“A Smart Breast Pump: Mothers Love It. VCs Don’t: The financial struggles of a young startup beloved by mothers highlights a blind spot of the male-dominated venture capital industry.” (Bloomberg) was linked-to by a Harvard professor friend on Facebook. She introduced the article with “Here’s a startup with an excited market, meeting a real need, but having a hard time raising VC funding bc boobs are hard to talk about in board rooms.”
We know that these entrepreneurs raised $6.5 million. But now they’ve spent all of it and couldn’t raise more. The entrepreneurs, the Bloomberg journalist, and the Harvard professor are confident that sexism and/or venture capitalists not wanting to discuss breast pumps explain the failure to get the next stage of funding. But does stating this as a fact make it true?
Let’s see if there could be another explanation…
The market leader in this field is Medela, a Swiss company with 1,740 employees and more than $500 million per year in revenue, mostly thanks to Obamacare mandates that insurance companies give customers a new breast pump for each new baby. I know people who have four kids and… because Americans get a new Medela pump “free” (i.e., paid for by other Americans) with each kid, four Medela pumps (two brand-new in boxes in the closet, one that gets used, and one that was unboxed and used temporarily somewhere). The basic Medela product gets 4.5 stars from 1,675 Amazon customers. Medela is in every Target, every CVS, every Walmart, etc.
The founder of the startup, Janica Alvarez, has a master of science in bioethics (LinkedIn). Her co-founder, Jeffrey Alvarez, has a bachelor’s in mechanical engineering (LinkedIn) plus an MBA.
What if this startup can out-compete Medela? The other successful companies in this sector are Philips (Dutch, with nearly $30 billion per year in revenue) and Ameda AG, a private Swiss company founded in 1962 (hard to find revenue numbers).
So the proposition was “fund innovative Americans with minimal credentials and experience to compete with boring Europeans who have nothing more than Ph.D.s in the relevant fields, a centuries-old tradition of craftsmanship, and billions of dollars in current revenue.” Investors in Theranos tried this against Siemens and, starting in 2015, learned that hopes and dreams did not magically materialize.
[Of course it is possible that a clever engineer who doesn’t work at one of the current market leaders could design an improvement to the existing products. But then it is just as possible that the market leaders can respond with their own improvements and push the improved version into every Target, CVS, and Walmart a few months later.]
Is this an example of Americans having reached the stage where we can blame all of our failures on an -ism?
It would be better for everyone (except a few scammers) if there were some strings attached to crowd funding, and kickstarter backers got actual ownership in the intellectual property.
Here is another spectacular flop, my first and last kickstarter “investment”:
https://www.kickstarter.com/projects/zpmespresso/pid-controlled-espresso-machine
Also, there might be much better due diligence if the compensation to the platform owner depends on actually delivering.
Does the economics of VC investing matter to Bloomberg? It’s more important to address real sexism. Bloomberg should run articles encouraging discussion of boobs in the board room.
This is a silly example, but extrapolates to a relatively profound observation: most of us hit a “glass ceiling” in life, whether it is an inability to handle middle management, lack of quant skills, lack of social adeptness, other priorities in life, etc. Normal people carry forward with an acceptance that, through skill or luck they couldn’t advance further in their career. It is really only the feminist crowd that insists every failure is the result of a “boy’s club” which is an observation with a very high false positive rate.
P.S.
“boobs are hard to talk about in board rooms”
This complaint is often reversed. Boobs are the only thing the dirty old board of directors talk about!
Nothing to do with sexism, but VCs seem to be fixated on recurring revenue models rather than sell-it-once-and-you’re-done.
This does make it harder to bring products as opposed to services to market, and more often than not, to placate investors, dubious subscription requirements are tacked on to products that would be perfectly good standalone.
I’ve never understood the TechCrunch mentality of raising $M in funding (translation: losing all your equity) as some measure of “success”. Success is actually selling something to customers.
The VC’s must hand money out. It’s their job. Whether the venture works out or not is a problem for another day.
@#3: most of us hit a “glass ceiling” in life, whether it is an inability to handle middle management, lack of quant skills, lack of social adeptness, other priorities in life, etc. Normal people carry forward with an acceptance that, through skill or luck they couldn’t advance further in their career.
So true. Due to a couple of layoffs and missed opportunities, the “Great Recession,” crushing competition, and my own risk aversion and sub-optimal career moves, my salary today is the same as it was in 1998 when I started my Top 20 MBA. Nonetheless, due to long-term reasonably low-cost cost of living, consistent investing, and a couple of serendipitous real estate purchases I will retire in my mid-50s.
As a white male, I had many career set backs. I missed out on a number of promotions due to the good ole boy network. It’s hard to see idiots promoted only because they are your boss’ friend or your boss’ boss’ friend. Eventually I prevailed and made it – although many years later than I would have in a merit-based organization (if such a workplace actually exists). If I had been better at politics, I know I would have avoided at least some of the delay.
I have often thought about how I would have viewed my career setbacks differently if I had been a minority or female. It would have easy to chalk up all my bad experiences to racism or sexism when the reality was completely different. Of course, many people (regardless of color or gender) just don’t recognize their own weaknesses so they search for and assign blame to causes outside their own control.
The politics is what makes it fun! There’s a reason everybody hates nerds and feminists.
@Hugh G. Rekshun
How come over at Lion of the Blogosphere you are just E. Rekshun?
Dean Kamen’s company specializes in far-out fluid-pumping medical devices. You’d think that if you can’t sell it to him, maybe it can’t be sold.
My own personal question about breast pumps: why does no one make one that is conformal, so it can be worn and used unobtrusively, under somewhat normal clothing. Wouldn’t the ability to pump at one’s desk or while driving save a ton of time and hassle?
Anon: Minorities and females probably do experience every day unfairness and rudeness and may very well misinterpret at least some of it as racism or sexism. This does not rule out the possibility that IN ADDITION TO everyday unfairness and rudeness they ALSO experience racism and sexism which white males do not. I can provide an example from another posting in this very blog: When I related an anecdote about individuals who “ were probably immigrants (not refugees) from Mexico” another commenter referred to them as “MS13”. Even setting aside the fact that MS13 is a Salvadoran (not Mexican) gang, I would not expect anyone of Latin American heritage to get a fair shake in employment decisions (for example) from someone who uses the terms “MS13” and “probably from Mexico” interchangeably. The fact that we encounter evidence of prejudice in the comments section of this blog suggests (but is not rigorous evidence) that racism is more common than would be expected if it was limited to a few thousand remaining KKK members as has sometimes been implied in this blog. Of course, there is plenty of more rigorous evidence that both racism and sexism remain problems in our society.
These comments will no doubt result in the accusation that I am contributing to a supposed “culture of victimhood”. No one has been able to explain how this is worse than the fairy tale alternative, “shut-up and pretend it doesn’t happen anymore and it will go away”.
@#9: That’s my half-brother.
Neal, there is a world of reality in between “why, it’s practically 1903 for women/minorities in the workforce!” and “all racism ended in 1965”.
We now have critical masses of minority groups that can hook each other up with sinecures. There’s diversity in the “hire your incompetent friend/co-ethnic over the qualified not-friend/not co-ethnic” club now. Admitting that would go a long way towards honest discussion of whatever actual race and sex prejudices exist in society at whatever levels.
The Practical Conservative: Of course there has been tremendous progress for women and minorities since 1965 much less 1903, to the point where some policies which might have made sense in 1965 may not make sense now. I find it hard to believe that statement would be controversial anywhere in the US, even on those college campuses where a “culture of victimhood” is hip.
No doubt the growth rate for sinecures in the “hire your incompetent friend/co-ethnic over the qualified not-friend/not co-ethnic club” since 1965 has been much higher for women and minorities than for white men and that has produced “diversity” in the “club”. However, that’s because they were starting from an extremely low baseline. I would bet that women and minorities are still underrepresented in this particular “club”. I’m not sure how important this particular “club” is anyway, since I expect such sinecures represent only a small fraction of total employment.