#67: Grew and Sold a Profitable Healthcare Software Company – Patrick Randolph

Hey, everybody. Welcome to the Practical Founders Podcast, where every week we hear an amazing story from a serious founder who built a valuable software company and did it without big funding. I'm your host, Greg Head, and this week my guest is Patrick Randolph. the former CEO and founder of Q-Doctor, a healthcare SaaS business that he grew, built, and sold successfully as a practical founder with a little funding along the way.

All the challenges that you'd face selling in the healthcare industry here in the States before, during, and after COVID. And he talks about the lessons he learned and the... humbling reality of selling in the healthcare industry. It's a great interview. And we're live with Patrick Randolph, the former CEO and founder of Q-Doctor.

a healthcare software company he created and sold. So welcome to the Practical Founders Podcast, Patrick. Great to be here, and thank you for saying the name of the company correctly. That was one of our biggest challenges. No one could say or spell Q-Doctor. And so why don't you spell it for our listeners out there? Q-U-E-U-E-D-R.

So for all you European, you know how to spell it. For all you Americans, probably not. And the Q, Q-U-E-U-E, means to line up to get in the queue. Yeah. So we're going to talk about your adventure here, but we start with... You sold the company and did your transition, all that. Tell us about what QDoctor was when you sold it and how big it was and maybe a little bit about the transaction if you can talk about that. And then we'll go back to your history.

Yeah. So for all of you out there, selling a company is awesome, especially if it goes well. So I highly recommend it if it's an option. So QDoctor was a, you know, the fancy way of saying it is an autonomous scheduling system for doctors and patients. We get patients' earlier appointments without doctors or their staff lifting a finger. We decided to go really deep.

in this area to the point where it wasn't worth anyone else following us down that rabbit hole. Built the company up to mid-seven figures, ARR. Sold to small health systems, large health systems, solo practitioners, and everything in between. And so we can get all into that health care and nightmare. I then got acquired by Freesia on January 8th.

2021. That was fun. Transaction was really tough in so much as they're a public company. We were their first transaction and they have certain gap things they need and all this other stuff, but it went well. They took care of the team and the product fit great in their portfolio. We already knew them for a while. We shared a ton of customers. So I couldn't be happier. Both financially went well. Everyone's happy. But also...

For my ego and the team's ego, the product lives on and does really well. Awesome. So Ephresia, can you spell that one? P-H-R-E-E-S-I-A A public software company that you sold that to. And that was at the heyday of 2021.

I guess you call that the peak. It was a little before the peak and certainly in the moment didn't seem like the peak. And frankly, in healthcare, there wasn't really that much of a peak in terms of exits, but more so within fundraising, I think. But yes, timing-wise, it worked out great.

Yeah. Oh, right. Great. You said mid seven figures of revenue. How many employees did you have back then? I think by the end we had around 20, a little less than 20. So we built this thing pretty lean and mean, raised about a total of 1.6 million. Right. Yes. We optimize for revenue per employee. All of our employees were just insanely gifted, insanely good. Outkicked their coverage. We beat people with hundreds and hundreds of employees. So damn proud of it.

So that was revenue per employee and you were mildly profitable or did you spend all that in promotion like old companies used to do? We were profitable. Yep.

Congrats on the exit. And what are you doing now? Do you have a new thing going yet? What are you playing around with? Yeah, I have two young kids. That's my new thing. Awesome. Yes. No, I've been, frankly, working with founders. Right. I try to be an employee and I'm only OK at it.

What's most fun and was most helpful to me when I was starting up was just founders helping each other. That's the biggest freaking thing. That's why this podcast is amazing. It's why you can talk to any founder anywhere and you're going to have something in common.

Right. Whether it's starting a brewery, because I was in Utah, I was talking to a brewmaster and we connected right away or a, you know, a hundred billion dollar company. Right. You speak, you speak a certain language. And so kind of giving back a bit to the community as it gave to me.

Tell us about yourself. Were you a technical founder here or were you running around inside the software industry or the healthcare industry and found this problem? And where did all this begin, Patrick? Yeah, they talk about founder market fit, and I'm not it. So I...

I took one month Rails. Shout out to the person who did that. It was very helpful. So I can code a bit. I'm pretty good at no code stuff. But back when I started QDoctor, I had never worked in healthcare and I'd never built software before. So my dad's a doctor. Grandfather, great-grandfather, all doctors. Mother, grandmother, great-grandmother, all nurses. So I grew up with the healthcare field.

I didn't really know anything. But my dad was the inspiration for the idea, which is patients are waiting a while for appointments and we're losing 20% of our revenue to missed appointments. So that was the inspiration for the whole thing.

What I ended up doing as a solo founder for the first couple of years, I ended up designing the product, soup to nuts, everything, every little screen, and then found a great little consulting team who helped build the MVP. Where was that consulting team? In the US. So they're based in Boston. I don't think they're still doing it anymore, right? But it was great. The benefit of doing things this way is you better be damn sure what you're going to build.

Right. And you have to think of every little screen. So it's not the classic throw it out there and see what happens because I couldn't code well enough. I had to be pretty darn sure. And I had a great advisor who basically said, like, figure out the way you can test all your ideas without writing a line of code.

So I would sit next to schedulers and write text messages instead of having a system do it. I would make the phone calls. I would create a paper wait list myself. I had to test out each and every hypothesis within the product before I could write a line of code because I couldn't do it. I wasn't good enough. You didn't come out of a doctor's office and you didn't start by prototyping with software. You were following along, riding along.

What was it about this idea that made you stop whatever you were doing and go sit next to schedulers and do it? Like, why would somebody, what were you doing before that?

I was at another startup. I was employee number three. It was a little more venture-backed social media. I was more on the business side. But I guess what it was is I had a list of ideas. Kind of ran them through, but really what the final... decision-making was is i gotta do this thing for at least i thought five years turns out eight to nine um like what will i enjoy doing but more play where do i have something unique to say right and for this

What I had unique to saying, like, what was the angle that was going to motivate me was it was a bit of an FU attitude, right? Healthcare is dominated by big players. Without naming them, they're giant players, software companies who have won and been around for 50 years. They're not very good. Right. So I always felt like for years I can get behind the David versus Goliath angle of it. Plus I can beat them a couple of times over. I'll feel pretty damn good. And we did.

Wow. So it's kind of, that was the angle that drove it. And, you know, different members of my team, they, you know, we got patient care earlier. That was lifesaving. Right. But for me, the core emotion was like. Let's fight for the underdog, the doctors and even health systems who get screwed by having to use awful software. If we can bring a little joy to their life, the schedulers who are the lowest on the totem pole, if we can make their lives a little bit better, that's a win, baby.

Like patients are frustrated doctors and there's this 20% capacity because of people canceling their appointments at the last minute and not being able to fill them, right? It was better than all the other ideas in your list. It was, yeah, I mean, the Tam was there, the story was there, all that other stuff was there. But I feel like you can make a case to yourself emotionally for a lot of different, you know, ideas.

This is the toughest part for those who want to start a second company. The naivete is your best friend. It truly is. When you're looking at ideas for the second time, you keep running into the, oh, this won't work because. Based on my first time, this won't work because this, because that. And it can stop you. It can be debilitating because you know better. But you kind of got to suspend disbelief and say to yourself, you know what? I figured it out last time. I figured it out this time.

But it can be quite debilitating. It is a real struggle. So that was – 2013, something like that. Is that right? Yep. So about eight years. Yep. So first two years alone, met my co-founder, John, at a hackathon, which we won, of course. So you're talking about TAM and hackathons and all that back then. Was this Silicon Valley? Were you in Silicon Valley? Where were you? Yeah. So I was, for those who were, yes, technically, I was in Treasure Island.

a former army base in the Bay Area, which is now condemned due to, I think, arsenic poisoning, cheap housing, though. I was in San Francisco for the first two years, but then I moved across the country, lived in Connecticut, Virginia. Our employees were all over the country. So a little bit in Silicon Valley, but didn't really run that race. But you didn't jump in and meet people and play the startup accelerator and join the cult? Did a bit. but I'm not good at cults, I guess. Uh, I'm just, uh,

Pros and cons, right? I'm a bit of a contrarian. I'm a major contrarian. There's a lot of downsides to that. A lot of downsides, but it makes us terrible for Colts. Like, Colt leaders just walk the other way is what I thought. Did you quit your day job to go run around doing this?

Did you keep your day job while you were prototyping and doing this? Great question, actually. So first two months of it, I was doing customer support for a taxi app. Talking to taxi drivers all day. Paid the bills. I don't know. But after that, I went full-time. I just had to do it full-time. And is that on your savings, that kind of thing, and the ramen? Yep. So you found this problem, and you said-

I can't code it, but I'm not going to waste my money. I'm going to figure out what the problem is before I code it. I've seen dozens, probably hundreds of vertical market specialists that come out of any industry and say, run out and say, I'm going to build an app that solves this problem over here. And they run over to the engineers and they say, I can download the whole thing in a half hour. So you will build it, which is like, that's the ultimate naivete because there's usually it's.

four months of back and forth details to get to the level of specification where you could build it and have confidence that can be built and it'll be reasonably confident. It'll solve a problem. You've got that level of confidence. and fidelity for your prototypes on paper. Did you get there or were you? Yeah, I was there. So what I did is, you know, I took the one month Rails course and that was great because it gave me a base level program, right? Because.

That was Ruby on Rails, one of the faster web programming technologies. Twitter was using it back in the day. Good for responsive. But it allowed me to talk engineer a bit. And also, any engineer listening is like... the freaking i'm sure at christmas people are coming up to them saying hey i got an app id i just need to build it so what i did

I literally, after doing all the research, I had every single page design, every single button, every single inner flow was fully designed. I used Microsoft Paint because I know how to use Photoshop. Yeah, but every single interaction, every single screen. So it was literally, I know exactly what needs to be done, where it needs to go, every decision that needs to be made. I know the coding framework we are going to use, right? I know it's web, mobile. I know every single thing.

before I even talked to an engineer. Well, that's a little different. Usually it's kind of race forward and put something in their hands and iterate and you got pretty close.

Was John, your co-founder, was he the coder that built the first version or? Nope. So he, in the beginning, our product was a kind of a web app. You'd add patients to a waitlist, press a button, it would text the right ones. And, you know, the first one responding would do a pop-up.

John took it from, hey, that's cool, to a fully autonomous product where there was no actual user interface, right? And that meant integrating with Dr. ZHM. So some time of day, it would check for open slots in the calendar. Oh, we went deep, baby. We went deep.

call it 10 to 30 minutes. You're looking for open slots. You're integrating with their existing schedule, right? You're identifying cancellations that happened. Who are the ideal patients who are already there clinically, you know, from a... Preference standpoint. It wasn't just a blast out to everybody. No, no, no. Intense work. Yeah. And so our promise to our users was you'll never lift a finger for us. You will never change what you do for us because humans don't do what we're supposed to.

Why would we? And so when you call a doctor to schedule an appointment, they might put you as a new patient or they might put you as a established patient and write new in the comment section. They're going to keep doing that. I'm not that persuasive. That's what I learned in the early days. You're not going to change people's work habits. let's not have them change it. And so we worked entirely around them. Those are a huge value add. Again, never lift a finger, never do anything.

And so John really made that happen, where we integrated with all the different EHRs, which are electronic health record software that we use for charting and scheduling. I'm combining the two for all you healthcare folks out there. And so we integrated with all this, which was an utter nightmare.

necessary and that gave us a huge first mover advantage and made our product the best in the game and it still is so when you got to the end of this prototyping thing and people were nodding their heads like if you could do that

I would pay money for that. Were you very confident you could sell this or did you have orders in hand before you built it? I did not have orders in hand before I built it. I think I had done enough diligence and it was kind of a bit of a do it or get off the pot. It is very easy. The toughest thing in the early days, I think, for a lot of founders is you're...

Doing a ton of work because you don't want to get to the real work, right? Which is like, let's put it out there and see if it sinks or swims. It's scary as hell. And I might fall flat on my face. And so you sometimes put work in there and sometimes that's what the ship it kind of really means, right? Once you got what you got, you got to go out and sell it and it might work or might not.

It's not, hey, let's do a PR plan, then a marketing plan, right? At least in, you know, kind of the way we did. And I think for a lot of practical founders, it is you got to go sell the damn thing. And if it sells, you did great. If it doesn't, either you're not doing great or you're selling to the wrong person or you're not selling it right.

We discover a lot. It's very humbling when we get into reality. A founder's got a huge ego and is immensely humble because they failed many times over. I think that's a beautiful... schizophrenia dual thinking that we're very confident about something and we're completely unconfident about the other and you can't tell which

you know, on any given day. But that's what gets us through it and plays open. It's why normal people won't do this game here. So you have the prototype, the design, then you got somebody to build it. And how did you get that built? Did you? write a check to a team to go build version one and use your life savings? Or did you get your doctor dad to invest a little? Or how did this go?

Nope. So I'm lucky that I have some friends who were successful and I think still are. I know they are on Wall Street and Silicon Valley. So we raised 50, 60K to build the prototype. And initially we wanted to build even a patient side where you could schedule much like ZocDoc, but constraints being what they are. We only built one part of it, made that decision.

I don't know if I caught a regret, but it would have been fun to see what happened. So that's what we did there. And then, you know, sold that, had revenue from day one, not a ton, but we found out, or we, I found out quite early that when people use the product, it was great. Right. And they loved it. Results were.

better than anything, right? It meant more money, saved them a ton of time, made their patients happy. But the engagement rate, people adding patients to a way list and whatnot, was like 10%. Right. And I couldn't figure out why. I tried everything. And that's where they had to queue up on the wait list to be ready for. That's what the doctor says. Do you want to be available for a cancellation? And then you get in the queue.

Yeah, let's see. And that was in the beginning. And that was the big eye-opener. So we did away with the queue. We did away with humans in the office having to do a thing. If you don't know about us, it works. And that was the big, big eureka moment. How did you start? Did you sell to the little doctors that would take your calls and then work your way up to the big guys? How did you get your first 10 or 20 customers?

I called it growth snacking. I was really proud of this term. Thank you. Thank you. I went to the local donut store or Starbucks, whoever had the most supply of donuts. And I canvassed the... In any town, wherever you are, you have a bunch of doctors all in one place, right? They all congregate in like two or three medical buildings. So I would go door to door.

to those buildings. And I would walk in, I would hand the secretary or scheduler a donut and say, you can keep the donut whether you talk to me or not. But how do you fill your canceled appointments? And I did that for weeks. months maybe um i didn't like cold calling i hated it and i didn't want to do it so i figured it's my company i'm not gonna do it uh and so i did door to door and that was how we got our first probably geez

10 to 20 customers. We started out with the small groups, actually dentists, in fact, but then moved into medical because it seemed like there was more of a moat there. Medical is harder. Theoretically, bigger market size, although dental moves faster. I can uncork a rant on selling to healthcare if you want, or we can save that one for later. We'll save that for the, you know. Okay, I'll save that one. As we get further up the hill here.

So is this, they say we have a scheduling problem and you say, I have this thing will magically add people to the calendar and fill it in, do the wait list. Maybe a dentist office, they could say, could you plug it in next month or something like that? Or did you have to go through this arduous sales cycle to sell a $1,000 a month widget? No, in the beginning... $1,000 a bunch, I wish. No, so in the beginning, again...

The early days, the goal is get your first 10 to 15, right? You're proving out your things. You're proving out your product works, right? You're proving out your monetization model, get into that a sec. But really what you're trying to do is you're trying to get a beautiful one-pager.

Beautiful one-pager that you can walk into every single customer and you can send to every single customer that consists of really three things. One, it's got a story. Two, it's got a beautiful quote. And three, it's got a nice headline stat. That was my only goal.

The flaws in healthcare are products are bad. They take a while to set up and they take a lot of clicks, right? And so we try to be the antithesis to this. So our original product, even though it wasn't unintegrated, they can be set up and live in minutes, right? They paid $9 per appointment filled. So the risk to them was nothing. If this doesn't work, you don't pay. So you don't need to believe me at all. You can think I'm full of it. It doesn't get me anywhere. It's got to work.

We ended up doing away with that pricing because as your product gets more mature, it discourages usage. I see, right. Yeah, of course. They don't actually know the dollar value of an appointment. You can't do a percentage, right? So you have to do a flat dollar amount. And so, yeah, without getting too much of the economics, it doesn't really help, although it makes it so much easier to sell.

What did the economics turn out to be for a typical small office, meaning they could fill 100 appointments a month that wouldn't have been filled and that was worth $10,000 to them? The answer is it will depend on specialty, but by and large, anywhere from 10 to 20 fills per provider per month, right? And an average appointment is going to be worth, geez, man, anywhere from 200 bucks to thousands.

The other added benefit, there's a lot of tangential benefits, but one is you're going to save about an hour of staff time each time you do it. Of course, you're going to make your patients happy, but also there's two big downstream effects. One is if you get a new patient in now.

right? You get the lifetime value of that patient, right? So the value might be that one appointment, but if you didn't get them in, they were going elsewhere. And that was the second downstream effect, which is the number one reason people don't show up for appointments is because they're booked far out.

So if I book you out three weeks, 21 days, you have a one in five chance of never showing up, right? So we actually cut their no-show rate. And it was a good lesson in selling because I would sell them on canceled appointments and they would say, oh, I don't really have a problem with that.

I would say, well, we're also going to decrease your no-show rate. And they'd be like, oh, that's amazing. Even though their cancellation rate was five times higher than their no-show rate. It was pure emotion, right? What bothers you more? Someone calls and cance you or someone didn't show up at all?

And so that was a nice little lesson, like the actual pain point I'm solving versus the pain point that gets them to buy. Right. So you had this hypothesis about this problem and then the prototypes and the product and, you know, the donut selling and so forth. How long did it take?

before, and this is just what everybody's going through. We get in the field and we're trying things on. How long did it take for you before you could walk into an office? Ask the three questions, get the answers and do the 15 minute bada bing, bada boom, you know, get the appointment, you know, like, you know, you knew a cold. They weren't going to surprise you. A couple of weeks. Okay.

You were in the zone. I was in the zone, but the benefit is of going in person versus on the phone is you just get more bats. You're going to get the pitch. If you're doing cold calling, especially in the beginning, you'll get, what, two, three conversations a day, right? Whereas if I go to the offices, it doesn't scale. But if I go into the offices, I will have 20, 30 conversations a day. Most of them will bomb.

But I will give the pitch at least 20 to 30 times a day. So we had it down pretty well. One of the struggles, though, comes later on where when you add different products onto your... you know, your platform, this is kind of a software, but I think anyone starting a second part of your business is the pitch that you start giving needs to be more holistic. But as a founder,

I knew this pitch cold. And so even when we added other products, I would pitch it this way. And that's not the right way to pitch it. And it's really hard to break from when your whole business is around one product and you particularly are focused on one style of pitch. Very interesting.

Were you onto something there and a little money started to roll in and you could, you know, start to work on features and I don't know. What was phase two of post donut selling? Did you do the cold calling with a. Sharper pitch, phone-based cold calling? Yeah. So phase two, we raised a little money. So shout out to those who raised absolutely nothing. That was not us. Major props to you. I couldn't do it. But phase two is starting to scale it.

And one mistake, I think in retrospect that I made is I kept, you know, they always say like innovate one part of the business, not the whole business. So what I kept trying to find was ways around the classic healthcare sales model, which is, as you said. Cold calling. It's a numbers game. This percentage go through to this, to this, to this. It's an economics game. I kept trying to find workarounds for that.

What if we could get patients to sell the product for us? We tweeted at people in the waiting room. We tried all these different things. It didn't quite work. But phase two is really about we... We utilized our EHR partnerships and events marketing. Those were the two big ones for us. So we had a playbook down, we'd go to shows, right? And we knew exactly how to do it. We would drive around a robot.

And lure people in like we're fishing. We always had stunts. Those paid off really well. We had our post and pregame, pregame and postgame follow-ups there that we kind of nailed. And then the partnership model, we would...

bother the hell out of our partners. There's no other way to put it because we couldn't offer the most money. We weren't the biggest to get them to push us to their customers. Right. So like all scripts, right. We would say, Hey, can you tell your customers all about us? Right. And they'd say, well, we have other partners too.

And I would just bother them every day or every week. And eventually they would relent and give in to me. And those were nice leads too. We had to educate their sales team. And the benefit of those leads, healthcare is a trust sale. Right? Unfortunately, you have to be around for a while. And what we try to do is use the umbrella of trust from our partners. Right? If all scripts, they're now, what do they call it? Maritime.

recommends us, then boom, right? Our code is very precise, 3X if we reached out code. And so those were our main models, our main distribution models. What was the ACV, the annual contract value?

Roughly. So – Like 5,000 or 10,000? Towards the end, we got to close to 250 to 500 ACV. 1,000. 250,000. Yep, by the end. Yep, we went way – Wow. Yeah, we went big dog hunting. What did you start with? Yeah, right. So I would say 6K MRR was probably our AC veins. Yep. Right.

So it was $100 roughly per doctor per month, right? And so what we found is a nice sweet spot. Yeah, it was probably a little lower, but that was the pricing. Sweet spot of around 20 doc practices where they would make decisions. They can make them quickly. So they knew how to buy things. They had a buying process. And it was relatively quick. We also weren't worried about them going out of business.

Right? That's a big problem in healthcare if you sell it anywhere, small practices. So you found a nice sweet spot there. And that market, again, another mistake I made, that market was deeper than I realized. And that causes to go upstream, which we did well, but the sales cycles were just two to three years. And all of our deals were about to close in March 2020, which these things happen. And so COVID happened.

Wow. It did. Very interesting. So you sold to – in the US here to doctors' offices that were part of healthcare – what would you call it? A group.

In the beginning, we'd sell to the group, right? You couldn't sell to a practice that was part of a health system because you needed a health system's permission. Right. Because you're integrating with their technical. So, you know, there's a couple of years in between. It's kind of a blur now. Right. Was kind of going up the curve. So our first big customer, St. Joe's Health, they're now part of Providence, which is one of the largest health systems in the country.

They signed our contract in like a week. But they ended up with a much higher ACV, right? So a lot of this was we had like a 7X land and expand. I don't know what that is in NRR, but month 12 was seven times the value of that contract for one. We would do pilots and expand. That was our first big customer of St. Joe's, and it was a great lesson in the enterprise.

what they expect, how the implementations and integrations work, how to do project management. But I remember the reason I got that deal is I cold emailed the CEO. And he was like, yeah, sure, let's do it. I don't know. I caught him on a good day. I asked him, I was like, why did you sign? It was like two people. And he's like, yeah, you guys solved a problem and you seem nice. I was like, yeah, thank you. Thank you.

Yep. So they were a big customer for us and grew. But that was a story of a lot of our customers, which was start small and expand within there. And expand within there meant adding more doctors. So you had to nail the account management, treat them well.

And you had to start from day one in the selling. So you had a third-party development team and the rest was kind of selling and implementing teams? No, we only had a third-party development team just for the MVP. Right. And a couple of features added to the MVP. And then John came on and then we ended up by the end had five or six engineers. Right. Great team all in house. We didn't we didn't do an external third party. It is a huge advantage.

If you know how to manage and identify offshore third-party dev shops, I've seen it. We did not. I don't know how to do it. Costs are down and everything. But yeah, so I had that. And then mostly it was marketing with a little sales, especially in healthcare. You need account managers. You need implementation. You need more bodies. They expect a level of white glove treatment. There isn't a, we're going to buy from your website. Self-serve doesn't exist.

Yep. And so that was, you know, healthcare is great, I think, for practical founders, right? It's bad, you know, and I specifically mean like selling to doctors and health systems. It's bad kind of for VC. Right? Because what happens at VC is like, hey, you grew really quick. Now we're going to give you a ton of money, grow a lot quicker. And the sales cycles in healthcare are so long that you quickly run out of those who can make quick decisions. And it really drags you down.

And there's also a ceiling. The bigger you get, the slower you go. Significant. And there's only so high a valuation you can reach. And for the VCs, again, you reach a billion dollars. That's phenomenal. But for some VCs, when you raise hundreds of millions of dollars, that's not going to cut it. So for practical founders, if you know how to execute, it's great.

The difference is that most places in the enterprise, they'll talk to you, try your software, and do the evaluation while they're trying it. In healthcare, that's not the order. The order is...

We're going to talk to you. We're going to evaluate your software. Then we're going to try in a little pilot, right? So they actually put the evaluation before the trying, right? They are so scared of being burned. They're dealing with patients, dealing with regulations, security issues, right? They're not screwing around here.

And so your sales cycles are significantly longer. And so for practical founders, but they do pay, most of them. And they'll do upfront deals, they'll do longer term deals. And they don't churn as much outside of macro factors. They're incredibly loyal. And so that's good for practical founders. And you see a lot of nice, really good businesses with 70 employees doing really well that didn't take BC money.

You can't grow that fast, but you can grow. And there are a lot of customers. So a little more patience is required. Absolutely. And I guess that's a benefit that compared to.

You don't have a lot of VC funded inpatient competitors, but you got to have a lot of patients here. I don't know if that was a positive or whatever, but it's very challenging to sell to the. health industrial complex here in the United States. I'm sure anywhere compliance is important and technology and the big systems that are already in there and the politics. And if a founder is interested in.

creating another software product for your customers, what would you say to them that you didn't know when you started? What would you explain to them about how this works? You don't have to do healthcare, buddy. No. So number one, the sales cycle is what it is. You cannot shorten it dramatically.

The best you can do is shorten it maybe 20, 30%. You need to be very well organized, right? Especially the longer term deals are more like project management. First, second, it starts from day one, right? From your first conversation, you're setting the expectations. You are then setting expectations of, hey, one day we want to go live with the whole organization. Then you're doing the project management planning of who do we need to talk to then? My mentor used to say,

Verifying truth is a very big part of this, right? So you will end every conversation saying, hey, this is what I heard. This is what our next steps are. You'll write that in an email. Then you'll talk to the next person. And you will re-verify, hey, is this the timeline still? Are these the people I need to talk to? And you will do that over and over again until you actually know what truth is in the org. You will continuously work towards a timeline.

And you'll know the cycle. So you'll know that if somebody, your first conversation you're having says, yeah, we'll get this live in a month. You're like, I don't think so. You're one of the largest health systems in the country. Either you've never bought this before or you're intentionally lying to me.

So you start to get a barometer for that. And you should also learn to ask questions in different ways. Hey, can we get this live by June 1st? Yes. Last time you implemented a solution like this, how long did it take? But it's also a personal thing, right? You also need to figure out like, what drives the person? Obviously, what's the org? What's their macro goals? Hey, what are the three big trends your CEO is focused on for this year? When's your budget, of course.

Let's fit into one of those three trends because you know they need to make the pitch for you. But you also need to understand what's going on on a personal level with your guy or your gal, right? What drives her? Is it getting promoted? In healthcare, is it money in healthcare? Not really. I mean, everyone wants that a little bit, right? But they're there because they care about people, right? But it's finding out what each person's lever is to make sure you're utilizing that.

And it's just doing this over and over again and being really well organized. And also not to give away things too early. I think this is a don't give away the free trial too early. Right? Don't cut price too early. All that stuff, if you're going to cut it, make them really earn it and get something in return. Right? That's why you see a lot of places will have this implementation fee.

This fee plus that fee. Usually it's to give customers something when they want something. Like, oh, sure, we'll waive this implementation fee. They had no intention of charging it. They wanted to give it away. And so it sounds kind of counterintuitive because it makes purchasing, this was a hard thing for me to get my head around. I want it to be simple, right? But they have a pattern and you need to fit into that pattern.

Right. So recognizing that pattern when you're selling and when you're negotiating. And like, you know, a lot of times the early mistake I made was I'd be like, you know, let's do a free trial. Right. I didn't realize that I was in conversation one of 50. Right. I'd given away the free trial in the first combo. What am I doing here? Holding your ammo until you really need it is important. Those are some of the many lessons. You talk about...

50 touch points in a selling cycle. I heard somebody describe enterprise sales as more like passing a bill in Congress than, you know, sales. See, you could have just said that. I was much faster than the way I said it. No, no, I get it. Well, no, you described it in its partial excruciating detail. How long did a sales cycle take for a, you know?

Something that could turn into a couple hundred thousand dollars a year. So a couple hundred thousand a year, six months, which wasn't bad, right? But to get into the, you know, 500,000 plus, you're looking at a couple of years. And who would, were those your deals? Because most salespeople don't stick around that long. So this is a good learning experience, folks. When you go enterprise, right, with the longer deal cycles, it isn't just a change in.

one thing. It is a change in your entire business, which means obviously your product needs to be a certain way. You've got to have security, you've got to have the documentation, you've got to have the roles. Usually that's the thing. But you also need to have the right salespeople who have done this type of thing before and your confidence changes.

You can't really rely on, hey, buddy, in two years, you're going to get a pot of gold. Because as you're saying, Greg, 30% of salespeople leave every year. Yes, it was a struggle to find the right salespeople. We never quite cracked it, but this is where practical finders are kind of at a disadvantage if you're trying to do the leanest team because you're going to lose some of those salespeople and it can be debilitating if you only had three to four salespeople.

You lost one-fourth of your sales team. So we filled that gap with me. Founder-led sales, I guess it's called. So I had to learn. I talk about it now, but I didn't know any of this stuff. I figured it out from guest checking, but also amazing mentors and reading a lot of Saster stuff.

And so you have to teach yourself a lot of these things because you are going to lose salespeople. Most of the salespeople lost. They didn't get better deals elsewhere, right? They got the promise of them. They didn't end up getting them. They would have made more money if they'd stay with us. You have to figure out how you can give them wins over a two-year sales cycle. And so we did okay with that, but that's where you want to...

put in those medium or small-sized deals to get them quick wins for confidence level, for the team, for revenue numbers, for cash, but also for confidence. Did you have a sales team focused on the little deals and a sales team? you know, the sales guys focus on the medium side deals and you would do the big deals. Did you kind of tear it like that or did you just drift up market and you guys worked on bigger deals every year?

In the middle, right? Call it some first-time founder struggles. But we started going up market. But usually when we'd have a new salesperson, we'd have them start small. Just to get familiar with healthcare, aware that like...

You know, we can teach them healthcare, right? But we want them to make their mistakes in the little people. And then moving up market, realizing that, hey, the things you learned in the ones and twos, some of that's applicable, but some of that's not. Right? Like the classic, like...

And you see this all the time. It's volume-based salespeople, right? And that's a hard job, but it's the classic. Hey, what's it going to take to get you in today? Yeah. Exactly. Exactly. And they're like, I don't know, man. We're going to do this in two years. What are you doing here? And you're just closing too early, too eager. And so we'd move them up market. We never quite nailed that team design. Again, because we didn't have as many people. This is where if you had 10 more people...

this could be a much easier solved problem. So you say you raised a little funding. Tell us about the funding. How much was it and how did you get it and what did you use it for? We raised $1.6 million, so mostly it was from a VC firm, Altitude Ventures, out in Nashville, healthcare-focused. We were one of their first investors. We didn't go any further than that.

For the simple reason that I saw a ceiling on healthcare, and I didn't know that I could run a – Luma is a competitor. They raised, I think, $100 million, right? And they're great at it. I don't think I could have done that. And so it was a little scary. So we raised very minimal money, right? And tried to keep things in our control. We, you know, we had a clear map of what we wanted to do. Right. And so that was struggle. Yeah. Yep.

It was a bit in the middle, right? There was some pressure. We didn't want to raise more money. They knew that. We were quite up front when we were screening investors. And hey, this is what it is. And I was quite up front myself. I am a divisive person, I'm sure. So I think what we did is we did a good job screening for investors. We didn't fit into the model that you're talking about. And then 18 months later, raise a crap ton more.

Wasn't going to be us. And the pressure, God, the pressure there, the pressures are in both places, right? Practical finance is really hard, but the pressure and the annoyance, I guess, if I had raised 20 million, I had a great business and you just missed your mark a bit.

I got a great product, great business, you missed your market a bit, and you're screwed. That's the downside of that model, obviously, as everyone knows. But man, it must be frustrating. You're like, I got something here, man. But they're like, yeah, you don't got it. So let's talk about that investor, that one and done investor. In the end, when you sold the company, were they happy with the outcome?

It was positive, I guess, but maybe it wasn't the trillion dollar 100x or the big bet. But were they happy in the end? Yeah, I think they were. Everyone always wants more money. And when you get more money, you want more money. But I think they were happy. People made a lot of money. I'm happy with it. I'm proud of it. The team is. And our customers take care of it.

I think it worked out very well. Was there anything else along the way that you were growing that was just, I guess you had COVID in there, but whether, and you drifted upstream, was there any other significant events? A little lot of retrenchments that I'm sure there's a lot of learning along the way. Yeah, so many to count. I mean, one is, I don't know the answer to this, but by the end, I was so burned out.

And I'm sure many of the founders out there are burned out as all hell. Exhausted, miserable. After we sold, my wife's like, I haven't seen you smile in years. You're so happy. And I don't know the answer to that. Yeah, yeah. I'm sure there's an, I don't know if there's an answer. That was one. Two was the interesting predicament we find ourselves in. And I think, again, if you're a practical founder, most likely you're not building in software, at least you're not building a platform.

at least from day one, right? And so what you end up getting with, because we had to rely on partners is we had partners stealing our product, right? Stealing our marketing. You know, copying everything hook, line, and sinker. You're kind of a feature, and they were kind of adding features to their stack. Or so they thought. What would happen, it would slow our deals down for about a year in that market. They would come out with their competitor.

There it is. They come out with something new. The customers would be like, oh, we're going to try it. And of course, the customer was disappointed and they probably didn't get it for six months to nine months. And then they'd come back to us. But this big company's got all day. We don't. It was just frustrating, right? On a personal level, you're pissed off. You feel betrayed. It's part of the game, I guess.

Our product was better. But one of the other things that's tough in healthcare is sometimes rationality is irrelevant. We had a customer who we were doing 40x what our partner competitive solution was doing. 40x in terms of results. But they went with the partner solution. I was like, guys, what? What are you doing here? You're living millions of dollars on the table. They're just like, hey, we made an investment of a billion dollars in this partner thing.

We like, you know, I don't know what it was. And so that was the other thing that's really burned me out. And I'm sure that's the same in other enterprises, but in healthcare in particular, that just, you know, you think, hey, it's a meritocracy. You build the best thing, you produce the best results, you should win.

especially when they're that much higher. Because I know there's a whole thing, and sorry, I'm ranting at this point, but there's a whole thing of, hey, you got to be 10x better. You can't blame customers if you're not 10x better. I think you can. If I'm 5x better, right? That's bad. That's ROI, right? You should use a thing that's significantly better. That's how ROI works. Or you're not calculating ROI correctly.

Right? Well, the 10-axis Guy Kawasaki from way back in the old days. Yeah, the Apple days, yeah. Yeah, talking about bringing a new thing into the universe.

We didn't, we just, we're going to do it a completely different way. Uber had to be 10x better than a taxi, something like that. But the ROI game as you're selling is a little different. What precipitated the sale? Sounded like you were tired. and the game was changing and, you know, you're more of a frontier entrepreneur and not the, you know, scale CEO or something. What precipitated? Did you get a call from the FreeGS CEO saying, we'd like to...

buy your company or did you circle these strategics? One thing I had done from the beginning that was lucky and smart, whatever you want to call it, is I kind of knew from the beginning we were going to get acquired if we were going to exit. And so I made sure... to try to know the CEOs of the companies who would buy us.

So Haim was zeofresia. Work the sales cycle. Bring the donuts. You got it, buddy. So it was a six-year sales cycle with Haim. In the beginning, he said, you have a cute feature, but not a product. Then it was a cute product, but not a business. And then it was, are you ready to sell? In which case I was, I was just, you know, I think for me, you know, all the stuff was right, but what it came down to is opportunity cost, I guess, like mental opportunity cost, which is.

You know, you guys heard my reasons get into this. I am not driven just by like healthcare, right? Or driven by, you know, making patients' lives better. Sure, that helped. It's certainly better than making their lives worse. But I didn't know that I wanted to spend another 10 years in healthcare. I was only in healthcare because it was the best idea I had at the time. And so I was worried about being stuck in that industry forever, only because of a simple idea I had eight years ago.

It was like, all right, here's my off-ramp. Everyone gets paid. It's good money. It's going to take care of everyone. But also, I get to stop too. I get to reprioritize, rethink through things. Thanks for sharing that. Usually part of the equation, investors are tired and founders are tired of investors in the slog.

you know, the dotted line of the upper to the right slowly changes. Oh, that dotted line isn't moving as fast and there's something that precipitates it. What did you do to develop this relationship? Did you... see them at trade shows and uh do partner go to the partnership events and just have conversations and just kind of express i've heard it you know here's what we're up to you should know and then you come back six months later and say we've made a little progress you should know and

do that kind of thing? Or was there something else going on? I wish I was better at the checking game, right? For those who are, it's a real strength, right? Which is the monthly, whatever it is. So one, I called email them, right? As founders, you should always take advantage of it. Any founder is almost always going to respond to your email, right? Oh, that's a founder advantage. You got the click rate is open. The founder is emailing you. Yeah.

significantly higher, right? Like it's probably 40%, right? We've all been through it. And it's obviously, as long as you don't abuse that. So that was that. But then what I also did is I got to know their whole team, right? Because like, you know, I'm CEO of a public company, right?

he can't unilaterally decide to buy a company. I don't think so, at least. And so we would go to the trade shows and I got to know their VPs, the SVPs, his co-founders. I got to know the lower level employees at all the trade shows. I did this with all the other folks.

too. And tried to make sure that we shared customers and they all knew about that. Because when you're thinking about it, if they're going to buy us, they're going to buy us because we can add value for their customers, like monetary value for them as well. So one of the questions they're inevitably going to have is, if we buy QDoctor, can we then upsell to our customers? Or will customers think this should now be included in our bundle? In which case, why do we buy them in the first place?

Right. And so by showing that we have similar shared customers. And you were able to sell it separately as a different product. Yes. So then when they were thinking through the ROI of an acquisition, they would say, OK, we're going to be able to sell this to a lot of our customers for actual monetary value, not just getting them.

to use it, right? That's a different calculus. It becomes a revenue generating acquisition versus a more defensive product style acquisition. Right. Did he show up one day and said, we'd like to buy you? And you went back and forth on some numbers?

That kind of thing? Kind of, yes. A little dance? Yes. Yeah, right. He called me because it was COVID. You didn't shop it. You didn't call the other ones and say, do you want to buy us? You pretty quickly got into the ballpark of what you thought was reasonable.

Yeah, I shopped it a bit. I didn't have too much time. The whole thing happened over three months. I should have shopped it a little harder, it turns out, in respect to one of their potential acquirer who, it turns out, was giving me signals, but... A high school boy, I didn't know their signals. But no, I think it worked out well. Yeah, I shopped it a bit, but there was a list of six people.

Right. And there were some other people I just wasn't going to sell. Right. So it was a good home and you already trusted these people. Yeah, they shared customers. It was an OBS place, right? And that's kind of what, you know, I always valued, right? I don't play the, I'm not good at playing the political game where you say one thing, but you mean another. As anyone can tell if you're still listening at this point, right? You know, they were like, hey, this is what we think.

this work we're doing I was like cool that made that much easier and then the due diligence process and the legal process was that the same normal you know frustrating experience I guess Apparently, yes. It was three months, 18 hours a day. The other way you get through it is knowing that it will end. It was... They had so many lawyers. Again, this was their first acquisition as a public company. And they're not an SPV. They're a real public company.

They made sure that everything, every contract ever signed, which we were well organized for, but all the different accounting practices, arguments over... God, so much stuff. So much stuff. And it's funny, and I'm sure anyone who's been through this can tell you, it is all the details are covered with the exception of the 1% chance that you are lying to them. And that is 99% of the work where they're like,

And the 1% chance this guy's full of it, that's what three months of diligence is, right? It's the, we're going to argue over protections in case this guy's a fraud. That's really all it is. Was there any holdback in there for the surprises? It was a 12-month holdback. I forget what it was. Nothing too extreme. Everyone was extremely happy, no issues. That was, of course, negotiated over. And really, you have your lawyer.

four different types of lawyers. And again, our acquisition wasn't that big. They had giant law firms. And you're hurting cats. I will say to any M&A lawyers out there, wow. you guys work way too hard. Like I almost died at the end of three months and these guys just roll on to the next one. Uh, so yeah, props to them. Get some sleep.

Yeah. Wow. Like they're personaries in battle. They're going to go do battle with somebody else, you know. I don't know how they do it. Oh my God. But I remember January 6th. We lived right outside DC. And while everyone's watching TV and what's going on, I'm screaming at my investors to sign documents to get this thing closed. And they're like, do you see what's happening? I'm like, I don't care. Sign the document. So that was where my head was at. What was the biggest surprise about that?

whole acquisition process that if you could do it again, you would do differently or prepare for better? Was there anything you could have prepared for? Honestly, no. I think we did a great job. I think the only thing I would say is if you get acquired, as much as you can, always make sure you nail the employment agreements too.

Yes. Well, with your employees and with your new employer, right? Oh, I see. Okay. Yep. So this didn't really happen to us, but I've certainly heard it where when you get acquired, everyone's happy. It's so exciting, right? But a couple weeks later, you're old news, right? And so you want to have nailed down, hey, I'm going to work there for two years. I want all my employees to have at least one-year agreements, if you can get that, right?

or two-year agreements, right? And on top of that, you also want to make sure that for you as a founder, and also your employees as well, you get them the highest titles you can. And you argue for that as much as you can. Because where that's going to matter is, even if you make a ton of money on it, you're probably going to want to work again. Not even for the money. And so you want to be like, hey, I was a VP.

at a public company. I did this, right? And it will certainly help you the next time around. You never think you'd have to work again. But I can tell you, starting another company, I probably will do it one day. It sounds still, two years later, it sounds tiring, right? The NVIDIA CEO talked about it. It's freaking exhausting, man. And so I was like, I'll be an employee. And so having that title, a VP title or an SVP title can really help you in that next round.

So you did a little time in the employee seat at Freesia as part of the transition and so forth. Was that productive or was that sometimes people recover? with their full-time job, you know, inside the big company entrepreneurs, you know, put their feet up a little bit, relatively. Yeah. Yes. I think I put my feet up a little bit. They were great to me. Right. It was kind of the deal I agreed to with them.

It was really interesting. They're a well-run company and they're a public company. So I got to see... Because again, if you're a founder, you don't really know how to do this stuff. I got to see OKRs, KPIs. How do you do that stuff? What is it? How do you do it? How do you motivate thousands of people versus motivating 20 people?

Right. What goes into these different orgs? Like, why are there so many people in finance? What do they do? Well, it turns out there's a really good reason for that. And so like you get to see all these things from, you know.

a different angle, which if you're going to start another company, take notes. It was really good corporate education for me on stuff like, I didn't know how to do any of this stuff. I didn't know what this stuff was. A performance review? I don't know, man. We had weekly meetings.

Right? But that stuff doesn't scale. So you need to do performance reviews. What's the right way to do it? What's the wrong way? How do politics work? Why do politics work? How do you root them out? How do you change the – all this stuff. You kind of learn. It was fun to see.

Yeah, I had a much bigger scale than I was used to. Some people describe, some entrepreneurs describe receiving the money in the bank account and, you know, look, honey, we did it. And it's just a relief. And then the next day, the game's changed.

You kind of feel off your game and maybe a little depressed that it's not the same quest. How did that experience go for you as through the transition? Some people say I can only play golf for a week and a half and then I need to get... back to doing something what was it like for you uh it wasn't the next day uh maybe six months later right like after six months i was just like smiley guy it was uh smiley

I was Mads Mikkelsen in another round. That makes sense to anyone. Big foam guy, right? But I made my way through all the hobbies. Turns out I don't like fly fishing or I don't want to catch anything. I like fly fishing and I love... books about it and movies. I like surfing, but it's really tiring and I'm really bad at it. So to the long story short, yeah, you get into this kind of depressed era.

right? Which is insane. Your friend's like, why are you depressed? But for your fellow founders, you're used to doing stuff, right? So you need a place to put your energy. Yeah, it's quite a come down. because you thought you'd never feel that way again. But then you realize part of you is just ingrained that way.

Right. And so you try to figure out what is that avenue. So like I worked at an AV company doing robotics because I was reading sci-fi novels and they'd seemed cool. Right. Learned more there. So you try to find your different outlets. professionally, right? Because I was like, I'll be a stay-at-home dad for two years. And oh man, being a stay-at-home parent is tough. So yeah, there is absolutely that kind of depression of what do I do now? Like I'm not dead. I've got a lot of years left.

Yeah. So what do you do now? Yeah, okay. Now, yes. Now I consult startups. I know that sounds silly. And I remember being a founder. Not to me. Oh, well, you're good at it. I just share my mistakes. But God, it's funny. Those are the most valuable resources for me. And that's what I do now, right?

Either go to market, founder, like mental health, it's product stuff, right? I think what founders appreciate is kind of no BS. Like, hey, I don't have advice to get you from 10 million to 100 million, but that's not your problem right now.

Your problems get to, as you said, zero to 10 people, like 10 customers. There, I'm hanging out. That's what we're doing well. And so I work with a bunch of different startups. Well, not a bunch. I only try to do a couple at a time so I can give my attention. And it's a lot of fun because it keeps your mind going.

you get to be like, Hey, you're going to start out in second base. You're going to avoid this litany of mistakes that I made that I do, you know, that was hard earned. So that's kind of, I've been doing that. It's a lot of fun. I'm just really good. Yeah. And you had mentors along the way too, as you mentioned, that helped you navigate the challenges. Oh, yeah. And again, we had these exact same discussions, right? That's what I love.

about this podcast is most of the time these conversations are going on founder to founder, right? And if you're lucky enough to have those, then it's great. But if you don't, you can feel very lonely. So this is great, right? Just be like, oh, I'm not alone. Like you listen to this thing, you're like...

Yo, guy's talking about what I have. I thought it was just me. And again, it's funny. You talk to any other founder, I said this earlier, within a minute, you're like, yep, they understand exactly what I'm going through. Now we can drop the facade and have a real conversation about real problems. So I have this little.

Trick. I meet a founder I know. I say, hey, John, how's it going? It's great. It's awesome, he says. And I say, so you're screwed. And then the look on his face is like, how did you know? That's far adorable. We don't really get to show that very often. Playing the game. Yeah. That's the biggest difference, though, is what pre- and post-selling the company. When we pre-sell in the company, we lose like...

Friday afternoon. By the way, if you haven't figured this out yet, don't look at your email Friday afternoon. It's when the bad news is delivered. That's a tip. You should use that. But we lose a $100 a month customer, and my weekend would be ruined. But afterwards... Eh, whatever. We're part of a bigger company now, right? That was the biggest difference is I didn't live or die by those tiny things.

Well, we got to get connected to it. You're making payroll. Like, this is a big deal. And it's living on the edge. I appreciate you thinking it was rational. I appreciate it. Yeah. No, I totally get it. All this crazy stuff is pretty normal for us.

Listen, shout out to every founder out there. I hope those of you listening, any other founder, whether it's VC, funder, whatever, talk to each other, bitch at each other. It's the only way you get through this. Awesome. It is unfortunately, as you realize, you get to the other side.

You're kind of ruined as well. You kind of don't want to do anything else because you're good at this one thing that's really valuable. Right. It's kind of a puzzle. You're great at this hard stuff. And the only way to...

To solve the puzzle is to do more hard stuff. So it's really tricky. So Patrick, you've had a lot of experience. You've shared a lot of wisdom here. You've learned a lot of lessons. What is the advice you... give most often to practical founders that aren't just, that don't think that the. Problem in this solution is just funding. They're out there building software products, solving a problem in the world and thrashing about as they do to make progress.

What is the most common advice or what would you like to share with practical founders out there that would be helpful to them as they're getting to journey? The journey to 10 customers, to $10,000 revenue, to $100,000, to a million. you know, to a little factory that goes, even if you leave the office for a day, something like that. What few bits of advice would you share with them? I'm going to give you a three. I can't give you one. Number one is focus.

And I know that's kind of cliche, but have like blinders on because you'll want to do a lot of different stuff. Focus on, you know, particularly in yourself, focus on, is this helping? Is this going to get a customer or not? If it's not, don't do it, especially early days. That's all that matters. Number two is work within yourself to find your angle. Right. So like, you know, if you're a introverted person.

then don't try to be an extrovert, right? Play through that introvert, right? If you went to Berkeley Law, then email every Berkeley Law person to be your first customer, right? Play within whatever your advantage is and tell a story. And then the third thing is kind of my like rubric. Whenever I get really down, it was, I have two choices. I can give up and go home and move back in with my parents, but I'm not going to do that. So I guess I have to keep going.

That's it. It is pretty simple. You're giving up, which you're not. So then you're going to keep going. So stop whining. Let's do it, baby. Let's do it. Great. Well, Patrick, thanks for sharing your story today. And thanks for helping so many patients and doctors out there in the thankless world of health care and the U.S. health system out there. And congratulations on having an exit.

the options to follow your bliss and figure out what that is and find the next adventure for yourself. Thanks for having me on. I love this. I love what you're doing. So thank you. Thanks for listening to the Practical Founders podcast. I hope you found this interview interesting and, well, practical and useful.

Please subscribe to the Practical Founders Podcast in your favorite podcast app and stay tuned to hear amazing stories from successful founders who are winning their big prizes and doing it their way without big funding. You can visit practicalfounders.com to join the community and get my weekly email with deeper insights for practical software founders all over the world.

And you can reach out to me directly on LinkedIn. Let me know what you think of this podcast or connect. Love to meet you. Bye-bye.