Healthcare Skipped The Internet And Went Straight To AI | Alamin Uddin, NexHealth

20:44Yeah, by far. By far. And there's a bunch of other reasons that we can maybe talk about offline, but Yeah, sure. We should talk about Epic as an example.

20:57But, you know, we are the largest by far. And so the use cases there basically is this, right? So you take a company like Align Tech, which are the makers of Invisalign.

21:08Turner Novak:Nice. Yeah. They're pretty big, aren't they? They're massive, yes. They're actually out of San Jose. So their use case as an example is, if you go to Invisalign.com, you should be able to book with a provider that will give you Invisalign cases, right? That accepts Invisalign cases. And they're using our infrastructure to connect their providers that are trained for Invisalign to consumers. That's one use case. The other use case would be something, you know, one of the most popular ones these days. A lot of the YC startups are actually built on top of our API, which is an AI phone agent. Meaning, you know, more often the use case is you call your practice or, you know, whatever doctor you're going to, right, after hours.

21:53The AI agent will pick it up, and you may want to reschedule your appointment. you may want to cancel it and the AI agent will need to ask you, hey, what's your name, date of birth? And once you give it, it'll need to know what time is your appointment and then actually action that cancellation or that reschedule as an agent. Otherwise, it's kind of useless. And all of this is built on our API and our infrastructure. So that's one use case. The other use case is that we do have a product that's built directly for these practices at the same time, where if you're practicing, you can buy NextHealth and we will digitize every single step of the patient journey where, you know, the key value prop there is that if you think of, you know, our competitors that came before us where the software was built to basically help you manage a set of tasks, right?

22:42If you're in an office, operationally manage a set of tasks.

22:44Turner Novak:So if you're like the reception woman or like the billing person that sits in the front and is like always on the computer clicking buttons with a stack of papers, inputting data. Yep. Where the core differentiator for NextHealth comes though, and it's only possible because of the infrastructure we focused on building first, is that we actually not, we don't help you manage the task. We do the tasks for you, like literally, right? And this has been the case for us even before AI. So this isn't because of AI, but like really because of the infrastructure that we own, right? What it means is that you're a practice, you can buy NextHealth and all you really have to do is, you know, configure it, set up some rules and so on.

23:24You turn it on and every single step in the patient journey gets automated. And honestly, like you don't even have to log into the product, like our product, except, you know, maybe if you want to respond to patient messages, like, you know, you're a patient and you responded to a text message from NextHealth or something, and then a staff member has to respond back. And that is what we optimize for. Like, unlike, you know, most companies where the objective is, you know, session time, as an example, right? You know, you want your end users to spend as much time in the software as possible, right?

23:54We optimize for the opposite. Like we think, you know, if our end users are spending a ton of time in our software, we're failing somewhere because the core value prop, right, is that we do the work for you so you don't have to log in even, basically.

24:06Turner Novak:So you just talked about before, before you explained this, you said you can't really access any of this data typically. How are you then doing this where you can? Yeah. And maybe it's worth talking about some of the first instances of doing that. How did you initially start to build the platform going back to the very beginning? Maybe even before you actually started. Yeah, I'm happy to actually maybe explain the full vision here, right? So our mission statement is accelerating innovation in healthcare. And like I shared earlier, this isn't the first time that anyone's tried to tackle this problem.

24:45It's been a problem since the 90s, right?

24:47Turner Novak:So people have tried? Yeah, many, many. I mean, many startups. I mean, even the federal government, right? The whole reason the federal government cares about data interoperability and digitization of records is because the federal government genuinely wants more innovation in healthcare. And the federal government wants innovation in healthcare because healthcare is about 25 % of our GDP at this point. I mean, it's a huge chunk of the budget. If you just go like, where's the money going to Medicare, Medicaid, Social Security, a lot of that is related to healthcare in some aspect. Yeah, so, you know, when I was 22 or so and my co-founder, right, you know, we were ambitious enough to tackle this problem and we thought we could.

25:28And the reason we thought we could is this, which is generally speaking, you know, whenever any company has tried to tackle this problem, they take either of one approach, which is they're going to be built specifically for hospitals. And if you build specifically for hospitals, which is, you know, what seems like the large enterprise kind of attractive market, right? If you're a startup. Those are pretty big deals, right? Yeah, like VCs will fund you and so on, right? Only to realize at a certain point that actually Epic will just kill you, basically.

26:00Turner Novak:Really? Yeah. Epic just doesn't allow you to compete. Doesn't allow you to get a full hold. Yep. Yeah. And by the way, Microsoft tried to solve the same problem that we're solving right now. And they also ran into friction with Epic and Cerner and so on. which is, Cerner is like basically the second largest hospital-based electronic health record system. How are they able to do it if like the government wants to solve this? Couldn't they be like, guys, cut it out? Like, you can't do this anymore. When you can build anything, Amplitude lets you know how to build the right thing. Use human language to get complex answers about your products.

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27:45The government tries, but then, you know, well, I think like twofold here, actually. A lot of the regulation actually doesn't have precedents, meaning there hasn't. So you can pass regulation, but one, you have to enforce it first. And that, you know, swings back and forth depending on the administration that's in power. The second thing is, in order for the government to enforce it and or, you know, a court case, let's say, to go through, like, it's easier for the government to enforce it if there's precedence of court cases as well. Like, how do you interpret the law, right? So a lot of the regulation is so new that that actually hasn't happened enough times that it's a very clear cut.

28:25So Epic, you know, basically what they do is they say, hey, we think regulation says X, Y, Z, versus, you know, like there was a famous, you know, battle between Microsoft, Google, and then Epic, I think it's like five years ago or so, where like the argument was, you know, Epic was like, hey, we think regulation means X, Google, and Microsoft. Their argument is we think regulation means Y, right? And it's sort of like who wins because there's no precedence of court cases. And nothing's been settled. Exactly, exactly, exactly. So like, you know, if you're Epic, right, and you're doing 8 to 10 billion in revenue every year, you're cashflow positive and so on, you can just, you know, take a startup and have them mired in like court cases forever and you're dead, right?

29:05Turner Novak:So that's one approach. Yeah, so anyways, so hospital systems, right? And that hasn't generally worked. The other approach is SMBs, just like we're targeting, right? And the SMB space is also attractive because unlike the hospital market, the SMB market, when it comes to EHR systems, is extremely fragmented. Why is that attractive for a startup? Yeah, so as an example, right? If you're looking to build what I call, let's say, a plaid for healthcare, the value prop is stronger. if you can say, hey, integrate with us and we will give you access to 50 or 100 other integrations versus like Epic or Cerno, which is just two systems, right?

29:43So a lot of companies do try to go after the S &P market from that perspective. Then they immediately run into the blocker of either that practice is using an on-prem system and maybe there's no API. A lot of the market does use cloud system these days, especially, right, I want to say like 50 to 40%, especially on the medical side. even if it's cloud-based, right? Either, you know, the API is like extremely limited. You can't just go and self-serve sign up like, you know, most other SaaS vendors. You have to actually have, form a real partnership. Like you have to have conversation, negotiate, get the rates, you know, what endpoints you can access and so on, right?

30:24So for startups, you know, that like 12 to 24 month cycle, it's just too long. That's one thing. And the second thing is from, you know, If you just put that, you know, the partnership, the restrictions, the incumbents, you know, they want to block data. If you just put all of that aside, like even if all of that was solved, just as an FYI, you still have to write, you know, 20, 50, 100 integrations for you to have scale as a product and as a company, right? Anyways, all this to say, so those are the set of challenges. But if you can solve it, right, as a company, you're massively valuable to the ecosystem.

30:56Part of this, you know, I want to distinguish two here. Like SMB is more attractive because it's a harder problem to solve. And if you can solve it, you are just more valuable to your customers, basically. What ends up happening on the SMB side, though, is most companies before us have tried to take the approach of, hey, we will partner and aggregate all of these relationships. And end up, you know, building a product where maybe, you know, it's not as good as like you can read and write anything, you know, with plan. You can read bank data and you can write back bank data and lots of different types of financial data, right?

31:33Maybe the product isn't as great, but at least we can aggregate all of these different systems through partnerships and make it available to developers. So there are companies that have tried that approach as well. The problem with that approach also is that when you sign these agreements and these partnerships with these various EHR systems, you end up having to share 30 to 50 % of your revenue with those EHR systems. And if you think about where an API or like an infrastructure company sits within the, you know, software supply chain, right? Your margins are, your take rate, you know, within that supply chain, right?

32:06It can't be so high that if there's a developer that's building on top of you, they have to price so high that, you know, they just price themselves out of the market, right? In other words, you know, they have to price so high because they have to share that revenue with these, you know, EHR systems. And that in itself just like literally prices them out of the market. Interesting.

32:27Turner Novak:So it's just like too expensive for any developers to use. Exactly. Interesting. So when you started Nexelf, I think you were working, the first inklings of this, you were, it was like a summer job at a clinic. What were you doing? Yeah. So, so at that time, you know, I was exploring maybe going to medical school or do I become a software engineer? Basically. Because you learned to code growing up. Yeah, in high school, watching YouTube videos, basically. Man, with Gen.AI, by the way. So much easier than YouTube. Man, the kids these days. It's like, man, back in my day, we used to have to watch a two-hour YouTube video.

33:03Yeah, yeah, it's crazy, actually, if you think about it now, man. Anyways, so anyways, I was exploring medical school or something else. And as a part of that, one of the things you have to do if you're looking to get into medical school is that you have to show you have some exposure, like real exposure to the field of medicine, like what it's like to be a doctor. So, you know, most students, what they do is they'll volunteer at a hospital or something of that nature. When I was in school, I also needed a job. So I just, you know, was crafty enough to, like, get a part-time job. With a professor, you know, at my school who also practices part-time, basically.

33:35And, you know, he was basically about to retire, so he gave me a lot of freedom whenever it is. And I was basically the receptionist over the weekend. And anyways, all I just say, so I was the receptionist, which means, you know, one of the great things about that job is that you get exposure because you're the router of information, really, like, that's your job, right? Every single patient that comes in. Exactly. And then you coordinate, you know, with the labs, with the pharmacies, with maybe other specialists, and so on. So you get exposure to everything, right? And, you know, at that time, my sort of, my, really, what I was really trying to do here is, hey, why can't I just, like, automate some of these, like, repetitive communication that I have to do, right?

34:10Hey, dear patient, you have an appointment coming up, you know, at XYZ time, right? So this is, like, 2014, 15, I want to say. and at that time you know so i was like okay i can probably just you know build this myself i reached out to um uh e-clinical works which is you know one of the vendors the electronic health record system that my you know doctor was using and their response to me was basically um hey we don't have an api but we can give you one for forty thousand dollars and i was like well look first of all i'm like 21 i think at that time anyways so so like you know at that time like my kind of insight was like wow as a college student right if i can't do this and i can just hack together something what about you know like everyone else right in the space and then one thing led to another you know i want to say and realized over time actually this is like a massive problem in our space and within my kind of motivation for like all right what do i want to do do with my life right like that was a question for me as well yeah um ultimately it was you know about impact for me part of this you know i was exploring in medical school is that I've always been, like whatever I do with my time just has to be impactful from my point of view, at least, right?

35:20Turner Novak:Yep. And being a doctor is great. However, I think, you know, having impact at scale is better, right? And the best way to have impact at scale is, you know, I think at least today, right? More pragmatically and something, you know, maybe you can control more than other kind of areas here, which is if you can build something useful for the world, you put go-to-market behind it and you make sure it's in the hands of everyone and you can really change the world, right? Like the iPhone is an example. It's a great one. Or, you know, ChatGPT is another great one, right? So it's all just to say that exposure to that office plus having the interest and ambition on, you know, impact at scale led to us, you know, me and my co-founder Waleed basically getting together and, you know, trying to build this API for, you know, ourselves at first and then hopefully the whole world.

36:11Turner Novak:you like first started, the first thing you built was just like some Twilio like strings and chains, essentially. Exactly, exactly, exactly. And actually, like the funny thing is, you know, we actually tried, you know, I was bashing partnerships. Do you have to, you know, go through all this right there? So that is the approach that we took ourselves, just so you know, like, you know, with eClinicalWorks and a few others. And here's like a crazy experience just as an FYI. So, you know, we're still in the we don't really have product market fit, but we have something. There's a large customer that was interested and they'll give it a try.

36:46First one ever. And this is, I think, like 2018 or so.

36:53And I'm at the office of that customer and they're like, well, you know, we have to call eClinicalWorks to give you access to the data. So they call him and I'm live on the phone, right? And, you know, some partnership person from there finally picks up the phone and they're like, no, don't work with NextHealth. we have this solution ourselves. Live on the call, by the way.

37:13Turner Novak:They didn't know you were there? No, they knew I was there. Like, they knew I was there. And like, you know, I had email chains going with them on like on threads, right? Where like, you know, and you know, we have something signed with them, I believe at that time as well. And it was all this to say, like they knew we were a startup too. They were like, yeah, just don't use these guys. Let's set up another call. We have a solution for you. So that's how, you know, anyway, so that's when we realized actually like the partnership approach is not going to work either. And so you, you, were you, do you guys stay in college?

37:45Turner Novak:Did you drop out and work on this full time? Like how did those next, next like year two, because it sounds like 2015 through 2018, like that's quite a bit of time. Yeah. I mean, so 2015, I think I was a sophomore in school. And so at that time, honestly, this was a hobby, I want to say more more than anything, right? We're still in school. My co-founder and I, I think, you know, we really got serious about this, I want to say, like, our last semester at school. Okay. It was, I'll just say, we got really serious, honestly, like, when I saw, one, how big the problem was. And, you know, I want to say I was naive enough at that time where, like, that was more exciting, if anything.

38:28Like, oh, wow, this is such a massive problem. You know, healthcare is such a large space. if we can solve this, this will have massive impact, not knowing how hard it would be. Right? And then we got some validation in the sense that every time I would talk to a practice and myself seeing the pain, right, that this is a really valuable problem to solve. And the key question was, honestly, for us at that time, it was, okay, what do we build? Given that we couldn't even build the Plaid, like the API product, by partnering with any of these companies. So the real question was, okay, how do we go about this?

39:00what do we build, and what should be our first product? Because historically, before us, a ton of companies tried an API approach where they tried to build platform healthcare, and it didn't work, and so on. Ultimately, just to fast forward, the strategy that we landed on is this, which is, if you think about it, these incumbents, they're not open systems. They're the gatekeepers to innovation, really, right? And they're just not incentivized. Really, ultimately, everything comes down to incentives, right? They're just not incentivized to be an open platform and give you access. What are they incentivized by, though, on the other hand?

39:36So if you're Epic, if you're any of these companies, what are you incentivized by? You're incentivized to keep your customers paying you and be happy with you. Some don't even care about that, honestly, but generally happy with you. So then just thinking from first principles, then our job is to make sure that those same practices that pay these vendors

40:01love us, wants to use us, and really gives these incumbents no choice but to either tolerate us or partner with us. So how do you gain that outcome, right? Yeah, you have to get to that point. Exactly, exactly, right? But the way you gain that outcome is this, right? So what are these EH, just from first principles, right? These incumbents like Epic and Cerner or like Dentrix and Eagle Software in the dental space, what do they have that we don't have? They have, you know, like really direct relationships with these practices, right? So like, you know, in terms of like, what do we build? Let's build something that's genuinely useful for these practices.

40:39It either, you know, makes them money or saves them money. Like it has to be, you know, that has to be the incentive for the practice owners as well, right? And as long as, you know, these practice owners value our product, they become, you know, dependent on it in a sense, right? Where they can't even, like it has to be so good that they just can't live without it. And as long as we can really quickly gain enough mutual customers with each and every one of these systems, the incumbents, the electronic health record systems, they'll basically have no choice but to partner with us or support us.

41:10So here's an example. You look at a company like Henry Shine, which is one of the larger, they're like the epic of basically dentistry, let's say. I can go into what that means. I've heard of them before. Yeah, yeah, yeah. So, you know, so as an example, you know, we have something like 10 ,000 mutual practices with them. We don't have a partnership with them or anything like that. We bypass them as well. And we go directly to the practices and the database or if it's cloud based, you know, directly to the browser in itself. Right. So over time, the evolution of our relationship with them has been this, which is initially they really tried to block us because we had maybe 100 customers with them.

41:51And then 2023, they went as far as sending a mass email to their entire customer base and showing an in-product pop-up to half that dental space, by the way, to not use NextHealth. Like a pop-up in their product? And an email. and at that time it was terrifying i was like well i guess some brand awareness but because at that time no one even knew who we were right anyways and then over time you know it's evolved to now neutral to like hey maybe we should partner but anyways yeah so so you know so over it's like over time that that problem for us you know where they were very hostile they were like really just trying to kill us has been solved and the reason it's been solved is because there are 10 000 practices out there that use next health for their scheduling needs for their payment needs for their paperwork needs, for their patient communication needs.

42:41And for Henry Schein, the question is, okay, do we want to turn off 10 ,000 practices that really rely on NextHealth for their day-to-day operations? Are those practices going to be happy? Of course not, right? So the reason we started with our SaaS product first, really, is to gain that incentive alignment one way or another, right? Of course, Henry Schein is not happy about it, But their incentive really is aligned with ours to a degree now where both of us just want to support our customers, right? So it probably makes sense for us to at least talk to each other and maybe partner with each other, right?

43:15So taking the approach of building a SaaS product, making sure it grows as quickly as possible, and then releasing the API product means that our SaaS offering lets us actually protect the API product in a sense. and make sure that no other vendor or developer that builds on top of our API actually gets disrupted by these incumbents.

43:35Turner Novak:So by building the SaaS, you build relationship and trust, and then you build the API on top of that, and that enables what specifically? What it basically enables is that if you're an EHR system, right? Yep. Typically, for a context as an example, and maybe I'll use a plot example. Do you remember, you know, a couple of years ago, there used to be headlines like, oh, you know, Capital One is blocking Plaid, right? Exactly, yeah. Yeah, or like Chase is, yeah. So, like, we have, like, a very, very similar kind of dynamic in our industry where, like, you know, these incumbents, they'll, like, release some, you know, software update that'll basically try to block our access to the EHR system, right?

44:15Turner Novak:Oh, it'll be, like, this guy's just like, oh, it's just an update. Exactly, exactly, exactly. And that used to happen just, like, every three months or so. They don't do that anymore because there are just so many of their customers relying on our software now. Hmm. And so that makes the API better because developers can rely on it. Exactly, exactly. And just, you know, connecting it back to why developers, I mean, or, you know, startups before us didn't succeed with the same product is that they just didn't figure out a way to align the, you know, the electronic health record vendors and their incentives to support an open ecosystem.

44:47Like, we kind of forced our, forced their arms, right, in a sense, right?

44:52Turner Novak:Yeah, yeah. But like, you know, so like if you're, let's say, you know, a platform healthcare, all you are is an API company. And like, if you're Epic, right, you can just be really hostile and like push some update that just like blocks your access completely. And that means, you know, every app that's built on top of your API, right, is also disrupted, right? And you just kind of go out of business versus, you know, with NextHealth, right? They can try to do that. But, you know, we have direct relationships with these practices. is. And of course, you know, we recover really quickly where honestly, like, we've never really had any downtime there either.

45:27But more generally, the bigger we get, though, it rarely happens now because you just don't want to disrupt the whole market if you're Epic, basically. Yeah.

45:36Turner Novak:So, yeah, it's basically like you have to get the trust of the end customer. I think the number that I saw, maybe it's bigger today, there's something like 89 million people that, like, touch the Next Health product. You're up to something like 25 % of the population is like 80 million consumers. Yep. Wow. That's insane. Talk about having a big impact on the world. I mean, hopefully the Nexel product is good, but so many people are using it. It's probably pretty good. And so back when you first were doing the very first customer, very first integration, how did you get around this whole, we can't access this.

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46:54Turner Novak:Start growing your revenue faster with Monaco. Try it now at monaco.com. I want to say, you know, like one of the things that we did, and this will sound, you know, I want to say, like just a general framework for how to find product market fit, putting the integration question aside, but it did, you know, that approach, I think, also helped us solve it, right? In terms of, you know, how to find product market fit, right? So my co-founder and I, you know, we were in New York at that time. That's where we grew up. And we decided that, hey, all we're going to do in terms of finding product market fit is that we're going to only focus on the neighborhood or this specific zip code specifically, which was Soho at that time in New York.

47:36And make sure I actually went into the offices to pitch them our product.

47:41Turner Novak:And this was all dental. Yeah, exactly. And the reason we chose dental specifically just as an FYI is that medical is way more fragmented than dental in terms of a vertical specialty that's large enough that we can just focus on it and have a meaningful business to start as a wedge. So the EHRs were concentrated enough that you didn't have to do that many integrations and you could still make enough revenue fast enough at enough scale to justify it. Exactly. Yeah, like as an example, in dentistry, if you integrate with like five systems, your TAM is probably around 100 ,000 practices versus in medical, if you're not good with five systems, your time is probably like 20 ,000 practices.

48:20It's like that wide, by the way. Anyways, so we chose Dentistry and we thought it'd be a good wedge for us. It's highly, highly competitive on the other hand. Competitive in what way? As in, you know, there's just a ton of vendors in this space for like similar reasons like us focus on Dentistry. Anyways, so we would actually go into the offices, try to sell them. And then we'd be like, okay, use Dentistry. show us your server. So we, at that time, by the way, we figured out, okay, thinking from first principles, it's a, it's a SQL server in your office. Why can't we just like run an agent that, you know, just runs a cron job every, every, you know, 15 minutes, some cycle.

48:56Turner Novak:This is a pre-AI agent, right? Like this is like a, like a recurring task. Yeah, yeah, yeah. This is the old definition of an agent. Yeah, like an on-prem agent. So anyway, so we're like, why can't we just do that basically, right? If, as long as, you know, the practices consent to it. And a lot of practices would consent to it. Generally speaking, yeah. Because they know it's their data. They own the hardware. They pay for it and so on, right? And as long as they trusted us, they would give us access to their server. And we would basically reverse engineer the whole schema in terms of how do we read, write, there's various patient data, run this cron job on that machine locally.

49:35And, you know, like, anyways, So that's honestly the approach we tried. We're just going to go into the office, get access to the server, and without an API or official access for on-prem, the traditional API method doesn't really exist. But more generally, without going through the actual vendor that makes the software, actually just go to the local machine because there's a local machine that stores that data and read and write into that local machine at the doctor's office. And the only reason we even got to that inside honesty is because we would just go in person and talk to a ton of practices and either to convince them to use our software or like learn more.

50:16And one thing led to another and a couple of them let us do it. And that's, you know, how we kind of scale to this point to this day. Yeah.

50:22Turner Novak:That sounds like extremely, it's almost like not scalable. Like they would go to offices. So what would you recommend, like in terms of like knowing that this isn't like a dead end? Like, were there any like, in the process of this, you're like, oh, I think I like, this is like not going super, super well yet, but we should probably keep doing this. Like, were there certain indications you're getting as you're going that like this strategy could work? Yeah, yeah. So to be clear though, in the part, like if you don't have a product to begin with, right, whether you're doing scalable things or not, it doesn't matter.

51:00Like who gives a shit?

51:00Turner Novak:So it's still just like making the product. Yeah, yeah. Yeah, like we're still just figuring, like, remember at that time, we didn't even know, right? Because the partnership approach that we took with these vendors first just didn't work. They don't want to partner with us, basically, right? So it's like, okay, our product doesn't have any value unless we can read and write into, you know, those on-prem local machines. So we don't really even have a product, right? And the approach we took is like, you know, we're just going to canvas the neighborhood, go into these offices, and see if we can run some local agent on that machine that'll let us, you know, run our cloud-based software.

51:33So you can go to nexel.com, still log in. But, you know, the data exchange, though, on the other hand, right, is locally some, you know, cron job running locally at that office that's connected to our AWS or like an hour back. And basically, that's the way to think about it. Anyways, in terms of, you know, like scalability, though. So the reason I say, you know, we would go into the offices and actually, you know, physically, manually configure a bunch of this, right? Right. That's what was needed to gain trust from the offices, like we'd show up in person, right? First and second is that's what was also needed to like go through the discovery process of actually how do we reliably read and write into these systems.

52:14Right. But in terms of scalability, you know, honestly, we always knew we could productize it. Like as an example, right. You download Spotify, right. Like you can download it on your MacBook as an example. Right. Or Notion or like any software on your MacBook. Right. Very, very similarly, you can go to nexthealth.com slash download, and you can download Next Health. If you use a local machine or an on-prem server-based electronic health record system, you can just download it and consent to a few things. And within, I want to say, 10, 15 minutes, you're up and running today.

52:44Turner Novak:And so you're basically mirroring their on-prem server into the cloud. Anytime there's a change to the server, it would eventually get updated to the cloud and maybe got faster. Yeah, I would say that's one way of saying it. I guess I say it that way just because I feel like that's, I've seen that approach with some of these like system of record companies that are like kind of AI native. They'll like, you run your like traditional cloud system of record and you have like your AI one and they, the AI one, maybe you don't have to adopt it right away and it'll just kind of mirror the cloud based one.

53:15Turner Novak:And then like maybe you use the AI one to like do some work and like get some stuff done, but you still have the other one. And like, it's easier to kind of transition the customers over and get them to try it without like getting the full adoption. mirroring, like mirror the system of record, I guess. Yeah, actually, I wouldn't say, yeah, I thought you were saying not literally, but more of an analogy, but actually, no. Oh, so you did not do that. No, we don't do that. No, no, no. So how did you do a back originally? Yeah, so like, here's what I mean, right? Like, if you're, as an example, right, if every company, like every cloud-based software company, right, they have a Postgres database, right?

53:50So what our customers and these practices have in their offices is an equivalent of a Postgres database running locally, right? Okay. And that's where all the patient data exists. And our job is to sync the data back and forth. This is literally like a file that's just saved on a computer. Exactly, exactly right. And then our job is to figure out, okay, what is the schema of that database that's in the office? Because you're a patient, right? You have appointments, you have contact information, you have prescriptions, you have your past appointments, your family, and so on. There's a whole schema that's set up for you in that local database, right?

54:27And if we're going to read that data, but then more importantly write that data, we of course have to insert the correct data in the right tables in that Postgres database, which they don't use Postgres, but I'm just using it as an analogy here. I wish they used Postgres, but anyways, just using it as an analogy here more generally, right? So we have to basically read and write and sync data between, you know, some local server, some office, and Next Health, which is a cloud-based software, right? Without an API from the vendor that makes that local software. And the way we do that is we basically run a piece of software on that machine in itself that connects to, you know, our cloud-based system and just syncs the data back and forth, to put it very simply.

55:16Again, we were young, and we had a lot of time on our hands. We were really passionate about the problem, honestly. It was really interesting to us. These days, honestly, I want to say, well, with Gen.AI, I guess software engineering, you don't have to learn it anymore. But I want to say a couple of years ago, software engineers, more generally, don't even have to deal with this on-prem systems, networking, and so on. So to us, it was interesting from that perspective as well. We're SOC2 compliant. We do our annual HIPAA audits as well, and so on. So all of it is compliant and secure. And in fact, honestly, like a ton of these EHR vendors will have a ton of security incidents.

55:49And like to this day, I don't think we've had. Any that I can think of at least.

55:55Turner Novak:Really? Yeah, yeah, yeah. So we've been able to productize it to that level and encrypt it to that level and bring that level of authentication to security. And more importantly, honestly, I can make it that reliable that we have never corrupted a database to this day. Wow. Yep. So all this stuff you were doing, you raised a little bit of money, right? Just to get started? Do you mean early on? through this whole process of like 7 p.m staying up till 1 oh got it till 1 a.m like did you raise any money to do this were you guys like working other jobs oh man this like how did this all go from there's like a capital stack side yeah honestly at that time um okay so my co-founder he was selling used computers or something on ebay and i still had like my part-time job basically while we're doing all of this.

56:49So yeah, at that time, we didn't have any funding. Were you making any money from customers? No, remember, we didn't even have a product to begin with. So just to maybe know what the product is, right? So the original insight was, okay, we have to build something, build a relationship directly with the end users, meaning the practices that own the hardware and the database and pays these EHR vendors and so on, right? How do you do that? okay, you have to build a product that's revenue generating. So we basically built this scheduling tool. And at that time, an online scheduling tool wasn't new either.

57:26ZocDoc, a bunch of competitors were already dominating the market. However, where we differentiated is that we can actually read your real schedule in the office and the schedule runs off of that on-prem system. We can read your real patient data and then we can actually write back as well. The write back part was the most dominant, the differentiating part at that time. So what it basically meant is this, right? Like, let's say, you know, you're a dermatology office or a dental office, or, you know, you're like a PE roll-up, right? The 10, 20, 15 office even. That means, you know, and like oftentimes, you know, you'll run some paid advertising to attract patients.

58:02You have, you know, Google Maps, you have Yelp, and you have social media, and you have your website, and so on. And the business model of, you know, every practice ultimately comes down to how full is each room and is each available slot for each provider filled up or not?

58:19Turner Novak:Because it's basically like a capacity utilization. Exactly, exactly. You pay rent, you pay the doctor, the nurse, et cetera, and just like, you know, that's fixed. You don't just say like, hey, we're just not going to pay. Like you need to have the rooms full of patients. Exactly, exactly. And then you also have to think about, you know, like, so in the tech world, we don't really think about these things because, you know, software, it's like you can scale, you know, hypothetically infinitely, right? for practice, there's a ceiling to their growth, right? And then after that, you know, it just comes down to, yes, utilization optimization, but then efficiency in terms of how do you optimize it, right?

58:55So anyways, all this to say, so especially in the larger cities, this happens often, which is, you know, they do spend some money on marketing and social media and so on, right? So we basically built a scheduling product where the value prop was, you know, we can read real data, like as in like if there's a slot open, we will know it within 30 seconds. And if there's a patient that wants to book an appointment, we will, you know, collect all the information from the patients. We will then, you know, write it back to the calendar exactly the way one of your staff members would. And that logistics, just as an FYI, in terms of a product build, is like way more complicated than you'd think.

59:31Because, you know, like as an example...

59:33Turner Novak:Well, this was pre-generative AI too, right? Yeah. Probably like the schema of like how data is transferred. Or do you have to get one shot perfected every time? Honestly, even the product design, though, I'll give you an example of what I mean. Let's say you go to a dental office, right? What do you do? You first see a hygienist, right? Yeah. And then you see the dentist, right? So that means as a software, you have to coordinate those times. And what is there? There's really two appointments. Yes. And then oftentimes, it's in two different rooms, right? So then you have to also take into consideration the fact that this provider may already be with another patient in some other room.

1:00:09and by the time the hygienist doesn't finish with you or like finishes with you, that provider may not be available. So like, anyways, it's harder than, this is the write-back part. It's not only the data access, by the way, it's also the logic and like, you know, it's harder than you think basically. Anyways, all this to say, so that part we figured out and that's the part, you know, that we want to market with. And the value problem is, hey, if you're a practice, I know slot utilization is the, like really what you're optimizing for. One, you can convert new patients across the internet. Yep.

1:00:38So just put NextSalt there. As well as, you know, we can reach out to your existing patients. So as an example, if you're a patient and you want to come in sooner for some reason, and you're on a wait list, right? And let's say another patient cancels today at 2 p.m., NextSalt will then just automatically text you, first-come, first-served basis. You have to fill up the wait list. Exactly, right? And that was incredibly popular to the practices. Versus in Azok, as an example, which is the more dominating scheduling tool in our space. I'm not sure if you're familiar with them.

1:01:07Turner Novak:vaguely yeah i know of it it's like a yellow logo right yellow and black exactly exactly exactly yeah they're more like a i want to say like a yelp kind of marketplace right i was gonna say it's kind of like a seo marketplace exactly exactly so the way to think about that product basically the fact that you know we are like another way to think about it is that we augment your staff now at this point right like the patient doesn't have to call they don't have to do anything manually and so on and once we gain adoption it's really hard to rip out as well so it's like if you rip it out, then that means that some staff member now has to spend something like 30 to 45 minutes coordinating those calls from the patient, rescheduling those appointments or filling those slots and so on.

1:01:46Right. So basically, you know, what I'm happening is as practices, you know, started using Next Health, our SaaS product, and they love it. We started growing fast enough that by the time, you know, any of these EHR systems even noticed next health to begin with. There were enough practices that loved us enough, that advocated for us enough, and so on, that, yeah, you know, like these CO2 systems just couldn't shut us off. Interesting.

1:02:15Turner Novak:And people were paying for it at that point, right? Exactly. And did you, I think I saw a number, you raised$391 ,000. Is that the number? That was like the very first amount of capital you raised? Yeah, yeah, yeah, yeah. Around that, yeah. Okay, that is just, that's like an odd number. Like, Oh, yeah. Yeah. Like, was it just, like, scraped together? Like, someone gave us, like, one person gave us, like, 6K. And, like, that's how. Yeah. So, it was, like, it was, man, bringing back memories here. I think I buried that round in my, like, memory. Yeah. It was that hard. I mean, that's always the hardest round to raise.

1:02:51Turner Novak:Yeah, exactly. Well, the first one. People say, like, the IPO is the hardest. And we will say, like, whatever. That's a champagne problem. The IPO is the hardest one, you know? Yeah. Right? Yeah. Yeah. So, you have to think about this. We didn't actually have any connections to Silicon Valley or the Bay Area at all, any VCs. My co-father and I, we grew up with immigrant parents as well. So really, honestly, we don't really have any connections to money to begin with. So the way that we raised that initial capital is two sources. One, it was actually a couple of our professors at school. Yeah. And then a couple of our customers on top.

1:03:31And that's how we scraped together 390. You know, we still have two of those customers on our cap table. Still using us, love us. Yeah, so that's honestly, it was our customers. And then basically people we knew in a sense, like professors, a couple of friends and so on. That's how we scraped together 390.

1:03:45Turner Novak:Wow. And then a year later, though, we ran out of cash. So it was terrible from that. Yep. Why you, like, how did you run out of cash? Yeah. So when we raised that capital, right, we raised it off of, you know, basically think about it this way. Customers, early customers, maybe like the first like 10 to 20, a few of them loving our product to begin with and seeing potential in us. And the second part was, of course, you know, people we knew, like professors and so on, also seeing potential in us. But we don't really have like anything that could, any amount of revenue, I want to say, that can actually sustain a business to begin with.

1:04:20So if you take like 20 customers, that's probably a couple thousand of MRR a month for us.

1:04:26Turner Novak:So you were still burning money. Yeah, exactly. Exactly. And it was me and my co-founder. We hired two or so engineers and so on. And we talked about earlier what it took for us to figure out how to read and write to these on-prem systems, right? And you were surprised yourself. How do you even scale that? Great question, right? So you were figuring it out with the$390 ,000. Yes. Yes. Yes. And it took us a year plus to get to some level of stability with it. Okay. Where even if we would sign customers, they would actually end up churning, basically. Really? Yeah. Man, that sucks. Yeah, yeah, yeah.

1:05:04So why did they sign up and then churn? So they would sign up because of the potential of what it could do. It's something new to them, right? It was early adopters still. So they would give us a try for a couple of months. And then eventually it's like, you know, if it doesn't work, it doesn't work, right? like it's not stable enough because the thing about our value prop by the way is that if you're going to have your ads running let's say right and you're spending money on it online

1:05:28Turner Novak:and Next Health is the CTA for it where as a patient you know you're advertising hey we do Invisalign and you click on it you fill in your information right it has to be reliable like meaning you know if the value prop is that your staff doesn't have to monitor that channel and it just like writes back to the on-prem system it has to do that otherwise you're losing money as a practice and patience right because you just you're not generating any revenue from those ads. In fact, you're probably causing them to lose money because like, as in like when I say, the stability of the integration, right?

1:05:58If you're a patient, you know, you click on some Facebook ad, you fill out a form on NextHealth and you pick, you know, you can see the real-time availabilities from that practice. You pick a time tomorrow at 2 p.m. as an example. You fill in your information. We take that information and then we have to, you know, sync it back to their on-prem system, right? Oftentimes, syncing it back, meaning like writing it back, just wouldn't work for one reason or another. And that, you know, patient and their information would just not go through. So the patient would oftentimes show up and be like, what are you talking about?

1:06:27We don't have your appointment. Yeah, it was like that sort of problems. Wow.

1:06:31Turner Novak:Yeah, yeah, yeah. So like, we need to get rid of this, like, this thing's like causing chaos in the office. Exactly, exactly, exactly. Anyways, all I should say, like the real problem, the honesty, was that we were basically not focused on making any one system and the integration we have with it work first. We were trying to make five of them work at the same time. So after nine months of trying, we realized, you know what? We just have to focus on one system and make that great. And then just as we started making that great, customers would stay with us, sign with us. They were happy. They were referring customers.

1:07:04We ran out of money, basically. So it came at the nick of time. Yeah. So we've honestly, we've always had product market fit because, again, our mission statement is accelerating innovation in healthcare, which means by default there aren't a ton of competitors to begin with. So as long as we can make the data integration work, we knew that it sounds so basic. Honestly, whenever I talk to people in tech, they're like, okay, what's the big deal? But it sounds so basic, but for our space, it doesn't even exist today. It's all manual today. So anyways, we knew that as long as we could make that work, any product we build on top would be valuable to customers.

1:07:38And as soon as that clicked for that one system, we started growing really quickly. But then, you know, like a year in, cash balance was basically$4 ,000.

1:07:50Turner Novak:Like you were going to die in like a week or two. Yeah, well, at the end of the month. It was like that sort of a situation. So how did that month go? Yeah, that was honestly, I want to say, like thinking back, it was probably, sometimes people will ask me like, hey, what is the closest NexHeld came to death? Throughout our history, I would say like that was the only one where it truly was a consideration for me. and my co-founder of like, hey, we're still young. Maybe, you know, we just got a job, basically. You had a bunch of credit card debt too, right? Yeah, exactly. I think I read on the website you had essentially maxed out your Amex card.

1:08:29Turner Novak:Your credit score was 500-something. Yeah, 530-something. And you got like a court order from Amex or something. Basically, like, you must pay this bill. Yes. So you really had like negative money. You had 4 ,000 in the bank, but you had like way more credit card yeah basically what was happening honestly like that 4 ,000 stated the bank because we had to like pay AWS and so on right so it was just enough to like you know pay the bills but then everything else though I would be like alright let me just max out this credit card at that time honestly like the risk that was for me personally I didn't really think about it I think from like maybe just a personal belief everything would be fine ultimately right and of course it worked out for us right to this day by the way still kind of impacts my credit score does it really?

1:09:10okay

1:09:10Turner Novak:yeah fucking Amex don't want to go to Amex use Flex have you tried Flex? no haven't heard of it actually they're going to sponsor this episode people listening will have heard it early on probably similar customer to Amex where you're just like a high net worth business owner gives you a credit card for your business and then also they're launching credit card on the personal side too Flex kind of operates in that space anyways it's awesome you should try it yeah I'll check it out for sure they'll give you better I hear you'll approve anything for me, huh? Zayn's listening to this. Don't sign me up for that.

1:09:49Turner Novak:Okay, so, but I think you guys essentially landed a customer that like... Yeah, so basically the reason I had to max out my credit card is at that point, we had two engineers. And I hired this kid out of college as an SDR as well. And anyway, so we couldn't pay them. Of course, we couldn't pay ourselves. And out of those two engineers, one of them left completely. and the other two now, that engineer, by the way, still with us, just as an FYI, was okay to delay their payroll for a couple of weeks. Ended up being three months though. And then everything else was just through my personal credit card.

1:10:24Anyways, all this to say, throughout that whole period, two things were happening. One is my co-founder and I were genuinely having conversations of like, man, this is really hard. Because first of all, you have to think about it from our point of view, right? We first tried the partnership route. spent like a year on that, right? That didn't work. And that, you know, we tried, of course, you know, just go to the database directly. And at that time I was like, okay, is that even going to work? Because it took us a year just to get, a year to like turn through customers and figure it out, right?

1:10:54This is hard, right? So like, maybe we should go back to school. And I remember very, like, this is frankly, like I would say like one of my biggest kind of like life lessons as well, which is at that time, you know, I don't know why, but I've always been, I want to say, it's kind of cliche, but more of like a first principle thinker organically. So at that time, I was just asking myself, okay, why do companies or, you know, like ventures fail in general, right? Like, what is the definition of that failure? Like, what point does, you know, can you say it failed, it did not fail? Is it, you know, when you run out of money?

1:11:25Is it, you know, when you don't have a product? Or, you know, like, how do you define that, right? And like, at that time, I realized, actually, it's a bunch of people just admitting that they failed and or just, you know. Like, giving up. giving up basically and i was like well as long as you just don't have to give up if you don't want to yeah i was like okay we don't we don't have to give up okay that's that simple anyways it wasn't that simple of course at that time but like so i was like okay like if that's the definition right and at that same time you know um this customer is still with us by the way they're massive now uh but at that time there were only 12 locations in detroit i was working on a deal myself personally directly and i was you know negotiating with their ceo um and this was i I think, like January of like 2017, I'm sorry, 2018 or so, right?

1:12:14Around February, actually. He's like, okay, you know, we love the product. You know, how much is it? I hear, you know, there's no contract. That's kind of what I pitched him on. Like it's month to month. He can cancel any time and so on. I was like, yeah, you know, it's a new year. We changed our policy. You have to pay upfront now. And, you know, I'm not going to name the CEO, but he knows all of this at this point as well. Anyways, and honestly, I'm grateful to that customer and that CEO. At the same time, I think they saw the value enough. They were like, okay, sure, we'll pay you$36 ,000 up front, basically.

1:12:48And that kept the company afloat long enough that Adam Lin, who's one of our actual first VC check in the Bay Area, gave us enough capital that, you know, we were able to sustain ourselves, find product market fit, and so on. Yeah.

1:13:07Turner Novak:That CEO is probably, like, solely responsible for accelerating innovation in the healthcare industry. A hundred percent. Yeah. Yeah. I know he recently came to our cab, our, like, customer advisory board. And I was like, did you know XYZ? So he's like, I did not know that. And so you, I think you famously, like, didn't really tell your investors this plan, how you were basically going to go SaaS, like software to the API, to building like this whole platform around it. Like, why didn't you, or did you try? Yeah, so I remember, you know, like in the very beginning, that friends and family round we raised, right?

1:13:49During that raise, as I would like share our grander plans, right? basically no one would take us seriously, honestly. Because for them, you know, I understand from their point of view, right? First of all, you're just two kids, no experience. And it's healthcare where nothing succeeds really. Distribution is hard. And you're telling me that...

1:14:09Turner Novak:You have like no customers yet. Yeah. And like really a product that doesn't work either, right? So I don't blame them, right? But also like, you know, honestly, like at that time thinking back, like if you just look at our strategy, it's kind of incredible that it works today. but theoretically, if you think about it, I can see why you would think that's not going to work. We're going to build a SaaS product. And we're going to build a SaaS product to get the customers on our side so that ultimately we can release this infrastructure product that anyone can use to innovate on top of. And then we're going to take both audiences and turn it into a full-sided platform.

1:14:47That's like two businesses in one company, first of all. Second is just two different audiences as well. and third is like a lot of things have to go right in just the right sequence for you to even be successful as a company and it'll take a long time as well. So like if you're, you know, a traditional VC or an investor I can see that's like extremely small chance that that would work, right? And I probably wasn't explaining it the right way. Anyways, all this to say basically what I decided on the next time, you know, we raised properly, which was, you know, 2018, I think hey, we're just going to build a great fucking SaaS business first software for dentists.

1:15:24Exactly, exactly. And like, make sure it grows fast enough. Customers love us. The retention is high enough. It's efficient, etc. That that in itself gives us enough credibility to then tell the bigger story. And that ended up working, basically. Interesting. Yeah.

1:15:38Turner Novak:And so this is 2018. I think you raised like a couple million dollars. Yeah. And how did those next two years go before COVID? The next two years for us, I would say, so 2018, you know, we raised a couple million and that was purely off of, I think, like, you know, 100 or so customers, really highly differentiated product. Customers are, like, honestly just, like, obsessed with our product, I would say. It's a big, big, I mean, that's got to feel really good going from, like, everyone churning the year before. Exactly, exactly. And that's, you know, what, you know, I want to say, like, Christophe at.9 to Adam Lin saw early on about Nexel.

1:16:13At a minimum, you know, this is a product that customers love, right? And they knew about the Grander Vision as well. But I think, you know, at a minimum, the downside is we're a great SaaS business, right? And then from there on, you know, I think our goal is like really twofold, right? One is, remember, as of now, we only support one integration, which at the time is too small, right? So write more integrations to begin with.

1:16:32Turner Novak:Oh, so you really still just had one single integration. So did you have to like find dentists that had that EHR? Yeah. So what we basically do this, we do this just FYI, which is like we basically go to market and we say, hey, we're in Axel, we have this product. And remember, this only works if your product is actually differentiated, right? Meaning, you know, you go to a practice, you don't actually support their practice management or electronic health record system yet. But you say, hey, we have this phenomenal product. And if you become a development partner, what we call a deaf partner for us, we'll give you a certain amount of months for free and like some incentives.

1:17:10But ultimately you'll have this great product and you'll get to like partner with us in building this integration and so on. And that's how we've done all of our integrations.

1:17:18Turner Novak:Interesting. So you basically say like, we will give you accesses for free for a while. Honestly, like three months, I would say generally. Yeah. Okay. Yeah. And that's how you built the new integrations. Yep. How many are you at today? Like how many integrations does Nextself have? Like across just like everything. Yeah. I mean, if you consider everything, I think 21-ish or so. 21 different EHRs? Okay. Yeah. If you go publicly, I would say like, you know, in terms of what developers can actually use. It's 15 or so, and there's a bunch of other ones that... Anyways, so there's different tiers we have that are public, that are non-public.

1:17:54But yeah, in total, 21.

1:17:57Turner Novak:And then what's the business? How many different business lines do you have? Different products? You have something called Synchronizers, kind of like an API platform. Yeah, so actually, on the 21 side, earlier I mentioned that we have to have 100 or so to get mass coverage, right? Here's actually the fascinating part that I discovered over time, myself, personally, is that, one, the market is massive to begin with. Like, just dentistry in yourself, right? So Henry Schein, that company that I mentioned earlier, they're a dental, you know, they're mostly a dental-oriented company. Like, that's the vertical that they focus on.

1:18:34They do$10 billion a year. So you can build that size of a business just, like, within dentistry, basically. So, you know, like, the earlier lesson on focus, as well, right? So anyways, we do have a culture of just genuine focus and not overextending ourselves, I think, as a result of that early, early experience. So anyways, yeah, so today we have customers across 19 different specialties as we speak. 21 integration, so you can think of dermatology systems to primary care, to dental and so on across the board. We just support a wide set of specialties just outside of dentistry today. And as we speak today I know we have three lines of businesses.

1:19:16The first one was, of course, the SaaS product that we built, right? We charge just a monthly fee to practices. And around late 24, as I started to see signals in the market that, hey, the EHR, like the electronic health record vendors, right? Like we've de-risked that part of our, you know, the existential risk to the company significantly enough that it's time to, you know, open up our API or our technology to like basically third-party developers. Like anybody can now go on our website, click on sign up, and actually start building healthcare-integrated products that then reads and writes to like 15 different systems, giving you a TAM of, I think, like, you know, 400 ,000 to 500 ,000 practices.

1:19:56So, you know, we're very targeted there as well. And that product, you know, within 18 months, in terms of like pure number of practices that it supports, has gone to the same scale as the SaaS product that I think, you know, took us. So for the SaaS product, it took us five years to get there. for the API product. It took us 18 months to get there. And today, just on a pure scale basis, the API product is larger than the SaaS business. And then, you know, late 25, we released a payments product for practices specifically. To accept payments from customers. Exactly, exactly. So what it basically means is, have you ever gotten like the statements in the mail from your doctor's office?

1:20:34Turner Novak:Yeah, like lose them and hate them. Yeah. Actually, what I get most often is I'll get like the collections bill. And I'll just be like, I didn't even see the bill. I didn't even know like I would have paid it. I didn't even know I owed you money. Like, why are you sending me bills in the mail? Like, I'm not, I'm a millennial. I can read that. Just like shoot me an email or a text and I'll pay it. Yeah. I mean, honestly, like the world of healthcare practice is so insane. Like that we can talk about this all day. But yeah. So today, like here's how, here's how it works. Like a payment collection at an office.

1:21:06so the dominant sort of you know players in our space when it comes to payment terminals and payment processing it is your typical one so again it's square and like a bunch of other ones right um and like here's like an anecdotal example to exemplify how big the problem is we have this customer you know a couple of minutes from here so this is like a year ago um they were one of the early adopters of the payments product they use square i went in and just like you know talk to the end users i was like okay uh how do you like it and they love the product right why do you love it so much like what he used to do right and so this is what they showed me and i and by the way whenever i go to our customers i also just actually have a real visit so i got a real cleaning too and to pay like 50 right so she's like you know what i'll pull up our old system and like process the money through that old you know square basically and show you what we have to do so i had this appointment at 1 p.m she you know she reactivated the square terminal and she swiped it she's like okay so you paid this 50 right and you know at that so i had this appointment at 1 p.m and I think now it was like 145-ish or so.

1:22:05She's like, okay, so at the end of the day, what I'm going to have to do is take the receipt and see that it's$50 around 145 and make a guess that, hey, Al's appointment was at 1 p.m. So this$50 payment must be from Al and then manually type it into the electronic health record system. Oh, because it's not synced. Exactly. But like not even not just synced, but it's like they have to guess who paid that bill. So why did you get your bill in the mail? or like why did you just get a collection right it's because often they don't even know

1:22:36Turner Novak:wow so you so you can't just pay so even when you do pay right at the point of sale with a square it's not connected to the ehr so like there's are there mistakes then where like your your bill doesn't even get like paid properly yeah a ton so you know like um at any given time and our average like practice smb practice right they'll carry like 45 000 every month in in ar and then at the end of the year, I think they write off like a few hundred thousand to bad debt. Yeah. And by the way, here's the intricacies of the whole system though. So that payment, that cash payment I just made, along with everything else, right?

1:23:13The reason it has to be typed back, all the data has to be actually written back to that electronic health record system, is that that electronic health record system has a component that connects basically, to simplify it, connects back to like APNA and whatever pair they use, right?

1:23:29Turner Novak:All the insurance information. Yeah. And that practice has to submit a claim to get reimbursed on, you know, the rest of the, you know, the visit amount, whatever you owe, like 500, you paid 50. So, you know, now the insurance carrier maybe has to pay, you know, reimburse that practice for 50, right? So all the data has to be perfect for you to even get the reimbursement. Any error, I mean, of course, you know, like if you're an insurance carrier, like you are kind of incentivized to actually not approve a lot of these, right? Or you heckle down too, right? Exactly. So the pain and the level of inefficiency for these practices is that high.

1:24:02So what these practices will do today, though, is twofold. One is, there's a concept in our space called admin day. What's it called? Admin day, like administrative day, basically. So this is the typical thing, which is like every Friday, they will either not be open at all, or they'll close the office at 12 p.m. So what do they do the rest of the day? They do administrative work, meaning they'll, you know, type data into their electronic health record system, or they will, you know, send out the statements to the patients through the mail and so on. And oftentimes, you know, they'll have some sort of like an external agency that owns a lot of this for them, where they spend apparently a ton of like paper and postage.

1:24:44Anyways, just, yeah, yeah, yeah. And this is the power of, you know, I want to say the synchronizer API, right, that we have. the core infrastructure that we built that sits on top of, you know, all of these electronic health worker systems reading and writing data, right? Which is that honestly, like, whatever product you build on top of it, if you're either an XHealth or an external, you know, founding team, right? Whatever product you build on it, you gain instant 10x differentiation by the sheer fact that you can remove hours and hours of manual work, errors, compliance risk, and so on from a practices workflow, as well as, you know, lost revenue as well, right?

1:25:24with NextHealth, you know, like, so this customer that we have, you know, a couple of minutes from here, on the other hand, you know, with the NextHealth payment terminal, I'm a patient. I come in at 1 p.m., 1.45, you know, I have to walk out of the office, right? NextHealth knows that, like, that you have to walk out at 1.45, right? And all the practice has to do is click once, like, hey, I want to collect this balance, and we will auto-calculate everything. There's, like, a whole calculation process for how much you owe your co-pay as well, just FYI, that they have to do manually, right? So we'll auto-calculate all of it.

1:25:55And, you know, in near, like, instant real-time, we'll then show you the balance on the terminal without any other, like, manual work. And we know it's you and so on. You swipe it, and then we basically type all of the information back to what's called a ledger back in the EHR system. And then we zero it out as well. So, like, there's a whole, like, accounting concept that plays into this as well. So the practice is, you know, like, they're, what used to take, I want to say, like, you know, maybe hours and hours, like a half day, right? Now is a couple of clicks, literally just like a couple of seconds.

1:26:25Interesting. Yeah.

1:26:26Turner Novak:So you said the software product took about five years to get to the scale that it took the API 18 months to get to. How's payments been going? It's, I don't want to share exact numbers here, but in the last 12 months, it grew 308%. Okay. It's grown even faster than the API product. Yep. Yep. Honestly, I can talk about this product all day. Like one of my personal joyous products. In a sense, like the value prop that we offer to these practices is so massive that generally, you know, if customers hear about it, they don't first believe it. Really? Yeah. They're like, how do you even do that? So what is like the average doctor's office look like that hasn't heard about NextHealth yet and thinks, oh, that just sounds fake?

1:27:20Turner Novak:Like, what is their like technology stack kind of look like? Yeah. So I would say like, you know, there's like two types of, after COVID, and like we talked about earlier, and especially last couple of years, the ICP profile has really, really changed, right? And I think that's also honestly like what's leading to some of the faster growth we're seeing, right? But still, you have to realize that, you know, like these doctor's offices, they're so busy and they do genuinely get bamboozled by salespeople all the time in our space. So there's just like a bit of cynicism as well. However, I know we have a great brand in the space and customers in the market generally trust us, right?

1:27:53At the same time, though, they'll be skeptical in a sense of like, hey, I pay an entire agency. I have half an administrative day just to like do this work. So how are you guys, you know, turning all of that into a couple of seconds, basically? Like that's the skepticism. But once we showed to them our win rate there, just as a pure sales map, last I checked, it was like 72%, which is wild. No one has 72 % win rate on any product. Honestly, when I saw it, I'm like, is this like data entry? Is it like a Salesforce hygiene problem?

1:28:24Turner Novak:It's not. Yeah, it's not. It's not. It's wild. You mentioned COVID again. So what happened inside the company when COVID hit? Oof. Because you guys had only raised, I mean, you only raised a couple of million bucks. And it had been a couple of years since you did it. Yeah. So when COVID hit, so actually, I think here's the kind of maybe chain of events, right? So we raised that, you know, a couple of million back in 2019 or so. And then a year or so later, basically, like 18 months within 18 months, COVID hit. Right before that, though, we had a term sheet signed for our Series A, like right as COVID hit.

1:29:00This is like... And it wasn't public. It wasn't closed yet. It wasn't closed yet either. So this is how like in a kind of intense that period was.

1:29:07Turner Novak:Yeah. So like when did you sign the term sheet? Yeah, so we literally signed the term sheet, I think end of February 2020. And if you recall, like it was, I believe like first week of March where everything was shutting down, right? Yeah. End of February, people were like making fun of the sign on A16Z's door saying no handshakes. And then by the end of the first week of March, people were like, the world is legitimately ending. Yep. Yep. Exactly. Anyways, hopefully Josh is working with me sharing this. It was Josh Buckley, actually, on that term sheet, right? COVID hits and so on. And 100 % of our customers at that point are dental offices.

1:29:46And you can't really go into people's mouth, right?

1:29:49Turner Novak:You're literally just sitting there breathing on them. And they're breathing on you. Yeah, so they were all closed for the month. And they were not paying any vendors nor taking any demos. They weren't signing up with any vendors. Nothing was happening. and on top of that, you know, we couldn't collect from our existing customers, no new growth, nothing was happening, basically. Josh, you know, he's really high integrity. Like, we signed a term sheet. So, you know, we still follow through on it. But honestly, like, from my point of view, I was like, we're probably going to die because our market just disappeared overnight, basically.

1:30:21Turner Novak:Yeah. Yeah. So, you also acquired a company that summer, right? Yeah, so here's actually kind of how we recovered from their period. It's this, which is two things started to happen, basically, instantaneously. One is this concept of teledentistry, basically, started to come up at that time, by the end of the month. How did you do that? So, okay, so it kind of disappeared after COVID completely. Yeah. But even myself, I was kind of like, why would you do that? But if you're a patient, right, let's say, and you have an existing treatment going on, you still have to talk to your dentist one way or another every couple of weeks.

1:31:04So for those sorts of cases, either you could come in or you can do it virtually. It's like new regulation passed. So what we basically decided to do is this. We started to give away our product for free to anyone that would sign up. And along with it, we attached this video conferencing tool to it, right? and honestly like given it was free versus our competitors um i think most of them were charging

1:31:24Turner Novak:more because it was like oh for the telehealth no just like in general for their software because increase their prices yeah because like you know there was was like well you know like none of our customers are paying anyways i don't know what their excuse was uh but it was basically like within a couple weeks every practice realized oh shit we need to digitize really really quickly here if we're going to stay in business and continue to maintain our relationship with our existing patients, right? So we went ahead the extreme other direction. We're going to give it away for free. And we did that for like through the five months, I think.

1:31:56With the terms and conditions of like, hey, you know, in like six months, we'll charge you again. And honestly, that shot up our growth significantly because of it and gained us a lot of trust and so on. We didn't collect cash from existing customers for like six months and so on. So yeah, like that shot up our growth. And then to your point there, yes, by the end of the year, we did acquire a startup.

1:32:16Turner Novak:Which was? I think I think it was like a pretty significant like product expansion for you guys. Yeah. So here's kind of maybe. Because like you don't see very many like series A companies acquire, like make a significant acquisition, like as a, as a percentage of the business. We spent half the series A on it. Really? Yeah. It was. Yeah. I mean, honestly, like in hindsight, it was kind of crazy that we did it. Like, you know, we took a lot of like strong gutsy bets at that time. Yeah. And it most, and all, nearly all of it worked out. And I think we wouldn't be here otherwise. So at that time, you know, like our product was just like one product, like one, you know, like it was scheduling still and some patient communication.

1:32:54So if you're, you know, a dental office, right? And it's, you're like five months into COVID. You can, I can maybe start to see some patients for emergencies and so on. Right. Filling out paperwork through hand became a no-no as well. Cause you know, it's COVID, right? Like, you know, you're a patient, you would come in like handling paper in general. That was a no-no. So, you know, customers needed digital paperwork. And there were a couple of vendors out there that did it. And a couple of our competitors already had it. Like, that's where they differentiated even before us, right? So anyways, all of this to say, that was a real gap that we had.

1:33:30So we could have taken the time to build it ourselves or partner with someone. And that was the approach we took. And then the product was good enough. The team was good enough. It was a small team, like five or six people that, yeah, we just made a move and, you know, I decided to acquire them and make it native to our product, basically. Interesting.

1:33:45Turner Novak:And then you end up raising a Series B and a Series C over the next, like, year-ish, I think. I mean, the company was going pretty fast, right? So are you, like, going back, I mean, it's 2026. We're halfway through 2026. Was that a good idea, looking back, like, to be raising that much money? Yeah. Yeah, I mean, here's the fascinating part about Next Health, though, I would say, which is this. every time we raised capital, we didn't need it specifically. Because, you know, remember, like we ran out of cash, right, at a certain point. So we had to run cash flow positive by default. And then we raised some capital, right?

1:34:22But that lean efficiency, at least, you know, from my, like, culturally speaking, never went away. So we were like roughly break even, you know, for a couple, you know, up until, I want to say like really 2023, right? But in between that, we raised a total of 176 million. So the question is why, right? And at that time, you know, like there was massive bubble going on at the same time and happening as well. Right. However, at that time, I didn't have a ton of VC connections to begin with. I was just like we were like going from one fire to another fire every six months. First, you know, running out of money and that COVID happens and so on.

1:34:56Right. So I didn't really have time for it. All of this to say. So around like mid 2020, 2020, what started to happen actually is that we started to experience our very first couple of, electronic health record systems started to try to block our connection with updates. And that made me really panicked in the sense that, so, you know, we ended 2020 with about a thousand customers. And I was like, holy shit, if, you know, we're only a thousand customers and, you know, Henry Schein and like some of these vendors, they own a massive part of the market. And if they block us, and we're just going to die.

1:35:33So how do we solve it, right? And what I realized, like the only way to solve this problem is that we have to grow as fast as possible. Meaning like, you know, the earlier concept of like, we have to have a lot of mutual customers with them, right? And then we have to do it so fast that a lot of these companies are, you know, like really large political. By the time they get, you know, their kind of reaction together,

1:35:53Turner Novak:like we got a lot of meetings and meetings about them. Yeah, exactly, exactly. We kind of snuck up on them. So that was the goal, by the way. So we went from a thousand customers to 10 ,000 by 2023. And the reason we raised was literally just to solve an existential problem with an amazing product and value prop and so on. So we knew it would grow. But for me personally, it was like, if we don't grow, we're going to die. Like it wasn't even like, oh, you got to grow. You know, you're a startup. It was literally like, if you're going to grow fast enough, there are like, you know, five different companies trying to kill you at all times.

1:36:22Turner Novak:I mean, it's not even like it's that much capital. You're right. By today's standard, yes. Especially today. Yeah, yeah. No, you're right. You're right. I mean, that'd be like a, you could have raised that. Like, hey, we're at AI healthcare and you raised a hundred million bucks. Honestly, yeah. If I just change our domain to like.ai, I bet some random VC will throw like half a billion dollar at us. Their AI sourcing tool will like surface it to investment, make many, you know. AI is honestly kind of so fascinating because how do you even differentiate at this point if you're a company, if you're any sort of like a B2B or even consumer, really?

1:36:54Turner Novak:That's a good question. I mean, I feel like a lot of the way people answer that question is go into the physical world. Like that seems to be the solution to that. It's like... So like is the software category dead? that Claude and OpenAI are the only software companies remaining. But then at the same time, could I just say, pay Claude, go to nexthealth.com, copy it, come back in a day, make no mistakes, go. Could I do that? You could do that, yeah. Oh, I could do that. Yeah. Well, it depends. It depends which part. But you could. So here's the thing, right? Here's actually a really fascinating part about NextHealth.

1:37:30And more recently, I was having this conversation with this investor. They're not on our cap table. And we're just joking around like, man, if you were founded before 2022, you're probably pretty screwed right now, right?

1:37:41Turner Novak:Yeah. Except honestly, I would say like the fact that NextHealth was founded before 2022 is one of the biggest like just happenstance kind of strategic advantages we have today. Really? Yeah, because like we had enough time to go through all of the pain of like figuring out these integrations, right? To build an infrastructure where now because of AI, and I shared earlier, within 18 months, the API product grew so quickly from 2024. The reason it grew so quickly, just FYI, is really because of AI. And the reason it's because of AI is that if you're building any sort of an AI agent in our space today, the whole reason that you're building AI agents is because you want to complete tasks.

1:38:24Ultimately, that's the value prop. You really can't complete tasks unless you can read and write data into those electronic health record systems, be it cloud-based or on-prem. And NextHealth is your only option today because, really, honestly, I don't think, at least not that I know of, like a direct competitor in our specific space from SMB, dental, dermatology, and so on, that has the number of integrations we have, the depth of data that we have, the reliability, and so on. And the fact that he can go and sign up and he can start building for free in itself was a huge unlock for us. And I have also never seen the rate of startups being created in our space.

1:39:04Really? It is phenomenal. I've never seen that before, ever, honestly.

1:39:08Turner Novak:So what are some of the most interesting startups doing in healthcare right now that you're seeing? Yeah, so I would say the majority of the startups that are building with us first, just to be very clear, one way or another has to do with AI these days. Of course, you're building AI products, right? The really, really fascinating part, though, is that on the SaaS side, we have direct competitors that are much bigger than us. So they compete with us for scheduling, patient communication, and so on. Even they have very large deals with us to use our API to build AI agents and AI products for various workflows out there.

1:39:45But anyways, just to answer your question, though, what are the more interesting use cases? More and more, I think what's happening in our space is this, which is there's a famous chart. I don't know if you've ever seen it. We know the administrative growth versus physician growth. Yeah. So there's a massive amount of founders and engineers that are literally all hacking away at that problem.

1:40:09Turner Novak:And this problem is that there's like the pace of jobs in administration is going like five times faster than the number of people that are delivering care. Yeah, yeah. Basically, I think it's like the ratio is something like 50 to 1, meaning like for, you know, I could be wrong there. But it's that big of a gap. For every doctor, like person administering care, there's an increasingly larger number of administrators around it. Yep. And these administrators are, you know, by the way, like for the example I gave earlier of, you know, someone, it's like two people's job just to like do the billing stuff.

1:40:45Someone has to pick up the phone. someone has to then negotiate with the insurance carriers or so on. A ton of this work goes into just supporting an office, right? Anyways, so the more interesting ones that I want to say it's not that the technology is fancy or anything but products are being built that you couldn't build before because of Excel's API but because of AI to overall solve the gap and the overall staffing gap that these practices have so about 45 % of practices in the country at any given time, just FYI, is missing one critical staff member that they need.

1:41:20Turner Novak:Really? Why don't they just hire someone? Labor shortage. Just pay more money. Do they not have more money to pay? Yeah, I mean, you also have to be trained and so on, right? And I think, like, you know, the latest data is, in terms of, like, graduates, it's increased by, like, 20 % over the last five years or so, but that's also not enough because one where... Probably attrition. What was that? Like attrition, people retiring or... Yeah, so usually, like, you know, if you're, for SMB practices, right, like, the profile that's usually working there, they're usually being paid hourly, they do consider it, like, you know, a temporary, maybe, like, in a short term, like, two-year job.

1:41:57And then they'll move on to something else. And so the attrition rate is pretty high as well, so you have to constantly replace it. So it's a genuine problem for these, you know, practices and these doctors. And at the same time, you know, they can't function without them. So, like, that's the gap that's being filled today throughout our platform, and I think that's really, really interesting.

1:42:13Turner Novak:So where do you think a lot of the value is going to accrue in AI healthcare specifically? I mean, that's probably where you spent the most time. Like, where do you think are the most valuable places to be building things? Like, where do you think most of the value is going to accrue? I can guess, I would say. And like, of course, I have a thesis and there's a strategy we're chasing here at NextHealth as well, right? What are you allowed to share about that? Yeah, yeah. Happy to maybe share, right?

1:42:40So overall, you know, like in terms of sequencing, right? I think, you know, let's maybe consider like the hype cycle, generally speaking, right? It's like we're in an AI hype cycle.

1:42:48Turner Novak:Yeah, yeah, exactly. And like the different parts of the stack that's, you know, in the hype cycle, right? So first, it was the chip makers, NVIDIA, right? Oh, yeah. In the very, very beginning, right? And then, you know, it's OpenAI and Claude, right? Like the companies that do the R &D, the research to build the actual LLMs, right? And then I think the third wave that hasn't truly come yet, but I think more and more of the ecosystem is realizing, is that the third wave will be the companies and the infrastructure that takes the LLMs and then enables it to actually action stuff in the real world.

1:43:24When you say physical, what I truly mean is the layer that sits in between the physical world and the software world, where these LLMs can then actually go into the physical world and actually action that data. So very basic example that I gave earlier as well, right? If you're a practice today, you can buy a product out there or like, you know, maybe you build it yourself, right? That uses OpenAI API to build you some, you know, like website chat bot product, like kind of like Intercom. Think about that. There's a bunch of those as well, right?

1:43:56Turner Novak:This is in healthcare specifically for a practitioner with the patients. Exactly, exactly. And like you can go on the website as a patient and you can chat with it about your condition and so on. and it'll like recommend you like the right provider in the slot, let's say, in that office to book with, right? That chatbot or that LLM, right, needs to connect to the physical world, meaning what room is available, what day at that office in real time, because, you know, this patient is actually talking to that chatbot in real time as well, to then surface to you, hey, here's what's available, and then take your information and then write it back as well.

1:44:31because otherwise, you know, that patient will show up and it will not be on their calendar, right? So anyways, I want to say like, you know, so in terms of like if you just track the hype cycle, chip makers, the companies, you know, that actually build the LLMs and it's the infrastructure layer that sits between the LLMs and then the real physical world. And of course, you know, NextSelf very squarely sits in that stack, right? And as a result of the, I want to say, a couple of like faceted things are happening within just like our platform here. One is nearly every AI startup, and I recently went to this conference where I think like nine out of 11 of the vendors there that are showcasing and their AI native are built on our API.

1:45:10Turner Novak:Really? Yeah. And then, you know, we have direct SaaS competitors that are building with our API. And every, like almost nearly like every SaaS product out there is kind of getting destroyed by AI native products, right? Really? Yeah. I mean, like in general, by the way, like this is not like about Next Health specifically, but I just mean in general, right? If you're a workflow SaaS product, I don't know, like you're a communication tool for lawyers or something, AI is really eating your lunch today if you don't evolve quickly enough. The really, really fascinating part is when it comes to NextSell SaaS product, we're actually not facing that pressure at all.

1:45:44And the reason is this, right? So AI doesn't happen in our space today. And this is really not just an exaggeration, but really, I truly mean in the sense that we really do own the infrastructure layer today, right, for it. So AI doesn't happen without an Excel. So all of these companies, if they want to build AI agents, they have to build on our infrastructure. And they know that, you know, we own these, like, specific SaaS workflows, right? So they just don't go after it to begin with. Oh, interesting. Yeah, because, you know, we claim that, right? It would be like, you're building with OpenAI, but you want to build a chat, you know.

1:46:17Like a chatbot, like chat. Yeah, you want to build chat. Like, that would be kind of stupid, right? So that's the same effect we're seeing here. So all of this to say, I think most of the... There'll be many, many, many valuable companies, and a lot of the developers that are building with us, they have massive potential. Some of them are growing way faster than we are growing, right? But I want to say, where do you differentiate today, right? I think the most highly differentiated companies will be three types of companies. You can differentiate on distribution. You can differentiate on infrastructure, So like payment processing or like, you know, what NextHealth's synchronizer API is, or you can differentiate on like maybe some, you know, unique proprietary data.

1:46:59NextHealth has all three. Distribution. Like when I say distribution, here's what I mean. Every single time a developer builds any sort of a product on our API, they have to then onboard some practice. Like, you know, if you go to Venmo, you try to connect your bank account, Venmo will have to onboard you to plan. Literally, right? So they have to do that as well. And that in itself gives us exposure for the SaaS product. And then some practice will discover us from there, sign up for the SaaS product. And then they'll be like, well, hey, what about my other vendors? Why aren't they using you guys?

1:47:34Like, I wish they could read and write into my system as well. Then those, you know, some developer will sign up. So like, we're seeing a really fascinating flywheel motion today as we speak.

1:47:42Turner Novak:Oh, where it's like a practice will have one of their vendors use NextHealth, and then they'll ask the other vendors, say, hey, you should use NextHealth too. Exactly, exactly. Or like, you know, they'll actually directly buy our SaaS product and then realize NextHealth is the only vendor that can read and write data. And they'll be like, they'll reach out to us like, hey, how come my other vendors can't do this? Basically, right? And then, you know, like a lot of the developers that build with us, they also want access to the practices that are on our platform. We, of course, own the infrastructure layer that can read and write data.

1:48:13And then, of course, you know, we have 89 million patients in our database. So we have really all three, you know, data infrastructure and the distribution at NextHealth today.

1:48:23Turner Novak:I mean, you probably had to be pretty patient, though, because I'm thinking ChatGPT launched in 2022. Were you just like, let's just like do a bunch of AI stuff. Like, do we train our own models? Like, what happened after ChatGPT launched? Like, what was that like evolution of how you're thinking about the business? Yeah, so one of the things about NextHealth as an FYI, we generally like to wait a bit for things to mature before we start building with it. So when actually ChadGPT first came out, within three months, we had two AI features built into our SaaS product. And within six months, I flew our entire engineering team to Mexico for a three-day hackathon of just building a bunch of AI native products and features.

1:49:09And then more recently, by the way, we also did another hackathon where you just build AI products on our own API. So we are very, very early to it, but we actually never truly released anything user-facing. Really? Yeah. Why not? So healthcare is one of those areas where being innovative and being at the cutting edge is really, really important. At the same time, it has to be accurate, compliant, and it has to work. Meaning, you know, at that time, you know, I personally didn't think the models were mature enough to be able to support the types of use cases that our customers would want to use us for.

1:49:49Turner Novak:So they would like hallucinate some customer data and mess something up. Yeah. Like, you know, imagine, you know, you're, you know, I think you have like what, three kids, I believe, right? Only two. Only two. Okay, got it. So some days I wish I had three. Some days I'm like, I'm just so glad I only have two. imagine, you know, some, you know, like AI messes up, I don't know, like one of their appointments or something, right? Yeah. And then your busy father or mother, right? Yeah. You'd be pretty pissed. Like that is what actually often happens with a lot of the AI vendors in our space, right?

1:50:18Really. So it's really, really important that the model is mature enough. And at the same time, though, really like, you know, what we've been, we've waited for up until now is not only, you know, that the models are mature enough, But releasing a version of our API, what we call an intent-based API, you can think about it as basically our own API that replicates what traditionally in AI-based products you would call tools or workflows. Imagine we have 98 total endpoints, right? As a developer, you can weave them together and build workflows. versus, you know, we released a new version a couple of weeks ago where all of those workflows are pre-built for you so that, you know, whatever LLM product you're building, right, can just simply call those pre-built workflows and get going, right?

1:51:10So first is, you know, we wanted to actually take the infrastructure approach here first and then release practice-facing products. And, you know, we're going to have practice-facing products coming soon as well.

1:51:19Turner Novak:Oh, really? Yep. Okay. How do you think about, like, you have competitors that are building on your API. That's a pretty sensitive thing to navigate. I mean, just how do you generally approach that? Because someone might say, like, why would I build on my competitor software? Like, people make the same marketing with OpenAI. Like, you know, they'll just steal the best products and ideas. Like, how do you navigate that? I mean, honestly, like, I mean, from my seat, it's not like we're forcing anybody, right? We have a really valuable product, right? And the market trusts us enough, right, that they're doing it.

1:51:55So in terms of, like, how do you navigate that? I don't really think about navigating it, frankly. They're a partner, they're a customer. We'll give them a great service and we'll build a great product for them and we'll enable them to innovate, right? Ultimately, that's our value prop. And then when it comes to competitive areas, sure, let the best product win, but we're not going to, you know, for us, they're just as important of a customer and partner as anybody else. And our, you know, kind of, well, what NextHealth is, you know, we're a platform, right? And our mission statement is to accelerate innovation in healthcare.

1:52:27And what we do not want to become is Henry Schein, right? Where we treat different vendors specially, or like, you know, we play favor to them. None of it matters. Like if we're truly, you know, sticking to and being honest with our mission statement, right? I think, you know, the technology we have is amazing. You know, it took us a while to build it. It was really hard, but you know, I think we have something magical here, right? And using it like as a, you know, know, hammer or like a tool to manipulate product quality or the market and so on, just like the, you know, incumbents do today, where they are the gatekeeper, right, to innovation.

1:53:05We'll just go, you know, against our mission, right? So from a cultural principle standpoint, you know, we tend to be very, very neutral there. And then it shows up in the market because these, you know, competitor, you know, there's very large companies, by the way, some of them are public that are competitors of ours on the SaaS side, their CEOs, you know, trust us enough that, you know, they stake their entire business on our infrastructure. And overall, you know, we tend to have a great relationship. And generally, what ends up happening, though, you know, like I gave that earlier example, right?

1:53:34We do have our own lanes. Like everyone differentiates in some way, right? And because, you know, we're the platform, right? It would just not make sense to go straight for the SaaS product and the core value prop that we have. And, you know, there's like plenty of ways to differentiate and like go after workflows. The market is large enough. So that's what, So more organically, you know, competitors end up just like kind of staying away from our core lane anyways over time.

1:53:56Turner Novak:So it's really like the whole OpenAI and ChatGPT thing from earlier. Yep, exactly. And so you don't really think of yourself as a healthcare company. You guys specifically say we're a technology company. Like why is that so important to how you guys think about things? Yeah. so earlier you know we had talked about why did it work with next health versus like every other startup that tried before this right yeah one of the core things i realized you know maybe like around 2022 or so is that what did everyone else do before us and like that was different it was all relationship-based like as hey we're going to go sign partnerships have good relationships with you and that's how we're going to solve this problem right versus we took a pure peer technology approach.

1:54:41We said, hey, this is a technology problem. We're going to build some unique technology that can sync data back and forth, make it reliable, stable enough, and scalable enough that it can build these massively scale from Invisalign and so on, right? These massively scalable products on top of this infrastructure, right? Anyways, all of this to say, so healthcare and more generally, I want to say nearly every space, right? Taking the approach of technology and just building great technology and great products is the way to change healthcare versus anything else. And it's really, really important for us to differentiate that way because I think the majority of companies, even if they're tech companies in our space, you'll notice culturally to the way that they describe themselves and so on, they will say, hey, we're a healthcare company.

1:55:25And that has a ton of consequences because the way you approach problems is different now. So really, again, example of do you partner with these EHR systems? do you pay them 30 % or not, or do you just treat it as a technology problem and solve it with technology, right? Depending on how you think about yourself, you would make a different decision, right? So it may not feel that important, frankly, from the outside, but at least in the world of healthcare, and especially internally, I really, really, you know, like every couple of months in all hands, emphasize it like, hey, we're a technology company that just happens to be in healthcare, solving problems, right?

1:56:01And I think, you know, that, if we continue that approach, I think we will continue to succeed as a company.

1:56:07Turner Novak:And you don't really hire from the healthcare industry. Most of the people in Next Health, their background is in technology. Yep. They worked at Netflix or Databricks. That feels pretty important to them of keeping that ethos. Yes. How do you convince people to then come join? What's generally the pitch for joining Next Health versus, could you go work at Anthropic right now? Maybe they could. But I mean, I guess only a couple thousand people can. But like, why is NextSelf like, what's the pitch like convince people to come work there? Yeah, I think, you know, there's twofold, right? Like one is we have a great mission, right?

1:56:46In addition to that, like NextSelf is really, you know, I want to say for a very like specific type of person and a specific type of culture as well, where not everyone is the right fit for us, to be very clear here, right? So what's, who's a bad fit? Or who's a good fit? Okay, just to be blunt here, I would say like, you know, A bad fit would be someone that would join OpenAI today or Anthropic today.

1:57:08Turner Novak:Really? Yeah. So next up is for the type of person that genuinely wants to have real impact on the world, that genuinely wants to do good for the world more directly, right? But then also so ambitious, right, that they want to build something that will outlast OpenAI or any other software vendor I can think of. And here's what I mean, right? Healthcare and the lack of innovation and this problem statement, right, is a type of problem that every single human before us has had, like healthcare problems in general, right? And every single human after us will have. So it's really a species-level problem.

1:57:49And the ambition that we have here, right, building the infrastructure where innovation happens, if we can unlock that, right, I think we've changed the course of humanity in a sense versus anything else, frankly. And healthcare is so personal. Yeah, money is important. Work is important. Productivity tools are important. All of it is really, really important, right? But, you know, the one area where I think it matters the most, you know, everyone's health, really. Yeah. If you can impact that and you can build, at the same time, scale it globally and build something valuable, institutionalize it, meaning a company that's generational, right?

1:58:25Like, that is our ambition here. If you can do that, then, you know, I think, what I like to call, you know, you'll be a legend, basically.

1:58:33Turner Novak:What are the, what's the importance of shoes at Next Health? Yeah, so I want to say like, it's a symbol of being scrappy, basically. So, so this, this actually comes from, you know, you'll recall that, you know, I hired this college kid, Bobby, basically to be an SDR. It was his first job. The first one. Yeah, like first job ever, or, you know, one of our very first hires at Next Health on the sales side. So at that time I was closing all of our deals and then I was like, all right, Let me hire someone that can create pipeline for me. And of course, he was ambitious. And within like three, four months, he wanted to start closing his own deals.

1:59:05Anyways, all this to say, so at that time, I was like, you know what? How about this? As soon as you close your first deal, I'll get you a gift, basically. And he did. And I walked over to the Allbirds store and spent like$60, I think, on a pair of Allbirds and brought it back to him and gave it to him as a gift. And since that, that's a tradition that has continued at NextHealth, which is, you know, when you achieve a milestone or like the first time, first milestone, everyone just gets shoes basically.

1:59:31Turner Novak:Was he literally walking around closing the deals? Like when he was the BDR back in New York? Yeah, let me think. I think by that point, honestly, it was like 50-50. Okay. Because I was like, all right, maybe you don't have to go into the office, right? Yeah. But anyways, yeah, it was 50-50. But at that time, man, we were doing anything and everything. Like I would drive like two hours to go to an office sometimes. I mean, you were in Detroit, I guess, for one of those big customers. and you guys I think you're you like don't use Slack as much as like the average startup like you're very like like you do a lot like a lot more emails oh structured in that way or okay so that's my desire oh okay as a CEO but that is not true honestly it's always not true yeah like Slack is just messy like I don't like it honestly like company coordination internal communication from the tools to how do you effectively coordinate a set of people cross-functionally and then execute.

2:00:29And then when you're doing the execution, it's generally something, whatever we do is usually something new. Maybe it's been tried in other spaces, but it hasn't been tried in our space. Great example is the payments product. You think Square knows who paid this bill. Those basics don't exist. So we do have to invent new concepts in our space. right? So I think one of the reasons you see me complain about sometimes just internal communication tools in general is that coordination and speed internally is just so important, especially when a lot of the people that we have come from outside of tech.

2:01:08And on top of that, it's a problem we're addressing that no one else usually has solved yet. And it's a new thing for the market. A lot of things just have to go right, honestly. Like execution and Excel is really hard, but really important.

2:01:20Turner Novak:How have you, are there things inside the company you've changed because of AI? I think the obvious one is, you know, like I think something like 100 % of our code is ran by Cloud these days, right? Here's the, I would say, like, you know, kind of, I want to say... a change, at least for me in my thinking, and it's kind of, it's taken a bit of adjustment in two areas. One is because of how advanced, like Fable, right? Like Fable 5 is just freaking amazing, right? Because of how mature these models have gone, you can genuinely say, hey, this is, you know, Fable 5 is probably like, I don't know, like close to a staff level engineer today, maybe, or will be very soon, right?

2:02:06So what does that mean if you now take that same skill set and take it to marketing, legal, and so on? I don't think it necessarily means you hire fewer people. I don't think that's the right way to think about it. But I think the way you get work done, though, is fundamentally changes. And if you don't change the way internally as a company your teams are working, you'll be left behind and someone else will just outcompete you really, really easily. I think most people look at it from the lens of like, hey, it's about the number of people, right? And that's like the ultimate end outcome. Honestly, I don't think in reality that's what's going to end up happening.

2:02:44I think what's going to end up happening is you'll generally probably have the same number of people, but the same number of people now are getting things done at like 5x the speed and maybe 10x the output. No company in the world will say no to that, right? So like that'll, I think, continue to happen. And I think that is what's happening at NextHealth as well. Like to the point that our marketing team, I am not even kidding, like, you know, just a random problem we're having more recently internally the last couple of weeks. Our marketing calendar for product releases doesn't work anymore because there's just so many things there to ship.

2:03:13Oh, yeah. Okay. Yeah.

2:03:16Turner Novak:What's the, when you look at like the line item, like cost, expenses in the budget, like what are the biggest AI tools you guys are spending on? So open AI, actually we're sort of model, like not sticking in a sense, but different use cases, right? so for product facing we use OpenAI for internal cloud but in Gemini as well anyways so our inorami our VP of engineering he spent his early Google spent 20 years there then Databricks and he's also a PhD in machine learning so he has a lot of opinions on these things and a lot of expertise as well and also and understands obviously all of the pitfalls as well so we tend to use all three but it all depends on the team and I think it's important that any company honestly remains model agnostic One last question.

2:04:00Do you have a favorite founder, CEO, or business

2:04:04Turner Novak:just from history that you've gotten a lot of inspiration from? So this is going to be, I think, for a lot of people, it's surprising. But for me, frankly, it's Microsoft. And the reason it's Microsoft is this, which is Microsoft was one of the very first companies out there to scale and really invent the business of software. So before Microsoft, just as an FYI, software culturally was expected to be free. Like you... Really? Yeah, you paid any charge for hardware, but the software was a hobbyist thing. It was always free or just by default. It's not that valuable, basically. But it all kind of sucked, right?

2:04:40Turner Novak:Like it was... I mean, compared to today. I mean, yeah, computers sucked back then too, technically speaking, right? Yeah, yeah, fair, fair. But anyways, Bill Gates was the very, very first one to start monetizing software, and everyone kind of hated him from that point onwards. Really? But the reason I admire the Microsoft story specifically is that at NextSelt, I feel like, you know, we're really honestly, like it truly does feel like we're doing something very similar in the sense that when I say that we're really inventing a lot of new concepts and like really new products, new ways of doing things.

2:05:13and also fighting a ton of inertia, right? And creating this ecosystem for innovation as well on top. The best company I can think about from a business model perspective to the number of products, to the strategy and really everything. I would say Microsoft 1990s is the best comparison. I'm also a huge history nerd. And yeah, Microsoft, I want to say 77 to 1990 would probably be my biggest inspiration.

2:05:40Turner Novak:Really? Yeah. do you have any favorite like people from history i mean this could even be like 10 000 years ago like i don't know caesar cleopatra like i just know george washington like anyone interesting yeah that's a that's a good question the thing that i always am pretty fascinated by is like you'll read this story of like you know the american revolution like we just ran when we're like hey let's like break away from the british and like we like won a war but it it had to do with like there's like a business commercial reason for like we didn't just wake up and say like hey let's like secede from like the colonies are just going to break away it's like there was like incentives and there's like a whole business behind it there's a pretty interesting actually podcast i listen to my friend time morse has a podcast called relentless and he talked to uh ryan peterson the founder of flexport it was 45 minutes of just talking about like the history of logistics and it was fascinating that every single like big historical event that you think of was related like some kind of logistical problem very true like how global trade evolved and like the economy evolved around how like a new technology enabled like a boat to go farther or like a wheel enabled like the trade route to be longer or like the like planes enable trade in different ways so i'm always fascinated like with history or like how these like non obvious types of things really impact stuff yeah no actually i mean like all of history just as like is driven by trade like really all of it is driven by trade trade routes ability to trade and like really money movement in a sense like where does the money go basically good um uh so so like here's the thing that like um i am a history nerd and like you know over time i sort of like have evolved my points of views on a lot of different things.

2:07:31Turner Novak:Really? One is the admiration of just like great men, in a sense. And like, I'm not one of those, you know, people that don't believe, you know, history is driven, history is not driven by, you know, great historical figures. I think there's, I think there's much more nuance than that. But at the same time, though, honestly, like what I more so admire are the structures, the institutions, as well as the conditions that exist to drive some change. And the people that saw that opportunity took advantage of it and then drove that change, essentially. Wow, this has been a lot of fun. Thanks for coming on the show.

2:08:09Turner Novak:Yeah, of course. Thank you for having me as well. Honestly, really fun conversation here. And I hope you had fun. Thanks again to this episode's sponsors, Flex, Numeral, Amplitude, Merge, and Monaco. If you enjoyed this, please like, comment, subscribe, and share it with a friend who should be using Nextelf. Make sure to check out the back catalog of over 100 episodes with investors like Gary Tan, Elad Gill, Chathan Ayurk at Benchmark, and the founders of companies like Robinhood, Sweetgreen, and Mercury. Tune in over the next few weeks for conversations with Naveen Chata at Mayfield, Michael Tannenbaum, the CEO of Figure, the first blockchain-based lending company, and my friend, Shansi Dink at Merge.

2:08:47Turner Novak:If you don't want to miss any of these, subscribe to my newsletter, The Split, linked in the description. Get each episode plus a transcript emailed directly to your inbox every week. Thanks again for listening. See you next time.