirements (CE, FDA, ISO 13485, etc) and found product/market fit, but we couldn’t quite crack the business side of things. As Samuel Levy, Founding Partner at Lauxera Capital Partners, said in this blog post, “Selling novel medical devices, diagnostics, digital therapeutics, and tech-enabled healthcare services is hard. Really hard.". Building any business is hard, but building an enterprise software interoperability business in healthcare, involving deep technical expertise of medical imaging, pathology, genomics, clinical workflows… to tackle cancer and pandemics, with a team of four or five developers and two or three sysadmins, is especially hard.
Some think that innovation is all that’s needed to win the game. Wrong. It’s not even enough to survive. We invented the first Precision Medicine Software Platform (2014), the first vendor-neutral Digital Pathology Dicomizer (2012), and launched the first commercial Augmented Reality system for surgery (2009). We even won all the top awards in the industry, like Frost & Sullivan, HIMSS, NASA, Digital Pathology Association, IBM… But you need scale to grow. And you need capital to scale.
I’ve come away with a clear understanding of how this whole “healthcare technology business” works. Where the buyer is not the same as the user, reluctance to change is extreme, and vendors try their best to avoid innovation. I’ve come to understand overworked and stressed out clinicians, who have to deal with patients, administration, uncertainty, research, liability, staying up to date, and non-interoperable ancient technology.
I’m saddened to see some of our customers go, as we’ve become friends after (in some cases) over a decade of tireless effort to keep the system operating non-stop 24x7.
And, now what?
It’s my goal to first try a last minute Hail Mary pass to find a good home for the technology and the team, but we only have a few weeks for that. If you know anybody that may be interested, let me know right away! I’m also helping our customers find replacement vendors, migrate their data, and helping the team find new jobs.
However, I’ve initiated the legal process of shutting down, which will take anywhere between one to two months, so our doors will soon be closed.
I’m disappointed that I couldn’t produce a better outcome for those who supported me the most —my family and my team. It doesn’t matter that it was because of Covid19, and that hundreds of thousands of companies in Spain have shut down for the same reason in the last few months. Or that surviving sixteen years in business can be considered a success in itself.
The fact remains that I not only failed to find ways to grow but to keep the company going.
I am is extremely grateful to have had the chance to work with such an amazing group of people. It’s easy to enjoy working when the ship is taking off like a rocket, when the company pays above industry average, has a 4-day work-week, you have standing meetings in the pool, and nobody has to check in or out. It’s a whole different thing to remain friends and working together as a team when the ship is on fire, money runs out, and customers call on a Saturday at 2am. Yet, they’ve supported me throughout the ups and downs, especially the downs. And in “team” I include my family. I owe them several life-times over.
With that said, life goes on. Time to lick the wounds, and get up from the floor. I have a personal motto, the Japanese proverb ‘Fall down seven times and get up eight’. So here we go again, more experienced and motivated than ever.
As for what’s next for me, I have no idea. This is the first time in sixteen years years I’ve been at a crossroads like this. But after seeing the outpouring of support I’m receiving on LinkedIn, something tells me I will be alright.
Whatever I end up doing, I hope I can help educate others about a path fraught with hardship, but rewarding nonetheless. As you’ve seen, I believe in absolute transparency. I don’t wish to glorify my failure. It’s something I’d rather embrace than hide behind for rest of my life.
Last but not least, to the Spanish Government, thank you for all the public services our taxpayer money helps fund, some of which have helped us at times. To the Open Source community, keep up the good work, you’re the giants on whose shoulders we stood on. To my team, I am eternally grateful. To my family, I could not have done this without you.
And to everyone who has supported us over the past sixteen years, from the bottom of my heart: thank you.