Oliver Kharraz On Raising Almost $400 Million To Connect You With A Local Doctor That Takes Your Insurance

Oliver Kharraz’s health tech startup has not only attracted hundreds of millions of dollars in investments but has become the largest provider of its kind. The venture, Zocdoc, has attracted funding from top-tier investors like Amazon’s Jeff Bezos, Khosla Ventures, and Salesforce CEO Marc Benioff.

In this episode, you will learn:

• Pricing and business models
• Building marketplace businesses
• Growing your business through crises
• Redesigning your company culture
• Sales versus product-led businesses
• Working in highly regulated industries

SUBSCRIBE ON:

See NordPass Business in action now with a 3-month free trial here https://nordpass.com/panthera with code panthera

Also Wingman is sponsoring this podcast. Visit https://www.trywingman.com/dealmakers for more details!

Partnerhero: to waive set up fees, go to http://partnerhero.com/dealmakers and mention “DealMakers” during onboarding!

If you are struggling with projects, sign up for Basecamp. Their pricing is simple and they give you ALL their features in a single plan. No upsells. No upgrades. Go to basecamp.com/dealmakers and try Basecamp for free. No credit card required and cancel anytime. Thank you, Basecamp for sponsoring this episode!

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.

Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

About Oliver Kharraz:

Oliver Kharraz, MD, is the CEO and founder of Zocdoc. Oliver is the most recent doctor in a 300-year family tradition. Over the course of his wide-ranging career, Oliver has accrued comprehensive experience affecting change and building efficiency in large-scale healthcare organizations using information technology.

Prior to Zocdoc, Oliver was an Associate Principal at the global management consulting firm McKinsey & Company. During his seven-year tenure at McKinsey & Co., Oliver developed and implemented new patient utilization models for the national health services of a number of governments and major hospital chains.

In 1994, Oliver built and sold his first business – a forerunner of early internet software. He later became a resident doctor at the clinic of Ludwig Maximilian University in Munich, where he earned an MD and a Doctorate in Neuroscience. Oliver also has a Master’s Degree in Philosophy from the Jesuit College of Philosophy in Munich. He is also a member of the Council on Foreign Relations.

Born in Germany, Oliver immigrated to the U.S. during his work for McKinsey & Co. He currently resides in Brooklyn, NY, with his wife and their twin daughters.

Connect with Oliver Kharraz:

• Crunchbase
• LinkedIn
• Bloomberg
• Zoominfo
• Twitter

Read the Full Transcription of the Interview:

Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I am thrilled you know with a guest that we have today you know he he and his team. You know they’ve built you know one of the um one of the one of the biggest you know startup successes that we’ve seen you know coming out of New York city you know I have a lot of respect. You know for what they’ve done for what the company has done and and I think that we’re going to be learning a lot about building scaling. You know, adjusting to whatever is in front of you with the markets and yeah and all the good stuff that we love to hear so I guess without further ado. Let’s welcome. Our guest today. Oliver Carraz welcome to the show. So so give us a little of how walk through memory lane. How was life growing up.

Oliver Kharraz: Um, thank you Good to be here.

Alejandro Cremades: So let’s go. Let’s go through it. How was life growing up.

Oliver Kharraz: So I only experienced my dad ever with paralyzed arms and that was an incredible daily reminder how much he had sacrificed. You know to in in his fight and he he erases with this belief that. talent- for responsibility. So I grew up with an uber ego that always told me Oliver whatever I just did. But however much I had sacrificed whatever you know I’d achieved to make the world better. It wasn’t wasn’t good enough and so I think every entrepreneur has some chip on their top shoulder mine ends up being. And I want to live up to that example and you know in many ways it make me the leader that i’ am today just because I was looking for something that can have a big impact on how the world works that can improve many people’s lives and it’s I think created environment. Where other people who feel very similarly want to join me and I always say you’re like you can teach a turkey out of climb tree. But you’re much better. Ah off hiring a squirrel and so is a company full of squirrels.

Alejandro Cremades: Now Now Let’s let’s let’s talk about you know, starting companies too because you know right? after if you know, um, literally. You know, being there and and and seeing what was going on. You know you you even started a company before going into med school. So So what? what did you do there with that company.

Oliver Kharraz: Well, yeah, my dad had this philosophy that with 18 I’m on my own and I should earn my own money and so I started a preternet online company back in the day when emails took five days to get from Munich to Los Angeles and yeah I ran that company completely bootstrapped you know for for profits in cash flow and at some point as saw the internet coming and and you ahead to make a decision whether I yeah know sort of drop out of college and make that company internet ready or you know sort of sell it before everyone else sees the internet coming. Also. I ended up deciding to sell it. It was like in the early early 90 s before Aol sent out all these cds for the internet and yeah I think it was a good decision because it protected me from too much money to early on in life. I made some money on that and I took that to go through med school and then practice as a physician for a few years

Alejandro Cremades: And that’s interesting because you went to med school and then you did practice a physician but you know really in instead of of in what they say you know is that once an entrepreneur entrepreneur Always an entrepreneur right? but but in your case I mean you you.

Oliver Kharraz: Effort.

Alejandro Cremades: You actually went at it again. You know with a perhaps you know like the thought of of of going at it with building a business but you end up blending at mckinsey. So what were what what happened there for you not to go at it again and then all of a sudden you know work for somebody else.

Oliver Kharraz: You know it’s interesting. What I had realized at some point is that I sold my first business far too cheap relative to what what a company should have been ah worth and I said well I want to do another startup but I want to at this point know enough about business to make the right decisions. And thought I already had enough degrees so I wanted to learn this very very practically and I ended up joiningning mckinsey originally with the thought to just stay a couple of years but it ended up being incredibly interesting. So I stayed as state I became a junior partner and it did a lot of health care technology and then someone looking back I would say. That was actually quite helpful because I learned a lot but I also developed a deep expertise and perspective on an industry that allowed me to to start so dark. Yeah, with the right? Ah, you know initial starting point.

Alejandro Cremades: Now, let’s talk about you know this? you know really quickly because being at Mckinsey you know and having that the those consulting chops. You know it gives you also the visibility and the capability of of grabbing a big problem and then you know, kind of like putting it into. Smaller problems and then you’re tackling 1 by 1 so what kind of visibility did that give you into execution into being effective at execution in resolving problems.

Oliver Kharraz: Yeah, it’s it’s interesting, right? So mckinsey even before you know selecting opdog was a big impact because I had a framework on what I wanted the company to be that I was going to start I wanted one that had a great mission I wanted it to have a large market I wanted to have a large. Mode so that you can defend it and I wanted it to be based on a contrarian insight so that we could ultimately have enough time to really dig out that mode interestingly when we first got started and and first began to raise money the mckinsey background. Was actually a bit of a hitance for us. So we we you know got started with the company and then we went to santo road like so many others before us and we pitched and we pitched and we pitched and we got very polite reception. Ah but no offers no term sheets and we didn’t know why that was until. At some point a kind soul took us apart and and said like look the idea is great. You look smart enough but you’re consultants. Yeah consultants can get anything done if we looked at our at each other and we both were wearing khackiess and and buttondown shirts. And we knew what we needed to change so we just sort of walked into our gap ball jeans andt -shirts and and continued our tour from there and and then the term sheet started coming in.

Alejandro Cremades: I Love it now for the people that are listening to really get it. You know what? what has you know the business model of shot dog How it has evolved and what it is it today. How do you guys make money.

Oliver Kharraz: So we started out as a saas business where you know doctors would come on the platform and and pay us a monthly fee to be found in this marketplace and that business worked in in a number of ways for the patient was great. You know the the experience. Ah, for the patient was if you pick up the phone and dial for doctors. You have to wait nearly a month tilll you can see one but doctors have last minute cancellations. No showss rescheduls right? in like any other industry where there’s perishable inventory. You know there is marketplaces that match you right? Whether it’s flights or stays and and. So actoc is that market pay for healthcare now we decided you know that doctors would pay us a flat monthly fee. But you know the obstacle we could overcome is that some doctors would get lots of bookings some of them tens of thousands a year and some of them would. Get 10 and so whatever price you would pick that you charged everyone would be way too high for some and and a fraction of what others should pay and so you couldn’t get that right and we scaled socog for a long time. With this inadequate business model and you could say maybe nearly too long.

Alejandro Cremades: Now you know on this you know it’s it’s interesting too because you know it’s um, building marketplaces like that you know where you’re getting like the doctor and the also the the I mean the the chicken and the egg right? So they supply and the demand connecting both. How did you guys go about that because that’s like building 2 companies at the same time. So.

Oliver Kharraz: Um, yeah, it is. It is very hard and quite frankly, we brutefored it. Yeah, we went from doctor to doctor to doctor and walked in and pitched them on this idea when it was really you know questionable. Yeah, how much demand was really on the other side but we we started out with the doctors now we did a number of things that I think helped us make the successful um, the most important one is that we constrained it to a really small geographic area so that we could create density and we ended up. Putting up a big map of Manhattan in 1 of our offices and we would plan flags literally only in downtown only with dentists and we would Mark the different insurances that these dentists accept to create. Ah yeah, critical mass and and you know sufficient options for consumers that would come. Into into that specific area and I think that will set us apart from others that had tried to do the same thing early on that were signing up. You know a dentist in Boston to one in Las Vegas and really delivered value for none of the users as a result. Think that that’s one of the things we did right now we did wait a long time to rethink the subscription part of the model which ended up being the unlock for. But first octrack is a business and it’s something that we started doing really in 20017.

Oliver Kharraz: And and it’s been a step change on every single metric in the business.

Alejandro Cremades: Now in this Regard. You know when it comes to um to obviously you know this kind of business. You know you you need money right? you need money and marketplaces. You know they take money to have the um. Networking effects you know going in the right direction and and making sure that the you know the supply you know and the demand you know are matching and there’s liquidity in the marketplace and all all of that good Stuff. So How did you guys go about you know, financing the company. How much capital you know first and foremost how much capital have you guys raised to date.

Oliver Kharraz: Yeah, so we’ve raised several $100,000,000 in a number of equity rounds. But interestingly we raised our very first round all the way back in 2008 and if you remember these times right? This is when the rest in peace memo was circulating and so we have from day one. But extremely prudent about how we spend our money and money we spend. We always look at as a tax on our ingenuity to replace this with some good idea and I think that’s yeah, very different experience from a lot of companies that sort of grew up in ah in a time when money was 24 so I think we’ve been. Ah, extremely capital efficient over time and because of our strategy of focus on just a handful of markets early on these markets actually sort of overcame the critical mass and started generating. Cash to partially fund yeah know other parts of the expansion of other parts of the business and and that’s been sort of a pattern the most very very helpful for us as we had to go through the business model transition.

Alejandro Cremades: And in this case I mean I mean you were mentioning you know several hundred you know hundreds of millions I mean close to 400 you know, according to um to public sources. But my question here is how has it been you know going from 1 financing round to the next. You know for you guys? What? How how you seen you know to the expectations you know from investors maturing and and and also going you know the business you know from from one cycle to the next.

Oliver Kharraz: Yeah I think again, it’s it’s important to think about what’s the milestone that you want to deliver for the next financing and you should start thinking about this really before you have the prior financing closed so that you know what you can promise and how you position yourself I think the biggest break in that. Stre was certainly having to go through the business model transition right? That is something that we hadn’t anticipated was going to be necessary and and it sort of was a break in the story arc but it was also sort of increasing our work in capital requirements somewhat so that was ah was a. Difficult time to manage through. But you know again, it is all about you know all the expenses you know over is discretionary and in times like this we tend to forget this or or think that the only thing we can do is is sort of thinking about the team. But you know I think this is my two cents for for leaders in general rethink everything that you’re doing right? and when you approach business like that and you have positive unit economics on on everything. You do all? you do is change the dial on how quickly you grow. And you’re complete control of your profitability and we’ve been running ourselves like that you know for a long time now I think that’s what’s really helped us because we’ve always been in a position where we didn’t need to raise money when we did.

Alejandro Cremades: Now in your case. Um you know? Obviously you know there were say a bunch of events. You know that led to another and then all of a sudden you know the board you know, um, decides that it’s time to hit reset you know and because of you know, certain aspects of the business and certain you know, ah things that that you had in front of you guys. And then you had to step in you know because you started as the Ceo you know then you step up, you know I was the Ceo and then you know you’re faced with a bunch of challenges. You know, including culture. You know how did you go about? you know that transition. What did that transition look like.

Oliver Kharraz: Yeah I think that that was one of the most you know, important excruciating things to do with Zocar we had grown very aggressively with a very aggressive outbound sales culture and if you go back and and Google some of the. Articles were written about us back then they didn’t necessarily get everything right? but they also didn’t get everything wrong either and so there’s something that needed to be fixed I realized that in order of it to be the company you wanted to be. We need to transition from a sales led culture. To a product led culture and so we repattformed ah all of our core values right? We we went from a very aggressive competitive culture to one that stresses collaboration in a you know, safe, psychologically safe working environment. And curiosity. You know the the long-term thinking and innovation right? and so that was there was work that required the tyre leadership team sort of to pull through like have these big anchor events and and make sure that all the folks that are on the bus. On board with that being our culture. Go forward and and I think doctor is in that sense unrecognizable today from what it was 7 eight years ago

Alejandro Cremades: I Mean fixing culture is not easy right? because a you know culture really starts with the founders and and really transitioning that is is pretty difficult. Um, obviously you know this has been a work of ah of multiple years now and I guess you know as part Of. Of this Journey. You know what kind of what what would you say were like the 3 key things that you were keeping an eye out for you know when making sure that that transition you know like wouldn’t break.

Oliver Kharraz: So I think culture was actually ah 1 thing that was that I had the most confidence and we’d be able to pull off because there were yeah a sufficient number of people that were really at Zcok that were there for all the right reasons that were very mission driven. And that would see through sort of a rough patch. Yeah with an eye on the long-term vision that that we want to deliberate I think the the financial part of the turnaround was was much more scary because we needed to have a model where we can charge. Doctors more closely related to the value that they’re getting right in in the old bottle. The doctors that got 10000 patients from us a year were literally just paying cents per patient that wasn’t going to be a sustainable business model for us going forward and in some instances we had to go in. And charge these doctors a hundred times more than what they had originally been paying us and now I get upset when Netflix chooses their price by $2 yeah like leave alone by a hundred x and and so those are were set of very very. Challenging conversations to have and it was made more challenging by the fact that when we talk to pricing experts about wanting to change our model. The first thing that came out of everyone’s mouth was but whatever you do don’t charge your best customers more which is obviously the exact opposite of what we had to do now net.

Oliver Kharraz: Over half of the doctors on the platform were actually paying less as a result of the business model transition. But obviously the the squeaky we also were the ones that were paying more sometimes even only modeerably more so that was a very difficult part of the transition. The the third part which was. Maybe the most daunting one to begin with well the fact that it required regulatory clarification. So I spent a couple of years in Dc talking to regulators talking to politicians creating bipartisan consensus that octorg is an important. Piece of healthcare infrastructure that we need bought in this country. That’s actually helping everyone the patient the doctor, the health insurers and and and the employers and and funders of the system all benefit. Yeah from socok’s existence and that can only be scaled. And this new business model and um, it’s a point of pride for me that we were able to convince the regulator to clarify that sock dock and and Zotter specifically has the right to operate the way we do today which is charging the doctor on a per booking basis.

Alejandro Cremades: And at what point you know, Obviously you know a tough um I’ve tough trend tough transition tough responsibility. You know that you’re faced with at what point do you realize hey I think that we’re we’re turning a corner here I think we’re going to be all right.

Oliver Kharraz: Yeah, it’s it’s interesting. We were finished with this business model transition in December of 2019 and we had a fantastic january and a fantastic February of Twenty Twenty right we saw the growth rates. We saw the unit Econs. We realized that we could now start marketing to patients to to make more patients use the service and we’d have yeah an attractive payback period on this and then in March Twenty Twenty covid happens right? The Cdc tells patients. Well don’t go to the doctor if you can avoid it. Was obviously a tough time to have transitioned to a use usage-based pricing model. Our revenue you know broke sixty seventy eighty ninety percent in some weeks so it was a very very difficult time we had board meetings a couple times a week. The board was asking me to consider to to lay off. You know. Part of the employee base to make sure that we match our expenses to our rapidly banishing revenue in the case I said no, we can bet on ourselves. We can add the things that consumers want now to the marketplace and make it resolve and and i. Asked for and got eight weeks to put telehel on the platform. Which yeah, we had prior to the pandemic but it was a rounding error less than 1% with yeah and we we started all this and in early April by late April we had teleoff live by.

Oliver Kharraz: You know, ah mid-may we were the largest tele elth network in the country and by June we had sort of our revenue return and and we were able to actually eke out some growth in 2020 overall despite a really wipe out quarter in q 2 so we ended up being very much. Okay, but after surviving something as devastating as the as the initial covid wave I knew that this business had the resiliency to really go all the way to the top when our execution attorney 1 and 22 and you know the beginning of 23 really points towards this being a correctly sort of correct assessment. Um, we now see very healthy growth. We’ve seen the doctors side of the network actually. Change in quality. Dramatically it used to be that we had ah many many people outbounding calling doctors asked them to join the network now doctors are coming to us they fill in their information on the web they put their credit card in on the web themselves and and can really sign up without ever talking to a human being. And to give you a sort of a sense for the scale of this in just 2022. We signed up more doctors in the first eight years of our existence combined.

Alejandro Cremades: Wow now now in this case, you know for you guys too. I mean there’s a lot of employees. How many employees do you guys have today? Wow and now you know when it comes to um, you know to when when when you know obviously that’s how a lot of employees. You know I wonder like for the.

Oliver Kharraz: A little bit over a thousand.

Alejandro Cremades: People that are listening to to get the you know a size a little bit of a size you know like scope and size of the operation today of so dock I mean anything that you can share in terms of like users or doctors or anything like that.

Oliver Kharraz: Yeah, so we we have over ah 200 different specialties where in every major city. Yeah, we have roughly 50,000,000 appointments available in every given month and and we deal with over. Ah, 120,00 different insurance Plans. So It’s a pretty comprehensive platform at this point that’s growing that’s growing at a very rapid clip and we are sort of I think the default Marketplace in Healthcare At this point.

Alejandro Cremades: Now when you have you know it’s amazing like when you have the the the fly wheels you know and and the network effects you know going you know for for a marketplace like this I mean little, you have to do to really mess this thing up. I mean it. It kind of like goes on its own right.

Oliver Kharraz: Well, it’s actually it’s actually slightly different than many marketplaces right? So healthcare is hyperlocal people in New York Bone even cross central park to go see a doctor so you end up having to manage tens of thousands

Alejandro Cremades: Okay.

Oliver Kharraz: Zip code specialty insurance-specific micromarkets and it’s something that is that we’ve had to learn over the years that is very very complicated and and isn’t completely on autopilot but you know we’re. Proud that we I think are mastering this on behalf of our patients and that we’re getting better at this every day and it’s obviously no regret you know platform for a provider to join so I think it’s getting easier and easier to do this even though it’s a very very hard thing to do well.

Alejandro Cremades: Now imagine if you had the um you know you if you were to go to sleep tonight Oliver and you wake up in a world where the vision of shock dock is fully realized what does that world look like.

Oliver Kharraz: Yeah I think it’s it’s easiest to think about what sort of the ideal future. Looks like when you think about how broken the present is right? if you think about what what’s the patient’s experience today right? when when you start getting sick. Yeah, in your most most vulnerable state you go to an insurance. Directory. That’s largely incorrect you you start dialing down the list for doctors waiting on hold for a long time to then you know, ah play scheduling tetris to get an appointment that’s weeks out into the future now to then go in there fill out. Information that you’ve provided many many times before to just then sit in a waiting room had to be seen and ultimately then you wait some more you get a surprise bill that you never expected in the entire process that is a really uniquely broken system. That we wouldn’t accept in any other industries right? Whether it’s e-commerce or you know stays or flights. Yeah, we always expect that there are marketplaces where you can choose between hundreds of transparent options with clear upfront pricing and where information. Travels seamlessly between the different players that actually they’ll provide you with with services right? You don’t need to tell your your address to ups and Fedex separately now that’s all that’s all here on and I think ultimately we need to have a similar experience in healthcare where there’s.

Oliver Kharraz: 1 place where you can compare the different treatments with their effectiveness where you see the prices upfront where you know that your clinical information travels with you and it’s going to be there for the provider and I think. The the company that that will transform this complex and really uniquely broken healthcare system is going to be a dutiier at its heart and and that’s what zockok is I think optimally positioned to the look.

Alejandro Cremades: I love it now if I was to obviously here we’re looking you know towards the future if we had the opportunity of looking you know towards the past obviously with like um, you know, big lens of reflection there and. And by doing so you know let’s say I put you in the situation of putting you to a time machine and I’m able to bring you back in time you know, maybe back in time to that moment where you were still in school and figuring out. You know, maybe like doing something of your own as an entrepreneur if you had the opportunity of sitting down that younger. Oliver. And being able to give that younger oliver a piece of advice before launching a business. What would that be and why given what you know now.

Oliver Kharraz: I Think there’s a number of things that that are really important and they are you know I think bespoke to the person because you want to make sure that you’re surrounded by ideas that are complementary to you right? think you you want to have that diversity. Of capabilities and the diversity of thought early on I think that that is yeah probably the single most important advice I think the other bit that is is very clear is that you know making important decisions quickly is I think that the. For you know, capability and the core competitive advantage of an entrepreneur and and sometimes we we get stuck in and sort of things that kind of work but don’t work quite well enough and and we’ve experienced that certainly at Octrark with sticking with our old subscription model for too long. Quite frankly and I think there was a very instructive period for me to to say no when you see something is not working then change it and change it radically to what you think is the best solution or what you need to do and accept the obstacles that you need to overcome to get there. Um, yeah I think there’s a lot of other things that we learned about ourselves on the way and and how we manage ourselves with others and and the last thing and this was advice that I got from but of our board members and I think it is really really valuable Advice. You know every entrepreneur I think has to be.

Oliver Kharraz: Very confident in their own skills right? Otherwise whyly would you ever take the risk of doing something completely new and it leads sometimes to the inability to delegate and and one of my board members told me once look you may think that you can do everything 20% better than your team members and maybe you can. But you cannot do all of their jobs 20% better. So you need to be able to accept the way that other people do things and you need to be able to delegate jobs completely and entirely to others and I think that’s something that really opened my eyes and and changed the way. That I manage others and manage myself. It’s been a key unlock to becoming an effective Ceo for larger organization.

Alejandro Cremades: Amazing! Well Oliver for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.

Oliver Kharraz: Just send me an email it’s it’s easy it’s all over at doctor.com or if I’m be on Linkedin and you know I I try to respond as quickly as I can I can probably say always go to be very very fast but you know. This is a super interesting journey I think it’s good to connect with me but it’s even more important to connect with yourself and and and find out what it is that you uniquely bring to the table on this entrepreneurial journey and and find the right ah people and the right advice to compliment you and it’s ah it’s. As hard as it may be at times. It’s a wonderful and very very rewarding thing to do and and I congratulate them for going down that path.

Alejandro Cremades: Amazing! Well Oliver thank you so much for being on the deal maker show. It has been an honor to have you with us today.

Oliver Kharraz: Thank you Za much good to be here.

* * *
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at [email protected]

 

Podcast: Play in new window | Download

Subscribe: Apple Podcasts | Google Podcasts | Spotify | Stitcher | TuneIn | RSS | More