The medical-supply startup Bttn had ambitions of being disruptive. Co-founded by JT Garwood and Jack Miller, their vision was to create a convenient “one-stop shop” for healthcare professionals, offering a wide range of products from N95 masks to wheelchairs.

However, two years after its inception, and just one year after a successful $26.5 million fundraising round that valued Bttn at $110 million, the company has faced challenges in gaining customer loyalty over established distributors. Additionally, supply chain issues and a decline in investor support have hindered Bttn’s progress. The company fell short of its projected $30 million revenue for 2022, with CEO Garwood stating that it generated $22 million, a 27% decrease. Furthermore, Bttn’s workforce has been reduced by nearly half in the past year, leaving the company, pronounced “button,” struggling to stay afloat.

“We are closely evaluating how to achieve profitability in an environment where funding is no longer readily available,” Garwood.

Bttn as a Middleman in the Medical-Supply Industry

At the heart of Bttn’s business model is its collaboration with established medical supply distributors nationwide, rather than owning its own warehouses or inventory. Garwood emphasizes that Bttn’s competitors are essentially its partners, as major distributors like McKesson, Cardinal Health, and Henry Schein are the ones fulfilling its orders and consequently contributing to its market share.

However, this argument relies on the assumption that customers will not be hesitant to engage with an additional intermediary, especially when they have the choice to purchase products directly from the distributor. The connections between doctors’ offices and their trusted long-term suppliers have proven to be resilient, posing a challenge for Bttn to establish itself, as reported by some former employees of the startup.

“In our attempt to compete with established regional players, they consistently outperformed us at every stage,” explains Chris Henderson, a former Bttn account executive who resigned after just six months in late 2022. “Many of these individuals saw no reason to switch to us or even give us a chance.”

Bttn in the Wholesale Medical-Supplies Industry

During the pandemic, the startup seemingly found itself in the right place at the right time by providing masks, gloves, and Covid test kits, as the demand for medical supplies, particularly personal protective equipment, was high. However, as the $345 billion wholesale medical-supplies industry faces a scarcity of opportunities, securing business has become increasingly challenging, with the three dominant distributors holding significant influence.

“The medical supply industry in the U.S. functions on the basis of a few major wholesalers who act as intermediaries between global suppliers and hospital markets,” explains Gary Gerrefi, a sociology professor and director of Duke University’s Global Values Chain Center. “In this case, the distributors, rather than the manufacturers, are the most dominant players in the medical supplies sector.”

Alongside the fierce competition, former Bttn salesperson Henderson reveals that the startup faced persistent challenges related to backorders and delayed shipments of products during his tenure. He further notes that employees at Bttn were encouraged to provide inaccurate estimates of shipping times to customers.

Henderson recalls one particularly distressing incident when he encountered a customer who had bought syringes for her diabetic son, only to receive a notification that the syringes were unavailable due to being on backorder. “When I informed her that it would take another three or four days, maybe even a week, she responded, ‘My son has diabetes. This isn’t a matter of uncertainty. I need to have a definite answer,'” he shares.

According to Thomas Haupt, a former inside sales manager at Bttn who spent only four months with the company before being laid off, the persistent issue of backorders and a lack of transparency from senior management created significant challenges in conducting business during his tenure. Haupt states, “At best, it was inefficient. At worst, it was poorly managed.”

Bttn’s Response to Supply Chain Issues

The inefficiency mentioned by Haupt was also felt by customers like Joanna Vasiliadis, the owner of Pure Bliss Aesthetics. In August, she placed an order for specific lip filler needles intended for her clients at her medispa located in Massachusetts.

In anticipation of upcoming appointments, Vasiliadis urgently required the shipment and therefore sent multiple emails to Bttn after the expected two-week shipping time had passed. It was during this correspondence that she discovered the needles were actually on backorder. This led to a month-long exchange with the company, during which she was offered Bttn coupons as a resolution before ultimately managing to cancel her order and receive a refund.

“It was incredibly frustrating because I had just transitioned to independent work,” Vasiliadis expresses. She further adds, “The company was essentially giving me the runaround.” Vasiliadis, who typically procures her supplies from larger distributors, highlights the significant disparity between her experience with Bttn and dealing with companies like McKesson, which regularly provides her with updates via weekly emails regarding backordered or out-of-stock items.

Garwood refutes any claims that Bttn instructed sales staff to provide misleading information about shipping times. However, he does acknowledge the presence of backorder problems and recognizes the adverse effects of supply chain issues on the company.

“It has been an incredibly difficult experience,” he admits. “Not only did we face the same challenges as everyone else in the supply chain, but we also encountered unique challenges specific to the healthcare industry, which are among the most complex in the world. Nevertheless, Bttn’s core belief is centered around resolving these very issues.”

It’s Been Brutal

Bttn CEO JT Garwood

Bttn aims to address various issues, including pricing transparency, by providing customers with the ability to compare prices from different brands. Instead of having to navigate between multiple distributors, the company’s online marketplace is designed to simplify the process of finding product deals and, in theory, promote greater transparency in pricing for medical supplies.

However, experts like Wally Hopp, a business professor at the University of Michigan, express skepticism about whether Bttn has found a viable solution to the problem of supply disruptions. Hopp points out that the industry has a history of dysfunction, which raises concerns about the effectiveness of Bttn’s approach.

“This appears to align with the very dynamics that have contributed to shortages of low-margin medical products time and again,” Hopp remarks.

Amidst the pandemic, the United States faced significant shortages, and these scarcities were not unfamiliar. Gereffi explains that manufacturers, particularly those in China and Malaysia, who produced masks and gloves, played a role in the global supply chain disruptions that hindered the availability of products for American healthcare providers.

Financial Struggles & the Vision for Bttn Future in Healthcare

According to Gereffi, these manufacturers were often stretched thin or heavily reliant on an offshore sourcing model for various medical supplies. His expertise in globalization and industrial upgrading sheds light on the underlying factors contributing to these challenges.

Against the backdrop of the pandemic, Garwood, a self-proclaimed enthusiast of marketplaces, ventured into founding Bttn. This came after his departure from his initial healthcare ecommerce business, which he sold in March 2021. Garwood’s firsthand experience with his previous startup, coupled with the multitude of challenges exposed by Covid, motivated him to combat what he perceives as the root cause of healthcare problems.

Garwood strongly believes that clinicians should devote their time to patient care rather than being burdened by the task of meticulously managing healthcare supplies. He asserts, “They shouldn’t have to worry about cost-cutting for medical supplies.”

While it may have been true that Bttn aimed to alleviate financial concerns for healthcare providers, the company is currently facing its own financial challenges, including layoffs and a shortage of venture capital funding. The startup now finds itself in a less favorable startup environment compared to recent times. According to Crunchbase, global VC funding dropped by 53% year over year in the first three months of 2023, amounting to $76 billion.

Since the 2022 fundraising round led by Tiger Global, Bttn has not secured any additional capital and has no immediate plans to do so. This financial situation has forced the company to be more cautious with its expenditures. However, Garwood remains steadfast in his vision, stating that Bttn is shaping the future of healthcare and aiming to become the primary supplier for healthcare providers worldwide.

Contrarily, Haupt, the former employee, holds a more skeptical view and expresses reluctance to repeat his experience, saying, “I’m not going to get taken again by a startup.”