Why 90% of Start-Up Companies Fail with Dr. Dan Cohen

0:01Boom! Shake the room, Fire Nation! JLD here and welcome to Entrepreneurs on Fire! Brought to you by the HubSpot podcast network, the audio destination for business professionals with great shows like The Hustle Daily Show. Today, we'll be breaking down why 90 % of startup companies fail. To drop these vibe bombs, I brought Dr. Dan Cohen into EO Fire Studios. He's a neurologist and sleep technology expert and invented the first automated sleep disorder diagnostic equipment used in sleep labs. He also co-founded CNS, the company that launched Breathe Right Nasal Strips, which he later sold to GSK for$566 million.

0:38In today's foundation, we'll talk about the aha moment that led to this amazing story, how he formed partnerships with Jerry Rice and other athletes, raising both private and public capital, and using mindfulness and meditation to make business decisions, and oh, so much more. And a big thank you for sponsoring today's episode goes to Dan and our sponsors. The Next Wave, your chief AI officer, hosted by Matt Wolf and Nathan Lance, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. AI technology is transforming the way we do business and the media landscape is fragmented.

1:11The Next Wave strives to be the leading podcast on AI technology and how you can apply it to growing your business. Listen to The Next Wave wherever you get your podcasts. Have you ever said to yourself, one day I will write a book? If yes, then I have an opportunity for you. Author 100 is a 100-day program where I will personally guide you one-on-one to create, write, publish, and market your book. I will provide daily guidance and mentorship every step of the way. Head over to Author100.com to sign up for a free call with me to chat about the details. Author100.com. Dr. Dan, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.

1:56You know, that's an interesting question, because let me answer it by not that they necessarily disagree with it, but they omit it. So I guess they don't consider it very important. And that is I deal with a lot of first time entrepreneurs. And it's very rare that I come across anybody who has thought through the business from start to exit. and in particular exiting with, you know, because they have good intellectual property. And even when I deal with investors, I rarely have any of them ask me about intellectual property. And that's so vital to gain value when you sell a business. Well, Fire Nation, we have a lot of value coming your way today, as you heard in the introduction.

2:48A lot of exciting things to talk about with Dr. Dan. And I don't always do this because we like to get into straight value for our listeners, but this is going to be incredibly valuable because your aha moments is very interesting. Give us the Breathe Right story. How'd you come up with the idea? Why? Actually, I didn't come up with the idea. At the time, we were a publicly held capital equipment company, and my VP of operations came in and said, hey, I've got a friend. He would like to meet you and show you his product. And I said, fine. So his friend comes in and when he shows me his product, it's nothing more than a cure ad bandaid with a piece of plastic glued on top.

3:34And, you know, you could you could tell he was embarrassed by it. And and I said, have you shown this to anybody? He said, well, only to my family. And I said, well, what did they think of it? He says, well, they laughed at me. and I told him, I said, well, I'm not going to laugh at you. I said, I think this is a brilliant idea. And, you know, one of my first questions was, have you filed a patent on this? And he said, yeah. He says, I think it's a good enough idea where I went to this patent attorney, this well-respected firm, and we've crafted a patent and we've submitted it. I said, well, good for you.

4:11And as soon as I saw the product, I knew I wanted to take it. And I knew that, you know, Because we were publicly held and because we were a capital medical equipment company, my board of directors would say, you're nuts for taking this product. So I decided I wouldn't ask them about it. I just went ahead and licensed the product. And when I showed it to them, a couple of days later, a contingent of the board showed up at my office the first thing in the morning and said, you like this product so well. Replace yourself in our existing business and you do it. I said, fine. And, you know, so we figured out how to get it to market and we thought it through from essentially start to end.

4:53And it was a very successful business. Now, just to give Fire Nation a really clear understanding about what we're talking about, give us an idea of what this means with the Band-Aid across the nose to kind of help with the breathing canals there. So what exactly is this? You put this on your nose. And I mean, I'm sure most of your listeners have seen it on football players and the like. And essentially, because there's plastic strips and you're bending them down, they want to straighten out. And so when they straighten out, it opens up the nostrils and you can breathe easier. And it took us a little bit to realize that, you know, it's not just a breathing product, but when you breathe better at night, you sleep better.

5:34So ultimately, we changed our marketing pitch and talked about improving sleep. And that was really important to lift the business after it was introduced using football players. And the introduction using football players was pretty novel. You know, we had to get it into distribution and then we had to get the players to wear it. And back then it was going through the NFL head trainers. We badgered them forever, you know, until they started to try it. And then we circulated pictures of those players that were using it. And ultimately, it started to catch on, you know, in the NFL without, you know, we didn't have to pay a person to do it.

6:12It was all free. And this was pre-internet. So it's tough to market something that's that's really novel and new, you know, at that time. And during that time, Procter & Gamble wanted to buy it from us. And they brought me to Cincinnati, had me speak in front of their whole new business development department. and the guy got up on stage who was in charge of the department. He says, look, he says, you're a public company. We know you have 10 million in the bank. We're the world's expert at launching consumer packaged goods. And we can't launch a product for under$50 million. With$10 million, you can't do it.

6:51And I said, well, we've got a plan. I said, let me try. And if I can't do it, I'll come back to you and we'll let you take it. And before we talk about that plan, I want to kind of dive back into something that was so key that you mentioned, which is, you know, a lot of people might have just marketed this as like, look at this helps athletes breathe better. And then people would have looked at it and been like, oh, that's great. Well, I'm not really an athlete or I may just be like a side time athlete or not even really an athlete at all. I'm just here, you know, living my day to day. So it might it might not be for me.

7:23This must not be for me. But when you shifted that product marketing and that pitch to saying, hey, this will help you sleep better. When you sleep better, you're healthier, you're happier, all these different things. Everybody then says to themselves, wait a second, I sleep and I definitely have had bad night sleeps. In fact, I may have a lot of bad night sleeps any given week. This could help. And guess what? It couldn't probably hurt that much because it's an inexpensive product and I can just really test it out and see if this is for me. So Fire Nation, you really need to be speaking to the core of who your ideal client is.

7:56And I love how Dr. Dan just did just that. And you started to kind of get into this a little bit, Dr. Dan, but I really want to dive deeper because you literally rewrote the playbook for launching a consumer product. You did this through radio interviews, NFL player partnerships. I mean, Jerry Rice, I mean, he's the one that when you start talking about this, everybody that knows football, at least, can picture Jerry Rice with this product on his nose. Because, I mean, to me, that was the person that made it famous. And of course, because he was widely considered one of the best, if not the best wide receiver of all times, everybody else wants to say, well, if it's working for Jerry, who's the best, then I need to try this.

8:34And then that's where you got that free marketing that just came from you not paying for that, but just because it's a good product. So talk about that, the launching of consumer products through radio interviews in these player partnerships. We couldn't get the product into distribution and we wanted, we needed to get it into distribution before we introduced it to the football players. Because obviously there would be no place to buy it. And what happened was I had visited the top 10 wholesalers in the country and all the pharmacies had to buy through wholesalers at that point. And so without having wholesalers, retailers couldn't get it.

9:14And so I had to do the radio interviews to basically close the loop between the consumer, the wholesaler and the retailer. And I had to do 400 interviews before we had enough demand so that all 10 top 10 wholesalers had the product so that every retailer could buy it. And of course, when the customer would call us, we literally had a guy that literally closed the loop between the customer, their pharmacist, and the wholesaler to get every sale through and get every store accounted for. And once we had the independence, I couldn't get the big guys to do it. I walked into Walgreens, talked to the cough cold buyer, and he said, how much business are you gonna do the first year?

10:05And I said, 23 million. And he says, you're full of sales. I said, probably. It was really kind of interesting. He says, well, I'm not taking your product. I said, oh, yeah, you'll take it sooner or later. And and so what I did is after I left his office, I made I asked the local rep for Walgreens in the Twin Cities. I said, would you have lunch with me? And we went out for lunch and he controlled 43 stores in the metro area. and I told him my experience with the head buyer for Cough Cold and he says oh yeah he's a grumpy old man he's kind of like that and he says I can take your product I said what do you mean you can take it and he goes well I have control over the counter space I said really and so he he basically took the product on himself for the 43 stores and then he told four of the other regional managers and they took the product.

11:00And then I get a call from the cough cold buyer. He says, get your ass in here. And so I went in there smiling like, yeah, you know, I told you so. And he goes, because the only reason I'm taking this product is because you're a pain in the ass. And I have to process all these orders from the regional managers myself by hand. He says, I'm literally, this is a payoff to get rid of you. I said, fine. I said, I'm happy to take it. And then I took his order, which was for$200 ,000. And I met with the most prestigious general merchandise regional brokerage house in the country. And they were luckily based in Chicago, where Walgreens is headquartered.

11:46And I went I went down there and I and I said, here, I've got a present for you. And I slid. I basically I took the two hundred thousand dollar check and I slid it across the table and I said, here, this is yours. And and there were two of them, the Pan Cal brothers. And they looked at each other and they said, what are you doing? You know, I said, I'm going to give you this order. You can give it back to me and you get commission on it. And I want a favor in return. They said, name it. And I said, I want you to contact what you consider to be the eight best other regional brokerage firms around the country.

12:18And they said, done. And in no time, we jumped from 3 ,000 independent retailers to 40 ,000 stores across the country. I mean, Fire Nation, this is just an example of first they ignore you, then they laugh at you, then they fight you, and then you win. And Dr. Dan, I can just tell by just your tone of voice and by the way you're going about this that you knew from almost the first minute that this was something and that people were going to come around to it. It was just a matter of when they were going to figure it out because you had already figured it out. This was meaningful. And Fire Nation, we have a lot more to talk about around this topic, around capital, mindfulness, meditation, when we get back from thanking our sponsors.

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14:52Simplify compliance and get$1 ,000 off at vanta.com. slash fire. That's V-A-N-T-A dot com slash fire. Dr. Dan, we're back and you are really big on using mindfulness and meditation to make business decisions. I need to know more about this. I think it's really important that a person in business is receptive to any idea that comes their way. And the best way to be receptive is to basically slow down and listen and watch and see what comes your way. And don't judge it too quickly, but see how it feels. And I don't mean think about it. I mean, how does it feel? Because there's a big difference between knowing and thinking.

15:44Knowing is a felt sense, and it's sort of in your gut. And the more receptive you are to feeling that and getting a strong sense of knowing that, hey, this is going to work, usually does. I mean, I'm a neurologist. So you'd think that, hey, you know what? This guy uses his brain a lot. Well, I generally use my brain to formulate questions and I let the answers come. And I think that's really key in making good decisions because I can tell you right now, My gut is smarter than my brain. Fire Nation, I love this process that you go through when you're really understanding the power of being present, of taking time to sit down and say, what's working right now?

16:27What's working for me? How can I balance what I'm doing as a businessman, as a businesswoman, as an entrepreneur? Because I mean, you went through some pretty stressful times that you needed to use mindfulness. You needed to use meditation, Dr. Dan, I'm sure, to just take a deep breath because you are raising both private and public capital. I mean, that's a very scary process for a lot of people. So I want to hear more about how you raise capital from high net worth investors. I do more of that now in my current business than I did back then. Back then, we were in the early 80s, and that was sort of the beginnings of venture capital.

17:04And at that point, the venture capitalists tended to be guys in their 50s and 60s, and they were operators. So you weren't dealing with, you know, somebody who just got their MBA from Harvard and had no business experience. You know, these were people that had a lot of experience and they had a lot to teach. And so that was very, very helpful early on because the advice you were getting was seasoned and they could introduce us to the right people, you know, essentially other VCs primarily. that were like them. And so that wasn't too hard. And we went public early because we needed the cash and the market was receptive.

17:44So, you know, we were in public when I was 35 years old. And and I actually enjoyed being a public company because you had access to a lot more capital and people knew about you so that it was easy to, you know, open the door and meet other people. and basically expose what you're doing so you had a broader audience to reach. Now, what exactly would you say was a breakthrough that you made when you were looking to raise capital? I mean, what do those conversations look like? Like, how did you get through to individuals that were looking to put their money in that this was a good idea? Well, for Breathe Right, it was really just, since we were already public, I contacted all the stockbrokers I could and I sent them samples and I had them distribute it.

18:35And so, you know, it wasn't hard when you did that. You had an inexpensive product to get thousands of people trying it and investing. So it was pretty straightforward. Now, there are massive and major challenges when you're creating a new industry, you know, something that really hasn't been done before. I mean, that's actually a reason why there's all those images of pioneers who have arrows in their backs because, listen, when we're figuring things out, we get a lot of things wrong. because we don't know what we don't know. So how did you approach creating this new industry with your sleep enhancement and stress reducing technology?

19:11Dive deep on that. That was or has been much more difficult because it's something so new and different that people have a hard time believing it and it takes a little while to explain it. So it's a longer process. You have to be patient, but you have to get your point across in a clear, succinct manner so that they've got something to grab onto as to why it would work. And fortunately for me, I had a lot of credibility because we also pioneered in CNS, the last company, we pioneered the field of automated sleep diagnostics. So I was a sleep expert and we were very successful doing that. And and so people sort of felt like, OK, you know, this is a guy who knows sleep.

20:03He's a neurologist. He knows the brain so we can trust him in terms of his scientific background. The other factor was I was already successful as an entrepreneur. So, you know, they were dealing with somebody who, you know, had already done it. But even so, even with all of that credibility, it was this is a weird device and it's not cheap. And so it was convincing people that the thing really works. And so we had to do a lot of demonstrations so that they could feel it or fall asleep. And we had to start getting people to buy it. And so we're we're at the cusp right now where, you know, we're getting regular orders and the order volume is growing.

20:49And we were starting to get more and more opportunities. communities, but I got to tell you that to launch a product like this is very, very difficult. And I don't think I could have done this if I tried to do this at the beginning of my career. Yeah. And I will say I'm looking at it right now. I'm looking at a picture of it on the website, Soltech Health System. Take a couple minutes and just describe exactly what this system is. It's a closed loop system. So there's a few different parts. The key part is a magnetic generator that generates specific frequencies that impact the body and ultimately the brain.

21:31And this is placed under the bed, on the floor under the bed or on the floor by the footboard if it can't fit under your bed. And it's about 19 inches long and about seven inches wide and high. and there's two magnets in it associated with motors and they spin at the frequencies we want them to spin at which are very very slow the slower than brainwave frequencies and then you have a wrist wearable you know just like the wearables out on the market today and this wearable is a little different because it's really geared primarily for sleep and stress and so it does a different kind of analysis that is much more detailed and it can tell what stage of sleep you're about to move into.

22:15And then what it does is it says, okay, we know what stage of sleep the person is moving into. Let's send a message to the generator, the magnetic generator under the bed to produce these frequencies that we've already determined work best for that particular subject. And then it creates those frequencies. And throughout the night, it may interface with the generator, I don't know, anywhere from 30 to 50 times to make changes. And what those frequencies do is they support the stage of sleep you are in. And all of this is, you know, you start it with an app, you end it with an app, the data comes across, and then you can see it.

22:57But the main benefit here is this is not just a wearable that tells you how you sleep, like the other wearables. This wearable actually works with a therapeutic device and as a closed loop system to produce better sleep. And then you could watch as you use it, how over time it improves your sleep. Fire Nation, I will say one thing when I really shifted my mindset into what are some levers that I can pull that's really going to improve my life, my health, my wealth, my overall happiness, my day-to-day interactions. I mean, man, what's more important than a good night's sleep. I mean, if you have a bad night's sleep, everything is literally unfortunate and not at an optimum level.

23:40And it affects everything you do, at least in my experience, in a negative way when you get a bad night's sleep. And a great night's sleep, you feel like you can conquer the world. So there's obviously still a lot to learn and a lot to know when it comes to our systems and our processes and our day-to-day. But adding in these tools, these systems that are going to help us improve different facets of our life. I mean, that's going to help us overall stack the cool, so to speak. So of all the things we talked about here today, Dr. Dan, I think Fire Nation is really interested to learn more. So what I would love to do is this.

24:15Give us one key takeaway, one thing that you really want to make sure our listeners get from our conversation today, and then follow that up with the best way that we can connect with you, with your company to learn more sleep is is a really interesting topic and what most people don't realize is there are different stages of sleep but they differ in importance and deep sleep is the most important stage by far because it rejuvenates cells that are damaged that you lose it even it even um corrects mistakes in your dna when they occur it supports your immune system your endocrine system Um, it's basically everything you need to, um, essentially heal your physical body, uh, helps with, it helps with an abundant number of, uh, aspects of your health.

25:09Now, having said that the bad thing is that you start losing deep sleep, um, in your twenties, even by the time you're mid to late forties, you've already lost 60 to 70 % of your deep sleep. Right. And by the time you're 80, it's pretty much all gone. So if you look at that, you say, well, this is kind of a ticking time bomb because as you lose deep sleep, you increase the number of chronic illnesses that you are subject to. So it's really all about improving your health. And what our technology has been found to do is it can literally rejuvenate deep sleep. So I'm 72 now. When we started having prototypes, my deep sleep, I had already was reduced to about 20 minutes.

26:05And for a normal 20 year old, you get about an hour and 45 minutes. So I was I was way down there. And on average, now I get an hour and a half. So I get as much sleep as a 30 year old or deep sleep as a 30 year old. And that's that that's a total game changer because before it was four cups of coffee a day and a nap. And now no naps, no coffee. Well, I drink decaf from time to time, but it's a total game changer in terms of health, energy, performance, creativity. All of those things improve when you get good deep sleep. So Dr. Dan, if we want to find out more about what you have going on, what is your call to action for our listeners today?

26:51I think the best thing to do is, as you said, go to soltechhealth.com and it's spelled S-O-L-T-E-C and then health, H-E-A-L-T-H.com. And we have a lot of information on the product and about sleep. And so there's a lot of material that you can learn from. And I think that's probably the best way to gain information. Fire Nation, you're the average of the five people you spend the most time with. You've been hanging out with DC and JLD today, so keep up that heat. For links to everything we talked about, visit eofire.com. Just type Dr. Dan, or just Dan, D-A-N, in the search bar, and the show notes page will pop right up.

27:36One more time, give us that URL, Dr. Dan. It's soltechealth, S-O-L-T-E-C, health.com. Dr. Dan, thank you for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute you and we'll catch you on the flip side. Thank you, John. Hey, Fire Nation, a huge thank you to our sponsors and Dan for sponsoring today's episode. And Fire Nation, successful entrepreneurs are great at three things, productivity, discipline, and focus. That's why I created the Mastery Journal so that you can master these three things in a hundred days. And we're talking step-by-step. visit themasteryjournal.com and I'll catch you there or I'll catch you on the flip side.