Ariel Katz is the Co-founder and CEO of H1 Insight, a network dedicated to connecting healthcare professionals and companies with the aim of being the “LinkedIn for healthcare.”
Founded in 2017, H1 now has over 8 million HCP profiles in 16,000 institutions in 70-plus countries. Its clients, which encompass over 35 pharmaceutical companies, including seven of the top 10, use the platform to do things like find doctors to work on a clinical trial for a given biotech, find hospitals where they can do their clinical and find the thought-leading healthcare professional to lead a CME session. H1 saw its revenue grew 350 percent year-to-year in 2019.
The company, which graduated from Y Combinator, recently raised its first institutional funding round, a $12.9 million Series A led by Menlo Ventures, along with Novartis dRx, Y Combinator, Baron Davis Enterprises, ClearPoint Investment Partners, Jeff Hammerbacher, Liquid 2 Ventures, and Underscore VC.
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Building Healthcare’s Connective Data Ecosystem With Ariel Katz
Welcome to the next episode of the show. Our guest is Ariel Katz. He is the Cofounder of H1. Ariel studied Applied Science and Experimental Psychology at Binghamton University. He went on to be a research assistant at Columbia University and did his honors thesis at Binghamton. In addition to cofounding H1, Ariel was also the Cofounder and CEO of ResearchConnection, which was acquired in 2016.
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Ariel, I’m so glad you could be on the show. Thanks for being here.
I’m excited to be here. It should be fun.
To get started, you have a very impressive background. We started with Binghamton, where you went to college, but fill us in a little bit and put it on a timeline. Where did you grow up and what happened before Binghamton?
I grew up in Manhattan. I grew up in the Upper West Side and went to school on the Upper East Side at a Jewish private school. It’s not in my background, but I went to the University of Pittsburgh for a year. After that, I went to Israel for a year and ended up at Binghamton. I got involved in academic research. I thought I would pursue a PhD, which was a very great initiative, but it was a bit slow for my taste, so I decided to start a startup instead.
What was it like as a kid growing up on the Upper West Side? I’m from the suburbs, so that, to me, sounds like a lot of fun.
When you’re a kid, you don’t know anything different, but now that I realized, I was exposed and I had access to things that are hard to get access to if you’re in the suburbs. When I was eleven years old, I would take the subway, a public transportation. Eleven-year-olds growing up in the suburbs don’t take public transportation themselves as a small kid. It was a good experience in hindsight, getting exposed, having to grow up early, and having to have street smarts early in life. It was a good experience doing that. I didn’t have a backyard, so I missed that, but otherwise, it was a good experience getting that exposure at a young age.
Were you running around exploring the city in the subway with any brothers or sisters or are you the only child?
I had a couple of sisters, one older and one younger. I’m right in the middle. I would take the cross-town bus every single day with my younger sister to school. She went to school on the Upper East Side. I lived on the Upper West Side. With my friends, we would go downtown. Going downtown to Soho was like going to an amusement park. It was a different part of the city. It was a big city. It was exciting at that time. As you live in it for longer, it starts to become smaller, but going to different parts of the city with your friends on the Lower West Side, East Village, West Village, and Soho was a crazy time. It was all new.
You were eleven years old. Was there a talk your parents had with you and said, “You’re allowed to go out and run amok in the city?” Were there certain guidelines or did they turn you loose?
There were guidelines. I didn’t listen to any of them, though. They said, “Don’t go to certain neighborhoods. Don’t go to certain streets. Don’t walk across the park at night. Don’t go into Central Park at night. You’ll get murdered.” I was like, “I’m fine.” I didn’t listen to any of the guidelines that they said, but they gave some.
I always think that the role of technology in our childhood is interesting. For instance, when I was eleven years old, it would have been 1990 and I didn’t have a cell phone. I didn’t have a cell phone until my senior year in college. You look like a young guy. Did you have a mobile when you were running around at eleven?
No. I wish. I had a cell phone in high school. I didn’t have a cell phone then. It was better that way, though.
Especially if you don’t want your parents to know what you’re up to, not that you’re doing anything wrong.
I would play basketball in Central Park until 7:00 PM. If I had a kid and they had a phone, I would call them. I’d call their friends. I’ll text them to come home. At that time, it was a freer experience of life where time felt differently. There was a connectedness to people. Things felt differently. Maybe it was because I was younger, but it also felt like a freer, more natural experience throughout the day without a phone at that age. Now, it’s different.
When you were playing basketball in New York, were you a Knicks fan at this point?
I was a Knicks fan. They were bad at the time. They weren’t good since the Ewing days, but I was a Knicks fan. They were New Jersey Nets at the time. They had Jason Kidd and Kenyon Martin. They were pretty good back then.
I have four boys, and then two of them are at that age where they’re developing their persona. Someone wants to be an athlete, a skater. Someone wants to be in music. If you had to put yourself in one of those buckets, what were you like at that age?
Friends would make fun of me. It’s in my middle school yearbook. I said, “I’m going to run a hedge fund.” Since I was ten, I was like, “I’m going to run a hedge fund.” I might one day, but not now. It’s a weird dream to have. You’re a ten-year-old kid and you’re like, “I’m going to run the hedge fund one day.” That’s what my dream was.
Was your mother or father in finance?
No. My father was in the garment industry. My mother was a consultant.
Where did you get this idea about hedge funds?
I loved fantasy sports. Do you ever play fantasy sports like fantasy football?
Yeah.
I was really good at it. I would always win the bracket. I would always win fantasy basketball and fantasy baseball. Fantasy baseball was pure numbers, like WHIP, ERA, batting average, and OPS. It had all these things. I was like, “I’m good with these numbers. I’m going to run a hedge fund.” That’s my thesis for why I should run a hedge fund.
It all worked out because you went on to have a career in data. You were playing to your strengths.
To be honest, I never thought about that.
Really?
Yeah. I didn’t put two and two together.
I was talking to a long-time finance executive. The idea of the hedge fund is becoming less relevant with algorithms and computer trading. Everyone can play the same game unless you have a unique position. That’s a different topic for another time. Applying a lot of what you do with data to investing, there are a lot of interesting places to take that.
I’ll give you an example. In medical devices, if you want to predict success, you can start with the obvious things, like the market size. You can make a judgment call on how much better the new thing is compared to the standard, but if you want to get into the real data that’s going to pick winners and losers, it comes down to CPT codes.
There is a spread between the facility who buys the product makes and what you can charge. The arbitrage opportunity is finding a code that has a lot of ceiling that happens to also coincide with a big unmet need market and then bringing a technology that’s going to address it. That, to me, is where you can apply the hedge fund concept. You can hedge the computer model that’s going to tell you what to invest in.
I didn’t know about CPT codes and devices. Is that what they do? Do you seek an unmet need around CPT codes that have old technologies around them? Do you find technologies that could be used for that CPT code?
It’s a slightly different way of approaching it. Usually, you have a great idea that’s addressing a problem and then it’s what the investors do as they go through diligence. They would look at the reimbursement landscape. It’s a quick way of saying, “The hospital makes $2,000 for the surgery. You’re telling me this prototype costs $800 to make. There’s not going to be a whole lot of margin even if you sell the hospital for $2,000 and they don’t even make money.” My approach is slightly different. You start with the codes and then you overlap that with unmet needs. There are a few other layers to it that are important, some of the obvious ones and some less obvious, and then you say, “Can we develop a solution?” because then, you know all the parameters.
That’s fascinating. It’s an interesting approach to think about. It is so different than software. Software is around product-market fit. There are no codes. I wish there were codes because they don’t know user behaviors, but in the game, you hire product people to figure out user behaviors. You bet on creating new behaviors and filling them into behaviors. I wish there were codes in technology. That’s like coding human behavior in real life. It’s a cool concept.
That’s because you know a lot of the incentives. That’s what’s nice about the codes. You mentioned you went to a high school that was fairly insular. Tell me about that if you don’t mind.
I had 80 kids in my grade. I was in that same grade from K through 12. It’s an observant Jewish private prep school on the Upper East Side of Manhattan on Madison Avenue. It’s this weird bubble of wealthy Jewish families in Manhattan. You think that’s the world because that’s the only world that you’re exposed to. When you leave that bubble, you’re like, “This is not real life. Real-life is different than just the Jewish bubble in Manhattan.” It was the best experience ever. It was the most watershed, eye-opening experience to leave that bubble.
There are a lot of benefits to the bubble that you develop. It’s like a fraternity. When you get hazed together, you experience shared experiences and shared memories and you’re never going to leave those bonds and friendships. It’s not hazing, but it’s like pseudo hazing going through this and then coming out and realizing it’s much bigger than this bubble.
For the 80 kids in your class from K through 12, is it co-ed or is it all boys?
Co-ed. It was 40 guys and 40 girls.
To this day, are you closer to your college friends?
I’m the type of person who, if I like something or like someone, I’m with them forever. My best friends have been since I was six years old.
When you were looking at colleges, how did you make that decision?
I tried to go as far away as possible from New York, and I couldn’t get that far. That was what I was optimizing for. I didn’t do well in school. I didn’t have good grades. I didn’t care. I had other worries in life that were weird worries at that age.
Like what?
I cared a lot if LeBron James was better than Kobe. I cared more about that argument than doing well on my history test.
We had a guest on earlier. He was a very successful guy like you. He went into medicine. He was like, “I was curious about a lot of things, but I wasn’t that motivated to get As and memorize a phone book and recite it for a teacher.” It wasn’t until maybe in his twenties that he was like, “It turns out I like organic chemistry.” The timing worked. What did your parents say when you didn’t bring home straight A’s? Did they mind?
Parenting is hard, but they gave me the best tactic. They were like, “If this is your best, we’re happy with your C. If this is not your best, you shouldn’t be happy with your C.” I was like, “It’s not my best, but I don’t care enough to change that.” They always said, “Put your best foot forward, and then the rest will work itself out.” I was getting Cs until I cared and I stopped getting Cs. I always thought, “If I put my best foot forward, then it doesn’t matter. If I try my best and I’m killing myself to make something work and it doesn’t work out, I don’t care.” I care, but I’m like, “What else can I do in this life?”
A lot of times, as a kid, there’s that one thing that we’re good at and that becomes a big part of our identity. Whether it’s grades, sports, or music, that’s my thing. Was your thing fantasy sports?
No. It was my thing. It ranged. I was weirdly good with numbers, and that was my thing for a while. It still is my thing, but now I can use that to my advantage in business. I was weirdly good with numbers and models. You don’t play with financial models at 14 or 16, but I was pretty much building models without knowing what it was. Now, I know what that is. I was always a numbers person. That was always my thing.
How long of a drive is it from Binghamton to your house where you lived in Manhattan?
Three hours.
When you started your freshman year, did you start at Pitt or did you go there after?
I went to Pitt and then I went to Israel for a year. I got pretty far away. I then went to Binghamton. I was there for a couple of years and started a startup in my senior year.
Have you found that your faith has helped you a lot going through the journey of being an entrepreneur?
The community has. It’s all about the community because when you travel anywhere, like Vienna, Jordan, Israel, Lebanon, or Paris, you can always find a friend. That’s a big thing in life. I didn’t realize that growing up. Knowing that you have a sense of community anywhere around the world and you have something to relate to or you have a mutual language with that community has been the biggest benefit. It is faith interwoven into community faith. It’s been the biggest thing. Do you have something like that? Do you have a language that you can talk with people?
In many ways, my community was sports. I played a sport that has grown a lot. It’s lacrosse. In the ‘90s and 2000s, it was still growing nationally. I was part of that in my hometown. I’ve had a lot of communities, but it’s not as broad and as influential as you go to any city in the country and you’re going to be connected to people. How did you get the idea to start a company your senior year in college? What was the problem you saw and how did it all come together?
My problem was I wanted to pursue PhD and I couldn’t find a faculty member. There was no way to find one. It still doesn’t exist. There’s no place. You have to go to each university website to find all the people who are studying or doing specific research projects. It’s a pain. You can’t click on 4,000 websites and click through each biology or psychology department page. There’s no central source for all this information. I was like, “I’m going to fix that. I’m going to build a marketplace where faculty post research opportunities for students and students apply to it.” I called up a friend and he was like, “I’m in.” I then called up a couple of other friends and they all joined.
Did you know how to get incorporated?
You have no idea how many mistakes I made. I had to change our corp three different times. I had no idea what I was doing. I faked it the whole time until it worked. When it doesn’t work, you get in trouble and then you fix it. I kept learning and fixing on the job the entire time. I started an LLC because that’s what I thought I should do, and then I switched it to S corp, and then I switched it back to C corp.
The third time’s a charm.
That’s what you do in business school. You switch corps three times in the first year of business. I faked that the whole time.
It's good to have a startup where you can have many failures and learn from them quickly. Click To Tweet
For the audience, if they’re starting a company and they have aspirations to raise venture capital, what type of corporation should they start and why?
Start a Delaware C corp. It took me a couple of years to figure that one out. Starting a Delaware C Corp is easy. They have a friendly shareholder, corporate bylaws, and rules for corporations.
I remember getting the advice that when most venture capital funds raise money from limited partners, most of the management agreement that governs how they can invest and what they can invest into, with their limited partners mandate that it be a C corp. I never did the LLC to S corp to C corp. That’s a great 1, 2, 3 shuffle.
I did that within a year.
It’s worth noting for the audience, though. If you’re starting a business that can generate cashflow quickly or you want to self-fund it, there are a lot of advantages to the LLC model.
I would do an LLC if you’re not trying to raise capital and it’s your personal business. I have my own LLC besides H1. Start an LLC if you’re trying to live life off your business.
You had an entrepreneurial dream. You graduated college. You started a business in your senior year and you sold it pretty quickly. How did the transaction come together?
We raised about half $500,000 three months after I graduated. It was from Angel investors in the city, which was difficult. I didn’t know how to network. I was a 22-year-old or 21-year-old kid. I was reaching out to every single person. I cold reached out to hundreds and thousands of people. Eventually, some hit. There’s always a distribution if we would hit. We raised some money and grew the business. We pivoted once. It was a good pivot. At its peak, we had over 117,000 students on a given month using our platform, which is cool. That was the most users I have ever had on any one of my products in a given month. There were a million people a year.
All these people were using this thing you figured you needed to build.
I know. It was a crazy feeling, but the thing is, almost none of them were American, which was interesting. At the time, this was pre-China and US trade wars. This was before everything was going down. A ton of Chinese and Korean students were coming to America for education. I remember this was a few years ago. That was the thing. They would come to the US for grad school. They were all using our platform to find graduate schools and graduate professors to work with.
At that point, both economies were growing at staggering rates, particularly in China. You have all these wealthy parents that have relatively inelastic demand. Were they willing to pay anything? Did you keep testing the pricing?
We sold the data back to the university. I figured out that with business models, you sell it to people who are easier to sell to, not those you originally thought you should sell to. We were so stubborn about selling to universities. The idea from H1 came from that where it was like, “We don’t need to sell to universities. We can sell to industries, companies, pharma, biotech, Microsoft, or Apple. They have more money than small universities do.” We didn’t test the business model. We learned a lot of lessons in the first business not to test the business model as you suggested.
That’s such great insight. As entrepreneurs, you get inspired by your experience and the problems you see in the world. Once you have an idea, at least in my experience, of what you want to bring into the world, the problem you want to solve, and where there’s a need, it’s so important to know who the buyer of this product is. I want to hear more about H1 as we transition. It’s very different to sell a product to thirteen-year-olds with no disposable income to Fortune 100 companies that if they have a need, they have the willingness and ability to pay.
It’s a very different go-to-market strategy and capital that you need to go after. I learned all this. I had to. You learn all this on the job. It’s good to have a startup from which you can learn a lot of failures and quickly. I always tell people, “If you want to start a startup, what are you waiting for? You’re going to fail anyway. At least fail on the thing that you want to fail at. If you’re good, then you’ll learn quickly and adapt.” Everyone fails. Mark Zuckerberg failed in a lot of ways. He succeeded because he’s smart and he adapted. He learned from his failures quickly. Start it.
Adapting is the key. In your case, though, 2 or 3 years in, how did the transaction come together? Were you looking to sell the business or did someone reach out?
We were looking to sell. It came from a relationship that I had been cultivating for years. We were talking about a partnership. This guy was looking to do something similar. It ended up coming out naturally, as a lot of these things do. It was like, “Let’s partner together,” then the partnership turns into something more serious, and then it ends up being an acquisition.
When you’ve raised $500,000 and you’ve got people using the product and generating data, you can sell it back to the university. You have a lot of flexibility on how you can exit where, as a founder, your people that has equity incentive, and the Angel investors that took a big bet on you, get a lot of flexibility on how you can exit.
I love the metaphor that venture capital is rocket fuel, but you better have a rocket ship because putting that rocket fuel into an economy car is very expensive. Their expectations are returns. The structure that companies can contemplate and ultimately execute for a business that hasn’t raised that much is flexible.
I love that analogy because most people don’t get it. If you’re an entrepreneur, you don’t have to raise money. The goal is not to raise money. The goal is to raise money when you can use the money. Otherwise, you’re paying a lot for that cash.
That’s a good segue. In the case of H1, you announced significant venture financing. Congratulations. I love what you said because a lot of the press around entrepreneurship is celebrating the closing of VC financing. Much has to do with, “Did you raise venture? Did you do a round? You get a seed round?” I always love to hear about when companies need to raise capital and they’re willing to let other investors own a piece of the great thing they’re building.
That works out perfectly well because they figured out how they can apply capital to build a lot of value. I also love hearing about the stories of people that are bootstrapping companies with $6 million or $7 million in sales and $2 million in EBITDA. As a builder, that’s a pretty good business. You have a cofounder. How many cofounders are you?
It’s myself and Ian. There are two of us.
Was Ian your cofounder at ResearchConnection?
No. I met Ian through a former salesman of mine at ResearchConnection. After ResearchConnection was sold, I was going to go to India at the time for much longer. I ended up going for about four months. This guy was like, “If you’re going to India, you should meet my buddy, Ian. He’s a good guy. He’s been to India a few times.” I met Ian and we had coffee. That’s how it all started.
When you guys got together and you were like, “We have the idea for H1,” which I want to come back to, did you already know that this idea that you’re working on has tons of scale potential? Were you building this thing to be able to take in the round that you raised?
Ian was running a $20 million business at the time. It was a big business. We wanted to work together. We started working on side projects. I came to Mumbai and I was like, “I have this idea for H1.” It came from the ResearchConnection thing. He was like, “I’m in.” When we built it, we knew it was going to be huge. We bootstrapped it. We were able to bootstrap it until we had a few million bucks in revenue, which is great because then when we did raise capital, we were able to use it like rocket fuel to take off.
In your case, when you approached Ian with the idea, what was it?
It’s what we’re working on. It’s pretty similar. It was crazy. We looked back. I made a two-year financial plan. I was good at numbers. I was pretty close. I was within $100,000 of what we hit in terms of revenue. It was very off in expenses. It was true on the revenue. I still have the deck I created in 2016 or 2017. It was very close to the numbers. It was off in the expenses but close on the revenue.
For the audience, give us the pitch. What is H1, and what’s the problem you’re trying to solve?
H1 is the world’s only database of every doctor and every healthcare professional in the world. It solves a lot of problems, but we’re focused on the industry side. That’s pharma, biotech, med device, hospitals, and health systems. A lot of the world probably uses LinkedIn Sales Navigator, but that doesn’t exist for doctors. You can’t go somewhere and find out for a given doctor all the work they do, where they’ve worked before, who they work with, and who their network is. All of that was solved with H1.
The biggest difference is we collect the data ourselves. We have a global team of hundreds of people collecting and curating this information from public and private sources, buying the data, and scraping the data to pull it all together. That’s what we do. We’d license access to the platform to hospitals, health systems, pharma, biotech, med device, med tech, etc.
When you start putting together the model for the kinds of data sources you want, you’re looking at what is out there. It’s amazing whenever you search for a doctor. Some of the stuff that you get back from Google or the search engines is incomplete. It’s been that way for so long. When we met at the Rambam Foundation, you were a moderator. When we first connected and I was learning about your business, I was like, “We need this.”
In the case of spine surgery, there are about 9,000 orthopedic and neurosurgeons. We’ve been at it for over a decade. We’ve been building a database of spine surgeons through a CRM, but you’re always trying to layer in different types of data. There’s the challenge of keeping it current. People retire. People come out of fellowships. How did you come up with the data mapping plan for where you would go scrape data by data and come up with your own data source? How did you think about that out of the gates?
I didn’t. Ian did. I thought about other stuff. I thought about who we would sell to, how we would market it, and the brand. I thought all about the product. Ian’s a data guy. He has been building data businesses for 25 years. He is amazing at it, so I didn’t have to think about any of that. He’s pulling this all together and managing a team of hundreds of people around the world. We have teams in Hyderabad in India, China, the UK, and the US. He’s the data guy on the team, which is great.
With your experience building a distributed team, is that the way forward?
I don’t know. It’s interesting because, with ResearchConnection, we were a cult, in all seriousness. It felt like a cult. We bled Research Connection. This one’s a bit different. As we get bigger, it’s a bit different. There’s a lot of flexibility to this. When COVID hit, it had no impact on productivity because everyone already worked whenever they wanted to work. They work whenever and they work from wherever. It’s pretty nice doing this distributed model. I don’t know how you do that for a manufacturing company, but for a software company, it’s incredibly easy to do this type of distributed model.
You would have the experience at ResearchConnection, where selling it back to the university is not always easy. There were maybe a lot of layers of decisions. When Ian’s out building the backend of the data part of the business, how did you know you wanted to go after pharma, biotech, and health systems?
I didn’t, but I called every single one of them and learned about it. I realized who I could sell to. Pharma is the easiest to sell to, followed by biotech, device, med-tech, and systems. We worked our way down the list.
That makes sense if you look at the revenue that each of those types of customers generates. It’s a great insight for entrepreneurs. Calling the customer and understanding what their problems are and getting a sense of where you might help is a great exercise. I’ve made that mistake a number of times where I fall in love with a solution and I’m convinced I can sell it to the person I’m trying to help. They don’t always need it. What is the biggest unmet need for the pharmaceutical buyer?
They want to understand the community that they’re going to be treating. They want to understand the life of a provider that will be seeing patients with the disease they’re trying to cure. They want to understand the patient. They want to understand them to sell to them. Pharma does well, but they get a lot of bad PR. It’s becoming better because of COVID. They want to understand who the healthcare professionals that they should be engaging with. They want to educate them on why the product that they’re developing is going to cure that disease and why it’s best to use for their patients.
If we could help them identify who those people are, help them keep up to date with it, and help them get in contact with them, it’s a huge value add. Who are the systems that they should be engaging with? What do the healthcare systems care about? Who are the providers? What do they care about? We help them solve those problems.
Organizationally, with your first sales call into a pharmaceutical company, which department are you targeting initially?
It is anywhere from clinical development, medical affairs, and marketing. It is rarely across the board.
Do you find that the clinical folks that might be investing and planning clinical trials because maybe they’re going to commercialize a drug are at the top of the funnel? Is that where they want to understand the customer?
They want to understand them as we get closer to the drug launch. When they’re 5 or 3 years out, they care a lot about understanding the community and the customer. They care a lot about it upfront. They care a lot about the science upfront. They’re like, “Is this therapeutic? Is this molecule going to cure it? Is this device new at solving an unmet need that wasn’t there before?” As they’re getting closer to launch, they care a lot about it because they’re about to engage with 10,000 bladder cancer docs. They got to know about them. They got to know what they care about.
Through the R&D program, there’s this promising drug. It’s getting closer to being commercialized in five states. It’s five years out and they start to bring in the marketing team. How are they going to go to commercialize this drug successfully? In this case of bladder cancer, for instance, what is the question that they’re trying to answer?
Tell me every single bladder cancer doctor in the world to start. We’ll give them every single one of them. Tell me everything about them. What do they care about? Who are the thought leaders? Who are the people that are speaking at medical societies? Who are the social media people that could teach us about the community and educate the community? Who are the ones that we should engage on this advisory board so we can learn more about the community?
What’s the first line of treatment? What’s a standard of care? What do patients look like in terms of readmission rates? There’s all this information about it, so they get to understand the community. It could educate them about why they think their drug is better and how it improves the standard of care and patients’ lives. They try and learn everything about them.
You can compare that to many years ago when a marketing team does a focus group of twenty of these types of doctors. They ask a bunch of questions and they’re like, “We got it all sorted out now.”
You get to use data where there are 15,000 bladder docs in the US and you get to know everything about the community, where they’re located, who are the key people, how they treat patients, what’s important to the patients, and what’s important to the doctors. There’s all that information.
Revenue model-wise, is it a SaaS business?
Yeah. You buy seats to the platform by access.
Did you do any experimentation early on with pricing? What do you call that model where it’s a per-seat basis versus maybe consumption?
I don’t know what you call it. It’s the best model ever because you grow with your clients. It’s like Zoom. If Zoom sells to a startup and the startup grows, they buy more zoom seats. It’s the same for Salesforce. When you sell to a startup and the startup grows, you buy more Salesforce seats. It’s like a land and expand model that works well. If you sell to a pharma company and the pharma company grows or they get acquired by big pharma, it grows. It’s a great business model.
Is there a moment in the onboarding of H1 where you’ve landed a new client? Is there some feature or step in the experience as a customer where they get the power of H1 and there’s a low chance of churn if that moment happens?
For us, it’s a few categories. It’s the high utility of the tool if they use it all the time and then the golden metric if it increases productivity. Are you able to engage with more healthcare professionals when you use H1? Are your engagements richer because you knew more about them? You could skip the, “Let me learn about your problems,” type of discovery and jump right into knowing what their problems are potentially. That type of richer, deeper engagement and being able to gauge with more people is what we think about a lot.
Put it on a timeline for us. You started in 2017. You bootstrapped it with Ian. What did you guys put in between the two of you?
In terms of cash in?
Yeah.
Ian funded most of it. We put in a few million dollars and we ended up generating a few million dollars in revenue. We started in November of 2017. We put in a few million, generated a few million dollars in revenue, and then realized we could grow this thing and create a multi-billion dollar company. We were like, “This is pretty cool. Let’s get some serious capital behind us and squirrel this thing. What else are we doing here besides growing a business and making an impact?” We decided to do that.
Was it interesting, fun, or difficult when you went out to raise VC? What was your experience like?
It was a rollercoaster. It was about a four-week fundraising process from the first meeting to the term sheet. Is that fast?
There are still people in your life who don't care if you're a millionaire or if you're worth nothing. It’s nice to know that no matter what, people are still there to support you. Click To Tweet
Yeah. You’re better at it than I am, but in my world, that’s pretty fast.
It was the last week in January to the last week in February 2018. We had 30 meetings. We met with a lot of people in the Valley, Boston, and East Coast, New York. At the time, I was in living in SF. I got a few term sheets. I met amazing people. We love Menlo and decided to call Menlo Ventures. They’re a great venture firm. They did Uber Series B, Roku, Gilead, and Warby Parker.
You had the experience that you were part of the 2020 Y Combinator.
We did Y Combinator before we fundraised.
Would you do that again? It’s very exclusive. It’s like getting into the most elite college.
I wouldn’t recommend it. I would do it again. They helped a lot with the fundraising. They accelerated the fundraising because they made a lot of powerful intros. We would have raised without them, but they helped. I met amazing people there. There are some unbelievable people that are in the program. I would do it again. It was a cool experience.
I’m sensing some hesitation.
There are pros and cons to the thing. They take 7% no matter the stage of your business. They took 7% of us and we had a few million bucks in revenue. They took 7% from people graduating college that are twenty years old with an idea. There are pros and cons to the thing. I would do it again mostly because of the network, the acceleration of fundraising, and the brand exposure. It’s not an obvious choice, but I would do it again.
You get access to some of the best investors in the world. In four weeks, you had 30 meetings with VCs. Menlo is one of the elite venture firms. They funded some of the greatest companies. Did you raise $13 million in that round you announced?
Yeah.
That’s a lot of capital. When you started, you had $3 million. When you closed the round, what was the round rate at that point?
We don’t share that, but in 2019, we grew 4X in revenue. We’re going to grow the same in 2020 even with COVID and probably grow in multiples in 2021 as well. The business is doing well.
In medical devices, they have these big strategies. Small medical device companies also grow with the venture. Sometimes, they go public and become multi-billion-dollar companies, but a very natural consolidation happens within the space. In a data business like H1 that is selling to some of the biggest companies in healthcare, who is the acquiring ecosystem for your type of business?
IQVIA would be a name that people know or Symphony Health, Clarivate Analytics, or Veeva Decision Resources Group.
Veeva was the one that I was thinking about.
Veeva bought I’d be able to give about Crossix this 2019, which is a marketing and data business. Those are the big guys that you would think about. IQVIA and Veeva are the big mammoths in the industry.
It sounds like you think this could be a much bigger business in that. Would you be happy if ten years from now, we’re doing another conversation, the CEO and Cofounder of H1 and you guys are doing hundreds of millions of sales, or would you want to get onto the next thing?
We want to create this thing to be huge and have a massive impact.
I’m sure your investors love to hear that as well.
We turned down acquisition offers. We want to grow this thing. I don’t know what I would do with the money either. If you gave me X million dollars, it would sit in the bank. I’m not here living this life and having money sitting in the bank. I’d rather do what I want to do every day, which is this.
That’s a great question because, in the entrepreneurial journey, it’s odd sometimes how we celebrate the success of big financing, an IPO, or an acquisition, but at the end of it, your business is different. Sometimes, you have different bosses. Sometimes, you’re not there anymore as the founder. In exchange for all your efforts, you have this lump of money, which can be profound and you can do all sorts of great things. For you, it sounds like it would sit in the bank. What do you do for fun when you’re not building H1? What kind of extravagances do you afford for all your hard work?
My type of extravagance is rollerblading for 5 miles or 10 miles and walking the dogs in the park. I don’t go on city bikes. I don’t trust them, so I rollerblade around the park. I would spend time with my wife, spend time with the dogs, and read. That’s pretty much it. That’s my level of fun these days.
That’s great because if you don’t have that motivation where it’s all about money, you can build for the long-term. I wish I was included in that round. Maybe next time. The final part of the interview is we’re going to go to the vault. I’m going to ask you a few questions. We’ll keep it moving pretty quickly. The first one, since you’re such an avid reader, what is a book you’ve read that made you think, had a profound impact on how you view the world or your business and is something that you think is worth sharing with the audience?
In 2018, I finished a five-part series on LBJ, Lyndon Baines Johnson, the president. He was the guy who was the VP of JFK. It was a crazy book. It’s 5,000 pages about this guy. I’m always curious about how somebody becomes the president of the United States. You think they must be perfect. The guy had so many failures. You wouldn’t believe it. It was more than we could count, but he kept putting himself out there. The ambition was burning fire within him. It was great to see stories of great people failing and then picking themselves back up. The failure didn’t matter. Those are good life stories to read.
The next question is, other than your parents, who in your life saw your potential or was supportive and has been a mentor to you throughout your education, ResearchConnection, and H1?
My wife. She supports me no matter what, even if I have crazy ideas. She’s amazing. My friends support me too. That was always nice. I mentioned it. I have had the same friends forever and they support me. They like me even if I fail or if I succeed, and that’s nice to know that there are still people in your life who don’t care if you’re a billionaire and don’t care if you’re worth nothing. I made no money in my first few years out of college, but they didn’t care. I’m still the same person to them. That’s nice to know that no matter what, you could succeed or fail or you can miss a shot or hit the shot, people are still there to support you.
The next question is in your work at H1, what’s one software tool that you use almost every day that you haven’t developed yourself that you can’t imagine working without?
I love Slack. It’s easy to use on a monitor 24/7 and attracts all conversations, which I like.
Do you find that you emailed us because of Slack?
I pretty much only email clients.
The last question is, in your role at H1, what is one unmet need that you’re facing almost every day and that you think somebody should build something to solve?
Recruiting. It’s impossible. It’s the most impossible task that I have. Recruiting is speed dating. You hope that you pick the right person. You have no idea if you do. It’s an expensive mistake. It’s more expensive than going on a date where you spend $100. You’re spending a lot more than $100 to make a bad hire. I wish someone could fix it. No one has fixed it even though it’s such a big market and such a big problem. No one has fixed recruiting.
You read it here. Ariel finished a five-part series on LBJ, his friends from childhood and his wife have his back no matter what, he can’t imagine working without Slack, and the problem that needs to be solved is recruiting well. I appreciated the time. Thanks for being a guest on the show.
I appreciate it too. Thank you.