How to grow and exit a business after 186 investor rejections: case of Honest Health, a startup with Ukrainian-British founders

Honest Health is a startup with Ukrainian-British founders, developing an online medical platform that specializes in providing hair-loss-related treatments. It was founded in 2019 by Pavlo Maherovsky and Sam Gluck. In the early days, Honest Health was turned down by 186 investors, but the founders persevered and in 2021 the business was acquired by the US telehealth leader Hims&Hers.

In this article, Pavlo Maherovsky shares how the startup has managed to stay in the market, received its first investment, and closed a deal worth $20 million with a $1.6 billion company.

Pavlo Maherovsky and Sam Gluck. Photo: Honest Health

The idea for Honest Health first emerged when the two of us met during our MBA at London Business School. We started having conversations about the healthcare market, and these soon grew into conversations about starting a business together.

I came to the opportunity from the patient’s perspective. I was previously a customer of a hair loss clinic in London, and I had witnessed first hand the inefficiency and expense of in-person private treatment. This clinic would use pressure tactics to make me buy more expensive treatments, and once every few months, I’d have to go back into a pharmacy to pick up prescriptions.

Sam came from the provider’s perspective. Before Honest Health, he’d already built two healthcare businesses with his mother: a primary care clinic and a pharmacy. Sam was surprised by how old-fashioned people’s attitudes were when it came to healthcare. Pre-pandemic, fewer than 1% of medical appointments took place online.

We were looking for solutions, and that’s when we recognized the emergence of the direct-to-consumer (D2C) healthcare category in the US, with companies like Hims & Hers, Curology, Nurx, and others, and it clicked. They were offering a variety of telemedicine solutions for medical issues, including erectile dysfunction, birth control, and dermatology.

Such an approach could solve the problems of inefficiency and the high cost of medical services. So in 2019, we launched our product Freshman, a D2C platform that offers subscription-based remote treatment for hair loss.

Fundraising was consistently the biggest challenge we faced early on in the business.

Having been turned down by 186 investors, we bootstrapped the business with our limited savings. We built and launched the original product, Freshman, on a tight budget of around £35,000, which came entirely out of our own pockets. Pile this on top of the fact that we’d both just taken two years out to study MBAs—and taking on the significant student debt associated with that.

During our fundraising journey, we spoke to many investors – and the vast majority of them didn’t invest. It was difficult to deal with at the time. It makes you question what you’re doing and puts doubt in your mind because we were very fixated on trying to secure a big fund to invest in our business. But actually, the investors who added the most value were some of those angel investors with smaller cheques, but they provided much more value over and above the financial investment.

In 2020, everything changed: suddenly telehealth became a necessity, then a norm.

The COVID-19 pandemic triggered a rapid acceleration of the trends that we predicted back when we started in 2018. Out of necessity, healthcare provision became remote where possible, and consumers began to see the possibilities that technology could provide. Compared to the 1% who had used telehealth before the pandemic, in May 2020, around 37% of medical appointments took place online.

We witnessed over a decade-worth of growth and adoption in the space of six months. The company grew by 800% over the course of 2020 alone. By early 2021, we had thousands of men around the country using our treatments each day.

Ultimately, the hard work all paid off. We closed our seed round in November 2020, which included investment from VGC Partners and Fagron, the leading global pharmaceutical compounding company. This seed round helped us hire our first employee, Head of Growth, build further momentum in the market, and ultimately led to our acquisition by Hims & Hers Health, Inc.

Our company is now 100% owned by Hims & Hers Health, Inc.

We were put in touch with Hims & Hers by one of our investors, who was an angel investor himself and a recently exited founder in London. He was just very, very plugged into the tech community in the UK and had known Hims & Hers for a while, and he just made that connection for us. As soon as we started talking to the Hims & Hers team in early 2021, it became clear that we shared a vision for the future of healthcare, and even more importantly, we knew right away that there was a great cultural fit too.

Our company is now 100% owned by Hims & Hers Health, Inc. Sam and I are now responsible for managing the Hims & Hers growth and expansion strategy in the UK.

Image: AIN.UA

Now, without the stress of having to think about our next funding round, we can focus on what we do best: building our business, broadening our range of products, and finding new ways to delight our customers.

Getting rejected many times is part of the game

What’s crucial to remember through the fundraising process is not to give up. Getting rejected many times is part of the game when it comes to raising investment: look at any successful company, and no doubt they’ve been rejected by investors at some point. Here are some of the best lessons we learned about fundraising:

  • You have to optimize your story. One thing we hadn’t really polished at the beginning was what exactly our company’s story was, and where we saw it going. This needs to be clearly thought through, and framed correctly, in order to resonate with investors.
  • Understand where you fit in the ecosystem. One of the best quotes we heard about fundraising is that ‘VC is fractal.’ There are big investors and there are small investors. There are Series A investors and there are seed investors. There are VC funds and there are angels. Each one has a different mandate, a different risk appetite, and different expected returns. There’s no point only aiming for the top investors that everyone goes for: that’s the mistake we made. Knowing where you fit in the fundraising landscape and therefore knowing which kinds of investors to approach is key to getting funded.
  • Investors prefer lines to dots. The honest truth is that almost no entrepreneurs secure investment after just one meeting. Don’t get disheartened after an investor tells you, “We need to see more traction.” Stay on their radar and demonstrate that you’re heading in the right direction. Add this investor to an email distribution list, and start sending out regular, monthly updates, for example. You’ll be surprised how many investors will start following your progress and reaching out with meeting requests.
  • Momentum is everything. Getting the first investment is hard. But once you get that, everyone else falls into place. By the end of our seed round, we were turning away investors. So think about who is going to be the investor to give you your first cheque, and focus on them.