To be a successful startup company, you don’t always need to enter the biggest, sexiest industry you can find. Some of the most interesting startups these days are finding ways to disrupt what is old, stodgy and stagnant.
Take a look at the most recent TechStars Boston class. Of fourteen companies, about a third of them are targeted towards disrupting old industries rife with inefficiency, old business models and decades-old practices. These industries - manufacturing, pharmaceuticals, government, real estate and farming - have not fundamentally changed in years.
These are not your typical startup accelerator-driven companies. TechStars Boston has tried in recent years to focus at least parts of its classes on companies that may not fit the typical notion of a tech startup, looking for companies, ideas and founders that have intimate knowledge of how disrupt an industry that others may ignore.
“We love stuff like that. We love it when it is not sexy, something that has been very stagnant for a long time,” said Katie Rae, managing director of TechStars Boston, in an interview with ReadWrite. “Because, and you can bring algorithms to it, a whole bunch of different software products to it and people are blown away.”
Three companies from the most recent Boston class highlight how a startup can have a huge ceiling disrupting industries that haven’t changed in decades.
Do you have any idea what it takes for most of your food to reach your dinner table? Probably not. And you don’t really want to know either. The human food chain is stuck in a logistical mess of shipping and receiving, where food can travel thousands of miles before it lands at grocery stores and restaurants. Millions of pounds of food are loaded into cargo containers every day and shipped across the world.
Instead of shipping those cargo containers, why not just leave them where they are and grow food in them? That is what Freight Farm does: use shipping containers (like the ones you see 18-wheeler trucks carrying) and rig them to be self-sustaining farms. Using solar energy, water filtration, sensor monitoring and the cloud, these containers turn into automated high-growth farms that take up less than an acre of space.
What is a company like this doing in a TechStars class? It is not exactly “tech” per se…
“I would consider Freight Farm tech-enabled but it is in an interesting realm of hardware, software, old industry, disruptive. We like things like that,” Rae said.
Tech-enabled is the key phrase. Not every startup needs to be led by geeks writing algorithms on dorm room walls. Real-world industries can take the type of tech that coders and developers have been working on for years and turn it towards real world solutions, like feeding your community.
When Freight Farm came to TechStars, it was led by a group of entrepreneurs that had been working on rooftop garden models. They realized that type of business wasn’t scalable. Rae and the rest of the TechStars selection process (which includes Angel investors and venture capitalists) recognized the idea, the drive of the team behind it and began thinking of business models. As of last week, Freight Farm had already raised $450,000 in revenue.
The pharmaceutical industry is huge.
And basically broken.
Gone are the days when you had your neighborhood pharmacist that knew exactly what medicines you were supposed to take, at what time and how often they needed to be refilled. The corner pharmacist and apothecary have been replaced by big chain groceries and the likes of CVS and Walgreens. How do you fix a massive industry that is more interested in getting people to take drugs than providing care for them?
Take it to the Internet!
We often think the Internet makes us more impersonal. We are separated by physical distance, interacting through a computer from our homes or offices. Yet, the Internet now can be the place where we receive the most specialized and personal of information. What can be more specialized and personal than your prescription medicines? Pill Pack gets to know you, the drugs you need and when you need them through its website, then ships you a package with everything you need. The “pill pack” is kind of like a large dispenser where your prescription drugs are dolled into individuals days of the week and you can just rip it off the reel when needed.
Pill Pack is going for the top of the spectrum of pharmaceutical brands. It wants to be synonymous with pharma-care, just like Coca Cola is synonymous with soda. Its founder, TJ Parker, grew up in a pharmacy – his father was a pharmacist – and knows what it is like to provide personal care on a human level. Again, it is not a tech company, but technology makes it possible. That is one of the reasons Rae and the TechStars team loved the idea of Pill Pack.
“For those of us under 55 or 60 (years old), we don’t realize that the primary care physician that used to coordinate all of your medications is basically gone. So, something like Pill Pack could actually be really beneficial for that industry,” Rae said.
Manufacturing has grown in such a way that new business developments have been folded into old practices. Machines run at certain times and at certain specifications, with little consideration for waste or inefficiency. LinkCycle attempts to streamline that process with data science, giving manufacturers tools to better streamline their workers and machines with an app that can be carried around by a factory manager on an iPad. The app can manage scheduling, machine utilization, process control and equipment upgrades.
For instance, if a machine would be cheaper to run at night, LinkCycle will tell you that, saving thousands in utility costs.
“The willingness to pay is super high because either the cost savings or increased sales for them are enormous. All those dollars drop to the bottom line. So, the customers are happy,” Rae said. “LinkCycle is a perfect example of that.”
Team Focused, Industry Experts
What traits do companies like LinkCycle, Freight Farm and Pill Pack share? Each has a team behind it that intimately knows the industry it is trying to disrupt. These are not entrepreneurs sitting in a SoMa coffee shop looking for where the money is. These are company founders that care about changing how businesses work, making the world more efficient and have the expertise to do so.
Rae says that the keys for successful startup companies trying to disrupt stagnant industries starts with the human passion and expertise. It then comes down to how big the industry is and the type of market the company is trying to sell to. Manufacturing and big-pharma? Ripe for disruption. Online CRM solutions or social photo apps? Not so much.
“Selection is about the human beings,” Rae said of the process of choosing what companies make it to TechStars Boston. “Every single one of these, we fell in love with the founders, we fell in love with what they cared about and thought the industry was big enough and then we fundamentally think they are so different.”