Worth

Worth doesn’t show up in a value proposition; it’s under the radar.

My recent investigation of pre-money valuation yields a number: $3 million. That is the current hypothetical value of Humaginarium: pre-grant, pre-investment, pre-product and pre-revenue.

Like any good hypothesis, this one’s just a reasonable guess. It’s based on the parameters of four valuation methods: Berkus, Risk Factor Summation, Scorecard, and Economic. I also took into account the informed opinions of skeptical or auspicious advisors; and factored in the lasting value of cash and intangible assets given to, or generated by, Humaginarium as it bootstraps.

So what’s next after this valuation exercise? There are five steps related to valuation in the foreseeable future:

  1. Ask federal agencies for SBIR seed funding
  2. Ask select companies for dedicated industry knowhow
  3. Ask other companies for transactional corporate sponsorship
  4. Ask select foundations for program-related investments
  5. Ask investors for private equity

I estimate that these five asks may increase early-stage valuation (pre-revenue) to just under $10 million – an amount that seems sufficient to develop, test and launch awesome MVPs that generate serious revenue.

Yet not all of Humaginarium’s value can be measured in dollars and cents. The company exists not to make money, after all, but to promote health literacy and empower self-care. I believe it’ll make a lot of money because our business idea is meaningful and strikingly, uniquely commercial. But it doesn’t exist just to make money. For that reason, I want for a word that connotes value the way I think about it. That word may be “worth.”

The dictionary defines worth and value almost as synonyms, and often that’s how they’re used. But not by me. I associate value with benefit. Whether you’re a consumer or investor, the value of Humaginarium is the benefit you may get from it. Such benefits may be aesthetic, behavioral, educational, financial or some combination of these gimmes. A notable example: adults with a chronic illness have fun while learning stuff that improves their lifestyle and lowers their spend on medicine. That’s four concurrent, measurable benefits. Another example: investors own a monumentally creative solution while working with a brilliant team on the cutting edge of several advanced technologies as they head for an exit of 20x their original stake. That’s four concurrent, tangible benefits. According to my projections, Humaginarium is valuable.

Still, the way I think about it, value is not enough. Humaginarium also has to be worthy. This is nuanced, please bear with me. I associate worth with merit. Unlike value, merit isn’t what people take out of Humaginarium, but what they plow into it. Whether they’re a founder, employee, advisor, investor or business partner. merit is the quality and excellence they impart to the venture. This principle even applies to consumers who are often cutthroat when it comes to spending their hard-earned dough. They want more than their money’s worth! So I unlocked the front gates by welcoming consumers into Humaginarium for free; not just into the foyer but free to roam the whole house. The attention they give, the devotion they consequently pay to their own marvelous bodies, the merit they enact when they radiate the insights of Humaginarium, that’s what I mean by worth.

Worth doesn’t show up in a customer value proposition; it’s under the radar of value. Worth shows up in the pride that Humaginarium makes people feel, the honor it bestows on them, the belief that what they’re doing – researching, making, investing, selling, using – really matters in real life and in the brave fantasies of an unshackled imagination.

Specific Aims

When consumers are ready to transfer knowledge from the fantasy world of play to the real world of health.

I recently received a green light from the National Science Foundation to apply for Phase 1 SBIR. The invitation was prompted by my “Project Pitch,” a compact description of R&D that Phase 1 has the potential to support. My proposal calls for a series of experiments, conducted over a several months, that may confirm the technical feasibility of scientific, educational and commercial goals set for the video game component of Humaginarium.

The video game is one of four components of my model unit. Maybe the most exciting and creative, but not the most powerful and impactful. Why? Because the video game is for learning huge things while having intense fun, but that’s as far as it goes. A video game by itself cannot make learning stick. If all I do is make incredible video games for health, that may not move the needle; it may not produce tangible and valuable outcomes.

The job of moving the needle is performed by a different component of Humaginarium. I call this the Diagnostic (versus Game). The Diagnostic is where consumers go AFTER having fun and learning the science of chronic illness. They go there to figure out what to do with incipient health literacy that emerged in the game. They participate in the Diagnostic when they’re ready to transfer knowledge from the fantasy world of play to the real world of health; i.e the human body and the experience of life that the body makes possible.

The Diagnostic is the subject of my “Specific Aims” document: a single-page précis that describes what Humaginarium would do with a Phase 1 SBIR from the National Institutes of Health. NSF requests a Project Pitch whereas NIH requests Specific Aims in order to prequalify applications for funding. Since grant writing takes week or months, and grant reviewing takes additional weeks or months, both agencies want to discourage laborious submissions that are just not a good fit for their SBIR mandates. I sent my Specific Aims to program officers at NIDDK (National Institute of Diabetes and Digestive and Kidney Diseases) because my R&D concerns mitigation of metabolic syndrome and diabetes mellitus type 2: morbid conditions in the NIDDK wheelhouse.

Actually I sent my Specific Aims twice. The first submission, a couple of weeks ago, was like throwing a stone into a pond and not seeing ripples form. Eventually the eerie stillness made me wonder, so I opened my file and read my text. OMG it was bad! Bad meaning incoherent, meandering, dotted with idiotic rhetorical flourishes, doomed to failure (in my opinion). I couldn’t fathom why I wrote it that way; couldn’t imagine why I sent it after writing; and couldn’t guess why it wasn’t immediately spurned by the agency as DOA. I hated it.

The writing was bad, but the ideas lurking behind the words were pretty good (in my opinion). So I started over; rewrote my Specific Aims as quickly as possible (fearing that NIDDK would acknowledge my first draft before I replaced it), and submitted the second draft with a cover note of mea culpa and fuhgeddaboudit and I’m not the a-hole that I seem to be.

I may not grab the brass ring with my second draft, but at least I won’t be embarrassed by it. “The tangible yield of my Phase 1 experiments will include cloud-based, self-administered qualification and prioritization mechanics for setting health goals, conducting intimate risk-assessment, contextualizing a personal choice architecture for change, modeling behavior changes to predict impact, and reinforcing medical and lifestyle resolutions.” In a nutshell that is the Diagnostic. It doesn’t already exist anywhere; it’s a linchpin for making health education stick; and if NIH lets me propose it for Phase 1 R&D, it may practically guarantee that the individual outcomes I promise with Humaginarium will be delivered en masse.

Pre-Money

Pre-money valuations are often guesswork loosely based on creative analytics.

Humaginarium is pre-money in a cardinal sense of the term: no financing, no outside investment, no revenue. We’re clean as a whistle! Nonetheless we’re an economic entity with latent equities: stakeholder contributions of facilities, services, material, time, and cash. These significant contributions are measurable and have practical value. Surprisingly then, though we’re unfunded we’re not poor. We have operating and capital budgets, expenses, cash flow, an elegant brand, and a business model though we’ve yet to write a profit and loss statement. This may sound like a classic tech startup holed up in a garage, except we occupy several garages.

Our financial situation is going to change soon, so I’m working on our first pre-money valuation. Not all startups do this, but I feel it’s worthwhile. A pre-money valuation assigns a total net value to our present and near-future company so that I can rationally price shares in Humaginarium. Shares of ownership will be exchanged for services in some cases, for hard cash in others. However not all contributors will receive Humaginarium stock; only those who want it and can materially enhance the company’s total value.

Even after three years in my virtual garage, that word “rational” still sounds a little jarring. It gets my hackles up because I don’t associate rational with guesswork, intuition, smoke and mirrors, or the Midas touch. However many valuations of early stage companies are concoctions of just these sorts of things. Pre-money valuations are often guesswork loosely based on creative analytics. As much art as science, maybe more. How’s that for full disclosure?

My first approach to pre-money valuation was led by a sensible financial advisor and for that reason it went nowhere. Months were spent trying to build a kind of sand castle with blueprints, but every time we stood back to look, ocean waves from the real world would wash over and turn it into mush. I still have some artifacts of that effort, but I doubt they will ever be used. They don’t enhance the value of the company.

More recently I met with Steve Lindo, a fellow member of the MATTER Healthcare Incubator, whose early-stage company Simergent recently closed a nifty second round of funding. I told him afterwards that he managed to call me out of the dense woods and on to a marked path, one that he had recently walked and was still navigating though Simergent is farther along than Humaginarium. By the way I talk a lot about the value of peer-to-peer learning, positioning it as a capstone of my innovative health education. Steve and Bob dialoging in a small, windowless conference room is a stellar example of how peer-to-peer works. Two explorers on a mountain trail, talking about conditions and directions, shortcuts and pitfalls, techniques and models that may hopefully lead to a summit.

Steve explained several tested methods for pre-money valuation. Everything made basic sense and I was encouraged because he spoke from experience and deep reflection. Afterwards I spent a few hours researching his methods and a couple others that surfaced online. I also sent questions to experts about non sequiturs of pre-money valuation that I just couldn’t make sense of (because, it turned out, they are nonsensical).

My net result is a hybrid methodology that nicely organizes the economics of Humaginarium (rather than some sand castle), plus a list of very doable analytical tasks to come up with my number. I wound up feeling pretty sure that my first pre-money valuation will be drafted soon, this month, so that I can head over to current and emerging stakeholders with a cap table that is as much science as art, maybe even more. That will be awesome disclosure!

Sustainment

Games require non games to capture their full value.

I enjoyed writing my compact Evidence for humaginarium.com. So much has been published about the utility and efficacy of games for learning, games for impact, games for change, games for health. Some of it substantiated and reliable, and some merely personal opinions. I tried sticking to facts.

What could I state about the value propositions of Humaginarium that is evidence-based and beyond reasonable doubt? How could I say it for an audience that doesn’t read scholarly papers, doesn’t care about video games or health education, and maintains a laser focus on controlling financial risk? I’m referring to investors and sponsors seeking assurance that Humaginarium will produce meaningful outcomes if it works as planned.

After posting Evidence I shared it with a few of the subject-matter experts whose research it epitomizes. I asked for feedback, in particular about whether it includes things that are false or misleading or leaves out things that are important.

I received several thoughtful responses including a vital observation by a co-editor of Computer Games and Instruction. It has a kind of sum-up-to quality so I quoted him at the new end of the deck. Here’s what he wrote:

“The big thing that Sig and I noted was that learning is substantially enhanced by helping learners reflect on underlying concepts of game actions, not leaving that to the learners to discover by themselves.” John Dexter Fletcher, email on April 4, 2019

I think the crucial point here is that games require non games to capture their full value. Without the addition of non game experience that dovetails with play, the cognitive and behavioral gains of play may not be realized or sustained. That’s consistent with findings I didn’t originally include in Evidence, demonstrating that games are not self-teaching. As another scholar put it: Instructor guidance must be applied during crucial states in game play to ensure that learning closure occurs. Players must be guided, prompted, motivated and sometimes forced to learn from their experience.

That’s going a bit far, in my opinion, but my opinion isn’t the organizing principle of Evidence. I accept empirical research as factual. Yet it’s also problematic here because entertainment and education don’t always coexist peacefully. One may try to destroy the other as they compete for dominance. Is there a way to forge a peace that allows us to reap the benefits of both at the same time?

I think Humaginarium has found that way. We have integrated extremely important non game experience into our model unit before and after game play.

Non game experience first occurs in a virtual arcade that helps consumers form a robust mental model of biological homeostasis: in other words, the healthy human body. With that model in mind, they enter a fantasy world of video games that are sheer and shameless entertainment. I don’t condone serious games that “force” folks to learn from their experience. Consumers must always have – and feel they have – the unfettered choice to learn and also to play without learning.

After a game is played, consumers can choose to start a diagnostic activity that helps them understand structural differences between the healthy human body they want and unhealthy body they actually have; the body that they are beginning to understand and engage for the first time thanks to playing the game. The diagnostic activity is where “instructor guidance” takes place in Humaginarium: not in game, where it may interfere with flow and fun, but right after the game when consumers have decided that they’re ready to reflect on their experience and make resolutions to take better care of themselves.

Can we be sure we won’t lose them in the interstices between game and non game experience? I think so. We use tech known as stealth assessment. Game mechanics trigger behaviors in players that make palpable their conditions, and symptoms, and beliefs, and worries, and longings. Stealth assessment is seamlessly woven directly into the fabric of game play. It’s quiet yet powerful technology by which consumer performance data are continuously gathered during the course of playing and learning, with inferences made about the level of legacy and emerging competencies.

Stealth assessment design has to include a competency model (what knowledge and skills should be assessed), an evidence model (what behaviors or performance should reveal those competencies), and a task model (what tasks will elicit behaviors that comprise evidence). The data generated by such tasks in game, and captured by stealth assessment, build bridges from the homeostatic paradigm to the fantasy of play to the urgent reality of illness and wellness.

Curves

I will be there with media that is not designed for yesterday, is not backwards compatible, and is wholly invested in the future.

Innovation may be a simple thing, like a better mousetrap. It may also be a complex thing that disrupts every which way. Humaginarium has a toe in the water of complex innovation.

I talk a lot about about bending the curve of bioscience in order to make it more relevant and interesting to regular folks. That’s one way to innovate: for example, by creating enjoyable content derived from radiography and microscopy that can be understood and used by blokes playing video games. Not so they’ll play doctor in a make-believe clinic, but in order to help them find and choose believable paths to wellness. That’s what I mean by “empower self-care.”

Humaginarium is also bending the curve of commercial games in order to make them more meaningful and consequential. Technologies like interactive storytelling, CGI, unlocking levels, and existential conflict scenarios are used to run half the entertainment algorithms, the dazzling half known as escapism. I want to run the other half too: the ancient medical salve known as catharsis, flourishing in the interstices between art and science. People will think better about their physical selves in the real world after they play around with our outrageous fantasies. That’s innovative too.

We’re likewise bending curve of execution in order to make products faster, better, cheaper. As Amazon Web Services says: don’t pick two, take all three! That’s innovation even a venture capitalist may appreciate. I’ve watched infrastructure as a service (IAAS) emerging for about 10 years; now it’s approaching prime time. I’m embracing it like the answer to my prayers, which in fact it is. IAAS lets me achieve practical and strategic goals with the wisdom of the commons and without wasting millions of dollars on crap like square feet and executive bathrooms.

We’re also bending the curve of delivery by streaming high-quality game entertainment from the cloud to all devices. No downloading, no consoles, no costly gaming PCs. Just instant access to video games the same way movies are accessed on Netflix and Amazon Prime. As the issue of latency crumbles, constraints on the video game market will burst. I will be there, with my toe in the water, casting exciting media that is not designed for yesterday, is not backwards compatible, and is wholly invested in the future. Dangerously innovative!

There is one more thing to mention here. We are bending the curve of enactment. This is very much on my mind as I approach the NIH for seed funding. By enactment I mean bridging the gap between learning (thinking) and doing (behaving). This innovation is so rare and desirable that it could be called fool’s gold, but not this time. Influences like behavioral economics and positive psychology push me forward, full of optimism, that we will reliably produce valuable outcomes. Humaginarium will ride them to a new level of achievement with video games that are great works of art; art that not only fills people with wonder, but also leads them out of their fearful fantasies and into objective reality where, more than ever before, sublime differences in the quality of life can be made.

Green Light

We’re not going to leave the long and winding path, but SBIR may strengthen and speed our steps.

The National Science Foundation has given Humaginarium a green light to apply for substantial, non-dilutive, SBIR funding. The light came on right after I submitted my Project Pitch, a required first step that gauges whether Humaginarium can “meet the program’s objectives to support innovative technologies that show promise of commercial and/or societal impact and involve a level of technical risk.

The Humaginarium project seemed like a good fit way back in 2010 when I first looked into SBIR. That’s when I began ideation for this venture, years before founding it. I guess this illustrates how serendipitously I approach even things that are important to me, and how I tend to follow long and winding paths with a compass but not a map. Taking me forever!

The manifold innovative technologies I pitched to NSF include computer models of physiology, high-fidelity time-based simulations of morbidity at scale, state-of-the-art medical CGI, cloud-built and cloud-based entertainment that streams to screens everywhere. My pitch is not about inventing these incredible emerging technologies, but rather adapting them (for the first time) to the direct use and benefit of regular folks.

I pitched my belief that the Humaginarium project will have commercial and societal impact. As commerce it operates in the nexus between entertainment, health, and education: three large, fast-changing and fast-growing industries. It caters to strongly-felt consumer needs at the center of each industry – but in this unique case all at the same time, with the same products that we rapidly make and the same business processes that are noncapital intensive. As a social enterprise, Humaginarium promotes health literacy and health equity not for a few who can afford it, but for everybody who chooses to use it. If activists are leading us to a brave new world where health is a right and not a privilege, Humaginarium may become one of the enabling technologies of that world.

The level of technical risk in the Humaginarium project is pretty high. I say the work can be done, but at the same time acknowledge that it’s never been done before. I speak with the voice of a world I’ve imagined, that doesn’t yet exist: one that will deliberately avoid an apocalypse in health care by empowering self-care. I promise to make health science coherent and beautiful and playful and useful to folks who currently know almost nothing about it; and who typically don’t want to know anything about it (until it’s too late). This is truly a moonshot, one that enables “one giant leap” for every individual who takes a ticket.

In order to mitigate this crazy level of risk, I pitched a series of Phase 1 experiments that may define the most promising way forward. Not only to design, build and test an effective solution, but also to commercialize it. I say mitigate, not eliminate risk, because the Humaginarium project is a lion that doesn’t wear a leash. We won’t abandon the long and winding path because that’s where know-how and value are captured. Still, SBIR can speed and mightily strengthen our steps. The green light thrills me like a call to arms on the White Mountains.

Click here to read the Project Pitch.

Scientific Entertainment. Variation on Academic Study, by William Mulready


One Word

We in our time, in our world, can master fate with one unchanging and unfaltering word.

One Ring to rule them all, One Ring to find them, One Ring to bring them all, and in the darkness bind them.

I recalled Tolkien’s incantation during a recent marketing workshop for startups. A facilitator had been lulling me to sleep with familiar bromides about 5 Cs and 5 Ps. Then suddenly she posed a striking question! A really good puzzler that I never before tried to answer and wasn’t sure I could.

“In this challenge,” she said, “you’ll choose one word that epitomizes the difference between Humaginarium and its competitors. One word you’ll coin that others can’t credibly use. One you’ll own that others can’t easily copy. Everything in Humaginarium will sum up to it. Customers will value and love its meaning, because it’s the generative organ of your brand.”

OMG! I expected to struggle for weeks or months and eventually give it up. After all, I’ve used tens of thousands of words to discover, explain, and promote Humaginarium. Distilling my sea of rhetoric into a single sparkling drop felt impossible. I squirmed, “This is ridiculous. Who cares about one word anyway? Why not two or ten or fifty? Why does one matter?”

The incantation reveals why it matters. Follow along here, I’m unpacking an analogy. I pondered: which one of my words can rule all the others and lead inevitably to them? Which corral my verbiage into a pattern or system or way? Which bind my jabberwocky to an elegant purpose that goes deeper and wider over time but never changes or falters? Which become a beacon that guides consumers to harbors they seek? I came to believe, reluctantly, that one word isn’t impossible. It’s crucial, and I need to know what it is.

The usual suspects were plainly wrong. For example, my word can’t be functional – concerned with how Humaginarium works or is made. Words like simulative, complicated, responsive, interactive, educational, streaming, informative, personalized, adaptive, entertaining, or immersive don’t cut it. Everybody has a version of those things. Functional is not experiential; it’s merely procedural. Neither can my word be conceptual – marshmallows like a brand name, an operating principle, a core belief, a price point or business model. Conceptual is not experiential; it’s spongy. And neither can my word be metaphorical – allusive like a symbol, a token, or an invocation. Metaphorical is not experiential; it’s tricky.

My one word had to connote the wondrous thing that happens when people experience Humaginarium that doesn’t happen when they experience my competitors. The word for that is uplifting.

Uplifting is the cumulative effect of improvement. It’s growth in strength and stature, grace and capability. Uplifting manifests in biology as homeostasis; in religion as zen; in behavior as flow; in learning as vision. To be uplifting is to concentrate rather than divert attention like so much entertainment does. To inspire, embolden, make resilient and curious. Uplifting is having less to fear and more to enjoy.

Every way I look it, this word seems appropriately generative. As video game entertainment, Humaginarium is uplifting: rather than facilitate escape or denial, it returns people to the real world with more understanding and appreciation of themselves. As health education, Humaginarium is uplifting: rather than bewilder and frighten people with medical jargon, it endows them with control of a human body that suddenly makes sense and is actually quite miraculous. As a diagnostic tool, Humaginarium is uplifting: rather than outrageously prescriptive and bureaucratic like 99% of health education, it nudges people to make excellent choices in their informed self-interest. Finally above all, as a work of art Humaginarium is uplifting: it’s gobsmacking cool to look at, play with, learn from, and build on.

Thus my one word, and this is where the magical incantation breaks down. In Middle Earth the One Ring belongs to the darkness. In Humaginarium, the one word belongs to the light. I suppose elves, men, and hobbits were unequal to the solemn power of the Ring, but we in our time, in our world, can master our fate with one unchanging and unfaltering word.