Ep 46: Thinkie Brain Training - Becoming a Brand of Choice Through Smart Value Creation

Welcome!  Upside/Downside is a podcast about value creation and inspiration for business leaders to grow profits and cash flow.  I'm your host, Matt Cooley. 

Acquiring a unique brain training product from one of Japan's keiretsu conglomerates and turning it into a B2C hit requires guts and vision.  Nick White and his three colleagues at Thinkie took that leap and he joins me on this episode to share several aspects of their value creation journey.

Thinkie's full throttle push is exciting.  Positioning against the 800 lb gorilla market leader, messaging strategies to target segments, what it means to be a science-first company, real-time cash management, and why you may need to argue with yourself when you wear multiple hats in a 4-person company (hilarious!) are just a few of the gems we cover together.

Increase your own neuroplasticity and join us!

Thank you for listening and please visit Upside/Downside podcast and enter your email for my FREE list: "10 places to look for higher profits and cash flow right now!".

Transcript

SPEAKER_00: 0:02

Welcome back everyone. This is Matt Cooley, host of Upside Downside, where we explore value creation and how the actions we take in business drive profits and cash flow and affect everyday people. Joining me today is Nick White, co-founder of Thinky, a brain training solution that provides feedback about how hard your brain is working. It's very cool sounding. The games you play on Thinky, I can tell you personally, are both addictive and totally fun. Full disclosure, Thinky is a supplier partner to a local startup my family owns, and that's how we met. Nick is here today to share some interesting real-time aspects about their value creation journey and how they're navigating growth of their B2C company. Welcome, Nick. Pleased to be here. Really appreciate your time. Hey, Nick, can you tell us about Thinky and how you got involved?

SPEAKER_01: 0:53

Yeah. So Thinky is a device that you wear on your forehead. It's a sensor that's been uh developed over the last 30 years by Hitachi Mitsui and Tohoku University. It originally comes out of Japan. And you wear the sensor on your forehead. It uses near infrared spectroscopy, which is an IRS, to measure the blood flow. That's a dead word. Yeah, it is. It's actually four. Four words. And it yeah, it's it measures the blood flow in real time to your prefrontal. Well, it'll measure it anywhere. But in this case, what's important is the prefrontal cortex. You could actually put the sensor anywhere on your body and it would tell you what the blood flow looks like. But what's important when it comes to staving off dementia and improving maintaining your cognition is the prefrontal cortex, which is the front part of the brain. It's got two lobes that are above either eyebrow. And it really governs, it's kind of the pilot or the bridge, captain's bridge, if you will, to the rest of the brain. So it assimilates everything that the rest of the brain is doing and helps you interact with the world. And then when you get feedback from the world, it is the first part to assimilate that as well. So that's the important part about thinking in terms of it being a sensor. And that's what's really different about us is we offer a sensor as opposed to just an app. With our app, you can do a variety of different things. We provide neuroscientist design games, or you can actually bring your own exercise. So if you play piano regularly, want to learn Spanish, play chess, whatever the case is, we'll tell you exactly how hard your brain is working and whether that activity is rejuvenative and restorative for your prefrontal cortex.

SPEAKER_00: 2:30

Wow, that that's outstanding. And I assume you don't have a lot of competitors in this space.

SPEAKER_01: 2:35

There are some, there are non-sensor-based apps that have done really, really well. Lumosity is one of them. They've had 100 million downloads, which is shows that there's clearly an interest and a need here that has been identified in the market. And then there's a company outside of Sweden called Mendy. They've sold 50 odd thousand of their sensors. They use the same technology, but they're not focused on cognitive training. Our sole purpose is to ensure that you can maintain and if possible improve your cognition because that is what's going to stave off dementia. We all go through cognitive decline or the potential for cognitive decline after about age 30, 35, when the prefrontal cortex is no longer automatically neuroplastic.

SPEAKER_00: 3:19

Wow. Fascinating. How did you get involved with Thinky?

SPEAKER_01: 3:24

Yeah, so it's a Japanese company originally. We spun it off from Mitsui just earlier this year. Mitsui owned it and for the last six years put five and a half million dollars into Thinky. And they were really trying to put together a B2B play because they own Mitsui's a huge company in Japan,$100 billion. They uh they do everything from ramen to rockets, is like the way that they position themselves. So it's and and everything in between oil exploration, steel production. It's just crazy. They have a big health and wellness business as well. And they also own a bunch of senior living communities throughout the U.S. And that this was a way for them to monetize their business in a in a different fashion. And it turns out that it's kind of tough to get an 80-year-old retiree to wear a sensor and learn a new app. But the uh the app was being used, well, the app and the sensor both were being used as sales tools to the adult children who are looking to perhaps enroll their parents in those senior living communities. And they were like, wow, this is something I want so that I don't end up here any sooner than I have to. So that that's how sort of Thinky had evolved. In my case, my brother is a Japanese translator and lived in Japan for 20 years and has very deep connections here in the Seattle area, the Japan America Society, the state of Washington, and other other special interest groups. And he caught wind of the need for a marketing person who was available and had the experience both in B2B and B2C. And that's how I got connected. So it was a it was very much who you know, not what you know. And then we spun the business off, and I took the role as the CEO earlier this summer.

SPEAKER_00: 5:10

Oh, that's excellent. Okay, well, that uh that's that's a cool story. It's roundabout. Come it not only roundabout, comes with a lot of responsibilities. But uh I'm sure you're I'm sure you're enjoying the ride. Who are your primary target customers? And is your business model as simple as price times quantity, like like a lot of you know, B2C businesses, like we just need to sell more? You know, with the infrared sensors that accompany your free app. Will you look at moving back into B2B like the original heritage of the early, you know, the earlier you know, attempt uh when it was owned by Mitsui? Like what what could you just expound on your business model and and kind of where you're headed with that?

SPEAKER_01: 5:53

Yeah, it's pretty simple right now. We want to keep it pretty cut and dried. We sell the sensor, one-time cost of$299, and then the app is free. But if you want the extended functionality of the app, it's$9 a month or$79 a year. So you can use the app in a limited fashion without the sensor, with the sensor, whatever works best for you. We're really targeting two different demographics. One is people who are about 55 years of age and above, who are concerned about preserving the cognition that they have. Because the brain is neuroplastic up until about 25, and then you actually need to work at that, much like your physique takes care of itself up until you pass through your 20s, and then you actually have to work at maintaining your physique. It's the same idea. But the difference between a between physical exercise and and mental exercise is you get a physical response immediately when you exert yourself. You don't get that when you exercise your brain. So that's hence the need for the sensor. I digress. So yeah, the the 55-year-olds are generally, and that's a rough estimate. I'm about to fall into that category myself, are looking to preserve the cognition that they have, knowing that cognitive decline is a potential reality waiting for them if they don't. Same thing as cardiovascular disease, all the same reasons why we take care of our physique. And then there's people who are 35, about 30, 35 to 55 years of age, who are really looking for a way to improve their cognition and improve their professional prospects as a result. They're in their prime earning years, they're perhaps building a family, and want to be able to keep their sharpness, their mental acuity as best they can because it's going to give them an edge over others. You could kind of think of these people as the biohackers. Sure. And that's that's a that's a pretty sizable group in North America, larger than I had expected. So we really sell to those two different demographics, and they have pretty differing purposes. You'd asked about B2B. I think that ultimately, after we get up to several thousand users, we're gonna turn back to corporate wellness programs and approach them. We already actually we've been approached by some, but they want to see that we've proven the model with, you know, instead of hundreds of customers, thousands of customers, so that they know that it's viable and then we can look at pretty broad distribution there. So that's essentially where our pivot point would be, but I'd say that's two or three years down the road.

SPEAKER_00: 8:28

Right. Okay, that that's neat. That's neat. B2C can be notoriously complex to figure out. Yeah, I know you're living the dream right now. What messaging are you finding converts your target customers to a purchase decision? And are those do those messages cost, you know, a materially different amount to go effect? For example, being backed by science, which is a huge thing for a lot of companies today. Gamification, you know, that's another big selling point. There's also a recurring revenue aspect to your business when you you outlined your pricing. So, how do you optimize across all of these things in the B2B space and capture those customers?

SPEAKER_01: 9:07

Yeah, that's something that we're wrestling with right now is the packaging of how we're going to put together our services. We've found that people respond to different incentives and different messages. Uh what we don't try, what we I try to avoid is coming approaching it from a fear-based standpoint, because we don't want people to act. That's not a good way to get them to sustain their activities. What we want to do is dovetail with the activities they're already doing. So if you're already somebody who's focused on your physique and you know that you need to take care of your mind, then you're already in the mindset to do that. If you're somebody who's concerned about dementia, then you're you're already in the mindset there. You may all, excuse me, you may already have a cognitive routine that you you use on a daily basis. And so if that's the case, then Thinky will support that and tell you exactly how effective that is. But it is from a messaging standpoint, we we are a science-first company. We, like I said, 30 years of RD behind our sensor and 20 years behind the software. So we're very much a science-based company. And not everybody needs that. They want to see that it's there, but very few people really delve into the random, randomly controlled trials that we've run and look at the results at that. But there are some, and so you need to have that as a means of passing muster. But then after that, it's really a question of is this personalized for me? And that's what the sensor does. Is this gamified and something that I'm gonna want to do as opposed to feel like a chore? We've tried very hard to build the app to do that. And then is it efficacious? Does it actually work? And so we give feedback throughout. You only need to use Fifth Thinky for about 15 minutes a day every other day. So it's not an onerous sort of, I need to pack a change of clothes and take a shower the way the gym is. It's something that can dovetail with your existing routine. So we try to be as friction-free as possible and and work with where people are at. But we find that that the science first and then the personalization, the gamification, the just uh the very personalized aspect of thinking is has been a pretty winning message for us.

SPEAKER_00: 11:20

Okay, that that's great. And and without getting into details, are the unit economics around you know, costing that out and how you would you know, how you approach that wildly different? Pro probably not, right? It's probably just different messages that you put out through the Yeah, not terribly.

SPEAKER_01: 11:37

Not terribly. You know, customer acquisition is is the key right now. We're our costs are our costs. We're working to get them down so that we can improve the margin. But we manufacture our device in Japan, so it's darn near bulletproof and maybe a little bit over-engineered. It's in terms of it's it's great. It'll last forever. That kind of hits your margins as a result. So we're we're working on ways to bring that down. But it really that who we're going after doesn't change the equation for us a whole lot in terms of profitability. It's more about getting folks excited, starting with the sensor, understanding the need for a sensor so that you can get real-time feedback. Otherwise, you'd you have no idea whether your time's being well spent or not, and who wants to do that. And then figuring out how we're going to get those people to upgrade or turn on the app and get into a recurring revenue scenario. And that's, you know, we've had varying degrees of success. There's there is subscription fatigue out there. So we're considering putting together a bundle that where, you know, you pay a flat fee and you get a lifetime access to the app. So we really want to be flexible to what people need. And that's required a lot of delving into our customers and our failed sales when people are kind enough to spend some time with us when they say, look, we don't, I'm not, I'm not gonna buy this. Have managed to make a couple sales as a result after talking to those people, but really it's important for us to know why it doesn't work as much as why it does. Sure. So we can adjust to that.

SPEAKER_00: 13:08

Oh, that's great. Kind of a related question. So from a cash perspective, you've got to invest up front in in a lot of things, right? Development, maintenance, inventory, marketing, you know, you you you produce in Japan. So, you know, that has its own hair right now in certain certain situations. So how do you reconcile your market forecast for a B2C business like this with your cash budget? And it seems like you're I know you're a relatively small operation, but it seems like your marketing and and finance team need to be besties, quite honestly. How do you handle all of that?

SPEAKER_01: 13:43

Well, we're a four-person shop. So I am marketing and part of finance. Perfect.

SPEAKER_00: 13:49

You can argue with yourself. Yeah.

SPEAKER_01: 13:51

And I I do late at night many times. Are we are we making the right decisions? Are we are we going the right route? Is this the right way to invest? And that's just, you know, I'm not unique in that regard. Anybody who runs a startup has to deal with that every day. But it is a reality, a wrestling match that's can't be avoided. But I've got really good partners. I've got Kate is our technician and she's in Vancouver. She does a really good job of putting together an app that gives a very great experience. She comes from a design background and gives a very great experience. And she's also got stroke rehab experience. So she understands this space and what people are going to respond to. Yeah. And then Kota, who actually started the business, has moved back to Japan and is heading up our commercialization and serving as a liaison with our manufacturer over there. So he's working on trying to get our costs down so that we can get the bill of materials to something that's more in our favor. This was when you're operating with Mitsu under the auspices of Mitsui, cost isn't generally the biggest, you know, and they have enough leverage that they can kind of throw their weight around.

SPEAKER_00: 14:56

They can round their numbers up to the nearest million or whatever. Yeah, yeah.

SPEAKER_01: 15:00

We were, we were not a rounding error on a rounding error. So it was just, you know, it's kind of absurd that how things are, how different things are, but it's caused us to have to impose a lot of discipline on our operations, right? We take, we distribute money to the owners as a stipend very judiciously because we know that every dollar we take out is a potential for a customer not to be one. So we we have to be real careful when it comes to that. There's a lot of ramen that's eaten at my house. My kids love it. My wife's not loving it. I'm sure. But uh yeah, it's you know, it it but that's just the nature of a startup. We're we're looking for funding. We bootstrapped the company it through the summer, and we're we're looking for funding now. We've got a million-dollar convertible note that's on offer. And uh we've got about a third of that landed thus far, and I hope to have the rest of it by Thanksgiving. But between now and then, it's really a this touch and go sort of dance of well, we want to start this marketing program, and it's gonna cost us X, and we only have a fraction of that right now. But if we don't, then we don't have the revenue to show to investors that we've got momentum. So it's sort of a chicken and egg situation. But again, it's not it's nothing that any startup owner doesn't face.

SPEAKER_00: 16:18

But you're dancing, and you're dancing like all startup owners have to dance. And no, I mean that's that's totally understandable. Where do you see Thinky in a few years? You've got a lot going on, you know, as you've explained the last several minutes. What what's going to happen in the next three years, you think?

SPEAKER_01: 16:35

Yeah, that's an interesting question because we're really creating a product category that doesn't already exist. Like I'd said, there are competitors out there without a sensor, but a great training app. There are competitors out there with a sensor, but they don't do the cognitive training. I want to create a platform. So you could use the Thinky Sensor with really any sort of stimulus that you choose. It could be one of those apps, it could be something used in a clinic or a practitioner sort of environment. I'd like to be, I'd like to see us in three to five years as the de facto leader because we are the first mover, we did things the right way, and we're the brand of choice. We're the preferred brand when it comes to improving your cognition and staving off dementia. And that is going to take quite a lot, you know, several thousand. I'd like to see us at in five years at 10,000 users. And what makes that really interesting is as we prove the model with several thousand users and move into more of a B2B distribution model, then we we have a chance to really grow the business in an exponential rate. And we've already been approached by pharmaceutical and actuarial companies saying we want access to that data when it's statistically significant and very broad-based because it doesn't exist anywhere else. It's brain blood flow. Can't get that anywhere. Right, exactly. Yeah, cognition cognitive improvement and response, cognitive response, they're they find that that is a really compelling proposition. So in the end, we could be a platform company where we serve individual users, we serve broader organizations, and we also help improve some of the drug offerings or financial products that are out there based on brain blood flow. Obviously, we want to anonymize that and make sure we don't run into any of the pitfalls that other companies who will remain nameless but have not stewarded their data well. And we've been very upfront with our users with our privacy policy in terms of use about how we plan to use the data. But that's going to require more reinforcement of that and a and a very simple and clear opt-out system as well.

SPEAKER_00: 18:45

Sure. Yeah. Speaking from a purely value creation perspective, that positions thinking nicely to not necessarily pivot, but to grow as you just outlined. And I think that's really cool and seems to be seems to be very well thought out. Well, listen, Nick, I appreciate you taking a few minutes from your hectic co-founder duties today and sharing some thoughts about your value creation journey. And I wish you guys all the best on the road ahead. It just it sounds exciting as anything. Thank you very much. Back into the fray. There you go. And thank you to the listeners of Upside Downside. Please visit visit us on upside downside podcast.com, where in return for your email address, you'll receive my latest list of 10 places to look for higher profits and cash flow right now. See you soon.