Full Transcript Introduction 0:01 Welcome to the Startup [music] Physicians podcast, where we explore how 0:05 doctors lead healthcare innovation. Please like and follow our show to join 0:10 our community of physicians [music] contributing to meaningful change.
Startup vs. small business: the core difference 0:15 One of the most [music] common questions that I get is what is the difference 0:19 between a healthcare startup and a small business or entrepreneurial venture? 0:26 Many people in the physician space teach about entrepreneurship and sometimes you 0:31 can get confused between the two. These are not the same thing. So, what's the 0:35 difference? The philosophy is very different from day one on whether you're 0:40 starting a small business or if you're starting a startup. The philosophy is 0:44 different, the structure is different, and the outcome is different. And the 0:48 decisions you make in the very beginning will set the trajectory. So, I've been 0:53 involved in both. I originally, before I went on my first startup journey, I had 0:58 planned to start a small clinical practice in my home state using the 1:03 contacts that I already had, the skills that I had, and myself as the healthcare 1:08 delivery model. And I had planned to kind of grow it one-zy, two-zy, copy the 1:13 program clinical model that I had built inside the hospital system, and and 1:17 hopefully grow it to serve a few thousand patients. And that would have 1:21 been a small business. It would have been very entrepreneurial. It probably 1:25 would have worked. I think I could have really put together a practice for that 1:28 model, but at the time I was approached by a venture firm that approached me and 1:33 suggested a different path. And they really pitched it to me that 1:39 like, this is a really valuable model. We could build this at scale. We build 1:44 companies that are billion-dollar valuation, and we would want to make 1:48 that the plan from the beginning. So, we spent 6 to 8 months incubating 1:53 the concept, building the model, creating a really aggressive growth plan 1:57 and contracting plan, and then pitching until we were able to pre-sell this 2:02 concept before it was even built. We launched a company that had funding and 2:06 a really clear plan to scale. And that's really the way that people do it in 2:11 venture studios. And that company reached a multi-nine-figure valuation in 2:15 less than 2 years. So, that is definitely in the startup realm, whereas 2:21 what I was originally planning to do would have been in the entrepreneurship 2:24 small business realm. So, a small business can really grow organically. 2:29 You can market to individuals. You may serve thousands of patients or clients, 2:33 but not really on your plan to to reach millions. You might keep your whole cap 2:38 table and make every decision as a solo business owner and iterate as you go. 2:44 And this is a very legitimate path. Some of the best businesses in the world run 2:48 this way. If you want full control, if you don't want partners on your cap 2:52 table, and if you're excited by building something sustainable in an organically 2:57 growing way, rather than something designed for enterprise scale, this is a 3:02 great option. And I actually I have had small businesses of my own, and I have
Why startups are built for scale from day one 3:08 amazing friends and colleagues who are very entrepreneurial, who run 3:13 businesses, but it's not the same as what I would consider a healthcare 3:17 startup. A startup looks different from day one. So, my firm partners had a 3:22 floor. Every company they built had to have a clear pathway to a billion-dollar 3:27 valuation. That was not even in my wavelength when 3:30 I got started, but it was a standard they held themselves to, and they had a 3:33 track record to back that. And before we launched, we did four things that a 3:37 small business does not do. So, first, we spent months in incubation, 3:42 gut-checking the model for scale. The plan was not how could I open a clinic 3:46 and start to generate revenue and make this work. The plan was how could this 3:50 model work with a million patients in it? Two, we built a business development 3:54 plan for enterprise partnerships. So, small businesses grow, you know, one 3:57 customer at a time. You have marketing pushes, things like that, but startups 4:00 can grow tens of thousands of units per enterprise contract. Three, we pre-sold 4:06 before we launched. So, if you have letters of intent or signed contracts, 4:10 or you've been able to negotiate agreements on what you're going to do to 4:15 serve a client, and a real pipeline of paying customers, and have all of that 4:21 in hand before you actually launch, it's honestly very easy to get funding 4:26 when you have that in place with a really clear plan for growth and scale. 4:29 And then four, we built three tools that tied these things together. One is our 4:33 pitch, our messaging. What are we doing? How are we explaining it to people? How 4:37 are we getting stakeholder buy-in from all the different people that 4:42 affected by our model. Two is a financial projection and analysis, a 4:46 forward-looking financial model that can model both the initial ramp-up plan and 4:52 the at-scale plan. And three, a product roadmap, understanding exactly what sort 4:57 of tech we were going to build and when, and how much we were going to use to 5:01 build versus buy. And so, as those three things mature 5:04 together, you can raise capital on evidence, not on just this idea that 5:10 like, oh, wouldn't it be great if we could serve patients in XYZ manner? You 5:14 actually have a plan. Um and you can give up a lot less equity when your plan 5:21 is more fully baked because you have better proof. So, you really have to 5:26 take a mindset test. Are you willing to take on partnerships, potentially 5:30 investors, and equity dilution to grow fast and big? If yes, you might be ready 5:36 for a startup. If you want full ownership and control, you may be
The four things startups do before launch 5:41 building a small business, and that is fine. My caveat is that sometimes when 5:45 people do their financial projections and analysis, they recognize that they 5:50 have an early revenue stream that can support the growth of the business at 5:54 scale, and they don't have to take on equity 5:57 partners, which is great, too. But I'll give you an example. I know someone who 6:02 runs a medical organization that has now started a second location, really 6:07 successful, great margins, wants to make this a much bigger thing, and it's like, 6:12 this person could find the growth of the business with the business in a 6:17 one-by-one fashion. But if they want to open 10 6:21 and follow that same pattern, that's a startup, and you need capital for that. 6:26 So, the other thing to talk about is the 6:30 tech enablement. Something that has changed in the past 5 years, and it 6:35 really does affect both paths. So, the companies that will do well, in my 6:39 opinion, in the next decade are the ones that combine technology 6:44 with a real human component. So, competitors can clone a software-only 6:49 company fast. The prices for tech platforms is going to go down, margins 6:56 going to compress, and a service-only business has a human labor ceiling. So, 7:02 you can hire a nurse, and you can get the output of one nurse. That growth 7:06 curve can hit the wall. But what's changed is the back end. So, we all know 7:10 about AI and that there's tools and agent workflows and structured data 7:14 pipelines you can build. Um and and these can do the work that used to 7:18 require a lot of employees. A small team of 7:22 experts can now sit on top of a tech back end and deliver something that 7:27 still feels very high-touch and boutique, and the cost structure looks 7:31 more like a software company, but the product feels like concierge care. So, 7:35 this matters for both lanes. If you're building a small business, AI can let 7:40 you stay really lean, hold your cap table, really really give a much greater 7:46 service for a much lower cost. If you're building a startup, your 7:51 product roadmap has to have an AI backbone from the beginning. And then 7:56 your financial model has to show how that layer bends the cost curve as you 8:00 scale. So, if you can't articulate that, you might be, um, you know, building a 8:05 startup that has not figured out what it sells. You should be selling 8:10 tech-enabled solutions, but there will not be much of an appetite to buy 8:17 platforms or connectors or tech that does one functionality as a SaaS model, 8:24 like a software as a service model. Appetite will not be there nearly as 8:30 much as it has been in the past. So, people used to buy technology solutions 8:34 for their enterprises because it was like, oh, we got to solve that problem. 8:37 Here's a tool. I can pay a a licensing fee and and use that. Now, at the 8:42 enterprise level, there will be a lot more pushback that like, hey, we have 8:46 these developers, and we're doing a bunch of AI stuff. If I needed that 8:50 functionality built, I could probably just build that in-house. So, there's a 8:54 big difference between a tech-enabled services business and a SaaS model, and
Ownership, funding, and capital decisions 8:59 I think the SaaS-only models are going to struggle in the coming years for 9:02 sales. People still want a human in the loop, especially when it comes to 9:07 clinical care. They want a clinician's judgment, and they want someone to care 9:11 for them. And the operations behind that human really can look very different 9:16 than what it's looked like in the past. You can get a lot further as a solo 9:21 founder than you ever could in the past. And as you're designing for scale, you 9:25 can design systems that need a lot less people. There's frameworks that apply to 9:30 both of these scenarios. The same discipline applies whether you're on the 9:34 small business side or the startup side. So, keep the three-tool framework in 9:39 mind at every stage. You want your pitch {slash} message, your financial model, 9:44 and a product roadmap that all tie together. And then you're going to apply 9:48 this build versus buy discipline. If you can get off the ground by piecing 9:53 together software subscriptions, you're going to do that because speed wins. You 9:57 want to get there fast. But build your own platform when the data intelligence 10:03 becomes part of the mode and you can really start to pull things together 10:06 that's proprietary to your IP. You want to phase your like your branding and 10:11 your marketing and your hiring to match your company maturity. I can give an 10:17 example that you know, in a startup you have to be okay with like 10:22 mediocre work of the first version of things. 10:26 I think back to the first logo we designed for my first company and like 10:32 none of us founders liked it, but I can't remember what we paid for it like
Why AI and tech-enabled services matter now 10:36 a couple hundred bucks. It was not good, but we didn't really need much at that 10:40 point. We were we were pitching. We needed something to put on our pitch 10:43 deck, but it was not a mature brand or message. And then as we grew, it grew 10:47 into another version and then once we got our contracts, 10:51 then that commanded the need for a real brand, like a real professional brand 10:57 that we could bring a marketing agency in and really design our logo and colors 11:02 and feel and and the messaging and all of that because we had all of these 11:06 patients we needed to engage and at that point more expensive branding became a 11:12 priority. That was in the road map. I think that as a startup you have to be 11:17 willing to say what's what's the MVP that you're okay with, whether that's 11:21 for your product, your marketing, the people you have on your team. What 11:26 what's the smallest thing you can do as a on your own and in this incubation 11:32 phase, this like prepared to launch phase becomes so important because it's 11:37 like, how can I build a billion-dollar business? How can I build a company that 11:41 serves millions of patients? That is a very different question than how could I 11:46 open the doors of a clinic? Those are very different questions. 11:50 So, there has never been a better time to be 11:54 a solo founder. You can do more of the core work yourself. You can hold more of 11:58 your cap table and arrive at the funding conversation with real evidence in hand, 12:03 but you still have to know what you're building. A small business is not a 12:08 failed startup. It has a very different goal from the beginning. And a startup 12:13 is not a bigger small business. They are different structures, different 12:17 mindsets, different growth plans, and different outcomes. And so, you need to 12:22 pick the lane that matches the the life and the business that you want and the 12:25 kind of ownership you want and the kind of impact you want. Then you build the 12:30 plan that fits that lane. And whichever you choose, assume from day one that you 12:34 need a human component to your product with an AI layer behind it because that 12:40 is the company that the next decade will reward. If you are interested in 12:44 building a startup, I mean in my mind if you're going to build a company, why not 12:48 go big? And why not make it at scale? And I would say that we are building a 12:54 community of physician builders. If you are interested in building a startup, I 12:58 would highly recommend you check out our website at startup physicians.com. 13:03 We have resources for physician founders and we are running a incubator program 13:08 this year. So, if that applies to you, I highly recommend you check out our 13:12 website. We would love to have you as part of the program [music] to come 13:15 build with us together. Thanks. Thanks for listening to the Startup Physicians 13:19 Podcast. [music] This community was built for doctors who 13:22 want to contribute to the future of healthcare. 13:25 We offer support for physicians who are ready [music] to make the next step 13:28 towards building the career they've dreamed of. 13:31 Visit [music] startup physicians.com to learn more. 13:35 And if this episode resonated with you, share it with another [music] friend who 13:39 needs to hear it. Let's change the future of healthcare together.
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