about this episode
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Jason discusses innovative tech within the healthcare space with 3 exciting companies. Ted Maidenberg from The Social+Capitol Partnership joins the discussion to give his view as a VC.
Show our guests some love!
1:15:00 Today is our Healthcare edition!
1:15:00 We have Ted Maidenberg of Social Capital with us today.
2:30:00 What are the most annoying questions that VCs ask?
3:15:00 How much research do you do on company before a meeting?
3:30:00 Thanks to our sponsor @HiscoxSmallBiz!
4:00:00 Katelyn, What is the mission of Eligible?
4:30:00 How does that become a business?
5:45:00 Ted, what’s the first question you would ask if you were meeting with Katelyn?
6:30:00 Can you describe the info that you get back from your queries?
7:45:00 How long has the product been in the marketplace?
8:15:00 Who are the customers?
9:15:00 Do you see a time when a corp like Google will use your API to create their own solutions?
12:00:00 Are you seeing people use your API for cost comparison?
13:00:00 Ted, for this to be an amazing opportunity does it need to have direct access to customers?
17:15:00 Go to @ShareFile & use promo code ‘TWIST’.
18:00:00 Jason O, what is the mission of Mango Health?
21:00:00 Ted, what’s the first question you ask a company like this?
23:30:00 How do you maintain user engagement in week 10 of taking a medication?
24:30:00 Is all the data self-reported?
25:45:00 How are users engaging with their physicians?
27:00:00 Who pays for the gift rewards?
30:15:00 Mark, what is the mission of Asthmapolis?
31:15:00 This is a device that goes on a rescue inhaler?
32:00:00 Ted, when you saw this device, what was your reaction?
34:15:00 Does location of the company matter?
35:00:00 If you could only invest in Eligible or Mango, which would you chose?
38:30:00 Jason, what do you have to prove to raise money?
41:30:00 Have you thought about adding more data points?
42:45:00 Ted, if Jason would have pitched the product differently, would you have thought about it differently?
44:00:00 Katelyn, have you thought about the consumer-side of your product?
45:15:00 What co’s are you directly connected to now?
45:15:00 What do you think about people opting out of the healthcare system?
48:00:00 Ted, do you think there’s a trend of people going to walk-in clinics?
49:00:00 Jason, what’s your thoughts on consumers opting out more and more?
50:00:00 Katelyn, what’s your personal take on Obamacare?
51:15:00 Ted, what do you think of Obamacare?
52:15:00 Mark, thoughts?
53:00:00 Thank you to all the guests today!
55:45:00 Thanks to my friends at @HiscoxSmallBiz & @ShareFile.
NARRATOR: Distribution provided by CloudSigma. The cloud that adapts to you. Today’s episode of “This Week in Startups” is brought to you by ShareFile from Citrix. Secure file transfer, built for business. Visit ShareFile.com, click the microphone, and enter TWIST for a free 30-day trial. And by Hiscox. Do you have the proper insurance for your startup? Get the right insurance, right now with Hiscox. Tailored coverage, starting at only $22.50 per month. Visit hiscoxusa.com/smallbiz to get a quote.JASON: Hey, everybody. It is “This Week in Startups.” It is our healthcare edition. We have a new format for you today. Ted Maidenberg from the Social+Capital Partnership, an amazing venture capital firm in Silicon Valley. He is with us. Together, Ted and I will interview three emerging healthcare startups, and hear how they plan to change the world, and make all of us just a little bit healthier. Stick with us. It is going to be an amazing program.
JASON: Hey, everybody. Welcome back to “This Week in Startups.” Today is our healthcare edition. With me is Ted Maidenberg of the Social+Capital Partnership. Ted, how are you doing?
TED: I am good, Jason. How are you?
JASON: I am well. Are we OK with the video there, Brandice? Yeah. OK! Good. Here you go. We get the video. We get Ted. I see that you are in a basement somewhere.
TED: Yeah. We are in a tornado shelter here, at the Social+Capital Partnership.
JASON: That tornado is technology flowing through Silicon Valley. The Social+Capital Partnership has been in existence for just under two years. Is that correct?
TED: Yeah. We had a first close in August of 2011 and a final close at the beginning of 2012, and then we actually closed our second fund in March of 2013, which we announced at a LAUNCH conference.
JASON: You did announce it at a LAUNCH festival. The firm has done great. Actually, you were co-investors in a couple of companies including Brilliant [brilliant.org], which originally was AllQuestion [?] [brilliantscholars.com]. And Cozy. The awesome real estate software as a service for landlords, which I am actually going to use for the LAUNCH co-working space. On today’s program, we are going to talk to three emerging healthcare startups and hear what their mission is, and then Ted is going to ask questions that a venture capitalist would actually ask in a meeting. So for those of you, who are aspiring entrepreneurs, you can hear the raw cutting, challenging questions that a venture capitalist would ask in a meeting. Like, what your China strategy is? What do you do if Microsoft comes into your market? Ted, we are going to shove those two questions. Ted, what are the annoying questions, that VCs ask, that are totally irrelevant? What do you think?
TED: Well. “What is your mobile strategy?” is definitely a big one. It really should just be the strategy these days. Asking questions about international strategy is pretty irrelevant, but the most annoying questions are when the VC or VCs have not actually done any prep work, and you are basically having to explain the company from the very beginning. That is what we try to avoid as much as possible.
JASON: So when you come into a meeting, how much research have you done on a company, typically?
TED: We at least try to get an idea of what the value proposition is, the competitors, and what we think the long-term business model would be. In healthcare, especially a lot of the problems that companies are solving are ones that you have dealt with as a consumer. So, obviously, you have a little bit more prospective in that manner, but we try to do as much work as possible, and that is why also speaking with the folks who made an introduction is super helpful as well.
JASON: Great. OK. So, let us get right to it. Katelyn Gleason is the co-founder and CEO of Eligible. Katelyn, what is the mission of Eligible? Welcome to the program, as well.
KATELYN: Hey! Thanks for having me. The mission of Eligible is to help developers pass and receive financial transactions with health insurance companies. So we connect to hundreds of them, close to a thousand, and then we make it simple. We create one connection for the engineers to connect to.
JASON: How does that exactly become a business, what do you say?
KATELYN: Every year, trillions of transactions are processed, so we are talking about the payments. I think a lot of people do not realize that “a claim,” that is what it is called in healthcare, after a doctor performs the procedure, he actually submits an invoice to the insurance company to be paid. You know, that is a claim, that is a payment. Before he does the procedure, he calls the insurance companies to make sure the patient has coverage. That is an eligibility query. So all of these things are actual transactions that are costing the industry billions of dollars every year. Trillions of them are passed every year. We are trying to help developers streamline that, obviously, through technology. So it’s similar to Stripe, but for healthcare. Instead of having to connect to some old gateway, and pay some $5000 setup fee, and spend nine months, implementing us takes about three hours. In addition, they can pass a claim to the insurance company.
JASON: So Ted, you are actually an investor in this company. Is that right?
TED: No, we are not.
JASON: Oh! You are not. OK. If Katelyn comes into a meeting with you, I am not sure if she met with you before, what is the first question you would ask, Ted?
TED: Yeah. Hey, Katelyn.
TED: So I think we have done a little bit of work in the space. We are investors in Simplee, which does not do what you do, but is about having more transparency and better information flow.
KATELYN: They are one of our customers.
TED: That is right, but I think the question I would really have, and this maybe gets a little bit into the details, is, “I assume a lot of what you do right now at a large practice is handled by practice management software?”
KATELYN: Our customers are practice management software companies. So Kareo has about fifteen thousand doctors, and they have built software for them, and they are our customer. So we handle all the connections for them, and they process eligibility through us.
TED: Got it. Can you describe what sort of information you are getting back from your query? Is that a yes-no? Are you getting details on out-of-pocket maximum deductibles?
KATELYN: We are getting details. We are actually making Simplee’s life a lot easier because the way they used to aggregate that information and, probably, a reason why it was so hard and cost consuming, it was not exactly something scalable, was because they were scraping the data from websites. So they were getting things like out-of-pocket max or deductible, which is incredibly valuable information, but we are getting that information by paying the insurance company. So we will get, “Is the patient covered?” We will get all their demographics that the patient has on file at the insurance company. We will get the co-payment. We will get the deductible, out-of-pocket max. We will also get cost containment. It is very detailed. It is a full plan basically. The one complaint actually is that it was too much data. So we have to dice it up, and build libraries, and build things that just made our user’s life easier to deal with the data.
JASON: Let me ask. How long has the product been in the marketplace?
KATELYN: So it was taking me two years to get it. I started the company almost two years ago. It really just came out to the marketplace in December. We have launched in November, but we really did not see any sort of traction or growth until December. Now, we just passed one million transactions, and those are all eligibility transactions, not claims. It is not anything like that, it is just eligibility.
TED: Who is paying the database? Is it mostly kind of companies like the practice management, who have already had existing relationships, or is it new companies looking to access this data?
KATELYN: So we have two different types of customers. We are very wary of that. Our bread-and-butter right now is the older practice management systems. They have been in existence. They have thousands of doctors who use them, but then that is why we get so excited about people like Simplee, or Brighter, or someone like… It is so exciting, they are using something for the consumer. It is not your typical doctor’s office software. Although, that is great for us. We love Kareo too. They are doing a really disruptive thing in the practice management space, but you do not see the real old guys. I would actually still consider Kareo like a startup. Like, they are young and they are… you know. We are not going to service someone who had been around since 1996, when this all started.
JASON: Do you see a time when, say, a corporation, like Google, might use your API to create, in their own private intranet, their own solutions to connect you with healthcare companies. Is this something that talking about Ted’s new customers, new people to hit the API, not the practice management software, but companies, or individuals, or as Nike+? Or somebody else is going to start saying, “Hey, we can start interacting with your insurance company.” Somebody is going to make a third-party app just to understand your insurance better.
KATELYN: Absolutely. And just to authenticate that this person has a plan. And just to authenticate that this is the person’s address. I mean, there are so many different ways to utilize it. I have someone who is actually building on top of us that is working with data. I think, it is one of these bigger companies, someone like Google, and they are helping them authenticate the patient’s plan. So Google offers them insurance, Google wants to make sure that the patient is being preventative for at-risk pregnancy, or something like that. Actually, one of my Rock Health teammates, Wildflower Health, they were using it to authenticate to make sure that the Google plan is the one that they are actually signing up for, when they sign up for their application. We have a large amount of new companies testing and trying to figure out ways to use this information, but the bulk of the high volume transactions is definitely the practice management.
TED: Cost comparison and transparency in pricing is a big issue. There is a great article in the New York Times on Sunday about the wide range of colonoscopy prices across the United States.
KATELYN: I mean there is something that most people do not know, because they do not know about the industry. If you noticed, the insurance company pays out the same amount. Did you notice, if you look at two…? Like, even the Medicare, this big release of all the Medicare information, the data. If you look at the cost of what the hospital billed out, which is like 100k, and then, let us say, Medicare paid out 20k. That is consistent, what Medicare pays out.
TED: Right. But it is because there are the negotiated discounts.
KATELYN: It is called the contractual obligation. So like, you have built the contractual obligation with the insurance company to say, “OK. I am going to be in network with you. So I am a doctor and I am going to be in your network.” Therefore, the insurance company says, “OK. I am only going to pay $20 for this visit.” The doctor is going to bill $100, but the insurance company is going to pay $20.
TED: Right. I guess the question was around, “Are you seeing folks use your API for cost comparison? Would you do that yourself?”
KATELYN: I try to stay focused on the problems that we can solve right now, and those are the sort of railroad, the gateway from all the insurance companies to the developers, and building that railroad. I think eventually, inevitably, we are going to have all that data. So all that data will be ours because we are processing all those claims. So certainly, we are going to have it. So then, we can build cost estimation tools, cost comparison tools at that point, and then open it up as an API.
JASON: Ted, when you hear an enabling technology company like this, something that is going to enable a lot of other people to more efficiently do something, is that something that as a venture capitalist you find, is it an amazing opportunity, or for something to be an amazing opportunity, does it actually have to have direct access to customers? Is this something that the sort of new…?
TED: Yeah. It definitely was the point that on the big picture side that you would think about is just being behind the scenes versus directly talking with the end-user, but also having more control over how your date is actually being presented. Now, early on, I think it makes a lot of sense to let a lot of people touch, use the data, see how it has been done successfully, and then bring more of that in-house. I think, another piece that would actually make me more positive on the company is the difficulty of accessing, processing, and normalizing the data that you are using.
KATELYN: That is exactly what we are doing now.
TED: Like, price comparison shopping became commoditized very quickly, because it actually is not hard to build a crawler and scrape plasma TV prices, but health data are very different.
KATELYN: We are building a direct connection into CMS Medicare. Building a direct pipeline, which we just finished last week, into CMS Medicare, we own those pipes. Building a direct connection to Blue Shield of California, we own those pipes. So every transaction that goes through them, we are going to get a percentage of those transactions.
JASON: OK. Thank you so much, by the way, Katelyn. Great job. Good job, Ted, with your questions. When we get back, Jason Oberfest is going to talk just a little bit about Mango Health, an app that lets you take control of your health.
JASON’S AD: And let me just stop for a moment here, and pause for the cause, and thank Hiscox Small Business Insurance for making getting small business insurance delightful and easy. Customized coverage, competitive pricing on small business insurance. It is designed for very small businesses as well. It could be like a self-employed consultant or a startup. Completely tailored coverage. Customers save $500 a year on average versus other insurers, and it is all online. It is simple. It is easy to do. I am ready to say this, but it is fun to get insurance. It is easy. You can just answer a couple of questions step-by-step and, all a sudden, they give you a price. You say, “Hey, I want more coverage. I want this type of coverage.” You can watch your prices change. It is what buying insurance should be. It is what it should have always been. Nobody wants to deal with this, like, numbnut brokers calling you on the weekends and trying to high pressure you into things. You feel like you are being gamed. Just go to Hiscox, and you will get everything solved, just by filling out a form, which is how life should be. It is like Uber of small business insurance. Go to Hiscoxusa.com/SmallBiz. You know, examples are like a technology business that needs a $200k of software copyright infringement. That would not be included for a marketing consultant. If you are a marketing company versus a software company, they are going to figure out what insurance you need, and make you only pay for what you need. It is super easy. Plans start at just tens of dollars a month. You have no excuse not to use it. It works great. We use it ourselves here at LAUNCH. We are very proud to have them as the sponsor of the program for a number of years. Hiscox does a great job. And go ahead, and tell them on their Twitter account that “Thank you!” for supporting independent media like “This Week in Startups” @hiscoxsmallbiz. They do a great job. I really thank them for helping startups. Hiscoxusa.com/smallbiz. It is just awesome and easy to use. We have a choice of sponsors and advertisers for the program. We have made the choice only to do products that we use ourselves. This way I can read an ad, and endorse it, and just not have you to come up to me at an event and be like, “Hey, Jason! You told me to get these e-cigarettes, I used them, and I am dying.” Ted, it is a true story. E-cigarette company says, “We will give you ten dimes in poker chips, and we will pay you World Series, if you wear like e-cigarettes things, and you have an e-cigarette in your hand during the game.” Should I take it or not for the main event? Ted, what do you think?
TED: I think that you can do better than that, Jason.
JASON: Exactly. That was why I settled on Wild Turkey Bourbon. It is going to be my official. Every level, I will take a shot of Wild Turkey. Boy, it is going to be a great main event.
JASON: All right. Let us go to our next company; we must keep the program moving. Here is Jason Oberfest. Hey, I know you. He is on the program with Mango Health. How are doing, pal?
OBERFEST: Very well, thanks. How are you?
JASON: It is great having you on the program. You are a serial entrepreneur, yeah?
OBERFEST: This is my first from-scratch startup, but I have been involved in startups for a long time.
JASON: Startups, including…?
OBERFEST: My previous company was Ngmoco, the game company. I ran the platform there. Prior to that, I was at MySpace, which was where we first met in LA, I think. And prior to that, I ran a strategy division of a product design consultancy, called Blast Radius, which is now part of the WPP Group in New York, back in the old days in New York.
JASON: Silicon Alley days. Ngmoco made that kingdom game; I forgot the name of it.
OBERFEST: We Rule.
JASON: “We Rule” did phenomenally well for a while, and then you were bought by Mixi, or GREE, or it was a Japanese company, who bought it?
OBERFEST: DeNA. DeNA, the Japanese company. Correct.
JASON: Wow! It took me three Japanese companies to get there. OK. Very good. All right. So let us hear about your business. What is the mission of Mango Health?
OBERFEST: So very simply, we are using everything that we have learned over the years about the game design and mobile app development to inspire people to get healthier. It is really that simple. So very generally, it is a personal health management app. Our first application is focused squarely on medication, and supplement management, and a very large and still relatively unknown issue, often referred to as medication non-adherence or noncompliance.
JASON: OK, Ted. You can probably see on your site there. I am pulling up the screenshots myself. What is the first question you ask the company like this, that is doing compliance around medication?
TED: Yeah. Well. First of all, I think this is letting users control better their own health. Mobile. These are all themes that we spend a lot of time on. You know one of the big changes that are happening with healthcare, it actually has nothing to do with Obamacare, but more just for the rising premiums. It is that everybody, whether it would be large corporations or even small partnerships, is just starting to pass on more of the costs of healthcare via the form of higher deductibles, and more consumer directed healthcare payments. I think that is what is finally going to make consumers really care and start to engage with their health. It used to be a sick person does not really care. They are not going to get better. They are not going to eat less. They are not going to quit smoking because if they had that problem to begin with, there must be a character flaw or something inherently wrong, but when you start to put five thousand, ten thousand out-of-pocket maximums in front of somebody, and they are not able to go on vacation because they went to the emergency room. I think it is really going to change the way that people start to think about their own health. That is sort of a general prelude. I think you know the problem of pharmaceutical medication adherence is a huge one. I have seen numbers like 30% to 40% of prescriptions are filled in the United States. I know from my work on the board of Asthmapolis, which, I think, comes about next, that they have seen even lower rates of that in some cases. These are for drugs that are diagnosed, prescribed by a physician, and they only work if you take them every day on a consistent basis. I think there are huge changes that can be made to an individual’s health and the overall cost of the healthcare system, if you are simply taking the drugs on schedule that your doctor has prescribed for you.
JASON: So what would your question be? I mean, coming into a meeting like this, it seems like you have drunk the Kool-Aid, you have a lot of background in this space, you understand it, what do you think would be your first question to Mango Health? You know, it seems like you kind of like the concept.
TED: Yeah. I think it will be around distribution and engagement.
JASON: OK, so ask that question to Jason.
TED: Jason, talk to me about distribution and engagement.
OBERFEST: Yeah. So, I agree. I think those are the two hardest issues in the space that we are working on, there is no doubt about it. First, I would focus on the engagement question. Having spoken with so many different leaders in the health space, who work in this general area of health and wellness initiatives, what I constantly hear from people over-and-over again is really two things: one is, getting consumers or patients to adopt any of these programs is really difficult, and then for the small minority of people who do adopt these programs, getting them to stay with the programs over time is really difficult as well. I think it really that places our strength as a company. Our background is making mobile apps and other products, which millions of people want to use for long periods. That is really our focus. So we are applying that here to this space. So far, we have seen good results. Before we launched publicly in the App Store in early April, we have run a 16-week pilot. We really wanted to mesh river [?] pretty long period of time, that was longer than I would normally run any beta or pilot, but we really wanted to see over that period, “What kind of fact we could bring?” We saw very strong repeat usage. For us, the number one metric, similar to a game company or many consumer companies, it is what I think of as a non-native return rate. So over a period of time, how many people continue to use the application or the product in a non-native way. We have seen fantastic levels of engagement. We are continuing to just leverage that and build on that as we go to a wider audience and a public release. So that is on the engagement.
TED: I was quickly going to try to tease out a bit more about the comparison of the online and mobile gaming space, where it seems to me after an initial engagement period of a game, their retention is among these very power users, the whales, who’d drive a lot of revenue, who have leveled up, who want to maintain their status.
JASON: How do you maintain your status at week ten of taking whatever you are taking? Prozac?
OBERFEST: Yeah. So Jason, to answer your question, the way it works, we are using a number of things that we have learned over the years, but principally, we are using what many referred to as earned currency system, that you would see in many different types of social games. Very simply, over time, in the app, as you stay on your prescribed regiments, you earn points. As you earn points, you level up. So there is a very clear sense of progression in the application. As you level up, you unlock the ability to win different items of value, so cards from leading retailers, donations to leading charities, and things of that nature. So some of our consumers, we are seeing, are very interested more in just really the quantify-itself aspect of it, just this idea of tracking points, and levels, and things like that. Others are little more interested in the potential to win the items of value, but in either case, there is that sense of tracking and progression, which is very similar to what you might see in a game.
TED: What are you doing to encourage? I assume all the data are self-reported right now, don’t they?
OBERFEST: It is right now, but we can also verify that very easily in a number of different ways. I think that plays into how we see the non-adherence space in general. Many of the initiatives in this area, which had been driven by the health industry, are very focused on trying to improve rates of adherence by improving mechanisms for tracking. So there are many different startups out there right now, that are really focused on improved tracking. Those are very important parts of the overall problem and fixing it, but what we really believe is, the root cause of this issue is behavioral, at the end of the day. The fact is that the most common diseases in the United States now, are diseases with very different consequences in many cases if you think about it. The big three diseases are: high blood pressure, high cholesterol, and diabetes. Typically, when you are diagnosed with those diseases, it is a far way out, that you are actually going to have a real challenge. So it is a classic human nature. It reminds people of a part of their life they are not happy with. They do not like doctors for whatever the reason. They are just not inclined to get on track. So we are really addressing that issue front and center. That is really our first initial goal.
TED: Got it. How do you find yourself engaging, or your users engaging with their physicians?
OBERFEST: Yeah. Initially I was not sure how physicians would perceive the app, and pharmacists, the other healthcare professionals for that matter, we just were not sure. You know, it is very early. I mean we are two months in for the app being live and openly available on the market, but so far the feedback has been really good. I would say almost every day now, we are getting emails from some combination of physicians and pharmacists saying, “Hey! Thank you for producing this. This is making my job easier.” We all know doctors are being asked to do a lot more with less these days. Pharmacists have a lot less time for talking with patients. And really, what we are trying to do is to help people manage their care in between visits with these professionals, and freeing up the dialog with these professionals to be more strategic high-value discussions. So they have been very welcoming that we found, at least so far.
TED: Got it.
JASON: OK. I guess the question I have is, “Is there something about gaming and giving these gift cards?” I am assuming the funding of the gift cards is from the drug companies or insurance companies. Could you answer that, Jason?
OBERFEST: Well. Actually, what we are finding is that there are many leading global brands outside of the pharma space directly, who are very interested in what we are doing. We essentially have an ability to connect leading global brands with health-oriented consumers, who often tend to be some of the highest lifetime value consumers. So if you think a lot about how brands get integrated into games in the currency of games, we are actually doing something very similar in the health context.
JASON: So somebody like Rite Aid Pharmacy might want to give you a three-dollar gift card, if you are taking your high blood pressure pills.
OBERFEST: Yeah, but I think other brands as well. I mean even brands like Target, who we announced as a strategic partner for us for LAUNCH, who happens to have a pharmacy business, but you have to talk to Target, my sense is, they see it more generally than that. They just see it as a way to get health-oriented consumers into their stores. Period. We are seeing that with other charities as well. And many other brands that we are working with.
JASON: Awesome. All right. Let us keep the train moving here. Great job, Jason with Mango Health. When we get back, we would have Mark from Asthmapol… Asthma… How do you pronounce that, Ted?
JASON: Asthmapolis. It sounds Greek. I mean it is Greek. All right, when we get back from the commercial break, we will have Asthmapolis on, which is helping obviously in the asthma space.
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JASON: OK. Last, and certainly, not least, Mark from Asthmapolis. What is the mission of Asthmapolis? Did I pronounce it correct?
MARK: It says Asthmapolis, like a map. Like Minneapolis.
JASON: Asthmapolis OK. Great.
MARK: We are an asthma and COPD disease management platform, which means we provide tools that help patients, physicians, caregivers, parents better manage asthma, and keep people out of the ER, out of the hospital, which is important to our customers, who are the payers, insurance companies, and at-risk providers, which are the healthcare systems. One of the key things we do is to attach sensors to the medications to automatically track the time and location of those inhaler events, which lets us know how the patients are doing, and gives a map of where asthma is occurring both, for the individual patient, and in the community.
JASON: Wow! That is completely mind-blowing. Because I have asthma, when I was a kid for a long time, and when I am over a certain weight, it comes back, so I have actually some rescue inhalers, but this is a device that goes on a rescue inhaler.
MARK: Yeah. Here, I will hold one up. There is the inhaler in blue, and that is our sensor on the top, and it transmits the data via Bluetooth through iPhone, or Android phone, or home-based station.
JASON: OK. You do not need to have GPS or cellular network in that device. You are simply connecting over low-wattage Bluetooth to my phone, and keeping track of all that stuff, so you need compliance from the individual. They must have the phone with them. It has to be connected.
MARK: To get the event live, but it will store the event, and transmit it later, if they do not have the phone live.
JASON: So then, you would not have the GPS though.
MARK: That is right. We lose location if there was too much delay.
JASON: This must have been an amazing thing when you, guys, came into the Social+Capital Partnership. Ted, when you saw this device, did you just have the same experience? Because it is the first time, I have seen it. Did you have the same experience I just have, which is “OMG.” Like, why does not it exist already?
TED: Yeah. Well. It was introduced to us by a mutual colleague, actually one of the investors in the company as one of the most exciting investments, and a company, which they have been working with for a while. When they came in, I think, it really hit on a bunch of different themes for us. As you have heard a bunch of times from the guys, who backed Mahalo at Sequoia, they always talk about team and market, right?
TED: I think what we saw here was huge markets, asthma and COPD, and a team between Mark and David Van Sickle, who had both clinical expertise and expertise in building IT and technology companies, which is something that we really look for in this healthcare IT company, is someone who sat on both sides of the fence. Then, we look for trends, which they are playing on, whether it will be mobile, sensors, medical adherence, and then helping doing population management for high-risk individuals. It was really a no-brainer for us to be honest. I think it was one we were able to move quickly on. The company had run very lean, had already received their FDA approval for the device. Was up and running in a few regions. We hit it often, despite the fact that they make me schlep to Madison, Wisconsin, a couple of times a year. I love the company.
JASON: Wow! Madison, Wisconsin, that is brutal for a venture capitalist. I mean, in a way, Ted, in all honesty, when a VC has to get on a plane, that does raise the benchmark for the company, right? They have to be just that much better. Do you think, Ted?
TED: I do not think that you must have a better quality of the actual overall opportunity because that would be saying that you would be willing to invest in a less interesting company locally. They all have to be super interesting. For me, it is about the management team. And do they have kind of a little bit more maturity? Have they been around the block a few times? Especially, in a place like Madison, there is a lot less infrastructure for a new startup founder, a young startup founder to build a company. The fact that Mark, David, and his team have a little bit more experience, was certainly played a role in our decision.
JASON: All right. So let us just do a couple of questions here, Ted. We had three amazing companies here. Obviously, you have invested in one, but let us just take the other two: Mango and Eligible. If you could only invest in one, which one is the most investment worthy at this time? I know it is a difficult question. I know they are on the line, but there is a lesson to be learned for entrepreneurs listening of which idea do you think has the edge and why? So, please, be as authentic and honest as you can, Ted.
TED: Got it. You know, to be honest, as you know Jason, these are two completely different companies, and it is very hard to even compare them. But to me, at least in the stage, where they are at right now, I think that it may be our point of view to have more of a wait-and-see attitude on Mango, simply because they are direct to consumer, and it has been quite recently since they have launched. I could dig into the numbers of the beta, and the first two months, and, actually, that could change my mind, but on a consumer facing company, I think that it would be a little bit more difficult to pull the trigger. I am also concerned about the fact that the user has to enter in all these data, and just the authenticity and the quality of the adherence data. I think that can change with some more data sets that they integrate. So I think that is another concern I have with that. With Eligible, as you know, again, they are the partner of one of our companies. I do think this is very valuable data in the arms supplier business strategy. It is very interesting. You know, my big concern there are not a lot of billion-dollar-plus companies that have been created off of being the data supplier. I mean ITA Software was a good example, which was providing the data to Kayak and Travelocity. I think that was sold for $700M. And Kayak was sold for $2B, which rather gives you an idea of a derivative of data versus the consumer-facing or business-facing site.
JASON: So essentially, what you are saying, Ted…
TED: You know, we are so bullish on the fact that healthcare is going to change. I do think that. Yeah.
JASON: What I am saying, you are saying, “In one instance, one is too consumer,” so that has you…
JASON: I mean this is the frustrating nature of venture capitalists. On one side, you say, “It is too consumer.” So that is concerning, you need to see more data results. On the other side, you are saying, “Hey, like these non-consumer arms dealers stuff, they never get too big.”
KATELYN: MD-ON. Look out MD-ON [MD On-Line]. They were sold for three billion. So they are healthcare arms, but they are old. They are older. They do some top stuff.
JASON: This is the nature of the venture capitalist and entrepreneur relationship. Just for people, who were tuning in, who maybe do not know as much as this is the VCs, they have to make bets, and they have to reduce the risk, and have as big an outcome as possible. Those are the two variables: reducing risk and increasing the chance of a huge home run. Jason, let me start with you. You heard the objection like, “Hey. You know, we have to take a little wait-and-see approach, consumer business is hard, and these compliance issues.” What do you think you have to prove to get venture capital money to take the idea seriously? I know you raised some money, but where are you at funding? You must have heard this objection before, how do you get over it?
OBERFEST: Yeah. I think we can address one of the concerns, he is rising pretty clearly. Imagine a scenario where we are integrating with a payer, or it could be a provider, or it could be a PBM [Pharmacy Benefit Manager], in any case, but from the user experience the flow would be, “You install the app, and all of your information is pre-filled.” When you go to a refill, it is actually tied into their system, so the self-reporting nature of it goes away, and then at that point, we are essentially monetizing in three ways. Initially, we are monetizing on things like refills, so our app knows, we know exactly the quantity you have on hand, and we decrement down, as you use the application over time, which puts us in a perfect position to do refills and lead the generation around refills both for prescription medications, OTC [Over-the-counter] medications, and nutritional supplements, which are all in-and-out themselves large businesses. So that sort of one revenue, very short-term, very immediate revenue stream, that we have seen play out right away. The second revenue stream is more outcomes. What is useful about us is that every one of the constituencies we talked to in the health industry has very specific unit economics for adherence. So I can sit down with them and show them the levels of engagements and the adherence, that we saw, for example, in our 16-week pilot. They can plug that into their models and tell me exactly what that is worth financially to them by type of user, by class of medication, or anything like that. So we had unique economics that we have already validated, that works for the application that we are doing. The third piece, I would say, the third revenue stream, and this is leaving the brand revenue aside, but even just in the health industry, the third revenue stream is around the value of the aggregate data. So if you think about it, I have read one report, I think it is widely accepted that now pharma manufacturers spend more now on sales and marketing than they do on R&D, yet they have very limited access to consumer insight. The pharma retailers do not give them back that data. The health insurance companies do not give them back that data. We know everything that a user does, not only within their prescriptions, but also across a much broader spectrum of over-the-counter medications and supplements. That is priceless. We can answer questions like, “Your meditation in a certain class…”
JASON: I think that is all great, Jason. I think the missed opportunity in thinking what you are doing is, people take these medications to get a certain outcome, like, I take some hypertension drug to lower my blood pressure, but you are leaving out a lot of the value, you discuss, is the value for the pharmaceutical company. I think, actually, if I put in my blood pressure, or my heart rate, or how I am feeling emotionally, if it was a depression drug or something like that, and you could track the consumer quantify-itself data along with the medication and correlate them, then you are sort of getting even more value into that. Have you thought about that?
OBERFEST: You are so spot-on. I could not agree more. We have the working designs in a lot of those things that you are mentioning.
JASON: Sorry, to reveal the roadmap, it seems pretty obvious.
OBERFEST: No, it is. It is a great point, and I do not know about you, guys, but just having done consumer products for so long, I am just a really big fan of having a razor-sharp value proposition. And very simply, when we started looking at this market really carefully during the ethnographic research that we always do, when we start building a new product, what we saw right away was just the fact that for many people, four out of five people now in the United States take some combinations of these things every week: prescription drugs, OTC drugs, and supplements. Hardly anyone takes them correctly. For that mainstream user, step one towards better health starts there. So we wanted a product with a razor-sharp consumer value proposition, and then from there we built into some of the broader areas that you are describing.
JASON: Hey, Ted, if he had presented as compliance for the hypertension drug, and self-reporting, and quantify-itself, and because you have a device on that asthma startup, it is pretty powerful to you, guys, would you have thought of it differently?
TED: Yeah. You know, Jason, this goes back to the point about having the right team. I have known, I have seen Mango before, and some other iterations, it is hard. You have to make a bet that the entrepreneur, the founder is going to see around the corner, and make the right choices on the product, and on the business side. Again, I was giving my objections to what we talked about earlier today, but I think that bet you have to make here on a recently launched consumer facing product, is really much more on the roadmap, and linking yourself with this company as the series A, series B investor, and being along for the ride. It is a lot less about what is actually in the market right now. There are very few investments we make, where it is based on what they have done in the past, that is just much more about what they will do in the future.
JASON: Katelyn Gleason of Eligible, the API that connects software developers with healthcare information. You heard some of the feedback. This is an objection you must get all the time, have you thought about like, “Hey! Can we dip into the consumer side a little bit?” Or you are trying to constrain yourself, so that you are not in competition with your customers.
KATELYN: Exactly. I will never do it. Yeah. We will stay at the bottom, and we will be a billion-dollar company. I think it is really something that happens in healthcare all the time, I think this is why problems do not get fixed, is that everyone starts to crawl up the stack. Everybody starts to build on top, because it is easier, it is faster. I mean what we do is hard work. Like, it is gruesome. There is no getting around it. There are no easy fixes. There is no pretty design to make it better. You have to build the pipelines. I really do think that there is enough data in healthcare that needs to be passed. I would see instead of going to consumer business, we would go to clinical information. We handle financial information now. We handle financial transactions. We would move toward clinical data. The reason we are not doing that right now is that the question is, “Who is going to pay for that?” We know who pays for the financial data. But never! We will never compete with our users.
JASON: How many of the major providers do you have in the system currently? What is your sort of coverage like? Who are you missing?
KATELYN: We connect to about thousand now, but I would say only 200 of those are direct connections, which handle over 80% of the insured population. With everyone, it has just about everybody.
JASON: But you need to get ultimately… The goal is to have direct connections with every provider.
KATELYN: Everyone. Every health information source.
JASON: Are they resisting giving you access? Or is this just a matter of your funding, your bandwidth, and your time to get everybody, 100% online?
KATELYN: It is a matter of me knowing the rules, so the Affordable Care Act [Obamacare] actually in a lot of ways is forcing the insurance companies to be real-time, to allow outside connections, to normalize some of their connections, because they used to be like dial-up, and like VPN, and then we are normalizing all that. So it is just knowing that, and I can actually bring that out to the insurance company. There is a bunch of them that we were their first real-time connection HTTPS SOAP.
JASON: All right. Listen. Let me ask everybody, open the panel. I want this stuff up to all four people on the panel. On my screen, South Portland doctor stops accepting insurance and posts prices online. This is becoming a re-occurring trend. People are opting out of the insurance system, and just saying, “Hey, here is the menu of prices: an office visit (one straight forward issue, i.e. cold, sinus infection, bladder infection) – $50. An extended one is $100. Complete Physical is $150. House Call is $200.” I will take that.
JASON: It is pretty amazing, when you think of it. Let me put is that out to Mark, since we have not heard from him a bit. What do you think about people just opting out of the insurance system, and the overall healthcare space?
MARK: Well. You know, for our product, there is down the road some kind of direct to consumer model, where we would go to, say, through our retail pharmacy chain or pharmaceutical company. Jason made a good point about their desire to connect to patients. But you know, right now we are focused on the people of big economic incentives, the insurance companies and healthcare providers. We are reaching our patients through those channels, which is interesting. We need to engage with those patients, but they are not paying us. They are not our direct paying customer, but we do need to engage with them and make them healthier. Down the road, perhaps, but today, we would not be trying to reach an “à la carte” consumer.
JASON: Ted, do you think that this is going to be a trend of people? I mean there are already a large number of people going to walk-in clinics. In fact, there is, I think, a venture-backed walk-in clinic chain. That is trying to make affordable walk-in clinics. That is venture-backed.
TED: Well. One medical group is venture-backed, but that does take insurance. It is more of a concierge layer on top of your existing coverage. I think this is going to become a much bigger trend. You see people moving to high-deductible plans, which are basically catastrophic insurances, and then jamming a bunch of money into a health savings account. As long as these physicians, who are advertising online or who are going to do fee for service, they are eligible to take HSA/FSA [health savings account/flexible spending account] dollars. You will very well see a lot more of this happening, as the consumer sees what it cost to go to a hospital or a clinic with the co-pay, with their out-of-pocket, and compares that to just using pre-tax dollars. I think you are going to see a lot more of the consumer taking control.
JASON: Jason Oberfest of Mango Health, what are your thoughts on this? Do you think you are going to get to the point where consumers are opting out more and more? I mean, in your case, they need a doctor in order to get the prescription, but paying for it themselves seems to be more and more viable, and ordering drugs online seems to be cheaper and cheaper. Are people going to run around the system?
OBERFEST: Yeah. I do not know about opting out specifically, but I think, in general, the market is becoming more transparent. It is, of course, just a great thing. Certainly, everyone who is participating here knows, I mean we spend more than every other OECD country combined on healthcare in this country, and yet we rank basically last or close to last in almost every major leading health indicator. It is clearly a broken system. It is clearly a system, I think, where market forces will really help it. I am excited about that trend personally as a consumer as much as an entrepreneur in the space.
JASON: Let us end on this. Katelyn, Obamacare is obviously very controversial. People are starting to actually think, that it is working. What is your personal take on it? What is the good of Obamacare? What is the bad part? Where is that put you as an entrepreneur?
KATELYN: What part of it? It is so big. Do you know? It is so big. There is a very small section that no one knows about that put more constraints on the insurance companies to create more of a regulatory system closer to like financial regulatory system on banks, where they have to process transactions in real-time. And people do not realize that, that will really help costs come down. Right?
JASON: Why would that help? Why would real-time help?
KATELYN: Because it is not paper any more. It is not going into a batch [?] “due caution,” where some person is reviewing it. It is a computer now. So all these things are still done by paper.
JASON: It took Obamacare to force them to be more efficient.
KATELYN: It started in 1996, I think, with Hillary Clinton, actually. In the Affordable Care Act, there is an article, which puts real pressure on it, like, “Listen. You have to start following this.” It is like a dollar fine per covered life, if they do not. Yeah. There is definitely pressure there.
JASON: Ted, what do you think? I mean, obviously, you have seen the impact of Obamacare, and some opportunities, and some problems. What do you think?
TED: I think there are a lot of regulations that are going to come down. One thing you will see is more of these Accountable Care Organizations being formed, which is going to help push the technology into the smaller clinics, which have not been able to buy the technology, like a large hospital, like a large ACO [accountable care organization]. So that is going to be a big difference, but I think more than anything, it is just Obama…
JASON: Hey, we lost Ted there. Hey, Brandice, when somebody is breaking up like that, just have them to switch to audio only, and just walk in through that on the side, so we keep the show going. Hey, let me just end with Mark then. Mark, what are your thoughts on it? How did it impact your business?
MARK: Yeah, for one thing, I think that the days of the health system doing better, if an asthma patient comes into the hospital, were numbered already. The integrated systems like Kaiser [Foundation Health Plans] or Dean Health, here, in Madison, they are able to out-compete other health systems, which are on that old fee-per-use model. So Accountable Care Act accelerates that. From our standpoint, it is great. We can help healthcare systems meet those different metrics and objectives, but I think that was coming because of market forces, to some extent, anyway.
JASON: All right. This has been an amazing episode. Thank you, to all of my guests. Katelyn Gleason of Eligible, which is EligibleAPI.com, and you can follow her on Twitter @KatGleason. Katelyn, thanks for being on the program. Continued success to you. Jason Oberfest is @Joberfest on Twitter. MangoHealth.com is the website. Jason, congratulations on an early success and stay in touch.
OBERFEST: Thanks, Jason.
JASON: Mark Gehrig, of course, of Asthmapolis. Did I get it right?
MARK: That is right. Very good.
JASON: I got it right. Yoo-hoo. I mean it is a terrible name, I think. Asthmapolis. Can we change the name? Are you stuck to this name?
MARK: We like the name now. It gets every conversation off to a good start, when the person mispronounces that. So we like it.
JASON: I like the ‘polis’, because I am Calacanis. I like it is Greek. It is good. Asthmapolis. I feel like I am ordering a Saganaki. I will take a Saganaki with the side of Asthmapolis. I am going to have some keftedes with that. It is going to be delicious. Fantastic. Listen, Mark. Continued success. I think what you are doing is brilliant. Thank you for dragging Ted’s sorry ass out to Wisconsin. Hey, listen. Good cheese out there, right? What is it like? I mean you have built such an innovative thing out in the middle of the country. Do you feel like there is a stigma against like the middle of the country? Do you feel like you are a second-class citizen compared to the Valley.
MARK: You know, I think that there are big pros and cons. It is harder for us to hire an engineer or certain positions, but I think there is a much different attitude here. There is a thriving tech community. I think people are loyal to the company. There is not a bunch of other startups to jump to. There is not a big company, which is trying to recruit everybody, so pros and cons. We are very happy being here.
JASON: Yeah. See, I think that is a very good point. You can run a company anywhere. Great companies can emerge anywhere. They typically do emerge in one of the big metropolises, but it can happen anywhere. You have this incredible advantage of lifestyle. You are the best game in town.
MARK: Yeah. That is right.
JASON: It makes sense. Ted Maidenberg, thanks for being on the program. I do not know if Ted is still there. Ted, are you there? OK. So, Ted, we dropped off. Sorry about that. We have a little Wi-Fi problem. This has been an amazing program. Thank you to all my guests. Thank you to Brandice on the one’s and the two’s video cameras, Kirin for setting everything up. Hiscox Small Business, thank you for getting small business insurance so easy. Your product is so buttery, smooth, and delicious. Thanks to my friends at ShareFile by Citrix, designed for business, really great to use. We have had a great time with ShareFile.com, click on a radio microphone button, use the promo code TWIST, you can get your 30-day free trial, plus you get that Top Ten questions episode. Follow us @TWiStartups. Thank you and we will see you all next time on “This Week in Startups.” Bye-bye.
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