The founder of one of Main Sequence’s first investments, medtech Maxwell Plus, on failure, timing, and being ahead of the pack

Founders by their very nature see things others have yet to realise.

Their challenge is to then get others to see that vision, believe in and back it. And then convince their customers to use a solution they didn’t know they need.

Seven years ago, Dr Elliot Smith’s Maxwell Plus was just such a startup.

Australian males have a 1-in-5 (20%) risk of being diagnosed with prostate cancer. It accounts for around 16% of all newly diagnosed cancers. It’s the 2nd most common cause of death from cancer in Australian men (after lung cancer) accounting for around 13% of cancer-related deaths in men.

Smith wanted to reduce those numbers with a machine-vision-powered clinician support system. Maxwell Plus was the first startup Phil Morle from the newly-formed CSIRO-backed deep tech VC Main Sequence backed in 2017.

This week, Morle announced the demise of Maxwell Plus in a thoughtful analysis of why things didn’t play out as hoped.

The technology worked, it saved lives, detecting cancers other tests had missed, but as Morle explained “we failed to prove the business model sufficiently to reach product market fit”.

A noble goal does not equate to a profitable one in the world of venture.

He’s collaborated with Smith one more time on the lessons learned, saying “we have encouraged each other to be direct and not to sugarcoat”.

To the naked eye, Maxwell Plus looks like the precursor to Harrison.ai, the medtech launched by the Tran brothers 12 months after Smith’s, initially using AI to find IVF embryos with the best chance of pregnancy. Harrison.ai went on to raise $158 million and is now focused on medical diagnostics – Smith’s original vision.

Five years ago, Startup Daily spoke to Smith about his vision to diagnose diseases accurately to allow doctors to act faster using AI  to analyse medical data, from medical imaging to blood data and genomic data.

“Our initial focus is on prostate cancer, however we’re also looking at breast and lung cancer, as well as neurological conditions. While today there is no cure for these diseases, having an early diagnosis dramatically improves the chances of successful treatment,” he told us in 2019.

AI everywhere now

Smith can see the sliding door for Maxwell Plus.

“Looking at the world now, two and a bit years after the end of Maxwell Plus, it is tough not to be at least a little frustrated. AI companies are everywhere, some more wrapper than others, and direct-to-consumer healthcare is big business. There is, and always has been, a lot tied up in timing,” he wrote.

Dr Elliot Smith

“Sometimes, good ideas are too early or late to hit the right combination of investors and consumers. I think, genuinely, we were one of those. We tried something a little radical in a market that wasn’t quite ready. Our product worked exceptionally well, but we couldn’t quite nail the go-to-market to make direct-to-consumer healthcare (with AI or not) happen. Putting my success aside, I am glad the market has moved on.”

Australia is a small and tough market to succeed in, especially in healthcare, where Medicare means people are not used to paying for services, Smith said.

“If I had my time again, I think it would have been best for us to ignore Australia as a market and focus solely on the US from day one,” he reflected.

“In an industry that requires so much country-specific regulation, you can’t be 100% global all at once, and I think our choice to go with the market we knew slowed us down.”

Smith muses about the complexity of the medical market, the fact that some clinicians saw them as a threat, rather than aid, and trying to determine who the customer was – doctors or their patients. It was fraught.

“We had a good product at the core. Our ML [machine learning] models were good at what they did, and we crossed the regulatory approval hurdle. However, we hadn’t yet nailed how those ML models became fully fledged market-ready products,” he wrote.

“Our clinical network was small, and we worked things out as we went. If I had my time again, I wouldn’t have jumped so quickly to try to make a dollar.”

Then there were the pressures of VC funding for a deep tech company.

“A funny thing happens in a startup the moment you go to market. In many ways, it’s a door you can only go through one way. When you’re in the market, your metrics shift from potential to reality,” Smith said.

“If your assumptions around GTM go to plan, this isn’t an issue. You sell, you grow and you start to get judged on your numbers. In our case, we might have taken that step too early.”

The problem for Maxwell Plus was that “the clinical world moves slowly and steadily, and it wasn’t something we could rush, even if we were confident in our results”.

His other lessons included staffing and moving beyond the mindset of doing it all yourself.

“As the company grew, we needed more than just technical people. A mistake I made, one I now keep a very keen eye out for, is that I felt we needed to have that same familiarity with any other role we needed,” Smith said.

“This was somewhere we should have leaned more on our investor network to help us find good people. Getting experts into your business in an area you’re unfamiliar with can be a bit scary, but in reality, there is almost a well-trodden path in hiring for these roles and judging their performance.”

Ultimately, his reflections are a maxim on startup life and all it entails. The mistakes are what makes you a better founder in the end. It’s just that the ending it not always the one you hoped for.

“There is a lot of stuff I would do differently. I only get to say that because I took the bet at the time. Decisions in any startup are often filled with uncertainty in the momen,” he reflects.

“We made the decisions that best aligned with the evidence we had. We took bets, risks, and choices that we knew weren’t sure things. That’s what being an early-stage founder is all about.

“We don’t get the luxury of jumping back in time and doing things over; ultimately, there’s no telling what the outcome would be if we did. Instead, I’ve done what I can to learn from the six years I spent at the helm. The ups and downs both contributed to who I am now, and if—or, let’s face it, probably when—I put the founder hat back on in the future, I’ll look back fondly even though things didn’t work out this time.”

The investor side

Morle is brutally honest about life on the investor side and the shades of grey in a world many like to see in black and white – investor V founder. He believed, but that faith was not as apparent to the rest of the Main Sequence team and wider investment community – and their views are equally as valid.

Main Sequence Ventures Partner Phil Morle

“As we approached the end of the runway and went to market for the next investment round, we did not have the evidence to show that customers were behind our strategy for a direct-to-consumer market entry,” he writes.

He warns of being swept up in hype cycles, the importance of cofounder chemistry – and the moments when the axis shifts, titling the world you backed – and the mistakes made in focusing on regulatory approval over customer engagement in a race to get to market.

“We burned through most of the initial capital and approached the end of the runway with limited clinical proof and almost no customer insight. The latter point is particularly important because we had a radical idea around how we would go to market with customers,” Morle said.

“When we approached new investors with this incomplete story, they were not convinced. This was my biggest learning. I now live the belief that there is NO deep tech company that is unable to start direct collaboration with customers from the first day. I still hear the argument that there is no point in doing this until we know the product works, but that is not what I learned at Maxwell Plus.”

It’s worth spending time taking a deeper dive into their honest and unflinching account of the lessons learned.

You’ll find it here.