$100M Revenue Profitably with No Outside Funding. Other AI Companies Are Burning Cash | Raj Toleti

0:00I have created quite a few million years. The last two companies I bootstrapped. I didn't even raise any dollar from outside investors. And I sold the strategics. 80 % gross margins, 40 % EBITDA. He started in rocket science. He comes from a family of 33 doctors. He's built and sold health tech companies for hundreds of millions of dollars without ever taking a dollar of outside money. This is Raj Toledi, chairman and CEO of Andor Health. Today, we are the only AI native clinical services company in the country that is highly profitable with over$100 million in ARR. Do you think that's because part of the healthcare system is broken?

0:43There's a lot to unpack there in that question, but I think...

0:54I was just reading a stat that was saying there's going to be a massive nursing and doctor shortage in the U.S. All these people are retiring. On top of that, you have baby boomer generation. They're needing more healthcare. I was reading, essentially, they were saying there could be a massive crisis. Do you think that AI can solve this? Yeah. I mean, first of all, thank you for having me on your show. I think there is more, there will be, there is a shortage today. There is a significant shortage. The number of nurses that are exiting the system are more than number of nurses that are graduating and entering the system.

1:38And clinicians and specialists especially, there's just a dire shortage of those resources, especially in the rural communities in America. So if you think about how do you democratize access to care across the country, and when people are not available in those remote areas and when there is shortage, you know, I think the only way you can actually solve of how you democratize access to care and improve the outcomes is through automation and virtually being able to meet the patients where they are, and then being able to actually bring technology that makes the life of these clinicians so much more easier so that they're available.

2:31So yes, the short answer is we today have seen AI directly actually cut down thousands of nursing hours. We've seen AI through our technology reached the remotest parts of United States and in some of globally where my company operates. And we've actually changed the outcome. So if the AI technology coupled with the clinical service is able to own that outcome for that patient, then you truly have changed, you know, the way people live. So yes, I know it's a long-winded answer, but I do believe that that's how it's going to play out. So I've talked to other people that seem that they want to use AI and robotics to replace the doctor, maybe replace the nurse.

3:28You take a different approach. I do. And I think there's always a human in the loop, right? I think there's a lot of work around administrative tasks associated with care delivery that can be automated through AI. So if I'm a clinician and you're the patient, the minute I come on to this video call, my AI assistant should be able to give me your medical records. They should be able to serve up the content for me. They should be able to do a lot of assessments on you. And by the time I come as a clinician, I'm actually reviewing. and maybe I'm using neural observation through the camera. I'm reading certain symptoms and maybe the AI is saying, you know what, this patient cannot speak English and I might have to pull in somebody that speaks Spanish or another AI agent that's able to translate.

4:26This patient is not able to hear. Maybe I have to turn on closed captioning. So all of those surround tasks that are needed in the process of care delivery, AI is definitely taking those tasks and not only doing it at scale, but doing it better in some cases. So I think there's a trust factor with using like LLM's chat GBT, for example, to give you a diagnosis. And I'm not saying that's the right way or that's the way anyone should do it. But from what I hear, what I read, what I see is a lot of people trust asking an LLM, maybe even more so than asking a clinician or even going to a doctor to try and get a diagnosis.

5:13Do you think that's because part of the healthcare system is broken? I mean, there's a lot to unpack there in that question. But I think it's easier. It's easy access to ask a question of chat GPT or clot or whatever that AI aperture happens to be. But to get access to a real clinician, it's not that easy. So I think that should not be understood as the value that you're getting through an AI response to somebody that has a human in the loop. Now, there are certain use cases. So we as a company, our AI doc and our AI reasoning is actually right now working at full scale. We see thousands of patients with AI reasoning.

6:08But we know responsibly when to insert the human in the loop, right? So that's about it. So we actually are doing neural observation. We're doing documentation. We're doing, you know, reasoning around you and your medical record. But then we then pivot to a human in the loop. And that's a lot of work and trust that you need to actually build in the platform. So what happens when you have silo solutions, say, I have an AI doc, but the AI doc doesn't have a digital front door to take your payment, to understand your insurance. So there's a lot of, so when you stitch the whole experience together, then I think the trust increases where the human in the loop is coming and helping.

7:03Let's go back into your history. you were essentially a rocket scientist, right? Like we always joke, it's not rocket science, but you essentially were working on AI and autonomy back in the 90s. At some point when you were doing this, did you say, I want to divert all of my attention to healthcare? Well, I mean, it's a great question. You know, it's like, you know, I'm an engineer at heart. I'm still an engineer. and my career started off in the mechanical aerospace engineering space. I worked on autonomous vehicle research in 1992. There was a lot of work that, you know, we worked with the FAA on the V-22 Osprey and, you know, multiple autonomous vehicles with expert systems and AI from NASA.

7:54Now, the pivot happened to me is because my family is full of clinicians. I have parents who are physicians my grandparents were physicians my mom has eight siblings they're all doctors their spouses are doctors the kids are doctors so the list goes on and on I have 33 clinicians in my family and my calling has always been how can I see not 20 or 30 patients a day How can I change lives for thousands, if not millions, every day? So I think automation and healthcare was a calling for me. And just given that I've been around healthcare all my childhood, and even now all my adulthood, that's just my life.

8:43I mean, that's my space. And I've started four companies. I called it four and a half because I have two companies and or ventures. But, you know, nothing gives me more joy than just building technology and automating so that I can truly change the way patients access care. I built FounderStory from a$50 microphone. And the most important thing is I didn't do it alone. For years, I've been using Upwork to hire marketing, editing, branding, you name it. In fact, the editor who cut this very episode and the team behind all of Founder's Story branding found them on Upwork. The quality of people is top notch and paying people is simple.

9:32Upwork is a one-stop platform to find, hire, and pay expert freelancers across development, data, marketing, operations, and more. With Business Plus, you can access the top 1 % of talent on Upwork. And with AI-powered shortlisting, you'll get matched to the right freelancer in under six hours. No endless searching required. It's free to sign up and posting a job is easy. Visit Upwork.com right now and post your job for free. That is Upwork.com to connect with top talent ready to help your business grow. That's U-P-W-O-R-K.com. Upwork.com. You might have the smartest family I've ever heard about.

10:21I mean, 30, over 30 clinicians. When you told your parents, I'm going to be an engineer, which is obviously something that is a great, that's a great field to be in too. But were they sad that you were not also going to be a doctor? Well, my dad said he was an emergency medicine doc, but he was also like he was a media personality. But he said, hey, listen, it's a disaster. for an emergency physician doctor every day for me because I have multiple jobs. It's a disaster once in a while. But if you want to be an engineer, that's the best because you can avoid this whole realm of being a clinician.

11:03No, I actually know I think they encourage me a lot. And I think I was very fortunate that I could follow my heart and actually follow a career that I truly love. I have a lot of friends that were also born in India, and they always tell me it took many years before their families were okay with them being in business and not having a typical job. Did your family think, why quit Microsoft in the 90s? Why would you leave something steady, paycheck, and become a founder? Well, I mean, I've got a couple of versions of this, but the short answer is yes. If you're from an Indian family, yes, you can be an engineer, a doctor, whatever.

11:45But when I joined Microsoft, my dad didn't even know what Microsoft was. He's like, you became a mechanical aerospace. What are you doing at Microsoft? What is this company? But before he passed away, he realized I didn't screw up. But I also have the fortune of, actually, Actually, my parents were always building businesses, even though they were clinicians. So I grew up around businesses. So in my life, there was always a metric of how many jobs I create. So that's something that I personally kind of like that's one of my north stars to like say, OK, you know, before I hang up my hat, I'm going to like create so many jobs and provide for whatever I can.

12:32And that's something that my parents actually fully supported me on. that's an amazing legacy right like how many jobs can you create which impacts so many people they then impact other people their families and it goes on and on and you sold companies for hundreds of millions of dollars now what was the sacrifice that you had to make to get there uh you know uh i mean you ask any entrepreneur uh they'll tell you you know most of the sacrifices are personal in nature and you know the the time you give up not spending with your family or kids and i'm very fortunate that i have three wonderful children and they all turned out okay it's probably because of my wife and not not me and then then you you you help a lot of people on the way and you know uh like my dad told me when you help someone don't expect anything back so i when when you go through this entrepreneurial journey and you change people's lives, the sacrifices are really relationships and personal.

13:41But I think what you actually are able to do at the end of the day, I believe outweighs a lot of those sacrifices. I think if I sold a company for$20 million, I would probably just retire. Have you thought about that? I tried for like, I mean, I never played golf before. So when I sold my first company, I tried to retire for like two months. My wife said, I think it's like very unhealthy for our relationship. So I think you should just go do something. So, I mean, yes, I understand. But I think having a purpose and I think building companies in health tech going back to the same health systems, selling them a different thing every four or five years, and still having that credibility.

14:36Like I tell my kids, you're only as good as what you did last. And I think that... And I don't know, I've not met many people that are in my space that are gluttons for punishment like me to go actually build another health tech automation company, trying to help patients again. So for me, it's just a calling. I think I wouldn't know what else to do if I retire. So I'll keep doing this as long as I can. I imagine people that got stock in Microsoft in the 90s probably could have retired just on that alone. That must be epic. I couldn't imagine getting stock in Microsoft or Google from day one. When you think about legacy, going back to that piece, I heard recently that legacy is everything, not just one specific thing you do.

15:38All of us, we all have a purpose. And you're a great storyteller. I mean, you can actually really bring out some of the most salient aspects of any entrepreneur that you talk to. I mean, that's just a skill that you have. And I think the legacy for you is not just the stories that we tell, but the knowledge that we can actually impart to all your viewers. And I think it's a chain reaction. So for me, legacy is fundamentally saying that at the end of the day, how many people's lives have you changed? And in that one statement, there's a lot to unpack. Right. And so the only way you can change is not just because you've given them a job, not just because you've educated them, but you truly were impactful.

16:38I built Founder's Story from a$50 microphone. And the most important thing is I didn't do it alone. For years, I've been using Upwork to hire marketing, editing, branding, you name it. In fact, the editor who cut this very episode and the team behind all of Founder's Story branding found them on Upwork. The quality of people is top notch and paying people is simple. Upwork is a one-stop platform to find, hire, and pay expert freelancers across development, data, marketing, operations, and more. With Business Plus, you can access the top 1 % of talent on Upwork. And with AI-powered shortlisting, you'll get matched to the right freelancer in under six hours.

17:26No endless searching required. It's free to sign up and posting a job is easy. Visit Upwork.com right now and post your job for free. That is Upwork.com to connect with top talent ready to help your business grow. That's U-P-W-O-R-K.com. Upwork.com. By something that you did. And I think to me, that's my North Star. It's like, okay, when I look back and say my legacy is like, you know, I've touched 10 ,000 people or changed 10 ,000 lives or whatever the number happens to be. But that's, I don't know if I answered your question because it's very philosophical, right? Yeah. Do you have a number where you will look back and say, I am fulfilled?

18:19Or even a number that, you know, at the moment or whatever that number is, the metric, the KPI, however you want to say it. Where you would say, okay, I'm fulfilled. You know, if I meet my number, the number is wrong. I mean, that means I have to do more. So I don't. I'll keep doing this till I can. You said you're a glutton for punishment. So that must be the reason. You just love to be an entrepreneur. What is the moment during your entrepreneurial journey where you were almost on the verge of saying, I'm just going to go back to working at Microsoft? Oh, boy. Oh, never. I mean, not Microsoft.

19:08I'm just saying. It doesn't have to be Microsoft. I'm just using that as like a hypothetical. Like basically. You're just ready to throw it in. I'm not saying a business company. They've given me so much.

19:22I've built companies and then large public companies have acquired my companies so I do actually go work for a large company to make sure that whatever we've innovated, whatever we bought to market is still my baby, right? And when I give my baby up to somebody else I mean we are there to make sure that we shepherd that product through that process. I mean, I sold my second company to NCR. My boss there at NCR is still a great friend, a great reference. So I kind of switched between the entrepreneurial frequency and then I come and I work at a large corporation. It's a different frequency. It's a different mindset.

20:12But then at the end of the day, I still, you know, I will still have to go build something else because that's what I want to do and that's what I can do. So I don't think so I can actually work at a large corporation for long periods of time. I don't know if I answered your question. No, I mean, I get it. Like sometimes I think about throwing in the towel, but I'm like, could I beat an employee again? I'm not really sure. I don't know. It's one thing if you sell, like you're saying, sell the company, then you now are great. But just to go and it would also be funny to create a resume and have to do an interview process.

20:53I think that would that would that would actually be pretty funny. What do you think about the secret sauce to the exit? Because you've done it a few times, a few hundred million in. Is there something that you do or you ensure that the companies that you're creating have? So at some point, you know, somebody will want to buy it. Yeah, I think it's actually a great question. I think most entrepreneurs will tell you that I've actually exited that there's no right timing. I think you always have to be preparing your company so that there is an exit. So you're always, you know, every day you're preparing your company so that it can go to the next level.

21:37I believe so all my companies that I've built in the tech space including this company and or health and synergy health I fundamentally believe that no matter how cutting edge that innovation is you have to build a company that provides sustainable value to your customers where they actually pay for it and my companies were all profitable. The last two companies I bootstrapped. I didn't even raise any dollar from outside investors and I sold the strategics. 80 % gross margins, 40 % EBITDA, very strong financials. So it's fundamental in my thought process because not just to my shareholders and to my employees but to my customers that there is never a question whether my company will be around.

22:31In my space, I'm profitable. In the AI space, there are a lot of companies that are raising hundreds of millions of dollars. My revenues are much more. And today, we're the only AI native clinical services company in the country that is highly profitable with over$100 million in ARR. So what I fundamentally believe, and basically anybody that works with me or for me, it's very, very important that we have very strong financials and a return on investment for my customers and outcomes. So I don't just sell a software and throw it over the wall. I basically say, listen, I'm going to reduce your readmissions by 40%.

23:23So I know this is also probably a long-winded answer, but I think this is why you can be assured that your exit is going to be right. And it can weather market changes. So I'm in a position where I don't have to raise money for my company. I'm profitable. so so we are able to actually think more strategically and position the company for the right exit so that that's kind of like a a long minute answer but i can break that down even further if you want me to it's super important to have a profitable company but then a company that can weather the storms which makes sense if somebody's going to buy your company they want to they want to know there's some sort of longevity in it and i'm wondering your thoughts we recently had another guest on.

24:16He's the founder of Equity Bee. And he was telling me this stat that 50 to 70 % of people don't exercise their options at the company they're at. And it could be a variety of reasons. Maybe they don't have enough money to do so. I'm sure there's many other things. From your perspective, having all these tech, health tech, AI companies, I imagine there's so much room for people to create massive wealth right now, not even as the founder just working at the company what has been your experience with this yeah so thank you for that question i think i have created quite a few million years out of my companies i mean like you know people started their own businesses that i've coached mentored and and this is like you know very large sums of money like you know equal to what i was able to drive i built founder story from a$50 microphone.

25:13And the most important thing is I didn't do it alone. For years, I've been using Upwork to hire marketing, editing, branding, you name it. In fact, the editor who cut this very episode and the team behind all of Founder's Story branding found them on Upwork. The quality of people is top notch and paying people is simple. Upwork is a one-stop platform to find, hire, and pay. expert freelancers across development, data, marketing, operations, and more. With Business Plus, you can access the top 1 % of talent on Upwork. And with AI-powered shortlisting, you'll get matched to the right freelancer in under six hours.

25:57No endless searching required. It's free to sign up and posting a job is easy. Visit Upwork.com right now and post your job for free. That is Upwork.com to connect with top talent ready to help your business grow. That's U-P-W-O-R-K.com. Upwork.com.

26:22Now, when you say 50 to 70 % of the... So we always had an employee stock option pool. So I always kept like 20 % of my company for employees. And I created a lot of wealth over the years for employees. exercising a stock stat like 50 to 70 percent and yes i mean he's right but there's two angle two two sides to the coin so if you exercise your stock and you hold it then you play pay capital gains when when when we sell the company so if i sell the company ten dollars a share instead of paying like whatever four dollars in taxes you pay 25 to like two dollars fifty cents So there's that part of exercising their shares and folding them for capital gains.

27:08And then what we do is basically we give you, let's say I give you 100 shares and you vest over four years, if you're with me for four years. And that's a standard stock option plan with the vesting period. And once you vest that stock, and when we sell, whatever your strike price is, whether it's a dollar and now I sell it for$10, you're going to realize the$9 gain, whether you exercise it or not with me. Okay? So, what you pay on taxes is different. If you exercise, typically enroll them for a year, you pay less. But if you don't, then you could be paying more, depending upon the type of stock, the class of stock.

27:55But I do agree that a lot of people just don't exercise. They don't understand what it means. And we try to educate our employees. We try to tell them, like, okay, this is the best way for your financial planning. You see that we're growing leaps and bounds. And this stock that you have came to you at a dollar. It could be like 10 bucks or 20 bucks or whatever it is right now. So yeah, it's interesting that a lot of people just don't realize that. Well, I've changed my perspective. I can work for somebody if they give me good stock options, maybe some equity. I changed my perspective. Okay. Okay.

28:36I could do that. I could do that. I mean, I know a lot of people that were working at like open AI. We'll see what, with Anthropic SpaceX. I mean, it's kind of wild. The wealth that is now being generated as an employee, like that is, and people in their like twenties or thirties. I mean, it's, it's amazing. You won entrepreneur of the year. Did that mean a lot to you or was it just another award? No, I, you know, like all of us, we like recognition. And I think an entrepreneur being recognized as an entrepreneur by peer entrepreneurs is always, is always cool. And actually I won it twice in the state of Florida.

29:26I didn't, I didn't, I never thought I'd win it second time. I mean, like I already won it in 2018. I said, Why would they give me another award in the next company? And I guess I didn't find anybody better. But I do really cherish those awards. Let me know when you have open enrollment of internship because I would like to apply to be an intern. I could be an intern and then maybe I could be head of something, something. And by the time I'm 29 years old, I'll be up there. Raj, this has been great. Raj Taleti, Chairman and CEO of Andor Health. Thank you for joining us today.