Dr. Eric Whitaker has gone from physician to private equity, and is now a three-time startup founder.
On the Dealmakers Show, Whitaker shared his take on the best part of exiting a company, generating a 50x return for investors in just 36 months, expanding your business through M&A, and what he has been doing with his approach to holistic healthcare. Plus, the benefits of a remote team, the funding fine print that can ruin your venture later, and the difference between venture capital and private equity.
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Solving Healthcare Issues At Scale
Dr. Eric Whitaker grew up on the South Side of Chicago. A place he often refers to as beautiful, but has certainly been in the news for its challenges as well. Those that get out and become successful have proven to be scrappy and can create something from nothing.
He enjoyed playing basketball in high school and while his coach told him that he may never go professional, he could use basketball as a path through education and a better life.
He studied and became a doctor, with a specialty in internal medicine. Though he has always been focused on medicine for whole populations, not just one-on-one care in a local practice.
He’s worked for some of the largest public hospitals, including San Francisco General Hospital and Cook County Hospital in Chicago. He saw what worked, and the challenges. As well as what he calls “Social Determinants of Health,” which includes factors like transportation and food insecurity.
Dr. Whitaker started the first black men’s clinic in the 90’s, then became the State Health Commissioner for Illinois.
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The Best Part Of Selling Your Company
Dr. Whitaker’s First company was Symphonix Health Holdings
He had been flexing his entrepreneurial muscles in the public sector for years. Yet, he saw that he was really the only expert at his level, from his background, that could add something to the private sector.
So, around 2012, he decided to raise the money to start his own venture, and have an impact on individuals’ lives and health in a different way.
They launched in 2013, and after expanding to 48 states, 420k clients, and $2B in drug spend, the company was acquired in just 36 months, by UnitedHealth Group. This createda 50x return for their investors.
Dr. Whitaker started his next healthcare company with his wife. In fact, she led the ship as CEO. He remained founding Chairperson and was there to provide advice when asked, and to help with things like fundraising.
The company was focused on helping the African American community on the South Side of Chicago.
They led the company to 65,000 clients, and $300M in revenue beforebeing acquired.
They wanted to expand the business into other states, and had an investor willing to put in $100M to help them do it. Unfortunately, an earlier funding arrangement meant that they were barred from taking any outside money, and that funding partner did not want to expand. And if you can’t grow, you are just going to die.
These were great financial outcomes. Though, what he said was really great about achieving these exits was being able to write checks to help people and causes he cared about.
That included contributing to his old school, helping to fund the education for over a dozen other students to go through it, and writing checks to causes in the community he cares about most. As well as donating to African American Museums and similar institutions.
Dr. Whitaker’scurrent and most recent startup venture is Zing Health.
During a two-year non-compete agreement stage, he says he began digging into new ideas. Including Medicare Advantage, a subset of Medicare. A product he says was great, but had very low enrollment, and poor health outcomes among its members.
So, Zing Health picked up the torch to help change that by managing members’ healthcare, and getting paid by the government to do it. With a focus on African American and Hispanic communities, and those in more rural areas.
They started out locally in Cook County, Chicago. Then branched out to 21 counties across Michigan, Illinois, and Indiana.
Then, they took to M&A to grow, acquiring Lasso Health, which was already profitable when the parent company wasn’t, and was already operating in 34 states across the country.
Venture Capital Versus Private Equity
So far, Zing Health has already raised $190M through a seed and seed plus round from VCs, and a private equity round.
Storytelling is everything which is something that Dr. Eric Whitaker was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here), where the most critical slides are highlighted.
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The main difference he says is that venture capitalists are happy funding ventures trying to break new ground and try new business models. They understand the risk, and are happy to make the trade-off for grand returns.
Private equity firms, he says, are not so tolerant of risk, or trial and error. They want to invest in mature, proven business models, and marketing models.
Listen in to the full podcast episode to find out more, including:
- The advantages of gaining better talent by using remote workers
- M&A deals
- How to handle running out of financial runway
- Eric’s top advice before starting a business