Sramana: In our incubation program, we teach people to get customer validation as soon as possible. It must be done before you even think about investors.
Daniel Cane: It is wonderful that you have formalized that concept into a methodology that can be taught. You can only achieve scale through formalized process. When I talk to entrepreneurs, I talk about a little “p” prototype and a big “P” Project. If an entrepreneur has a concept or prototype, then you are going to have a hard time getting investors to buy into your business. You have to be incredibly proven.
I had a few modest successes under my belt before I went out and tried to start Modernizing Medicine. I had absolutely no success getting investors. It was not until I went from a prototype to a project where I was proving the viability of the model that I was able to get attention. I was selling to people and closing contracts. I did not have marketing, manuals, and everything else, but I had proven my business model viability.
Sramana: Exactly, you need a product with a business model and pricing model attached to it. That is something investors can relate to. They can see how a business will be built out of that premise.
Daniel Cane: At Blackboard and Modernizing Medicine, I learned that there is no such thing as a magic number. You need to show that a dozen or so clients put their money down to purchase your product. That is the difference between a concept and idea. When people are willing to part with their money then you have a business.
Sramana: Did you do any ventures between Blackboard and Modernizing Medicine?
Daniel Cane: Yes. I left Blackboard in 2007 and started a company called Kadoo. I raised $5 million for Kadoo. It was a social media company in the education space, and the bottom just fell out of the Web 2.0 market. We were lucky enough to sell the technology, and the company is still out there. It was an exit, although not a positive one. It was, however, a wonderful ride that taught me an awful lot.
I then had two failures that I am proud of. I had a company in the legal space and the service space that just did not work. I think that is a badge of honor. I learned a ton from failing. If you are going to fail, then it is important to fail quick, fail hard, and learn a lot from it.
Sramana: What are your top three lessons learned?
Daniel Cane: Be careful who you partner with, you can’t control every aspect of a business so you need Plan B and Plan C, and finally that failure is absolutely an option. There is nothing wrong with failure. Most entrepreneurs never want to give up, but that is not healthy. Not every idea is going to take off. If something is going to fail, then learn from it and do something else.