When Software Eats the World, Vulnerable Populations — Like Kids — Can Get Exposed to Venture Risk Without Knowing It
I’m a believer in the ‘ software eats the world’ thesis, although I often change it to ‘software enables the world,’ which is not nearly as evocative but also not as consumptive. One byproduct of this movement, especially during the blitzscaling era, were new startups in areas such as finance, healthcare, housing, education, using venture capital to acquire customers at accelerated rates. And when these startups failed, the customers might find themselves confronting situations where a product they relied upon ceased to exist with very little notice.
For the investors it’s of course a disappointing outcome, but the failure is built into their model and they knew going in that ‘taking a zero’ was a potential ending — that’s why they’re ‘ accredited investors.’ For the human being who is your using your service, quite often they don’t have the same visibility or understanding of the risks — there’s no such hurdle to make sure someone is an ‘accredited consumer.’
In the B2C world, especially when the startup is serving a the bottom of Maslow’s pyramid, a flameout ca leave you without a home, a therapist, or your savings. Because to some people on the org chart and on the cap table it’s better to use the last $500,000 to take one last growth hack swing than to manage a wind down.
I’ve said before this is one reason why we are very very careful about investing in addiction or mental health startups. As I wrote in 2021,
Which leads us to the fundamental difference between, say, a small self-funded online therapy practice and one that has taken millions of dollars in seed capital: the latter can acquire a larger number of patients much faster using investment dollars for both customer acquisition and to subsidize the economics of serving those clients. That’s what always gives me a little bit of pause in this particular area — the scale ahead of the sustainability
And some hopes,
Whether you’re the platform providing the therapy or the software powering the therapist, entrepreneurs in this area should have their own version of the Hippocratic Oath. What I’d ask the investors in these companies is that they share the same values. Push for responsible growth and make sure patients are well-served. Realize that when you look at stats that involve quality of customer interactions, drug prescriptions, etc you’re talking about real people, not just percentages. And perhaps most essential, have a plan for what happens if the company doesn’t succeed. What does client offboarding look like, how long would it take and how much would it cost?
This concept is top of mind for me because we are now seeing the potential for AI products to change the quality and economies of service for addiction and therapy once again. As a recent WSJ article highlights, “ When There’s No School Counselor, There’s a Bot,” and one particular company trying to solve for a startling coverage gap in adolescent mental health
The hybrid chatbot is now available to more than 4,500 public middle and high school students in nine districts across the country, many of which are in low-income and rural areas where mental-health services are lacking. The American School Counselor Association recommends schools employ at least one counselor for every 250 students, but says the national average is one counselor for every 376 students. And 17% of high schools don’t have a counselor, according to the Education Department.
This is great! And if you’re founding, building, or funding any of these companies please please please know that you are taking on a responsibility, not just an opportunity. I toast to your success and your efficacy. But know that your customers aren’t taking ‘startup risk,’ they just want some help.
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Originally published at https://hunterwalk.com on March 11, 2025.
