The founders in our 2020 Multicultural Innovation Lab cohort face some strong headwinds due to the uncertain economy. But there are many opportunities in this environment, too.
In 2018, Kevin Dedner set out to launch a startup to help others who had faced the same issues he once had. “Years ago, I worked myself into mental exhaustion, which led to a period of depression,” says Dedner, whose background is in the public health sector.
“I saw three therapists before I could find one who I felt truly understood me as an African-American, who could connect with my narrative and my life experiences,” he says. “Once I started to talk about my depression publicly, I found that many of my friends had had a similar experience.”
That realization became the genesis for Henry Health, a platform that provides culturally sensitive, evidence-based teletherapy for people of color, with a current emphasis on Black men. “What my professional training had already taught me is Black men have the lowest life expectancy of any population,” says Dedner. “When we think about unmanaged stress and untreated mental health issues, we know that they're drivers to chronic disease, because stress weakens your immune system. I basically took my professional learning and my personal experience as a way to address the need to rethink what therapy looked like in our country.”
His idea came long before the coronavirus pandemic and the mass protests that followed the killings of Ahmaud Arbery, Breonna Taylor and George Floyd, but the resulting business model has proven to be particularly timely. “We have seen a significant spike in demand for our services,” says Dedner, who points to recent statistics from the U.S. Census Bureau showing the rate of black Americans showing clinically significant signs of anxiety or depressive disorders rose from 36 percent to 41 percent in the week after the video of Floyd’s death became public.1 “We’re seeing this play out in real time. Not only has this response come from individuals, but we have also had payers and corporate leaders reach out to us for potential services.”
The Pandemic Poses Challenges...
History contains plenty of examples of startups launched during an economic downturn that managed to thrive and ultimately succeed. Growing a startup during a recession caused by a pandemic that poses long-term challenges, however, isn’t in any existing playbook. And startups led by diverse founders, like Dedner, face additional obstacles. Among venture capitalists we surveyed in 2018, 3 in 5 said that investing in women and minority-led companies wasn’t a priority, and when they did invest in such businesses, they reported capitalizing them at 80% of businesses overall.
Morgan Stanley designed its Multicultural Innovation Lab to address such obstacles. The in-house accelerator supports early-stage tech and tech-enabled startups led by multicultural and women entrepreneurs. Its current, fourth, cohort includes Henry Health, along with eight other companies. The Lab connects these founders and their teams to the resources they need to grow and scale their businesses, along with a $200,000 equity investment. The 6-month program culminates in Demo Day, an opportunity for the entrepreneurs to pitch to a network of investors, potential business partners and customers to take their companies to the next level. “We identify businesses that have great potential but not necessarily the funding and the access to expertise to capitalize on that potential,” says Managing Director Alice Vilma, who co-runs the Lab. “The Multicultural Innovation Lab not only connects the founders with investors but provides mentors and advisors inside and outside the firm to help them work through any challenges that may be holding them back.”
While Dedner and the rest of the cohort started their time at the Lab during the pandemic and, like almost everyone else at the firm, are working remotely, they’ve already started to address issues relevant to the growth of their businesses, including how to find opportunities during economic downturns like this one. The challenges are real: Even in typical times, 20% of new businesses don’t survive their two years, data from the U.S. Bureau of Labor Statistics shows2, and according to a recent survey, 43% of small business owners said they believe they have less than six months before permanent shutdown is unavoidable due to the pandemic.3 The retail and hospitality industries have been particularly vulnerable.
But Also Presents Opportunities...
If the pandemic has presented entrepreneurs like Dedner with new markets that require disruptive solutions, it has also created other advantages, such as lower interest rates for startup capital and small business loans, cheaper prices on used equipment and office rent, as well as more tech talent suddenly seeking new employment opportunities.
Just ask Lab cohort member Erica Plybeah, the founder of MedHaul, which offers health-care providers an easy way to book nonemergency transportation for people with special needs. “I look for different personality types and work styles and team members who fit really well with our values, which are high performance, high integrity, and productivity,” she says. In the wake of layoffs resulting from the pandemic, Plybeah says she can afford to be more selective when adding to her six-person, Memphis-based team.
Like Dedner, Plybeah has managed to find ways to succeed during the pandemic. “We were already targeting patients who are either immunocompromised, elderly or have special needs,” she says. “Patients with cancer or diabetes, for example, are advised not to take public transportation, even if it is available, because their weaker immune systems put them at higher risk for serious complications from the coronavirus, so they need alternatives. For that reason, we've seen a dramatic increase in interest for the use of our platform.”
Disruption Is the Common Thread
MedHaul helps patients, as well as doctors and hospitals, says Plybeah, whose late grandmother’s experience with medical transportation inspired her to launch her business. Her grandmother was a diabetic, double-leg amputee and “we found that it took about 11 human touches to actually schedule a ride for her,” she says. “MedHaul is the solution I wish my family had for my grandmother.”
Another entrepreneur in this year’s cohort, Dr. Hilary Jones, has also found success with a health-care business model during the pandemic. Her patients, however, are pets. Formerly a practicing veterinarian, though she still occasionally volunteers and does relief work, Jones says that she and many of her colleagues were spending far too much unbilled time responding to client emails, phone calls and texts. “Don't get me wrong—as vets, we very much want to reply to every request, but we're just inundated and don't have the resources to deal with all of that,” she says. “I figured out I was giving away over $100,000 a year of time and expertise.”
TeleTails, a software platform that connects pet owners with online, high-quality veterinary care, lets vets convert those unbillable communications into “standalone, monetizable, structured consultations,” says Jones. “For clients, we're giving them access to high-quality, trusted information from their vets, rather than Dr. Google. And because it’s more convenient than traditional vet visits, people are using it as soon as they spot problems, which leads to better outcomes for pets.”
Business has surged recently. “Since coronavirus, we had a big spike in interest,” says Jones. “We’ve grown 338%.” But that success also can come with challenges, which she hopes to resolve during her time in the Innovation Lab. “We want to make sure that we have everything scalable, so that we can continue to offer that really high-quality service to our clients, even when we are four times the size we are now,” she says.
Says Vilma, “Our core value propositions are based on in-house experts with broad market experience who can act as mentors and advisers, extensive networks of investors, and original thinking and lived experience about the particular problems and challenges that women and multicultural entrepreneurs face. We’re also about building a community for the long run. There is tremendous strength in this shared journey, especially right now.”
While Dedner, Plybeah and Jones have three very different businesses, their definition of how to make them a success is no doubt similar. Says Jones, “Being able to say, ‘Hey, we've helped make life better for people,’ would be amazing.”