Jay Desai is the cofounder and CEO of PatientPing which is a health technology company that is building a national network of engaged providers who are sharing information, coordinating care, and working together to get patients healthier faster. The company has raised over $100 million from top tier investors including SV Angel, Andreessen Horowitz, First Round Capital, GV, Eight Roads Ventures, F-Prime Capital, Leerink Transformation Partners, and Transformation Capital to name a few.
In this episode you will learn:
- The pros and cons of hiring a cofounder
- Cracking the many chicken and egg problems facing startup businesses
- How Jay found his Seed financing
- Negotiating with investors
- Jay’s top advice for new founders
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
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Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Jay Desai:
Jay Desai is CEO & Co-Founder of PatientPing, a healthcare technology company that connects thousands of providers across the nation through real-time notifications and patient insights to seamlessly coordinate patient care.
As a devoted healthcare reformer, Jay Desai has spent his career creating tools to transform the healthcare system into one that provides higher quality care at lower costs. His passion lies at the intersection of technology, policy, and community building.
In his role as CEO & Co-Founder, Jay Desai sets the vision and mission for PatientPing and challenges his team of innovators and experts to change the way healthcare is delivered through light-weight and simple solutions. Jay Desai has spent the past decade as a health care policymaker, young executive, and investor.
Prior to co-founding PatientPing, Jay Desai worked at the Center for Medicare and Medicaid Innovation where he helped design and implement ACO, Bundled Payment, and other innovative payment models that would become the cornerstones Affordable Care Act.
While in this position, he was struck by the gaps in communication between providers. PatientPing was born out of his desire to find a simple solution that would transform the way providers would collaborate together on their shared patients.
Jay Desai previous experience includes Triad Isotopes, Parthenon Capital, and Lehman Brothers. Jay Desai has served as a subject matter expert on health reform for a variety of provider organizations and co-founded the Health System Transformation Task Force.
Jay Desai earned an MBA in Health Care Management from the University of Pennsylvania’s Wharton School, a BBA from the University of Michigan, and is a Coro Fellow.
When he’s not working to solve the hardest problems in healthcare, Jay can be found in his running shoes on Storrow Drive or walking his dog!
Connect with Jay Desai:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a founder that I think he’s going to teach us a lot about building and scaling, about creating a powerful founding team, about the chicken and the egg problem in business. Then, also, we’re going to be talking about healthcare quite a bit. So, without further ado, Jay Desai, welcome to the show.
Jay Desai: Thank you so much.
Alejandro: Originally born in Wheaton, Illinois. How was life growing up there?
Jay Desai: Well, Wheaton is famous for having the most churches per capita, and I was not a Christian growing up in Wheaton, Illinois. But there was a good community of folks. My parents are from India, and it was a great place to grow up. I don’t have any complaints.
Alejandro: So, your parents are immigrants from India, and I’m sure that influenced you into this entrepreneurial journey. Perhaps seeing their hard work and dedication of coming into a country, the land of opportunity. So, how much do you think that influenced you and that entrepreneurial drive?
Jay Desai: Oh, for sure. My dad is a pharmacist, and he has a small pharmacy that he owns in the south side of Chicago, and that was always where he worked and how he provided for the family. He used to say, “Why would I work for Walgreens or CVS when I could work for myself?” So, there was a strong bias toward creating your own destiny, creating your own environment to drive. So, yeah, it was certainly an influence for me.
Alejandro: Very cool. Then after you studied at Michigan, you did a couple of years – four years to be more precise, where you did a little bit of investment banking and then also private equity. I’m thinking here that gave you a good perspective as you were thinking about patterns of what makes good businesses and bad businesses, and different things that you recognized and how to build a path potentially toward success. How did your experience at Lehman and Parthenon shape your perspective about business?
Jay Desai: I would say Lehman was a traditional investment banking analyst program for hyper-ambitious, but aimless college graduates. What that taught me was about capital markets, and mergers, and acquisitions, and IPOs, and financing to a certain degree, but I would say mostly the vast majority of what I learned there was how to work hard. PowerPoint Excel had a frame and argument on how to make a point clearly and succinctly, and also what types of cultures I really did not like. Facetime cultures, really competitive cultures that were competitive for the wrong reasons, very male-dominated cultures, not very diverse, those are some of the things that I saw, and I knew intrinsically didn’t agree with me and didn’t feel right. Parthenon is where I would say I started carving out my market-driven or customer-driven journey, where I started diving into healthcare, understanding the healthcare industry, how dollars are flowing through the healthcare system, how healthcare providers are able to compete and what the basis of competition is when it comes to quality of care versus the cost of care, just how convoluted the system of reimbursements and how government policies shape how ultimately patients get care. So, the business of healthcare, the business of medicine, and all the various actors and how they all fit together. It was a really great launching place for me to understand the industry, and also what I would say what makes a good investment. I just start getting the sense of how you think about a deal, how you think about a financial model, and how you think about financing and debt versus equity and some of those basic principles. Most of it has been learned on the job, but I did get a good foundation there.
Alejandro: In fact, what a foundation. You invest in a company, and you end up going and working for. What was that?
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Jay Desai: Right. The other thing I’ll say that I really got a lot of exposure to – it’s just, again, around culture, the types of people I was drawn to. I loved working for my boss at Parthenon Capital. We still have a very close relationship today. He’s actually an equity advisor in my company today, and obviously, somebody I’m very close to over the years. The reason I joined one of the companies that Parthenon had invested in was because of the CEO. The private equity fund where I was actually hired in and brought into this new company that they had invested in. So, this gentleman, Don Mathe, was somebody who I found to be visionary and inspirational and an outstanding executive and manager and somebody who I was excited to learn from. I got a lot of intimate knowledge of the business, and I was very excited about its prospects as we looked at it from an investing perspective, and then was able to make the leap. I dealt with living in Orlando because it wasn’t my favorite city, but I was there for the professional experience and enjoyed everything that I learned from that.
Alejandro: At least you had Disney Land, which I’m not sure at that point in the stage of your life that you enjoyed it as much, but there’s always a positive and a negative. Jay, after this, you go into a fellowship, and I think that this is the segue into MBA, into Wharton. It seems that now you’ve been in the labor market for quite a bit. Why did you decide to do an MBA?
Jay Desai: I will say that at that point, it represented a pivot in my career. I was thinking hard about healthcare and where there are opportunities for me to extend and take my career. I just started getting jaded by how the way we pay for healthcare shapes, ultimately, what care patients get. As an investor, I felt very much like a lemming where we were just chasing where healthcare dollars are flowing. Actually, I do remember, at one point, Medicare was slashing reimbursement rates for a lot of procedures, things like nursing home stays and certain surgeries and other procedures. I remember, as a firm, we were like, “We should move into things that are cash paid.” I found myself at an aesthetic medicine conference where there were manufacturers of implants and laser hair removal and cellular ablation for excess fat that shows up on your skin. There’s nothing wrong with those industries. I think they’re all very important for certain people, but for me, I just didn’t find myself getting motivated by just chasing where the dollar was going. I was interested in creating businesses and how business can be a powerful force for change for making things better in the world. Again, no value judgments for other industries, but for me, I was interested in working on products and services that were improving patient care, improving how we deliver care, doing it more efficiently to save cost because we spend a lot of money in this country on healthcare. I did a fellowship in New York City called the Coro Fellowship, and then I went to Wharton for business school. Those were all part of my education to pivot out of for-profit healthcare into something that feels more mission-driven.
Alejandro: Got it. Then, after Wharton, you dive into it completely and join the Centers for Medicare and Medicaid. What did you learn there because obviously, this is the best segue that one could imagine before you started PatientPing? Here, you got exposed to this Affordable Care Act and the different new things that this would bring to the equation. What were you experiencing there, and at what point do you think of PatientPing and bring it to life?
Jay Desai: I got very motivated by the call to action to build programs that reduced the cost of healthcare and improve the quality of healthcare, which, to me, that’s a wonderful thing when you can solve for both of those, meaning you invest in things that keep people out of the hospital. You keep them safe and healthy at home, preventive care, coordination of care, things like that that keep you from receiving care and actually focus on health. The Affordable Care Act had a very large part of it that was focused specifically on this agenda of reducing cost and improving quality. At Wharton, I was the only guy that went to the public sector, to the federal government. I think people had gone through their two-year education, which wasn’t inexpensive, and were excited for jobs in the private sector that were really high-paying and very high-status, and really incredible careers that people launched out of business school. For me, going to the public sector, going to the government, was guided once again by the people. You’ll see as a theme throughout my entire career, and even now, as an entrepreneur and as a CEO, everything for me is about the relationships and the people and surrounding yourself with the right kind of people. Going to Medicare, it was people all across the country who were thinking about how to make care better in their communities. These were serious leaders across the country – people who had invented things like the [12:50] care organizations and bundled payments. For folks who are in the health care policy world, those are very meaningful monumental programs. It was like a magnet. They were all drawn to this call to action as part of the Affordable Care Act to make a big difference in our country. For me, I felt surrounded by luminaries in the industry, people who I had read in the New England Journal or followed at various points in my career that I was now able to work alongside. So, I learned a ton from them. I got to be part of some very important changes in this country, and it was a terrific learning opportunity.
Alejandro: Very cool. So, PatientPing. At what point do you come across the idea and say, “Hey, it’s time to make this thing happen”?
Jay Desai: One of the big initiatives that we created was a program so that a primary care doctor had a financial interest in keeping you out of the hospital. So, let’s say a primary care doctor had a thousand patients that they have a relationship with. Before, all that primary care doctor cared about was when they came to the clinic. You show up in the clinic; you see the patient; you have a consultation, and you send them off on their way. Maybe they get a flu shot, maybe they get medication, or maybe it’s just a bump or a bruise, and they’re fine. Then, you’re out of sight, out of mind for that doctor. It doesn’t matter anymore. With the programs that we were creating, we gave extra money to primary care doctors. If they worried about their entire patient population – let’s say it was 1,000 patients, and every time they kept those patients out of the hospital or out of the ER by delivering preventive care and saying, “It might be time for you to come in for your annual physical,” or “It might be time to do a colonoscopy,” or if you’ve got diabetes, to do your hemoglobin A1C read, or have them on weight loss programs if they’re obese and have cholesterol or hypertension issues. So, all these types of programs, and for them to be successful, one of the things that they needed was visibility into what was going on with their patients. If you’re taking care of a 1,000 patient panel, before, you didn’t worry about anybody until they came to your clinic, and it didn’t matter if they showed up in the ER, or they went to the hospital, or they went to a nursing home, or they went to another specialist, or whatever. It just didn’t matter because you just worried about them when they came back to you. Now, if you’re actually worried about their cost and all the cost that they’re incurring, it’s important for you to have a sense of what’s going on with them. One thing that we kept hearing that these primary care doctors needed was knowledge of when the patient showed up in the ER and the hospital because that was a really important moment to intervein, support the patient, and make sure they don’t have something bad happen to them later. Just as a very simple example, “Oh, Alejandro. We see you’re in the ER. Is everything okay?” “Yeah, I’ll schedule a follow-up appointment with you and to make sure the medications you were just prescribed, you aren’t going to have a bad reaction with what you may already be on. I want to make sure that you understand your care plan or if you need to get transportation to get to your specialist’s appointment.” It’s not necessarily a big problem for people who are younger, healthier, and who can take care of themselves. This is a problem for people who are older, frail, elderly, have dementia, don’t have a lot of supports, have social isolation, live in disadvantaged communities, or where there’s a lot of racial inequality as it related to healthcare. Those are the people who need a lot of support and care from a nation. One thing that they needed was to know where their patients were in real-time. Something very simple, which is, “Tell me when my patients show up in the ER or show up in the hospital,” and there’s nothing out there to do that. So, I left the building, and that’s what PatientPing is.
Alejandro: Nice. I know how important the first ten employees are for you. Why are they so important, the first ten employees?
Jay Desai: I do think that they set the foundation for the DNA of your organization. Five years into it or longer, there may be a fraction of those ten employees who are still at your company, and that’s very normal, and that may happen. But when you’re really trying to design your culture, your brand, your reputation in the market, how people think of the relationship with your company, particularly in enterprise software where a lot of what you bring to the market is your brand, and you’re selling into customers, so they’re interacting with your team on a regular basis. It’s really important that you set the right DNA to how you’re going to deal with the way you handle sales conversation, the way you treat customers after they’re live, the way you build your internal processes around recruiting, and how do you collaborate with one another? That tone will be set and will last through the duration of your organization. I do believe that; I’ve seen that over the past seven years. With that said, it’s pretty hard to have all the time and luxury in the world to pick those ten employees. You will make some mistakes. You’ve just got to be prepared to iterate as you go.
Alejandro: In terms of the idea, there are a bunch of people right now who are listening, that are thinking about – they have an idea. They’re thinking about maybe getting a co-founder or thinking about the corporate structure. How should they think about this? Should they perhaps wait until they find a co-founder to incorporate, or should they go out and incorporate right away?
Jay Desai: I don’t know if this is controversial, or sounds crass, or uncollaborative, or something like that, but if you have an idea or you have a problem that you’re really passionate about, and you’re committed to starting a company to attack that problem. I would still incorporate. I would go get the thing done. You can do it on Legal Zoom. It’s super cheap. A lot of law firms will have a quick-start program where they’ll do it for free for the first million dollars or so of funding or revenue. There are a couple of reasons that’s important. The first is, you get the structure in place, and that’s helpful. But most importantly, you have a choice with your co-founder. Either you can hire your co-founder, or you can actually co-found and set up a founder agreement upfront. If you hire your co-founder, then you can fire your co-founder. If you set up a corporate structure where you’re truly bound to the terms of a founder agreement, then the only way that you can part ways is if you divorce each other. One is a lot easier than the other. Firing your co-founder, if it does get to that point, certainly, it takes a lot of friction out of the process. Again, it is in no way meant to be crass or uncollaborative. What it’s about is setting up the right structure in place so that if inevitably some of the hard things that happen with the startup happen, that you’re able to think through them in advance and actually make those decisions quickly because those lingering decisions and those lingering hard things are what kill businesses, and I’ve seen this happen to a number of companies now. The one other point I want to make is that even if you hire your co-founder, it’s not like you’re hiring an employee. You truly need to treat them like a co-founder, and that means you can even split the equity 50/50, but it’s clear who is the CEO or who is the person in charge. If one person sees left, and the other person sees right, it’s going to be one person’s way. You need to make it clear which person is going to stay and which person is going to go, and having a sole incorporation right off the gate often helps with that process.
Alejandro: Got it. In terms of going back to Patient Ping, how did you figure out that chicken and the egg problem?
Jay Desai: We have a business that has a network effect, which means the product gets better as more people join our network. To use New York City as an example, let’s say you’re a primary care doctor that’s independent and works out of their clinic in Brooklyn, or let’s say you’re a primary care doctor that works at Columbia New York Presbyterian. You show up at Montefiore Hospital in the Bronx. For our product to work, we have to get both Columbia and Montefiore on our network for them to be able to share with each other. It’s not that different than Uber needing to get both drivers and riders on their network for the flywheel to start spinning. When you’re trying to get two sides of a market to move, it’s like the first telephone. The first telephone doesn’t work when it’s the first telephone. How do you sell the first telephone? Somebody else needs to be using it too. So, that problem of the chicken and the egg of how you get multiple parties to move at the same time is really hard. The thing I’ve learned in startups is that there are hundreds of chickens and eggs. For us, it was implicit in our product where we needed to get multiple parties to move at the same time to get the flywheel spinning within a region. Also, you’re going to deal with chickens and eggs constantly. To get your first funding round, how are you going to get your first funding round until you have demonstrated some traction? Well, how are you supposed to get traction? So, you actually have to have some money to go do it. That’s one example. First, customers are asking for an ROI. Well, how are you supposed to get some ROI data until you have your first customer? So, another chicken and egg. A lot of what you need to do with a startup is to sell a vision, convince people for what is going to happen, and you have to be very convincing with that argument, and then deliver. You can’t just say you’re going to do something and then not do it. But if you build a track record of saying you’re going to do something and then somebody takes a leap of faith on you to break that chicken and egg, you tell an investor, “I’m going to go get traction.” Well, go get traction then. Now, you’ve resolved the chicken and egg. For us, you tell Montefiore that you’re going to go get Columbia. Well, we’ve got to go get Columbia on. Or we tell Columbia we’re going to get Montefiore. You have to deliver. If somebody takes a leap of faith on you that you’re going to go do something, then as an entrepreneur, it becomes your obligation to deliver. I think that’s how you can break the chicken and egg.
Alejandro: For the people that are listening to get it, what ended up being the business model of PatientPing?
Jay Desai: If you’re a provider, and you want to know where your patients are, then that’s what you pay for. That’s how we make money. You pay to get a service that allows you to know where your patients are receiving care in real-time.
Alejandro: You guys have raised quite a bit of money. How much money have you guys raised to date?
Jay Desai: A little over 100 million.
Alejandro: I understand that your seed round was quite easy if you were to compare that with your Series B round. Why is that? What happened?
Jay Desai: Yeah. Our company is based out of Boston. Although, in this world with COVID, who knows where I am. I wasn’t going to raise money. I was pretty keen on just bootstrapping the business and becoming profitable and using customer financing basically to get it all going. I was networking. I had just moved to Boston. I didn’t know too many people there, and I went to an event, the Mass Technology Leadership Council. There was this thing called the Unpitch. The Unpitch is supposed to be an event where the VCs pitch the founders, but really, it’s not that. The founders are pitching the VCs. But you sit at a table, there are five founders, and there is a VC seated at the table with you. I was seated with this VC, and in rapid succession, each of the founders did their pitch. It was very quick. It was casual over lunch, and I was the last person to go. I pitched this wonderful VC, and he got really interested. He followed me afterward, and he started talking to me a little bit and asked me to come in to meet his partners. We went on to lunch; it was like a two-hour lunch. Then, very quickly, after that, I had a term sheet for a million bucks. I was like, “Oh, okay. Now, I should consider whether we should do a financing round for a seed round. I got advice from a bunch of people. I had already had this term sheet. I was giving me a lot of pressure telling me that I should take it, but I was like, “I told you, I’m not raising money.” But then, I went and got a bunch of advice from people, and it turned out that it would have made a lot of sense for me to go do a financing round. So, I actually put together a process, and I found out some people who knew my industry and some investors that people had highly recommended because they have great reputations and are good people. It was very easy. Now, I do some angel investing, and I do advising, and I help companies, and I see how difficult it can be. The thing that I realize in hindsight that made it easy is that we were so focused on the customer and building a product that the customer wanted and was going to get real value from, that they would actually pay us for. That’s all that mattered to me was actually building something that they cared about, and that they wanted, and that they would find very valuable, and for which there would be a market. Nothing else really mattered. With that focus, investors are very excited about that. We had already had a product. We had some traction. I had done it extremely cheaply. We had some revenue coming in – not a lot, but a very little. When I put those together – I’ve always had this emperor-has-no-clothes feeling where I think I don’t have the progress like maybe it’s always being an outsider at an immigrant or never feeling like I was – I was always overcompensating or trying to find ways to overdeliver what other people’s expectations of me were. Whenever I do financing rounds, I always think I don’t have enough, but I tend to always have more than what they’re used to seeing at that stage. So, financings have been relatively easy for us.
Alejandro: Got it. How would you compare that to your Series B round with Andreessen Horowitz?
Jay Desai: At that point, the business had matured. We had revenue. We were growing meaningful revenue. We were growing quickly. It was great to meet with a number of VCs. With one of the VCs, I made a move – being a little bit emboldened and seeing that we were having a lot of interest, I felt emboldened to ask for what I wanted and what I wanted for the business. One of the things was a specific board member, but it was a board member who I hadn’t gotten to know until after the term sheet had been issued. I didn’t realize this, but in the venture capital world, the person who brings in the deals for their firm and then later on shops it internally and brings it to their investment committee and gets the deal approved to go invest, they tend to be the person who’s going to be on the board. To ask for something different at that stage in the game is kind of not really something entrepreneurs do, and deals often fall apart if somebody does that because it’s just not how things happen. That said, I didn’t actually realize this, but our company was so highly coveted by that company – I found out later that they said, “We should get that company at any price with whatever they want.” I didn’t realize my negotiating position, obviously. But I was in a really good position. I didn’t get what I wanted ultimately, but I was very, very worried. I think I stayed up all night worrying that I cratered the deal by asking for something that I wanted to protect the business. In hindsight, I realize now when I advise entrepreneurs, I say, “It’s very okay to ask. It’s very okay to ask for the things that you want, as long as you ask in a nice way and respectfully. Money is a commodity market, so when you’re raising venture capital, I think being clear with what your wants and needs are upfront, and then getting to what you want if you do have strong interests, and make it seem like this is very heated, intense, threatening process, especially after a term sheet is issued and when you’re in the heat of negotiations. These folks are professional negotiators. It’s what they do constantly. It can make an entrepreneur feel timid or shy to ask for what they want; it’s certainly okay. I think I probably blew it out of proportion in my own head.
Alejandro: For the folks that are listening, what is the size of PatientPing today? Is there anything you can share about employee numbers or anything else?
Jay Desai: Yeah. We’re about 150 employees. We’re in 28 states. With our hospitals, we’re almost 50 states with our network of mostly key care providers. We’re growing rapidly. We’re still hiring, and even through this COVID crisis. The company has a lot of growth ahead of it.
Alejandro: Where do you think that your market as a whole is heading?
Jay Desai: It’s really exciting what’s going on in our market. I think connecting providers so that you get really great patient care, no matter where you go, there is a problem that needs to get solved. Let’s say you’re a snowbird, and you spend half the year in Florida and the other half of the year in New York. You’re visiting your kids in Chicago, and you go on vacation in California. No matter where you go in the system, the software is there. The system should be able to work with each other so that if you get care anywhere – for example, you’re skiing, and you break your leg. You should be able to pull the medical record down from all the different places that you’ve been at, coordinate with those providers through collaboration tools that look and feel as modern as like a Slack. You can share data. You can pass the care notes to the patient. There’s so much opportunity to build collaboration tools that allow providers to work together with each other in a seamless and easy way, and we’re just at the beginning of that. I’m very excited about it.
Alejandro: One of the questions that I typically ask the guests that come on the show is – you’ve been at it now for quite a while with PatientPing, and I’m sure that you’ve had your fair amount of lessons, the ups, the downs. It’s obviously not a straight line in entrepreneurship, but in your case, Jay, if you had the opportunity to go back in time and have a chat with that younger Jay, that is looking at launching a business. What would be that one piece of business advice that you would give to yourself before launching a business and why, knowing what you know now?
Jay Desai: I think it’s to do everything you can to make the – let me say this in a positive way. Things are never as bad as they seem, nor are they as great as they seem. So, if you can make the highs less high and the lows less low, I think that will help with your own mental health. The first-time founder and first-time CEO, I think everything had so much personal weight and stress. That makes the highs pretty euphoric when you experience them, but they’re very fleeting, so you move on to the next thing. I think that’s a good way to be very passionate about what you’re doing, but it’s an easy way to burn out. So if you really want to make this sustainable and long-term – I don’t know if there is a way, because some people are just wired a certain way. I am probably one of those, but if there’s a way to have a relationship with your company that is balanced, I would keep trying to find ways to do it. I’m still trying to find ways to do that. I think that, to me, is something I wish I would have done more of back then.
Alejandro: Very profound. Jay, for the folks that are listening, what is the best way for them to reach out and say hi?
Jay Desai: My email is email@example.com and shoot me an email.
Alejandro: Amazing. Well, Jay, thank you so much for being on the DealMakers show today.
Jay Desai: Great. Thank you so much.
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