Tahoe Startup Scraps Nationwide Launch, Focuses on California

First-time entrepreneurs Eric Shaw and Jeff Vogt were gaining momentum last year in an effort to get investors excited about their Web-based startup. They say the concept behind Talk Life LLC, which connects mental health professionals with patients for phone-based therapy sessions, was favorably received.

But right about the time the young duo were ready to seek more than $1 million in capital, the financial markets seized up. On top of that they had an impressive 400-page business plan for a nationwide operation with therapists available 24 hours a day, seven days a week. But there was one problem: the operation had yet to realize any revenue whatsoever.

Investors balked.

Instead of giving up, Shaw and Vogt changed strategies, went lean and sought small injections of cash from friends and family, surviving on what little savings they had and racking up credit card debt. They did all of the groundwork themselves, like Vogt developing, coding and testing the software for their Website.

“We changed our model completely, from a large scale national launch to a small, bootstrapped approach in California only,” says Shaw, CEO of Talk Life, based in Incline Village, Nevada. “Over the past three to four months we have re-envisioned every piece of our business to be successful with almost no budget.”   

“Over the past three to four months we have re-envisioned every piece of our business to be successful with almost no budget.” – Eric Shaw, Talk Life LLC 

Bank loans, venture capital, private investment and even revenue all are scarce today, but a few determined entrepreneurs still will manage to get off the ground. Talk Life may or may not after its planned launch in February, but its strategy may prove inspirational to others who find themselves in a similar bind.

Talk Life has to date contracted with a stable of 35 affiliated therapists throughout California. The founders plan to grow the business organically (i.e., slowly and on a shoestring budget), but they are hopeful that a tangible proof of concept and positive cash flow eventually will encourage nervous investors to get behind them.

A Simple Concept

Shaw and Vogt, who previously worked together at a Seattle-based employee benefits company, came up with the idea for Talk Life after concluding that people don’t often get the counseling or therapy they need, either out of fear or inconvenience. The original plan was to offer therapy via online chat, but they discovered that telephone sessions were much more effective.

So instead of trying to find a time to visit a therapist, prospective patients can go onto Talk Life’s Web site, find the appropriate professional through its search function, and get help right away.

Talk Life also is geared toward those who are too scared to open up with someone in person, says Dr. Lisa Cooney, Talk Life’s medical director, a licensed marriage and family therapist based in San Francisco.

“The standard of care is excellent, as if they were coming into the office. So the smart business model is retaining the soul of therapy over the phone,” Cooney says, pointing out that this is not necessarily a replacement for traditional therapy and may serve some patients better than others. “For some people, it’s going to be easier to call up instead of looking a therapist in the face.”

Service will be billed in 15-minute increments, but must be paid out-of-pocket. Patients—or customers—may file claims with their insurance carriers, but Shaw says most insurers do not yet cover telephone-based therapy. Talk Life therapists will be encouraged to make referrals for patients reluctant to pay full price for ongoing therapy, and the company anticipates that a portion of its customers will use the service as a stepping stone to more traditional formats.

In a world where people are more and more isolated and often reluctant to reach out for help, the anonymity of on-demand, telephone-based therapy may give some people hope, says William Crookston, a professor of clinical entrepreneurship at the University of Southern California’s Marshall School of Business. But he identifies a few weak points.

“It will have a low barrier to entry,” says Crookston, addressing the possibility that similar outfits will copy Talk Life’s business model. “Also, you can give bad advice and hurt people. And will the individual therapist want to go direct and ace out the intermediary?”

Shaw says the affiliated therapists are contractors and therefore personally liable for malpractice or other legal actions, although Talk Life also will have its own liability insurance as an extra layer of protection. With respect to therapists doing business with clients behind Talk Life’s back, the contract forbids such activity, Shaw says, but leaves enough flexibility to allow therapists to take on patients in a face-to-face setting where appropriate.  

Searching For Cash

Shaw and Vogt (the company’s chief technology officer) originally conceived Talk Life as a nationwide service. They knew how to make it work, Shaw says, but it would have required a lot of upfront investment to conform to the regulations of all 50 states and ramp up its marketing on a nationwide scale. They also wanted to create a network of therapists that would be able to serve most customers 24/7, which would require extensive recruiting efforts, and they considered adding chat groups and other online features that take substantial resources to develop.

Business consultant and seasoned executive David Talon, who mentored the pair, even suggested early on that Talk Life begin small and then expand.

“I asked them if it might be better to start out small, but they resisted at first,” says Talon, also based in Incline Village, who does business under the name iGrowth Strategies. “It’s that lure of starting a big company. They wondered if anyone would want to invest in something that small.”

“I asked them if it might be better to start out small, but they resisted at first.” – David Talon, iGrowth Strategies 

Talon says the freshman entrepreneurs look younger than their 24 years, making the search for financing even more difficult. Even in better times most venture capitalists will not invest in a founding team without a track record whose business has yet to generate revenue. Talon served as Talk Life’s CEO for short time, hoping it would help in the vetting process, but VCs—and eventually banks, after the crisis hit—balked.

An angel investment company offered $20,000 in exchange for 20% of the company, but Shaw and Vogt decided that was not a fair trade. Ultimately, they were able to raise about $15,000 from family members and friends, “which has kept us alive and able to pay our attorneys,” Vogt says.          

Forging A New Path

The turning point came at a venture capital summit last September, when the economy really started to sour, Shaw recalls. They were told point blank that they had a great business plan but would not be able to secure VC funding. The risk appetite for unproven ventures simply had evaporated.

“The competition for the funding was more about how they can help us grow, rather than helping us get started,” Shaw says. “It was our big mistake, because we spent all of our time forging ahead with our business plan—we should have done more execution to get that proof of concept.” 

Vogt explains how their 400-page document outlining the company’s potential revenue flow just didn’t cut it, especially without actual money coming in.

“It is grim,” Crookston says, about fundraising in today’s economy. “So how do you go out with a brand new company with no tangible sales results and come up with an investment pitch?”

“So how do you go out with a brand new company with no tangible sales results and come up with an investment pitch?” – William Crookston, USC Marshall School of Business 

That’s the million-dollar question. But instead of forcing the issue, they decided last November that they would have to go small first in order to make it work. So they put the brakes on their planning and fundraising efforts—although currently they are pursuing a $5,000 microloan—and started “doing” instead, Vogt says. They will instead start by focusing just on California, and by excluding some of the originally planned bells and whistles, they reduced their attorney fees and other related costs.  

“When we do get bigger, we’ll have more knowledge under our belt to know what to do,” Shaw says. “And since we’ll have a profitable business, we’ll get a better valuation. I wish we’d known this six months ago.”

But in the great tradition of entrepreneurship, the path to success is riddled with trials and tribulations. And soon Shaw and Vogt will know if their business plan is a model for success.