Entrepreneur Report – Lab Connect LLC

The Company

Lab Connect LLC was founded in 2002. It is a clinical research company that provides global central laboratory services including routine and esoteric laboratory testing, kit building, sample management, bio-storage and scientific support services for biopharmaceutical and CRO clients. The company has a unique combination of state-of-the-art technology, world-class laboratories, easy access to emerging markets and extensive specialized testing expertise, which means the drug development industry can rely on a single provider for all of their central laboratory service needs.

Target market

Its target market is small and mid size biopharmaceutical companies. Its target contacts are decision makers with titles such as Project Manager, Director of Clinical Operations, Clinical Research Associate, etc. with BS, MS or PhD degree, typically 35 to 50 years old, tech-enabled, but not necessarily tech-savvy.

They are disrupting an existing market. The current market size is about 4 billion dollars and the company has more than 20 competitors, including some billion-dollar companies such as Covance, Quintiles, and Quest. But the goal of Lab Connect is to develop a unique, distinctive and memorable brand to effectively differentiate from the much larger, more experienced competition. They want to promote the “decentralized central lab” concept with the messaging of “The world’s local central lab. Global reach. Local expertise”. As the CEO said, Lab Connect should be the “Toyota” or “Crate & Barrel” of the lab industry—connoting a well-designed product with good value. They are striving for a unique and differentiated “look and feel”. Some differentiating factors include connectivity and accuracy, humanness and “high touch” customer service, and high tech yet “user friendly”.

Positioning and Value Proposition

Positioning: The CEO wants to position Lab Connect as the “decentralized central lab” that provides biopharmaceutical companies with strategies for any phase of development, from target identification to commercialization, whether those companies require short- or long-term storage of their samples. He believes that proper sample management is a vital aspect of today’s clinical trials. Because samples may have to be retested for compliance, data or drug-safety reasons, a comprehensive bio-storage plan should be a part of their initial trial outline.

Value proposition: Lab Connect is focusing on taking customizable approach to meet clients’ protocol’s geographic and analytical needs, establishing regional laboratory hubs for site support, building industry leading specialty laboratories, providing unparalleled project management experience, developing innovative sample tracking and reporting technologies and keeping service oriented organizational culture, with solution driven mindset.

Channels and distribution

Since it’s a service company, its current sales channel is direct communications with decision makers of its target companies. They are taking a project management approach. Since the CEO used to work in the biopharmaceutical industry for several years before he founded his own company, he has a strong network in his target companies. He used to list all the primary contacts and let the sales people to call or visit them on a regular basis. Once they acquire a customer, they will have face-to-face meetings and start with project planning and hold routine project team meetings. They also have on-line collaborative tools with their clients.

Their customer acquisition is mainly through word of mouth. Starting from the CEO’s network in the industry, the company now has a stable customer group. Since the company did a good job in improving service quality and keeping a high switching cost, their retention rate is pretty high (around 22%, which is much higher than the industry benchmark). The company’s strategy is always focusing on increasing sales of existing customers. They’ve also tried email and cold-call sales to acquire new customers before, but didn’t achieve as many leads/sales as expected.

Entrepreneur Interview – BewithDTR

Every year, hundreds and thousands of Chinese students are considering opportunities to study abroad. This is a huge lucrative market for training schools such as New Oriental to provide full suite of services to help students achieve their dream of international study. New Oriental School is the first language training school that went public at NYSC in 2006. Since then, hundreds of language training schools and international consultancy service booming at an incredible speed. These schools provide TOEFL, GMAT, LSAT, GRE, SAT test preparation classes and experienced overseas studies consultants work closely with students throughout the entire process of preparing to go abroad: from school selection and application, to scholarship applications, to the visa and immigration process, to practical assistance such as locating student and off-campus housing.

BewithDTR is an international study training institution providing TOEFL, SAT and US college application consultancy service based in Shanghai, China. It is named after the owner, young entrepreneur, Dong TangRong. Before starting the company, he used to work for New Oriental School. He started worked as a part-time English teacher at New Oriental since junior year in college. After years in the New Oriental, an idea is generated and growing in his mind. That is, to build a learning community that’s totally different from what’s available in the market.

Like many of the young teachers who left New Oriental, DTR started his own training school – BewithDTR. Unlike many of them, he didn’t just copycat the model of New Oriental to recruit as many student as possible and provide all kinds of language training and international study consultancy. He chose to only focus on US college application and TOEFL and SAT tests, which are the preliminary tests for US college application. The way he disrupted the market is by provided small classes (15 students) including not only English, and subject matter training, but also other subjects as culture, history, politics, music, art, modern culture, etc to prepare the students to bridge the difference before they entered a different education system.

DTR was admitted to Columbia University for Education major in 2011 and observed great difference of the mentality and behaviors of Chinese students in US colleges. He found that, though many of them might score very high at academic subjects, they have little awareness to plan their future life and career. Thus, he wanted to start a small and intimate community based study group that would help these young students not only get admitted in the best school in the US but also build their all-round competitiveness to succeed in their life.

As he had built good reputation during his past job at New Oriental in the past years, DTR leveraged “Word of Mouth” from his past students and got constant referral resources. Unlike the other training schools that either set huge 100+ student classes or one-on-one tutoring service, he intentionally limit the size of his class size to 15 and set entry barrier to accept student. That is to say, he pick the candidate students that only meet his specific critiria.

In 2011, DTR started this first class of 20 high school student and helped them successfully get accepted to their dream school, including MIT and Wellesley. These student became the evangelists for his school thereafter. They are awarded as “Angel” Students and cherished as the most important people in his life.

Dan Liberman from SmartThings

I interviewedDan Lieberman from SmartThings, a 3-year-old startup. Dan Lieberman has a very diverse background and expertise in technology development and has worked at RealNetworks, Cisco, frog design (to new a few) before joining SmartThings about 3 years back. Dan joined SmartThings as strategy director and technology architect but has recently moved to research and standards.

SmartThings is a platform solution for smart (or connected or automated) homes; homes which are equipped with lighting, heating, access control and electronic devices which are interactive and can be controlled remotely with a phone or computer. Smart homes typical consists of a central unit called the Hub which communicates and controls the various sensors and actuators such as motion detectors, temperature sensors, electrical switches, security cameras, light bulbs distributed all over the house.

Smart home is a relatively new market, which has sprung up in the last five years. However, even in this short time frame, a host of established companies such as GE, Philips, Belkin and small companies have entered the smart home space with smart devices (sensors and actuators which go into homes) offering, which has made this market highly fragmented and competitive. With so many different sensors and actuators from different companies, there is a lack of interoperability between different devices, which leads to very poor user experience for smart homeowners. As a result Smart home technology is still very nascent with limited adoption.

SmartThings understood this key aspect of the market from the beginning and positioned itself as a platform solution. SmartThings developed their own hub, the central device, which communicates and controls all the smart devices in the homes and interacts with the cloud platform and a smartphone app. The hub looks like a typical Wi-Fi router and plugs into the existing routers through an Ethernet cable. The hub supports ZigBee and Z-Wave, the two commonly used communication standards for smart devices and can communicate and control majority of smart devices. The hub connects to a secure cloud solution through the existing Internet infrastructure and the cloud and the smartphone can be used to control the smart devices.

The key motivation for users to transform their house into a smart home is use cases; the smart home should accomplish something their current home setup does not. For example, a smart home with security cameras, motion sensors, automated locks and alarms is a great sell as a secure home. SmartThings focused on couple of such use cases and sold starter kits, which consisted of the hub (with complementary cloud solution and smartphone app) and a few (5-7) sensors to enable different use cases. Additionally, they understood that for their platform to be successful, they needed a developer base, which would develop applications for their platform. This was essentially the app store/play store model, interesting applications on SmartThings platform would lead to more customers buying and locking down to their platform.

SmartThings developed their technology with software/application developers as their central focus. The developer applications and all the intelligence was pushed into the cloud and the hub just served as a gateway to pass commands between the cloud and the smart devices. SmartThings developed an abstracted API, which enabled the developers to write applications without the need to worry about the end devices. For example, if a developer wanted to control light bulb, he/she can just call it LightBulb1 and the platform would associate it with the available light bulb irrespective of the manufacturer and the communicate protocol used by the smart light bulb. This ease of application development attracted the developer community.

SmartThings acquired it first set of customers (and investors) i.e. both home users and developers through a Kickstarter project. Their Kickstarter campaign was hugely successful; in fact it is among the top funded projects on Kickstarter. As it’s common with all Kickstarter projects, product delivery was delayed. During this time, SmartThings used customer forums, website and email to give regular updates, receive feedback and keep user in the loop. This created a strong customer relationship and a valued and trusted user community. SmartThings primarily focused on organic marketing and gave traditional online tools (facebook, twitter) a miss for most part. They invest a lot of resources on customer engagement and awareness using video series, content marketing on blogs, articles and posts to promote SmartThings and smart devices in general. They hired a top PR firm and ensured that every positive article on smart homes had a SmartThings reference which was easy given their Kickstarter popularity.

Array Health

With the big health reform, came the transition from the defined benefit insurance model to the defined contribution model. For those that are not familiar with this, the defined benefit model was pretty much a one-size-fits all model. An employee basically bought a single insurance plan and distributed it to its employees. The problem with this model is that each individual has different needs and so this model did not allow for choice and personalization. The reform has allowed the transformation of this model into that of a retail industry paradigm. People can now have more choice and flexibility in what they want out of a certain insurance plan. This is where Array Health comes in. Jonathan Rickert has developed a user-friendly and aesthetically pleasing interface that serves as a platform for consumers to “shop” options within an insurance plan. The platform allows the insurer to communicate better with the company itself and its consumers. With this in mind, it relieves the burden of administration costs on both sides by streamlining the workflow. In more Layman’s terms, the company sells its software to insurers (brokers) to allow their insurance plans to utilize the defined contribution model though an easy-to-use platform. This then makes that specific insurance plan more appealing to businesses looking for benefit plans to distribute to its employees.

It is interesting to note that when you view the website and read about its product and solutions, it seems as if their target market would be the consumer, businesses buying insurance, and the insurer. I personally thought the company would be monetizing on those transactions between employers and insurance companies. Its position according to Jonathan however is in fact focused on B2B selling with insurance companies, and licensing its software to these insurance companies for use.

Health reform in 2010 caused an increase demand for health insurance in the United States and thus sped up the transitional step from the defined benefit model to the defined contribution model. Back in 2006, this model was just coming out and Jonathan Rickert saw the opportunity to take advantage of it. At the time Array Health was one of the first to enter this market, and so one could say they created a market for software platforms that allow this model of insurance distribution to be viable and flourish. Since then, the competitive market space has somewhat saturated.

According to Jonathan, Array Health’s position in the market is to create a platform for insurers to help manage and distribute its products to businesses and its employees. The generation of the idea actually came when he was working in consulting and found that employers were really unhappy with the defined benefits model. He also got some inspiration by studying what happened in pension space. Finding a problem in both areas motivated him to find a way to help empower and help people make better health care decisions. So he first started validating his idea by just asking employers if they would use his product. He achieved this by utilizing his own network that he created through his consulting job as a channel.

Jonathan and the team at Array Health have done a great job of finding an opportunity and building around it. The team just had success by closing out 2014 with $13 million in venture funds, and hopes to continue to improve health care through the future.