Roman Rittweger On Starting His Business At 52 And Raising $100 Million To Disrupt The Health Insurance Industry

Roman Rittweger is the founder and CEO of Ottonova which provides health insurance through its digital platform. The company has raised over $100 million from HV Holtzbrinck Ventures, btov Partners, TEV Ventures, Vorwerk Ventures, STS Ventures, and Debeka to name a few.

In this episode you will learn:

• How to get in touch with Roman
• Ways to react to a market correction
• Starting a company at 50 years old
• The extra challenges facing healthcare startups
• Why having strong partners from the beginning is so important

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About Roman Rittweger:

Dr. Roman Rittweger is the founder, CEO, and Chairman of the Board at ottonova Holding AG since its founding in late 2015. Roman Rittweger received his doctorate from the Ludwig-Maximilian Universität in Munich, and his MBA from INSEAD Fontainebleau.

After completing his studies, he first worked as a consultant for A.T. Kearney and McKinsey & Company. Rittweger then founded and led ArztPartner Almeda AG, a service provider for health insurance companies, which was sold to DKV AG.

After that, Rittweger was responsible for the healthcare sector of BBDO Consulting as a Managing Partner and in 2006 started Advisors in Healthcare, a Management Consulting and M&A Advisory specialized in healthcare.

Roman Rittweger is a fan of innovation and has always enjoyed conceiving new ideas, building new structures, and helping to promote change in the healthcare industry.

Connect with Roman Rittweger:

• Linkedin
• Crunchbase
• Twitter

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today I’m very excited to have a founder from Europe. We’re going to be learning quite a bit about how you go from corporate to actually starting, building, and scaling companies, and also learning a ton along the way. So without further ado, Roman Rittweger, welcome to the show today.

Roman Rittweger: It’s great to be here. Thank you, Alejandro.

Alejandro: Originally, you were born and raised in Munich, so how was life growing up there?

Roman Rittweger: Life was good. I was lucky my dad was the manager of the Munich Airport, so we traveled a lot, and I was an early global citizen that way, spending a lot of my time in other countries even when I was young, staying with other families, learning other languages. At the same time, Munich was a nice, almost provincial town. We did a lot of skiing, and I even ended up in the army with the Mountaineers for two years. It was a mix of a healthy Munich mountain life and some international exposure.

Alejandro: Very cool. You developed this love for medicine and healthcare, so how did you start developing that love?

Roman Rittweger: It probably started with my mom being a physician, but originally, I said, “I’m not going to do medicine because that’s what my mom did.” It really started when I had a sports injury from playing basketball and went to the hospital, and I saw how they cared for me. I liked that. Then, when I was in the army, I was an officer of the Reserves, so I cared for people. I liked that as well, so I felt that the hospital thing was quite cool. I like caring for people, and so I decided, “I’ll study medicine.”

Alejandro: When you were doing medicine, and you were doing your studies, there was an internship at McKinsey that changed your view and how you were planning on going after the study. So what happened there?

Roman Rittweger: At the end of my medical studies, I had a chance for an internship at McKinsey through a scholarship that I had. I really liked the intellectual challenge at McKinsey and did a project on newspapers, something totally different. There were great people working there who were my bosses during this internship. I decided that I liked that much better than working in the hospital. So I decided to switch careers. I did this internship at McKinsey working with great people, and I decided that I liked that much better than medicine because medicine actually was a lot of routine work. At McKinsey, I loved the non-routine, the daily changing challenges. I decided to apply at McKinsey. Without much preparation, I went into the interview, and I miserably failed the interview because they did some mathematical questions that in med school, I hadn’t done mathematics for a long time. So, I failed it, and I wondered, “What should I do now?” I said, “I’m just going to go to the other consultancies.” I realized that there was a GMAT test that you could prepare for that had these kinds of math problems in it. I studied for the GMAT test. Fortunately, then I got a job at another consultancy, ATKearney, where I worked for a year. Then went to INSEAD, and I got an MBA there. Being a very bad loser, I reapplied at McKinsey and said, “I still want to get there.” Luckily, the second time around, I was better prepared and got the job at McKinsey and then worked for two years at McKinsey, mainly helping health insurances improve what they were doing. I liked it a lot, and I saw that there was a new wave coming from the U.S., managed care. I decided to leave McKinsey and do a startup in managed care in Germany. My dad was shocked when I stopped becoming a doctor and went to McKinsey. When he adjusted, I then left McKinsey to do the startup. But I had to do it. That first startup was a startup where we helped patients find the right doctor. When they were chronically ill, we helped them with their chronic diseases, the first telemetric ways. For instance, there was a scale that patients had a home, and we built a Bluetooth chip in it. The scale sent the weight to our call center, so we knew when the cardiologic patients were getting into heart failure. It was very early telemedicine that we did.

Alejandro: Here, you were able to get exposure to how you build and scale a company. You also saw the full cycle because you ended up getting this business acquired. Is that right?

Roman Rittweger: Yeah, absolutely. I first started out, actually, going broke very quickly. There was this day when the financing round wasn’t quite finished yet, but I had bills on my table, which in my youthful ways, I didn’t understand at the time that was illegal. But I closed the financing round quickly enough so that nobody ever noticed. In the end, we did get acquired, but it was not the big hit we were hoping for because that was the end of the new economy. In the new economy, we were preparing for the IPO, [0:08:00] from the U.S. was thinking about acquiring us. Then the new economy came tumbling down, and we went for a quick honorary exit to Germany’s largest private payer at the time, which then from one moment to the other got me—I became an executive of a health insurance.

Alejandro: Before going into that, Roman, I want to understand what kind of insights, because I’m sure you did a fair amount of reflection on the experience of your first entrepreneurial rodeo. What kind of insights did you get from being an operator in an economy that is correcting? I think that probably taught you a few lessons that you’re going to be applying the next time a correction from the market comes around. What did you learn?

Roman Rittweger: I learned a couple of things. First of all, I had to let some stuff go, which was painful, obviously, because we had worked hard to get them on board before. We did some hard rounds, reducing the costs that we had. I did a very interesting maneuver towards the end. In the new economy, we had done a merger with another company in a record four weeks, which we didn’t do enough due diligence, and we had some very unfavorable contracts that were pulling us down. So what I did at that time, we filed for bankruptcy and still had a lot of money in the bank, but we filed for bankruptcy very early on. Then renegotiated all those contracts. Once we had renegotiated those contracts, we took the bankruptcy back and then sold to the private payer. It was a very rocky ride. It was helpful for us to reduce costs early on. It was helpful for us to renegotiate those contracts with the prospect of going into bankruptcy. It was also helpful for us that we had worked on these relationships with the potential acquirers early on because, in health insurance, those things take a long time. But the most memorable event in that period for me is the day when we lost the big pitch when we decided that we had to sell and we had to do all those things. Obviously, my c-level colleagues were very frustrated because we were all rich on paper, and after that day, we weren’t rich on paper anymore. I took them to the IMAX, where there was a movie about Shackleton, where he went to the South Pole and saved his crew. He never reached the South Pole, but he brought his crew back alive, and that’s the whole story of the film and a very good book that exists too. I took my colleagues to this movie, and I said to them, “It’s the same in our situation. We haven’t reached the South Pole, we are not super-rich, but we have to get the members of our crew back and get them safe haven and safe jobs. That means that we’re going to have to do some hard work now to find the next home for this company. We did that over the next three months. We negotiated with those contracts taking the company to the next owner. I just learned the other day that one of the employees of that time is now has come to pension H in this company. So it has been worth it certainly for the people in the company. I think as a founder, you don’t do this to make a lot of money for yourself, but you also take a lot of people with you on the trip and you have a responsibility even if it does wrong to make sure that they have a happy end and venture.

Alejandro: Of course. Obviously, after these transactions, you did a little bit of time working for this other company. But then you also did your own advisory, and you got into conferences. I guess this, to a certain degree, helped you stay on top of what was happening, to stay on top of trends, and it was a very good segue into starting your business today at ottonova. Can you tell us what you learned during this time and what got you into starting ottonova? What was that incubation, and what was that process for you to identify this and say, “I’m going to go at this opportunity”?

Roman Rittweger: Right after I left the health insurance that had bought my first startup, I went to BBDO, and I learned a lot about marketing and sales because that was the first thing I learned. If you have a great innovation, good; if you can make great contracts, great. But in the end, it’s all about traction, and traction you get by being very good at marketing and sales. That’s the first thing that I learned. The second thing when I did my own consultancy, obviously, I had to do consulting projects to bring in the money. Those consulting projects were mostly in the area of pharma, and that was certainly not something where I would do a startup because, for pharma, you need a lot of money. I also wanted to do things that interested me. So, basically, as I was the owner of my own healthcare consulting company, I could do stuff that I wanted to do. So I did a lot of innovation projects where I helped bigger companies acquire smaller companies or smaller companies to get the next financing round. I didn’t make as much money as a consultant on those projects as I made on the pharma projects, but I worked toward my next step. I always had this long-term vision, where I wanted to end up, which was my next startup. I think the best thing that I did was running a conference. I started a conference, and I thought, “What is it that I really want to do? That’s how I want to call the conference.” I called it Innovations and Investments in Healthcare because that’s finance of innovations, and if you want to get them financed and running, you need investments. I could get great people to come to the conference. I would pay for a business-class flight from the U.S. to Berlin for that. I had great people coming like Halle Tecco, who started Rock Health, who was there as a speaker, and many other great speakers came there because it’s fun for a speaker. At the next conference, we had [0:15:37]. We always had great venues. I didn’t care about making money with the conference. We mostly just broke even. I had great speakers there and learned a lot on current trends. If I go back and look at the programs of those conferences, I see a lot of things we now do at ottonova. That was a way for me to stay in the VC, innovation, and healthcare scenes and seeing the latest and greatest from not only Germany but even from other European markets. Still, today, I see those people who came to the conferences. They have all made great innovations, started companies, and so that was a great pathway to starting ottonova. But in the end, how did ottonova start? A venture capitalist came to my office and showed me an investment that he wanted to make. I told him it’s not going to work because he would have to rely on that startup again to position their services with health insurance. Health insurances are very slow in their decision-making. I said, “Start in health insurance.” I told him about Oscar in the U.S. I said, “This is something that one can do something comparable in Germany, and then you are the paying layer in the healthcare scene, and you can actually drive innovations. He liked that. We even talked to a different investor for the next six months, preparing us a little bit in the beginning and trying to see who the management team could be. Basically, I have a very big ego, so after a while, I figured the best CEO would be myself because you need different skillsets for this kind of job. You need to understand health insurance. You need to understand startup. You need to understand financing and how that works. We didn’t find anybody else that we could put on that seat. I decided to leave my consultancy to my employees. I finally did sell it and launched it.

Alejandro: Very cool. How old were you?

Roman Rittweger: I was 51 or 52 when we started.

Alejandro: So not the typical 24-year-old getting ramen noodles in a college dorm room or whatever that is. Is it possible to be able to launch a startup and keep the same energy and momentum even if you’re in your 50s?

Roman Rittweger: Yeah. I did it twice. I did it once when I was young. I didn’t have a wife or kids. The second time, I had a wife and kids, but the secret was I didn’t have young kids. So I think it’s actually better. My sons were in puberty. They didn’t need me anymore, so I had a lot of time again. The other thing is, I came from consultancy, so I was used to working hard, long hours and also working from home doing telcos in my holidays. The change in pace wasn’t as hard as maybe as for somebody who has a steady day job. But if I compare it, it’s actually better to start a company when you’re older. First of all, I had the experience from my pharma life. I know the kind of mistakes I don’t want to do anymore from my first startup. I’m settled in my life. With my first startup, I was still looking for a wife, basically, which I’m not anymore, so I’m actually much more focused now than I was then. I’m much more stable now than I was then. Do I still feel like working three 20-hour shifts in a row? No. Probably when you get over 50, you don’t only work harder, but smarter. But at the same time, if I look today at the younger generation, Millennials, some of them don’t even want to work as hard as I’m still working in my 50s. To cut a long story short, I think I would encourage anybody in their 50s to start a company if they want to. It’s more a question of a mindset than anything else — of your risk profile. I personally enjoy it. I enjoy starting something. I enjoy taking a risk. I don’t need safety security. That’s probably much more important than how old you are.

Alejandro: So ottonova is born. What ended up being the business model of ottonova so that the people that are listening can get it?

Roman Rittweger: To understand ottonova, you have to understand a little bit about the German healthcare system, unfortunately. It’s a very specific healthcare system. Ten percent of the healthcare system is a bit like the U.S. It’s like private health insurance. You pay your premiums; you’re insured. The difference is, you stay for life. There is a very strong regulator. It’s a very regulated market. Basically, all the players in the health insurance market are profitable. You pay the same premium all your life more or less. So when you’re young, you accrue money, and when you’re old, the insurance uses that for you. That means if you switch insurances, you actually lose that money. So what you have is, you have health insurances that are very set in their ways and profitable for many decades, almost like a cozy cartel. They regulate it every 20 years, and that’s in a new player to the market. It’s very conservative about that, and the regulator let us in because the regulator wanted to have digital innovation in the market and a bit more competition. That’s one segment of the market: a segment of the market where you have a net promoter score of 11, on average, which is very bad. Customers are not happy. They see in other parts of their lives the Amazons and Apples and that service level, and they don’t experience it with their health insurance. We set out and said, “We’re going to be a health insurance in an app. We do everything from the app as a concierge service in the app. You go through the app, and the next day the money is on your account. It’s total service dedication and at very attractive rates. That’s how we started that business. It’s a very difficult business. You have to get a license from the regulator. That took us one and a half years. 

Alejandro: Wow.

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Roman Rittweger: After we started our full health insurance product, we also launched a product for the other 90% of the German population. We have coverage that is okay, but it doesn’t cover your dental; the dental coverage is not really good. So it’s like a type of health insurance, a supplemental health insurance.

Alejandro: For a business like this, Roman, you were saying just the license, alone, is a year and a half, so I’m sure that for a business of this nature, you also had to raise quite a bit of money. How much money have you guys raised to date?

Roman Rittweger: Until this day, we have raised 40 million at the time of the launch. We needed to have 40 million in our accounts before the regulator let us launch. Then after the launch, we have raised another 60 million.

Alejandro: So all-in-all 100 million. In this case, I know that having alternatives is very important. How important was it for you to have alternatives?

Roman Rittweger: I wouldn’t be here if I hadn’t had alternatives. It started at the very start. When we launched it, there was this first venture capitalist who wanted to finance it. We had a second venture capitalist who was also invested in Oscar. I had a very interesting call at the time with the investors of Oscar, and they said, “You guys are a copycat, and you are competitors, and we don’t like what you’re doing. We don’t allow this investor to invest with you.” At that time, in the beginning, I thought both investors would do 2.5 million, but then one was gone. So, very quickly, I got another VC on board that also wanted to invest. Then my first investment said, “We’re going to do the 5 million.” It was important for them to have somebody else step in right away, so they felt that this must be a good thing because, in the beginning, you have a lot of insecurity because nobody can know how this startup will turn out.

Alejandro: Of course. The fear of missing out.

Roman Rittweger: That helped me a lot. Then, later on, when we still didn’t have the license, one year later, the question is, “Will we ever get a license, and once we get the license, will we get traction?” What was even harder than that was my current investors felt like, “Are we going to do the next round and at what valuation. Hum. That’s really difficult.” Then I found another investor who was getting his fund started. Another large insurance was filling his fund, and when this investor then said, “I want to invest,” then my other investor said, “Okay. We’re going to do it.” In the end, weeks later, we found out that the insurance wouldn’t do this fund for political reasons. In retrospect, I found out that was never a viable option, but having this option up in the air for a couple of weeks helped me to close that financing round.

Alejandro: Wow.

Roman Rittweger: I think all of us, out there, who are successful, always had some moments before where it was very close.

Alejandro: Yeah. Definitely very close and very stressful. Absolutely, Roman. Now, you guys have raised all this money. You have a significant footprint. How big are you guys now so that the people who are listening get an idea?

Roman Rittweger: At the beginning, the first one-and-a-half years were very difficult. We were growing slowly because we had underestimated that most of the market in Germany was going by comparison [0:27:46] and brokers. We had the typical startup where we were going to do it totally new and disrupt everything. One year ago, we decided, “We’re going to switch this, and we’re going to have tariffs with commissions built-in, and we’re going to go with the comparison models, and we’re going to build our own brand. Since then, we’re now growing with over 1,000 users are new, which will last per month, every month, and we’re doubling our numbers of insured lives every three to four months. As a business, the numbers don’t sound so impressive, so we’re still talking about thousands, not hundreds of thousands, but you have to see that one customer pays 6,000 euros a year and pays that for the next 50 years. So the customer lifetime value is very high. At the same time, our business is a threefold business, so we have the full insurance, the top of insurance, and we also have sold part of our software to other health insurances. It really is about getting a lot of our own lives, but also getting our app into the hands of other insured persons. The vision is to have the best health insurance in Germany with a very high NPS, which we have because NPS is 70, while the interest average is 11. Also, we get many people onto our app by even licensing part of the app out to other health insurances.

Alejandro: Got it. Roman, one of the things that I typically ask the folks that come on the show is if you had that opportunity to go back in time and have a chat with your younger self, with that younger Roman that was maybe thinking about launching a business. You’ve been through the wringer. You’ve seen the good, the bad, and the ugly of being an entrepreneur. What would be that piece of advice that you would give to your younger self before launching a business, and why knowing what you know now?

Roman Rittweger: I think my main advice would be to look out for strong partners right from the beginning. No entrepreneur is so good that he can do it without strong partners. That gives you leverage; that gives you scalability; that gives you market power. All the examples that I’ve seen in my life when things have gone really well have been because of strong partners. That would be my main recommendation. In our case, for instance, we have as an investor the largest and strongest German private health insurance. It’s invaluable. We couldn’t have done the same good work without that strong partner; it would not have gotten us to the same point that it’s gotten us today. 

Alejandro: As the saying goes, you can go faster alone, but farther when you go together.

Roman Rittweger: Ah, perfect. Yeah. That’s a great fit. Yeah.

Alejandro: I totally get behind that, Roman. So, Roman, for the folks that are listening, what is the best way for them to reach out and say hi?

Roman Rittweger: The best way is through my LinkedIn profile and contact me through that.

Alejandro: Fantastic. Well, Roman, thank you so much for being on the DealMakers show today.

Roman Rittweger: Alejandro, thank you very much, and also, thank you very much for refreshing my clumsy ideas into beautiful sentences.

 

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