When to Pivot Your Business Model — Full Transcript
Why one digital health startup started really listening to the market
Co-founder and CTO of Validic, Drew Schiller, discusses the importance of pivoting and aligning your business model with a market that is telling you what they really want, and he shares lessons learned through the fundraising process.
Key takeaways from this episode of StartUp Health NOW can be found here.
[00:05] Unity Stoakes: Welcome to StartUp Health Now! The weekly webcast that celebrates the healthcare transformers and changemakers reimagining healthcare. My name is Unity Stoakes and today we’re having a conversation with Drew Schiller, the co-founder and CTO of Validic. We’re going to be having a conversation with Drew about the power of pivoting. And all things interoperability in healthcare. Stick around. It’s going to be a great show.
[00:33] Intro Music
[01:11] Unity: Drew, it’s great to be speaking with you today.
[01:13] Drew Schiller: Absolutely, yeah. Thanks for having me.
[01:14] Unity: So, We’re at Health 2.0. Do you come to Health 2.0 every year?
[01:18] Drew: Yep. Every year since 2013. This is my third year in a row.
[01:22] Unity: Ok. What do you hope to get out of, when you come to a conference like this?
[01:26] Drew: Yeah, so a couple things. First, it’s great to reconnect with a lot of people, such as yourself. And, actually Health 2.0 2013 was sort of, inadvertently, our coming out party. So it was our first conference we ever attended, and sponsored, and had a booth at. And that was a really big experience for us with a lot of customer interest, a lot of partner interest. And so, really, what I look for is just starting some good conversations and continuing the ones that we are already in.
[1:53] Unity: So, and that’s a good way to back up, because I want to hear about the mission of Validic, and really, what you guys do. And, especially for the audience that may not be familiar. What’s the back story? How did you get started? And what’s the mission of the Validic?
[2:11] Drew: Yeah, sure. So, what Validic is today. It’s the leading digital health platform for connecting patient generated data from digital health apps, wearables, and home medical devices. And what we do is we standardized and normalized all that data and provide one connection to the health systems. So, these are hospital systems, insurance companies, pharmaceutical companies, wellness companies, who are looking to get access to patient generated data from, you know, glucose meters, blood pressure monitors, of course the wearable tractors, anything like that.
[2:41] Drew: So, to your question about how we got started. This is actually not what we were trying to do. We were actually initially..
[2:47] Unity: So, shocker. You started doing something else.
[2:50] Drew: Yeah. Exactly, right? And so, what happened was, we were building a population health management tool. Primarily for the corporate wellness space. But really, just more in general for disease state management. And, what happened was we realized that there’s no way that we could get scale fast enough by building all of the programming options in our self. So, we decided to integrate with other programming options that were already available.
[3:15] Drew: So, this was back in 2012 that we started doing this. And, we were looking at Fitbits, we were looking at runkeepers, absent devices like that, that had API’s. And, we built an early version of that system. We were way behind in our development, because the integrations took so long. We couldn’t believe how long they took. And, we started, we took an early version of that product out to the market and everyone said, “Wow. This is really great. How are you getting all this data?” And we said, what we build all these connections and this is what we’re going to do with it. And they said “Yeah, okay. So, you can get the data from all those devices and bring it into our database?” And like, we kept having all these conversations and everyone kept going back to the data. That they wanted access to the data. And finally we said well, couldn’t you just build the data yourself? And they said, no, what we do is is the engagement piece. What we need is the data. So, what we recognized was that if we could feel this need and be the data connector for everybody, then it would actually help, every company is looking to do something with the data, start with a robust set of devices without having to build each one individually. So, we pivoted. And the rest was history.
[4:17] Unity: How many years did it take or how long did it take to get to that moment where you saw the need that you just sort of new, hey, this is what we’ve got to focus on?
[4:29] Drew: Sure. So, we started the company in early 2010. So, that was with our first product. That we then learned from that, and then pivoted to the second product which I just mentioned, the population health management tool. And, with that product it was about a year of building that and working on that product and raising money around that product. And then, it was the strangest thing. We had an idea, it was just, this day we were actually taking meetings in California. My co founder and I. And we were talking with a couple of people and they said, both of them happened to say, you know, the data is what we’re really interested in. And we said, so if we took away all this other stuff and just gave you the data would you would buy it? And they said yes.
[5:08] Drew: And so we were driving up the 101. My cofounder and I looked at each other and he’s like, do you want to say it or should I? And I said, we got a pivot. Like, this is, it’s so clear.
[5:16] Unity: There was a moment?
[5:17] Drew: There was a moment. And I remember it, and we actually had already bought a marketing piece. The challenge we had is, we had raised a bunch of money on this other idea. We had sold investors on the idea, we got everyone excited about the idea, and it’s actually still a really cool concept. So, we couldn’t just trash it and move on. We had to actually bring everyone else along. And so, we had already pre bought a marketing piece that was scheduled to go out a couple of weeks later. And, we said, Well hey, to our investors, we said, Look, here’s what we’re going to do. This marketing piece we already bought. But we’re going to try this new idea with it and see how it goes.
[5:55] Drew: And so, we had like a couple of weeks, so we came up with the name, the website, the logo, designed everything,
[6:02] Unity: You sprinted in action.
[6:03] Drew: We sprinted in action,, built the whole thing. We still didn’t actually have an API. It was just our, we spun out our own internal API. So we knew we were going to do an API but we didn’t actually have even have it live. And we just sent out an email blast that said, you know, the future of preventive medicine is in wearables and personal patient generated data. And had a video around it. And the response was overwhelming. And so, that’s when all our investors said, Ok, well clearly, this is what we need to do.
[6:35] Unity: So, how does an entrepreneur, you’ve taken money from a group of investors and you’re thinking about pivoting your idea. How do you go to your investors, what do you do, what’s that conversation like when you’re in the moment?
[6:54] Drew: Yeah, so it’s a little uncomfortable. Because, like I said, they’re sold. They’re bought in. And so, what we did as we said, here is what we’re hearing from customers. So, we brought it back to
[7:07] Unity: Focus on the market.
[7:08] Drew: Focus on the market. This is what the market is telling us. And here is why we believe this is right vs what we were doing before. And, if you have good investors, good advisors, they’re going to push back. Because that’s what they do. They challenge you, they really want to make sure you’re thinking through things correctly. So we answered a lot of very uncomfortable questions. Some of the questions we didn’t even have good answers to. We knew in our gut this was the right thing to do, but there was really no way around it. So, what we did was, we presented them with as much as we could muster. And for everything else we said, look, we’re not saying that this is what we’re doing definitively. What we’re saying is this is what we think we need to try. So, here is the steps we’re going to take to try it. And here’s the metrics we’re going to use to measure it. And if these don’t pan out, we will continue doing what we were doing before because it’s something we still believe in.
[8:00] Unity: I think you got to have that, sort of backbone as an entrepreneur and stick to what you believe in, right? Especially when you see the market telling you something, right? So, when did you decide to become an entrepreneur? Let’s back up into your personal journey and story. Was there a moment when you knew that you wanted to be an entrepreneur?
[8:27] Drew: There wasn’t a single moment. It was, it’s something that inadvertently I’ve been doing my whole life. So, when I was a kid I discovered in Corel WordPerfect that you could do columns and I could make like a newspaper like thing on an eight and a half by 11 sheet of paper. So I started a neighborhood newsletter. And started trying to sell subscriptions to my neighbors on that. Then when I was in high school, I was in a brass quartet and I started getting us to gig around town with our brass quartet. We were winning state medals, but then I was also trying to earn some money on the side with it. And so, when I was graduating from college I never thought about getting a job. I always was just saying, you know, I even had clients for web development and graph design when I was in college and I never once thought about applying for a job. I only thought about what I’m going to do to grow the business once I graduate. So, I’ve just always been somebody who wanted to work as an entrepreneur or independently. [9:29] Unity: Yeah, that’s fantastic. So you’ve just raised a big round a few months ago with Validic. Maybe talk about that process. What was that experience like?
[9:43] Drew: Yeah, sure. So, there is 12 and a half million from Kaiser Permanente Ventures. And what I will say is, this is our Series b. And this was the easiest round that we’ve raised.
[9:54] Unity: Why do you think that was?
[9:55] Drew: The reason is, because for our Series a, we had a lot of investors that we talked to and there was 9 months between our Series a and our Series b, which is a very short amount of time. And, in that short amount of time, you know, our valuation increased substantially because of a lot of customer relationships that we were able to, and customer traction we were able to get due to the Series a. So, what we did was, for all of the relationships we’d already developed with the Series a, we kept those warm knowing that sometime in 2016, sorry, 2015 we were going to do a Series b. And when it came time to do the Series b, my co founder and I looked at each other and said, we don’t want to do another road show if we don’t have to. Let’s try to raise this internally amongst our network. And so, we started just circulating it. We made a deck, we started circling it amongst people who were interested in the Series a
[10:50] Unity: And this is with the new pivoted idea?
[10:53] Drew: That’s right, yeah. This is with Validic. And so, this was, but in this amount of time, we had closed WebMD, and Cerner, and Weight Watchers, and MEDITECH.
[11:03] Unity: So the business was still growing.
[11:04] Drew: The business was growing like crazy. And so, when we went out to raise the Series b, you know, what we did was, we just circulated a deck to the people who we knew, and the conversations that were warm, and we said, here’s what we did with a. And now, here’s what we’re going to do with b. We said we were going to do this with a and you saw it. Now here’s what we’re going to do with b. Right? And so, the best thing that an investor can ever have is when you say you’re going to do something and you do it. Then they’re much more likely to then say okay, I believe you now. I’m going to go do this.
[11:36] Drew: We were sitting and we were talking to an investor who really wanted to participate in our a and they weren’t able to because of political things inside of their organization, one of their partners didn’t understand our business very well. And so, they weren’t able to get it done. And before our Series b, it was not someone who ended up investing in our Series b, but before our Series b we were talking to them and they said, well gosh, for your Series a, you did this, and you did that, you you did this, and you did that. And we looked and we said well, we told you we were going to do that. Like, I don’t understand why you’re so surprised. Like, this is exactly what we said we were going to do. And we just did it, right?
[12:13] Unity: So, then you had some trust and validation and credibility built in.
[12:16] Drew: Exactly. I would say the hardest thing for us a startup to do though is go from a seed to a Series a. Because the lines are kind of blurred.
[12:26] Unity: Especially today with the seeds being much larger.
[12:29] Drew: Exactly. Like, I see folks going for a, you know, a 2 million dollar seed. That’s going to lead to a big a down the road. But what’s the metric? When do you do that? The early stage fundraising is really difficult to track those milestones. And so, I think the best thing you can do for an a round is to start the conversations early. But make sure that you have really clear tracking metrics around exactly when you’re going to raise. So that once you’re ready you can go to them and say, look, I told you I was going to raise money when we did this and I did it. And in the same amount of time I said I was going to do it in. And now, I’m going to raise this amount of money for that. So, just really give them some definitive things to wrap their minds around.
[13:11] Unity: So tell them what you’re going to do, go do it, keep building the relationship the whole time, and then go back to them when you really want to do it. So, what are the lessons for entrepreneurs through that journey? It sounds like the ongoing relationship is key. It sounds like doing what you say you’re going to do and having that validation and credibility is key. You also had some traction you guys are executing.
[13:38] Drew: Yes.
[13:39] Unity: You guys were getting customers, you guys were building a business. You focus on, I guess, the focus of your business, right? To something that you saw the market needing. Any other lessons learned, anything that you did very well or things you would do differently through the fundraising process that could be helpful to other early stage companies, entrepreneur’s today?
[14:08] Drew: Yeah. It’s really big question, important question. So, one thing that I would say that we did, we did really well, and it was somewhat intentional, but also somewhat lucky. Is that we stayed laser focused on exactly what we were doing. And there were investors who were asking us, you know, or telling us we should probably look into getting into analytics, there were investors telling us, hey, you probably need to get into the EMR space. There were investors telling us we needed to do a lot of different things. But, we believe, and we’re seeing it happen, that the future of healthcare is in patient generated data, it’s in all the data that happens outside the four walls of the hospital. I mean, 99.9% of your life is spent outside a doctor’s office. That data that should matter, right? So, that’s our entire companies focus. And a lot of our investors or the investment community just didn’t get that. The other thing that..
[15:05] Unity: So they were trying to maybe steer you in a different direction?
[15:07] Drew: Exactly. And the other thing they didn’t understand fundamentally. Validic, When we think about ourselves in the market, we see ourselves as a market place. So we have the largest number of absent devices connected. The Fitbits, the Amaranths and the AMD devices, the J&J glucometers, all that kind of stuff. And then we have the largest number of healthcare customers.
[15:29] Drew: And so, it’s really hard to start a marketplace. Like think about when eBay started. Getting all the buyers and all the sellers going. It’s really hard. But once eBay got the wheels in motion, all the sudden you have a defensible marketplace that’s really difficult. So, a lot of these investors didn’t understand that we were building a marketplace with that network effect. And they didn’t understand the importance of that network effect. And so, they just kept saying, well there’s no way that Validic, you know, can be defensible. There’s no way that somebody else just couldn’t come along and build the same thing you guys have built. But now that we have device partners coming to us and we’re the only way that they can get, that their data flows into the healthcare system. And we have, you know, massive companies. Cerner, 25 billion dollar market cap using us to get access to all that data.
[16:15] Drew: So, it’s, the network effect worked and now we have the largest network for delivering this digital health data. But the investors, convincing them that that was the right idea was really hard. And so, we just focused on the few investors who did understand that.
[16:30] Unity: That’s a key point there. So, when you find an investor that just doesn’t get it. Do you keep trying to convince them? Or do you go try to find someone who shares the same vision?
[16:45] Drew: Yeah, so if we did make one mistake it was trying to convince the people who aren’t convinced. And we wasted a lot of time talking over and over, trying to convince people who..
[16:57] Unity: Because you know you’re right.
[16:58] Drew: Because we know we’re right. RIght? But, you know, there’s a saying, from an old marketer who I love, I’m blanking on his name right now, who says, “Is it better to be right, or is it better to be rich?” And, you know, you can be right in a conversation and the other person doesn’t see it, but you shouldn’t waste your time trying to convince somebody of something they’re not going to believe. So, just go find the people who do believe in what you’re saying.
[17:26] Unity: Yeah. Valuable lesson there. So shifting gears a little, where are things going? There’s all this data which you guys are organizing. You’re seeing the Fitbits of the world go public. Consumers are adopting these new solutions. Businesses are as well. Where does this go?
[17:53] Drew: Yeah, sure. So, I think that what we’re seeing, you know, Mark Cuban who is one of our investors calls this the consumerization of healthcare. We’re hearing that term a lot. And, I think personalized health really where all this is going. What does that mean. So, I think that the Fitbits of the world, what we know of today as the wearable devices, it’s just the very very beginning. It’s just scratching the surface. I think that a lot of these devices first and foremost, including Fitbit, are going to get much more into the clinical space. So for example, we’re already seeing heart rate being..
[18:30] Unity: So they’re becoming healthcare companies.
[18:31] Drew: They’re becoming healthcare companies. Exactly. So, we’re already seeing heart rate baked into a lot of these wearables. We saw it with Fitbits, we see it with Apple Watch. I think that there’s also, so there’s a new thing we’re going to start to see next year called pulse transit time. And it’s the amount of time it takes for blood to flow between two points in a body. Which you can also get with a light sensor on your wrist. And so, what that gives you is a really close proximity to blood pressure. So we’re going to start to see all these devices looking at real-time blood pressure data.
[19:03] Unity: We have a company called Oxitone and it’s a wireless pulse oximeter.
[19:08] Drew: Yeah. Great. So now you have pulse oximetry, you have blood pressure, you have heart rate, you’re going to start to see some noninvasive glucose measurements. And all of the sudden you have really the core for measuring a person at any given interval. And, there’s no stigma around it. Like you’re not sitting at a..
[19:27] Unity: It’s happening invisibly, passively.
[20:29] Drew: Exactly. So, I know people who have diabetes. And you know, at the end of their meal, once you’re hanging out for a while at a restaurant, they take out their kit and they have to take their glucose. And it’s a little awkward, it’s a little uncomfortable for them, right? But that’s what you have to do, And so I think with these wearable devices, it’s going to be something where it’s really passive and it’s something they don’t have to worry about. You know, having a stigma around. I’m actually really bullish on the fact that, you know, everyone’s going to have a wearable. It could be measuring any number of things about you, but it doesn’t matter what it’s measuring about you, because everybody has one thats measuring something.
[20:09] Unity: Right. So, what does this concept interoperability mean in this world that you’re creating?
[20:19] Drew: [Laughs]. I laugh because it’s this buzzword of like, we have to define it because it’s become almost so meaningless in it’s overused. So, for me. Interoperability for me personally really means data liquidity. It means data is available to flow. And so what we’re doing
[20:40] Unity: And even to the consumer.
[20:42] Drew: And even to the consumer.
[20:43] Unity:Especially to the consumer.
[20:44] Drew: I would agree with that. Especially to the, ultimately, this is the consumer’s health that we’re trying to improve, right? And so, for me personally, what we are trying to do at Validic is make sure that all of the data that’s being created now, again, outside the four walls of the hospital, is not encumbered with the same challenges that all of the data that’s currently inside the four walls of the hospital has. So, what I mean by that, today you have.. you know, I’m in Durham, North Carolina. We have Duke, we have UNC. Both have epic installs that have been installed in the last 18 to 24 months. Neither of them talk to each other very well.
[21:23] Unity: Right.
[21:23] Drew: Actually, they don’t talk to each other at all. They’re both epic. There eight miles down the road. I mean you could literally print out a file and drive it down the road faster than you could get the two electronic systems to talk to each other. And that’s a challenge that the current health care systems have in interoperability. What I want is, in the digital health space, is for data to just flow freely. And if you want your Fitbit data to go to a specific provider, or if you want your mother in law, for example, for her blood pressure, I’m speaking about myself in particular, my mother-in-law’s hypertension. I would love for her blood pressure data to be available to my wife and myself so that we can help monitor and make sure that she’s actually taking her readings the way she’s supposed to, and that it’s not spiking in any way that we should be concerned about. So, I think that world of interoperability of actually help making sure that the data is flowing in a way that’s helpful with the patient, that’s really what we’re looking for.
[22:17] Unity: That’s great. And what are you most excited about coming up?
[22:21] Drew: Oh, Man. That’s a very general question. I would say,
[22:27] Unity: Let’s narrow it down. How about in terms of health innovation, in terms of just the ecosystem overall. You already said you’re bullish. You’ve got this great opportunity with where you guys are as a company, it seems to be moving in the right direction. What happens over the next two, three years?
[22:49] Drew: Yeah. Ok. So, what I’m most excited about right now, and what the future implications of this mean. The fact that we have the world’s largest consumer electronics companies dropping hundreds of millions of dollars into this space.
[23:04] Unity: Apple
[23:05] Drew: Apple, Google, Samsung, Microsoft. I mean, Fitbit with their IPO, they just had the largest consumer electronics IPO in history.
[23:12] Unity: Yeah. It’s like 11, 12 billion dollar company now.
[23:14] Drew: Yeah, it’s amazing. And so, what I’m really excited about, is all of these companies are engaging the patient in their health in a new way that’s never been done before. So, what I’m hopeful that the implication of that is, is that healthcare has always been something that has been performed on a patient. And I’m hoping that now this is going to lead to something where a patient is actually taking a more active role in their healthcare and is actually participatory, which is really the ultimate goal that everyone’s always wanted.
[23:43] Unity: Well, thank you so much. It’s great to have a conversation with you. And glad you’re from Iowa as well.
[23:48] Drew: [Laughs] Yeah.
[23:49] Unity: Another Iowan here.
[23:50] Drew: Go Hawks.
[23:51] Unity: Go Hawks. Thank you so much. Where can people find out more about you and Validic?
[23:57] Drew: Yeah, So, Validic.com. And we’re also on Twitter at @validic. And then you can also follow me at @rdrewschiller.
[24:06] Unity: Alight. Thank you so much.
[24:08] Drew: Thanks.
[24:09] Unity: Thank you. We’ll see you next week.