Q&A with Techstars’ Matt Kozlov
I had the opportunity to sit down with Matt in Chicago to chat about Techstars’ partnership with Cedars-Sinai, his experience in his first year, and trends he’s seeing in the industry. Check out the entire conversation below.
Scott: Would love to hear a little more about how the Cedars-Sinai partnership was formed, and what that process was like?
Matt: In general, Techstars is looking to launch new programs in sectors and geographies that we feel are high growth and can support an entrepreneurial ecosystem. Both health care and Los Angeles fit those criteria really strongly. But, the real driver was Cedars-Sinai and their interest in doing a program that really fit with our values.
Cedars-Sinai actually has a very rich history of innovation and technology. They have a very strong tech-transfer office where they spin out technologies. For example they invented the Swan-Ganz Catheter. And even before joining with us, they had an 80 million dollar venture fund that had some incredible successes investing in health care tech companies that filled a white space for them as a hospital system. They would take companies that identified that space, had strong teams, they would bring them into Cedars-Sinai for several months to help get product-market fit. Cedars would then become their biggest and most reputable reference customer, working closely with the team as a key stakeholder in building out the product. Several of those companies, Health Loop and Voalte are two examples, were basically birthed at Cedars-Sinai. They had some customers before, but both companies attribute their success to their experience at Cedars-Sinai and the connections that they made through Cedars and Cedars’ CIO, Darren Dworkin. Darren is very influential in health care technology, a lot of other hospital systems look and see what Cedars-Sinai does and then replicate that. So, a lot of what we’re doing at Techstars with this program is trying to take some of the success that Cedars-Sinai has had working with early stage health tech companies and blow it up at scale.
We work with 12 companies at a time, initially we’re doing new batches once a year, but we’ve now shortened the cycle to every nine months. It’s been truly an incredible partnership, far more successful than I thought it would be. The entire hospital from CEO to frontline staff, across every department, have just given and given and mentored these companies. In fact, all of our first batch signed contracts with Cedars-Sinai in under 90 days, which was a pleasant surprise for us.
Scott: You’ve worked in just about every industry, has this given you any insights into health care? Helped you at Techstars?
Matt: I kind of feel like I stumbled into health care. I had a lot of misperceptions about the industry coming in, or maybe I had correct perceptions that are incorrect in the context of Cedars-Sinai. I had thought that the industry would be slow, a little obscure, the sales cycle would take forever, that commercialization for companies would be really hard, that I wouldn’t add much value. When I joined I was very upfront, I told Cedars-Sinai and Techstars, “I’m game, as long as you really truly are OK with me not having any health care experience.” Luckily, they brought me on to focus more on the entrepreneurial side: is it a good company? Is it a good business model? Is it real? Are the teams strong? In my mind, when you’re scaling a company it really doesn’t matter if you’re health care or consumer tech or a media company. Scaling a company, building great teams, budgeting, raising capital, it’s all the same thing. Maybe the metrics are different.
I think I am optimistic and naive when others would be jaded.
Scott: Totally, I would definitely be on the more jaded side in thinking that health care is slow. They say it takes 17 years for a therapeutic that should be the standard of care, to become the standard of care, for example.
Matt: Yeah, and we’re trying to avoid those companies for the most part. To that end, we try to only take companies into our program that can grow fast. So we won’t take a pharmaceutical or a Class III medical device, we won’t even take a company that Cedars-Sinai isn’t thrilled about for their own immediate needs.
Scott: Interesting, so you’re bringing in companies based on knowing that there is a need internally at Cedars.
Matt: Right, and we’re not going to run out of needs any time soon.
Scott: You’ve had a year under your belt at Techstars now, do you have any thoughts on what differentiates a good company from a great company based on your experience?
Matt: I would always go first and foremost to team, which is a Techstars truism. An A plus team can elevate a C plus product and make it a very successful venture, but the inverse isn’t true. So, passionate leaders, market expertise, people that really care about the product, a team that has enough grit to get through all the ups and downs (and there will probably be more downs than ups), people that are coachable, especially in a 3 month accelerator where you’re getting bombarded with feedback. How well you take that feedback and synthesize it, as opposed to put up a brick wall and say, “No, I know it’s this way, I’m used to being right and I know I’m right.” Those types of founders have a hard time really thriving in the accelerator, as opposed to the ones that treat every meeting like a learning opportunity, and even if a meeting goes bad, they can find a nugget to take out of it that is some value add. Those types of people really grow very rapidly, and they are also the ones that form really strong personal relationships with the mentors, Cedars-Sinai, and investors. They are the ones that will always find some way to get something valuable out of every person they meet. It’s really magical to watch them grow. But it’s not like in this industry I’m seeing a company grow faster than this other industry. The technology needs to be satisfying a need, the product needs to be far enough along. We won’t take an idea, we won’t take a prototype, we’re looking for products fairly far along their life cycle. Although, the exception is that we will take a team that is very strong, but needs to pivot into something they’re not doing currently.
And actually, an accelerator like ours is also a great place for an established business to try to launch a new product or a new channel to get the support and feedback from key stakeholders. For example, we have two companies, later stage companies, one of which is Home Hero. They had raised $23 million, had 50 employees, had a million hours in care provided. They had been selling into consumer, and they used our program to launch an enterprise product. They launched 5 different pilots within the program, and are already generating significant revenue from that segment.
Scott: Oh wow, I had no idea that there were also more established companies. I’m guessing they join because they see that partnership with Cedars as a real value add.
Matt: Actually, over a third of the companies in our first batch had already raised over $3 million in funding. And they’ll get the mentorship, and the Techstars for life experience, but yeah I would say those companies would be less likely to do a city program. They are really joining because of the health care focus, and the exposure not just to Cedars, but all the health system CIOs in our network. We have CIOs from health care systems across the country and they’ve all been very involved.
Scott: Any advice for health tech companies to position themselves for success in the current environment?
Matt: The first piece of advice I’ll give for anyone trying to go at it alone is don’t. This is a really hard journey, and the founder’s journey is very lonely. I was a sole founder and it was really really hard. I felt like I was bearing a lot of weight on my back, and it was not an experience I would do if I would do it over again. So, find someone who is completely additive in building your business. If you have a strong business background, but no technical background, bring on a strong tech founder. If you have a strong technical background, but no health care background, bring on someone with that expertise. It’s really important that you build a power base that brings credibility when you go and pitch to investors and others. You’re just never going to have all of that as one person. Probably not even as two. So build your team, make it strong, and use sheer force of will, and charisma, and leadership to bring in those early believers. And if you can’t find somebody who believes in your vision as strongly as you, then maybe you should be looking at a different vision.
The second piece, and this is really more of a criteria for us to even join our program, is does your product work. You might have an amazing idea, but if you’re in an early stage you’ve got to turn that idea into a reality. So beg, borrow, and steal to get the resources you need to actually build it. Don’t pitch an investor on this cool idea you have, make it happen. And in health care it is hard to prove that someone will pay for it, but traction can look different for different segments. I don’t have one metric I’m looking for when I’m looking at companies. One company might have had 700 patients complete their digital program, and that’s really good, that’s not nothing.
In the end, just find someone who is willing to use your product. Now, of course, that might not be as applicable to medical devices or pharmaceuticals. But, find someone who is willing to pay for it. One person, one organization. That is the hardest one. Show it works, get them to pay, and it doesn’t even need to be a lot. Because that will get the next person, and then the next person, and so on. And every subsequent sale will be much easier, and you can work your way up the chain after that. It could be a 10 person, skilled-nursing facility, in upstate New York, I don’t care who it is, just show me somebody who is using your product.
And even for medical devices, if you need to, look in other countries, if you can commercialize more rapidly in India, or China, or Southeast Asian, then do it. I don’t care if your family is in California, or Washington, or Southeast Jersey, do what you need to do to get your product commercialized.
Scott: Are there trends that you’ve seen via Techstars, or outside of Techstars that you’re most excited about in health tech?
Matt: Just the fact that Cedars-Sinai is willing to do a program like this is very telling. That health care systems are looking for technologies to improve operations, customer experience, and transparency. With the Affordable Care Act, and the transition to value based payments, there is more incentive in health care systems then there has ever been to innovate. So, now is a really good time to be an entrepreneur in health care technology, and I think people have been saying that for a long time, but I think deal flow right now is very strong, venture capital and a lot of generalist VCs are moving more and more of their assets to health care, so things are happening faster.
This is one of the last industries to undergo massive change. The patient experience today isn’t very different from 40 years ago, and nobody wants to preserve that in amber. It’s not something we’re going to be nostalgic about 40 years from today. And what I’m seeing as a result is that there are these amazing health care tech communities are popping up every city across the country, and probably internationally as well. I was in Nashville and I was blown away by the quality of the health care tech companies there, I was in New York last week, same thing, Chicago this week, and I’ll be going to Toronto in two weeks. I have 50 companies I’m meeting with there that I’m really excited about. There is just so much innovation it feels like I’m in a privileged place as a health tech investor because there are so many amazing companies out there doing amazing things. Hopefully we’ll be able to take as many of them over time as possible to innovate and improve health care in the country. It’s a fun goal, and a noble goal, and hopefully a lucrative one.
Scott: What’s next for the Techstars-Cedars partnership?
Matt: The first cohort was really successful. We’ll see in several years as a venture investment how successful it was, but at least from a commercial success it’s been really wonderful. Cedars-Sinai supported it fully, and every company grew quite extensively. The one big change is that while most Techstars programs are one year, we’re going to shorten that cycle and run every 9 months. So this next program will run January to April, and we are currently accepting applications. So we will “do more faster,” in typical Techstars fashion, but we’re not going to make radical changes, because it worked quite well. We’ll add some mentors, we’ll probably add companies from more geographies. In the first batch, about 2/3rds of the companies were from Los Angeles, which is great for LA, but one of my big efforts right now is to bring a little more diversity into the program.
