TheBlood: Econo­mies of scale or high scala­bi­lity? #DHDL

In the latest episode of „Die Höhle der Löwen“, the foun­ders Miriam, Isabell and Lukas receive a lot of praise for their product, but also as a team and their busi­ness convinces almost all of the lions. This should hardly come as a surprise to those who know the scene, as they are active in the booming women’s health market with their product.

The Blood makes it possible for women to collect their mens­trual blood at home with the help of a prepared kit and send it directly to a labo­ra­tory for analysis. Here, various makers such as vitamins are then evaluated and trans­ferred to the asso­ciated app. Depen­ding on the problem – PMS or period pain, for example – recom­men­da­tions are then made. In its tests so far, for example, the team has found that about 90% of women have vitamin defi­ci­en­cies, the compen­sa­tion of which can miti­gate the well-​known premens­trual syndrome – the days before periods that are as famous as they are proble­matic.

Despite the often-​cited crisis in the start-​up world, such topics have been getting a lot of atten­tion in recent years, from media and inves­tors alike. The expla­na­tion for this is as simple as it is shocking: the topic of women’s health has been prac­ti­cally slept through until now, even the phar­maceu­tical compa­nies, which are always portrayed as so greedy, could not imagine that millions of women would shell out good money for the relief of their monthly suffe­ring – despite exten­sive and costly market rese­arch and ever new fancy methods such as focus groups or lead custo­mers. It would be amusing if it weren’t so sad, this testimony to a coll­ec­tive failure.

But for such cases, we have start-​ups that have also tackled this field properly in recent years. And inves­tors who very soon under­stood that there was actually something to be gained here.

Like the lions, who are quick to prick up their ears, but this usually means that they also get to talk about the figures pretty quickly, and they make no excep­tion for The Blood.

Nils Glagau rings in the numbers – at least in the edited version – and asks about the sales price. So the viewers find out that there are prac­ti­cally two vari­ants: the one-​time variant with a single kit for 42 euros and the subscrip­tion variant, in which four kits within a year cost 150 euros.

Now, of course, the lions want to know how much of that money actually „sticks“ with the start-​up, i.e. how much money can be earned with such a kit. Unfor­tu­na­tely, the foun­ders have to admit that the lab currently receives around 30 euros for the test costs, but they empha­sise that these will go down signi­fi­cantly with more tests, so that the margin could then be around 60%. From this they conclude – subject to possible factual gaps in the average – that their busi­ness model has a „very high scala­bi­lity“.

But what does that actually mean, and can it be derived so directly from the one factor of a single decli­ning cost type?

Normally, one speaks of a highly scalable busi­ness model when it is easy to produce large quan­ti­ties quickly and, above all, when expo­nen­ti­ally incre­a­sing sales entail costs that increase at most line­arly. Simply put, if sales explode, costs do not explode with them, even though they natu­rally rise as well. An important factor here is usually the personnel costs: if, for example, I can produce and sell 1000 products a month with a team of 20 people, I don’t need 200 people for 10,000 products, but perhaps only 40. The turnover there­fore grows by a factor of 10, while my personnel input only grows by a factor of 2. With 100,000 products, however, I might not even need 80 people, but even manage with 60. So this can only work if as few staff as possible are involved in direct produc­tion or sales.

But we don’t learn too much about that at The Blood. The founder is mainly inte­rested in the fact that the costs per labo­ra­tory test are falling, which means that an essen­tial compo­nent of the produc­tion costs is falling with larger quan­ti­ties and thus the margin is incre­a­sing consider­ably. This is called a scale effect, but it has little to do with a scalable busi­ness model. After all, in this case, manual work – the evalua­tion in the labo­ra­tory – is part of the indi­vi­dual product, which usually has a rather nega­tive effect on scala­bi­lity. Because if the start-​up grows strongly, indi­vi­dual labo­ra­to­ries could quickly reach their limits, so you have to bring in more or set up some yourself. These struc­tures always take a little time, you can’t just press a button to double capa­ci­ties, which is a classic hurdle in scaling – though not an insur­moun­table one. In addi­tion, it’s important to mention that the cost per lab evalua­tion may go down, but it’s still substan­tial – that is, it’s a variable cost that’s always per unit.

However, since the market is probably huge and the labo­ra­tory infra­struc­ture in Germany and neigh­bou­ring coun­tries is probably not exactly bad either, inves­tors would probably assess the feasi­bi­lity rather posi­tively, but would certainly have diffe­rent opinions as to whether such a model really passes for „highly scalable“.

But scalable with good margins is suffi­cient in most cases – espe­cially with a suffi­ci­ently large market and effi­cient ways of acqui­ring custo­mers, about which we unfor­tu­na­tely do not learn much.

But the topic alone and the capable foun­ding team certainly deserve to prove its scala­bi­lity on the market, and the commit­ment of the lions Nils Glagau and Carsten Masch­meyer shows that they probably see it simi­larly. Even if the deal – appar­ently from the foun­ders‘ side – did not go through, we can be curious to see how many more such exci­ting start-​ups this market segment will produce in the future. Hope­fully they will scale as strongly as possible and finally help so many women who have been virtually ignored by medi­cine and phar­maceu­ti­cals for so many years.

Photo (above): TVNOW / Bernd-​Michael Maurer