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Using the technology installed by iPorta Corp., which puts seat-mounted computers in the waiting rooms of hospitals, obstetrics clinics and dental offices so patients can read e-mail, play games and surf the web.
Using the technology installed by iPorta Corp., which puts seat-mounted computers in the waiting rooms of hospitals, obstetrics clinics and dental offices so patients can read e-mail, play games and surf the web.

Case study

Expand quickly to gain a first-mover advantage Add to ...

THE CHALLENGE

Sergio Rattner, the founder and CEO of iPorta Corp., needed to find a solution to a Catch-22 situation common to many start-ups. He needed capital to get the company off the ground, but he couldn’t attract customers or investors without results.

THE BACKGROUND

iPorta is a health care media company, which puts seat-mounted computers in the waiting rooms of hospitals, obstetrics clinics and dental offices so patients can read e-mail, play games and surf the web while waiting to see a doctor. Revenue comes from online advertising. In the summer of 2007, the company was six months old and it had just completed a highly successful pilot project in Canada’s largest maternity clinic, Mount Sinai Hospital in Toronto. Ten advertising clients had signed on, a healthy profit margin was shared with the hospital, patients loved having online access while they waited, and hospital staff noticed a decrease in patient complaints.

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However, Mr. Rattner knew he had to expand quickly to gain a first-mover advantage. More engaged users on his computers would mean happier advertisers and more revenue for iPorta and the hospitals. Once he had the high-traffic waiting rooms signed up, it would be hard for the competition to catch up. But he needed at least $1 million to expand the business across Canada, and he had already depleted his own funds.

THE SOLUTION

To break the impasse, Mr. Rattner took a critical look at his company from the perspective of the advertising agencies, his source of revenue. He was providing a completely new advertising channel with benefits that could not be found through any other medium, but because the channel was new, it was seen as risky. Not only did he have to convince the agencies that the risk was manageable, he also had to convince them that they should deviate from their normal practice of developing large-scale campaigns and take a chance on growing with iPorta, one location at a time.

Mr. Rattner explains: “We had to get the agencies to like us. They had to trust us and they also had to believe that we could win in the marketplace. This meant demonstrating tangible results early and quickly, even with a very small network. For further incentives, we offered innovative billing rates, such as a cost-per-action approach that no other mediums offered in our channel.”

Mr. Rattner also provided reassurance by bringing in veterans from the advertising industry as investors and by hiring, as VP of sales, Frank Halbach, a former managing director of the prestigious agency DDB. Their enthusiasm was a potent signal to other agencies and investors that the company would succeed.

THE RESULT

The bootstrapping strategy worked. Within two years iPorta’s systems reached 50 per cent of the OBGYN patients in the Greater Toronto Area, and 25 per cent throughout Canada. After three years, iPorta has established relationships with every major obstetrics hospital in the country and it has signed up the majority of obstetrician clinics. More than 12,000 dentists will receive iPorta computers when the dental clinic expansion begins this summer in Canada. iPorta has also expanded into Britain, France, and Germany, and Mr. Rattner and Mr. Halbach are developing plans to enter U.S. markets.

Would they do it again? Luckily they don’t need to. Their location-by-location growth was painstaking and stressful, but its success gave iPorta the necessary momentum to move quickly into new markets. Indeed, iPorta raised enough money before entering Britain to cover most of London, Manchester and Birmingham – the three largest markets – all at once. The company’s experience shows how important it is for new firms to manage the risk perceptions of the people and organizations it wants to do business with.

Special to The Globe and Mail

Becky Reuber is a professor of strategic management in the Rotman School of Management of the University of Toronto.

This is the third of a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Your Business website.

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