Zocdoc: Oliver Kharraz

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Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Tires and up, going to order door for doctor's offices. If you're telling them a power by page and this is really a testament to Cyrus's she will lead to determination.

He just went to random doctor's offices. Yes, his selling to doctors is one of the hardest things to. Why? Well, first of all, doctors and injuries are trained to protect the doctor from people walking inside of stuff.

So he found out he done a lot of notes. And a few times, he was even escorted out the security. I really think one of the biggest ones was off. Ramen B.R.

It's how I go. This is the show that innovators entrepreneurs can feel us stories behind the movements. They go. I'm Guy Razzan.

Today show how two friends counted the payment in New York City to convince doctors to sign onto their new booking service and zobdock and how they grew that idea into a business valued at nearly $2 billion. One of the most challenging problems for startups that offer to connect customers with service providers is what's known as the chicken and egg problem. This is a problem. Companies like Airbnb and Lyft had dissolved.

Without homeless things, in the case of Airbnb, or drivers in the case of Lyft, you'd have no customers. But at the beginning, neither of these companies had any customers. So convincing people to list their homes or drivers to offer rides to strangers was not an easy thing to overcome. And Tony Chu, the co-founder of DoorDash, who was on the show back in 2018, had the same problem when he started out.

He needed customers who wanted food delivered to their homes and he needed lots of restaurants to participate. But you can't get restaurants without the customer man. And you can't get those customers without lots of restaurants. Same thing with class pass and first box.

You need both sides of the market to buy in. And back in 2007, in New York City. Oliver Kross had the quintessential chicken and egg problem. He had a co-founder, Cyrus Masuni, who were trying to launch his sock dock.

It's an online service that takes a lot of the pain and frustration out of booking a doctor's appointment. You can go online, find the type of doctor you need, plug in your insurance, and then book an appointment through a system that's directly linked to that doctor's calendar. A super simple and smart idea, right? But back in 2007, Oliver and Cyrus had to convince doctors that this was a service worth paying for.

But then why should they pay for it if there were no potential patients? And meanwhile, Oliver and Cyrus had to show potential patients that this was a service with lots of great doctors to choose from. And all those chickens and all those eggs took a long time to bring together. And then, after growing slowly and then quickly, Oliver faced his biggest growing pain of all.

For realization that he had to completely revamp the business model of sock dock if it was going to survive. A decision that was so painful, it actually led to the breakup. It was nearly ten-year partnership with Cyrus. But let's start the beginning.

Oliver Kross was born and raised in Germany, mostly in real parts of the country. His mother was driven and his father was from Iran and came from a long line of doctors. For me, it really starts in some ways with my dad and the time he rapidly had to get everybody's become a social activist. And so he came to Germany from the Middle East when he was very young around Chinese, but the nominee was pocket no laggers skills.

And he approached me then worked on a lot of jobs, and he eventually became a psychiatrist. But what has really shaped me much more than being born in Berlin is this social activist in the night. And I saw him live in that he really made our family mad right? We always talked about talent and responsibility.

And so they need to use whatever talent we have to help those around us that we can and make a difference. Given that your father was, Iranian, anybody was sort of German. And you even thought you were born in Germany. Did you feel, did you feel as German as everybody else?

So I did never say that we only spoke German at home. And yet, as you say, I was also not always fully accepted. So if I give you an example of my school, the French offensive students and you could pick out two, they didn't look like everyone else. And I was one of them.

And even in a country like Germany, that is noticeable. So I had what I call a visual accent, what people were seeing on the street. And they asked me how to speak German as well. But they also, it's cool that it's kept my name when reading out scores because they weren't trying to pronounce my last name.

And I introduced a convey and I was basically friends. So I did really shape me in many ways because I realized very early that in order to be as successful as everyone around me, I would have to be dramatic better and then really work much, much harder than anyone else. And so that really do stuffy. It's something that you can be.

For the record, all of it is somewhat downplaying his work ethic because just in high school, he actually started his first successful company. He was the early clunky days of the internet and he decided a way to help people send emails more easily. And he wound up selling that business not for a ton of money, but enough to get him through medical school. But after practicing medicine for a couple years, Oliver realized he couldn't stop thinking about that first business he started and how he wanted to start another.

So he quit his job in medicine and to get consulting jobs with McKinsey and eventually moved to New York. That was, my goal was actually to start another company. That's why I also realized at the time that I was open for a company, I started to think that I should learn more about business first and McKinsey got a total of balance genes and again, I had a lot of very practical experience about being still in the manager business. And I think very fondly, my kind of McKinsey was one of my better decisions.

McKinsey went to McKinsey's a little bit of business with other people at McKinsey, other people at McKinsey's hospitals. In that, you know, many people go to business thinking they will find a co-founder. Did you, were you actively looking around that your colleagues think maybe I can just make him or her maybe that person? Yeah, absolutely.

And were you just thinking about different business ideas all the time? Well, it is actually very hard to find good ideas. And my definition of a good idea was that I need to have a great mission. I wanted to make sure that we actually just think good and that we stayed true to some talent responsibility.

I also wanted it to be a large market and to have a great motor around it. And also I wanted to be based on a contrarian insight. I've always thought that all the best companies have that in score. Well, so you wanted a mission.

You wanted a company that could kind of dominate its field but you can go to the motor route. But it was also a contrarian. That's interesting. And that's why I streamed for several years and rejected pretty much every idea that I came across.

And meanwhile, while you're going through all that, I guess you meet this guy, Cyrus Moseumi, who's another McKinsey consultant. And you just become friends like he's just like somebody like in and you guys are hanging out. Well, we got to go to the study together that required us to travel globally. And you've never done that.

It meant for us who were 16, 18 hour days together for three, four, five months on end. And we really got to become great partners in that and then what we realized is that we had some very complimentary skills. Cyrus is one of the most charismatic and regards individuals who'd ever meet his, their passion that he could be more forceful, which sometimes was needed to be effective with science. And you've talked to me now for a little bit that you could probably tell and more dispassionate and logical more measurement.

More German in many ways, right? It also does affective with science. But it's obviously as an argument. He's Americanist.

But that closeness and network together that really started friendship and we stayed close after the study, we caught up over lunch pretty regularly to advance different business ideas of one another. And I think we connected because we had some of the interest because in some levels, we were equally passionate about what we were doing. It was our dispassion, it was more visible to others than mine. But we had worked close enough together that we both accepted the others as an individual that we could learn a lot from.

Was it clear pretty soon after you started saying, oh, Cyrus, this was a guy because you were on the lookout for a partner? Yeah, I think it was absolutely enough. And reality is that we both found a company before we can see and we both knew that we wanted to do it again. And Cyrus was always great about being very honest rather than just nice.

And I value that a lot. Yeah. All right. Cyrus, super charismatic, really smart, really the two of you start to work together.

And what kind of business ideas are you coming up with? Well, we kind of fell in love with this new idea that came about in one of these sessions where Cyrus told me about how he had recently wrapped his kid around by flying with a cold. And then he found it very difficult. Actually, he found a doctor and he had asked people recommendations and he called down his insurance directory listing starting with the A's and the company's doctors were accepting the patients.

Some of the long-term acceptance insurance one provider had passed away and so he said, why does it take me four days to see a doctor but I'm in pain? Right? And why can't this much easier? Yeah.

And we both very quickly realized the potential was that from working at Project McKinley to the health system for spending millions of dollars for marketing to grow the patient base because they had wasted inventory. They had something that I like to call in supply which is these last-minute cancellations and no-jose reschedules that go to waste and then other locations are in hard time accessing this. You thought immediately, because you thought, oh my God, yes, doctors appointments, connect patients to doctors. Yeah, well, if you go through the fourth or two that I had, right, it's a great mission by making one of the most personal needs more successful for patients.

We can get in fast, we can help the doctors, become more efficient, we can make the high health system more cost effective to keep all out of the emergency room things like that. And in the marketplace, so there's a strong load and clearly anything in healthcare is a lot of marketing and everything controlling inside that we had was the fact that most people thought it's normal that people have to wait 24 days to see a doctor because there's a doctor shortage and our inside was really that no doctors have asked me to do a little bit because of these last-minute cancellations and no-jose reschedules. And so I felt very good about this a year. So do you remember how long we could find that we had that first conversation to the time where both of you said, let's start this business with like months or weeks or days?

What was the week? What we started doing is actually mocking up the side in how we imagined it. And in PowerPoint, just the little bit of a website. Yeah, my advice, exactly.

When we go to Starbucks and go chat up strangers and say, hey, you're the five dollar gift part. Give me your thoughts. Wait, I'm sorry. I'm going to go back.

You just go to people in Starbucks and give a card and say, can you give your thoughts around the person? Yeah, absolutely. That was our market. They wouldn't be like, excuse me.

This is a weird. Nice pace. Oh, that might also happen from time to time. There's lots of people in Starbucks.

This is very undern about you. That's the rightness. Usually you would be more attentive about doing that. Well, I think there was a lot less rejection of this than you might think.

People actually fight open like, so they just try to put a view. If you're untening and look, it's not just that we probably did. And then they'll be pretty open. So you want people to start with and say, hey, now we're working on a company here.

Can you just look at this PowerPoint? We'll give you a five dollar gift card. And what was the PowerPoint? The PowerPoint was just what we thought the website would look like.

And we would ask them, is the service that resonates with me? What do you use? And we got incredibly valuable feedback here. And it really says, in many ways, on the right track.

Right. So and what kind did it to be decide? Let's quit. We can see.

Let's proceed. Probably a month or two after we initially decided. Did anybody say you were crazy for putting? Oh, everyone.

Everyone was crazy. We got a lot of negative feedback on that. You're too. People would say this is just work.

I would never pick my doctor on the internet or I already have a doctor or a doctor's wouldn't accept patients that are looking on the internet. There were all kinds of protections that people had when they were thinking about their own situation. But when you talk to people on Starbucks, they actually thought about it much more positively. So we were encouraged enough to say, well, this is the way to work as long as we get out of our circle.

And if you don't ask me kids or doctors, there's lots of them there. All right. So you are in your 30s at this point. And presumably, you're making pretty cash at McKinsey because you're probably getting no expenses.

You're on the road all the time. Yes. And probably a lot of well. Yeah.

So I very deliberately had never raised my living standard to the money that the opinion McKinsey. And I had saved every time so that I could, you know, be in a position where I can fund the same break and afford not to take us out for a couple of years. Absolutely. A couple of thousands of days.

You know, maybe I'm two terms of personal finances. But yeah, I have to tell you everything. I had enough money to live off for several years. But I also started to buy a company or not of our own savings so that really diminished how much money we had left over after that.

So now you both decide to quit. And you have some technical expertise because you have a lot of money to be able to be able to be able to be the technology founder and Cyrus was going to be the business founder. Absolutely not. So I go to that point.

I had really not touched on it for a long time. We knew we need to have a technical founder. And so Cyrus knew a guy named Nick Andrew from the time together, to the software. And this is another company that they both worked together.

That's a company that's worked together. And they just bought a totally different perspective and really educated Cyrus knew me on a lot of things. And he was really wanting to understand a building a seamless experience for the consumer. And in many ways, Nick was a little doctor or a genius.

Did you have the names of the doctor in the beginning? Not initially. We went to several phases on what the right name could be. For a while, we wanted to have a derivative name.

So we had a physician's department, Dr. Dr. Sockman, who had to track down the owners of one of these domains. They wanted several million dollars for the domain name.

And we were finding the company ourselves. There was a good deal of the patient. So then we just sat in a room and we brainstormed at least 50 or 100 names and started the meeting. The name sent to a V arrived at Doc.

What does it mean? Well, it doesn't mean anything. It was the media of it. Zero search results.

There's no meaning behind Doc. There's no meaning behind it. And I was precisely the right thing to do because it really was up like Slate for us to fill with meaning and really built up right around. 50 or 30 years ago, we started it.

It resonated. Once you know that it takes one or three weeks from picking up the phone and dialing for doctors to still get you. See someone, you realize, oh, there's really not much else that we have to wait so long for to get. And this is more important than those of these other things where you already have a fantastic access, most of you imagine if air travel worked the way it helped it works.

There wouldn't be an expedia. There wouldn't be a delta. There wouldn't be individual phone numbers for every plane. Imagine if that happened.

There were applications, it would be a massive pain. And there was exactly the state of healthcare before it started. It is amazing that nothing like this was out there in 2007. Yeah, I think in many ways you couldn't have built it much earlier.

In the early days when we went out there, we were the ones installing internet of the doctor's offices. Many times just migrating from a paperbook to scheduling systems. We were at the class of digitization where healthcare and we were just lucky in our timing to get this right and offering this organization that also happened. All right, so you decide to pursue a zachn.

That's the three of you assuming really just the beginning. And were you working out of one of your partners or did you guys rent space? No, we worked out of our respective apartments. Many times we came to Nicky of the nicest apartment.

And we could bring the breakfast where we don't pick them up. And the reality is that we originally had a pretty ambitious launch plan. And we wanted to launch by December of 2007. But then something interesting happened where Nick sent an email to this thing to look at what was called TechCrunch 40.

And TechCrunch is one of these now household names. But the draw for us like that was it was a $50,000 price. Now it's called TechCrunch is what I think. Now it's called TechCrunch is what's a major.

It's a startup competition. It's a startup competition. And we were the first to ask if this was much less known. We budgeted two hours to film an application and really just send it off.

We didn't think about it anymore. That was in early August. We heard that we hadn't accepted. But there was a publication.

We have to be ready by September 18th. That was three months sooner than we originally had to launch. So you had to have a live website by September. That is right.

We've done it. We've done it. So we actually paid it for a few hours when we should even try to go for that. But we both would say yes, we can get the best at working.

And we wanted to have enough doctors just to have a scroll bar. So we wouldn't look at that. So Nick and I go to night and day. And Nick really busted his spot.

He did the patient facing side of the website. And that was the program. So it was potentially even harder because we were trying to launch a marketplace. Also actually get the initial supply on there.

And remember, the website wasn't there yet. So Cyrus ended up going to the North of the Office's. Actually, he's talking about PowerPoint page. And this is really a testament to Cyrus' suitable determination.

If you think about what it means to really start a company or a lot, there's nothing to show. Maybe at PowerPoint, but there's no website. There's no patients. There's no other doctors, no social proof.

And it has run on passion. And I was very clear that that is Cyrus' superpower. He just went to random doctors' offices. He had like a list of doctors after he started kind of walking block by block.

Well, there's a lot of walking involved. We launched them in happen. So you can literally go down the street and you see the signs and you walk in. And he was basically saying, look, it's a way to connect your patients.

How was it? How many by way? What was your objective? How many doctors did you need to sign up to have this website look okay, September?

So between six and ten was our goal. It was a extremely hard. Really? Is that linked to doctors?

Is one of the hardest things to do? Why? What were they saying? Well, first of all, it was very hard to even speak to a doctor.

They are being shielded. They're valuable. The office managers are trained not to let anyone talk to them to protect the doctor from people walking inside themselves. Then secondly, they needed what to give up control over the calendar, which he has to do.

Right? They asked them to post times that a patient could book into it. And it was just a fire-fetched idea for many of them. The patient will actually do this.

So he got one notes. He got a lot of notes. But he'd go there and he just simply not leave until he got a chance to speak to the doctor. And a few times, he was even escorted out by security.

I really think one of the many could have bought this off. Was he going to particular kinds of doctors or was he generally focused on international practitioners? So we began with dentists because our thinking was that people go to dentists most often and they wanted to make sure that they're offering those relevant for patients as often as possible. So eventually, I'm assuming you do get what six to ten or how many did you get by September of 2007?

I think we launched with eight. And at the meantime, you and Nick were doing the back end stuff. You were doing the coding and building a website. And as you were building it, how did it look?

It looked awesome for the time, I think. And it was by the press. We were very satisfied that we had a score bar that we had a map that we had back then already during the lecture. And a lot of people that weren't to be found really anywhere else.

So September 2007, you are ready to reveal the service at TechCrunch. And don't forget you presented it. Did Cyrus kind of receive a spokesperson? So Cyrus and I presented Nick State behind me, or to make sure that the last time I was actually up and running.

Oh, this is never so silly. Yeah, we flew out to San Francisco. And we launched the talk in front of 800 people. A lot of them were journalists.

They opened up with feedback. They were lucky who we knew in value to as investors were ever Apple. He came out of the study. He didn't get it.

He would never use this in front of everyone. And his direct vote was something like, honestly, it was just never going to be to go to any type of pickled doctor. That's really burned in my brain. And what was worse is that he seemed to be right.

We didn't get a single booking that day. We were hoping that this PR would get us a very initial batch of users. So others might text journalists there. So you would say maybe he would lead two books.

And that was the whole. But it actually took three days before we got our first legitimate education. And in this entire first month, we only got five books. And they were like, oh, all right, so you come back from San Francisco.

And you had that guy, I was obviously, I don't never use this service. I'm sure he feels differently today. But maybe it doesn't seem to be so bad. But did you come back feeling like, like, dejected?

Like, losers? Or were you excited? Like, how did you feel coming back? Well, you know, I think we were obviously hoping that we would eventually get more bookings.

And in the beginning, we probably refreshed the bookings for about 100 times a day. But if we're thinking through this, we realized it was really a typical two-sided marketplace challenge. This is a classic chicken and egg problem. You need the supply to get the demand.

And you need the demand to apply supply. And for a stock dog, it was even trickier. When you think about it, healthcare is hyper-local and very complicated. So you have to match the supply and demand on a zip code specialty level.

And then we have thousands of insurance to take into account. And so we realized that there are also actually finding a patient that wanted what we had to offer. And so the best path forward was to, methodically build up supply. So we just kept going to put up a huge map of Manhattan on the wall and then actually put the flags on it.

Whether Dr. Swathere on the website, which turns to stay accepted. And we just, we need that experience is the name of the game. Going to come back in just a moment.

However, until I rise to begin to drop interest in stock dog and how they even start to raise money. So they figure out how to address differently. Stay with us on the guy-rass and you're listening to how I go this. Come in, here.

Hey, welcome back to how I go this run in PR on guy-rass. So it's 2007 and Oliver Cyrus and Nick are basically powering through with his hot dog, going door to door, trying to convince doctors it's a valuable service. And the thing about doctors is, even though they're really smart and capable and we depend on them, a lot of their offices, especially back in 2007, were sort of technologically in the Stone Age. It was incredibly complicated to think that Dr.

Swathere was ours because none of the software was actually made to think where even in the places where we had things up and running, we would frequently get feedback about the amount of the doctors that Dr. Swathere was an example. And we really couldn't figure out why this was the case because when we did speech errors with the office and we did the air calendar and our calendar, it was identical. And we couldn't figure out why that's happening.

So I was looking to start to say, next to the office manager, I went there and got to know him and his family, he was a photo of his dog, I fixed the printer, I thought I was going to go to my speaker, still couldn't figure it out. Until one day the doctor would come out and say, hey David, I'm out next Friday. And then what does David do? Does he go to the calendar and block out next Friday?

Or does he take a posted note right on a doctor out next Friday and sticks this to his monitor. Right? And so he was like, oh, this person knows what's going to happen. And so he knows that.

And he knows that. And he can start to turn this out. And that's why he's going to be a thousand point one percent solutions that we have to figure out to make this work. Wow.

That just sounds, I'm getting exhausted just hearing about that because this is like even just like pre-Google calendars, right? Yeah, that was early. That's what we were extremely focused around working through the experience was fantastic. And if something went wrong, we fixed it right.

So I was our customer service. I personally, we call the doctor and confirm the point and what I was saying. And if it wasn't, I personally contacted the patient to let them know. And then I would offer them an Amazon gift card alongside with an apology.

Right. And so I raised them to the doctor's office and picked up a couple of K-Flowers on the way there and then a person to apologize. And that was really a checkpoint where I said, well, this service has to work. And we need to have this patient's first attitude in terms of how it works completely ingrained in the company.

All right. So you clearly need to kind of grow this. Or you offer in a service to doctor for free of the time? Initially, we offered it for free, but we eventually started charging $50 per month.

But, for example, doctor, you come in a mouth and say, hey, if you pay me, I can bring you more customers. I would be skeptical. I would have said to you, who even knows about you. You're asking to pay you money for phantom, you know, looking for maybe no customers.

I mean, to some of the doctors say that. Yeah. Many, they used to summarize our sales challenge. Right.

Because if you wanted to, we couldn't easily share how many patients their competitors are down the road. Like that was something that was confidential. Yeah. All right.

So you are, you got this chicken and I promise. You know that the service could really benefit the doctors. But you also need to pay for it because of the way you know, business. Meantime, at a certain point, I'm assuming you guys start to think they're going to go out and look for money.

If you're going to really make this thing work. Yeah. That happens in the spring of 2008, we decided to raise a series A. And we make the rounds, we get in front of a number of the big name VCs.

Only if you work at the deal, it's going to stay in the road. In the hotel. The Our McKinsey payday, our khakis and pam donger, they were really hurting us. And so we were in khakis and pam donger shirts.

It's out. It's crazy. Were they were they pleaded pants or were they at least not pleaded, please. Yeah.

So they were not being back. But we after hearing that feedback, we very quickly just went to an extra happen, bought jeans and t-shirts and they are from there on the combos with the VCs when they're not better. So you went from McKinsey consultant look to, so the tag casually you want of jeans and t-shirts. That's exactly right.

And we introduced ourselves not as NBA's and McKinsey consultants. But we introduced ourselves as a previous entrepreneur starting the next company. What's that mean? What's the way that people who like to have this great idea?

So I mean, interestingly enough, we had raised some money from friends and colleagues. And many of those, they invested in us business plan unseen just based on the fact that we were giving up our money to pursue the stock. So that felt really great. And as we started changing, how we appeared and how we introduced ourselves to venture capitalists, we started to get offers.

And so in August of 2008, we ended up raising five million from close-up interest based in expectations. Well, Mark Banyov, Jeff Bezos and Vio co-selliz, all their funds are in, which sounds like a lot. But for what you want to do, it's actually kind of limited because you still, it seems to me in 2008, even though you have $5 million. You still have these problem, which is you've got to get customers and then to get customers.

You need lots of doctors, lots of options, but to get doctors, you need lots of customers, booking through the site. So how do you do that? Precisely, these five million dollars were really in Mark 4, making New York work. Right?

Make out for us market work. But immediately after raising the money, the financial crisis set. And you may remember there was this rest in peace. You may remember there was this rest in peace.

You may remember there went around. That's how it's right, yes. It's never being able to raise money, rest in peace, good times. So we got this right, it's to make the money stretch.

And we probably don't know not during this time. This was really our first go-long making hard choices and we wanted to be for a goal and not to do things we can afford. And we learned to not get money or place critical thinking and creativity. But now we continue to grind it in New York.

And at some point we felt, well, if we want to get to the next level, we have to prove that it's not just a New York City phenomenon. Right? We had to prove that it would work in a city. But at that point we didn't have the money to do this anymore.

And by the way, you're still your approach was still the same. It was door to door. That's right, door to door. And how are we building awareness about the fact that it's not existed with customers, with the customers.

So we, it was very, very difficult to get someone to the website. But when they did, they loved it because it was such a step change from how healthcare used to work. They used to have to pick up the phone and wait on hold and then place it. So the office manager can do Wednesday morning.

They know about Thursday, noon, no, everybody after night. Now they go to the same thing in a minute and have complete overview of availability. Patients loved it and they told their friends. They started to get what we're now going.

And so we saw New York really jiggy kappenifaut like, okay, this is going to work in New York at a minimum. Right? But we also realized that it took us a fair bit of time and money to get it going in New York. And we couldn't put the money we had left from the five million easily expanded to a new city.

At the same time raising money was going to be difficult because the next generation of investors wanted to see that it works in other cities as well. So we were a little bit in this cash flow too. We ended up applying to those force-boost-yope business competition. Force-forms has its competition, but they still do.

Where they give women right to. They were promising $100,000 price. And at this time, we won. And you know what?

They gave us all these large public sector clearing house size checks. And they just were actually used to cover a hole in one in our only conference room that was holding the wall and we covered it with that check. At this point you are working out this. Not an ordinance.

At this point we were working out of a shared office space. Free work, yeah. Free work. So that gave us this publisher clearing house size check.

But they failed to give us small check for three months. We were getting really nervous whether we were still getting it. But ultimately, we got $100,000. And that's what we used in the launch and hours second market in DC.

And what did it require you guys to move down there or will you do you hire? Because I'm assuming you have to, well, a lot of your early capital is going to sales. Like business development is hiring sales reps. Is that right?

There's a couple of sales reps at the time. In fact, a very first employee ever was a sales rep. He's still with the company today. And he was great.

He figured out how to really charm his way to the doctor. So there were no more security guards that scored anyone out. When did you, I'm assuming that even in 2009, 2009, you were not yet profitable. Far from it.

You're far from it, right? Because it's a capital in tens of minutes. Yes. We obviously invested heavily in customer service.

We wanted patients that have a great experience. And then we had quite sizable engineering team. Because that was actually a major engineering effort. So what started to happen?

When did you start to kind of see a real turning point? Yeah. So we actually, actually, actually with years of work, we've got to talk about these trends. What did you see?

And what did you see? And now we said, well, why are we not in more sales? And so we actually raised a series of B with our response. And we used this to expand all these goals in the fiscal year of Chicago.

And we just got better at it. So we then ended up raising a series of C in 2011 from Goldman and DSC. And we primarily used this to grow our sales team and sign up more doctors in 2011 to 2013. We launched roughly 30 new cities.

I read that by 2014. We covered like 40% of markets in the US, which is huge. And that's a huge number of cities. And in that year, your valuation of stock went past a billion dollars.

And that's pretty remarkable. And you were kind of like really rapid trajectory. And you had a pretty straightforward model. And you were charging doctors a flat fee every year.

And then they could take all the bookings they wanted. And I think that by that point, like 2014, it was not cheap. It was expensive. You raised the price.

It was like $3,000 a year. Yes, we charged $3,000 a year. And there was a flat fee. No matter how many bookings is not going to be associated with them.

And the reality was for some doctors, they've done a lot of bookings. That was a great deal. But there were also doctors that got a lot fewer bookings. And for them, the fixed cost was actually too expensive.

And some of them were starting to leave the service. And so we got a dissertation that required us to invest a lot to stay where we are. And then invest even more to continually grow our overall product base. Which means we had to build out a massive sales team to always sign up more doctors.

And at some point during this time, Nick actually ran into analysis to show that it would take us several years, if ever, for us to make our money back on many of the doctors we signed up. Because you have to sign up X number of hundreds of thousands of doctors paying that amount of a year to make your money back. To make the cost of the sales team back. And this was clear that this would make us dependent on external capital for our very long time.

And now it's a clearly, there are many companies that have taken the growth asset on cost of the search. And they've held up to this 40 centimeter of time. But it clearly puts off into a dependency to investors and their mindsets. Yeah.

So meantime, I'm from what I understand. There's disagreements. I mean, there are, you know, the leadership team, including Cyrus. He's sort of his position as the flat fee model is actually the best way to go.

Is that a fair assessment of his position? Yeah, I think that's right. I mean, there were two fundamentally divergent ways how the business could go forward. One way was to continue to work on optimizing the unit economics of our subscription model.

And the other way was to think about how to make a more transformative leap and find a new more profitable and a more sustainable model. And there, look, I can't understand the reckons in taking the sleep. Very few companies really changed their underlying business model once they have a certain scale. And then they've developed it.

Right. We know the names of the companies have done this. Netflix went from DVDs to streaming Adobe from box software to the cloud. But there's not a lot of companies that do that.

And they'll probably need to make a choice, which was a rational way to go. And I should say, although this became intensely personal for you, because you and Cyrus really disagreed on the direction of the company should take. And then he stepped down. He left the company and you moved into the role of CEO.

That's right. And I want to ask you about this. One of the beauties in the flies of the show is it's simplicity. And we talked to one person or sometimes two.

It's a single narrative. And so we don't have Cyrus with us to tell us what happened. But we asked you about this time because this was your co-founder. This was your partner.

This was your friend. And he was leaving the company. How did you feel at that time? I was very hard and very emotional period for everyone involved.

And it was certainly a departure. But it was also that given these two diverse choices, you couldn't. Not both of us would be useful to the doctor. And I have to imagine that for a very time, it was sort of an adventure.

Oh, look, I mean, we were very close. We were only friends with it for eight years, but we talked together for 10 hours a day. And we probably talked more to each other than to anyone else in our lives. But there's an hour still in touch from time to time.

And I think he's cheering on from side. He still doesn't really own a company. He still shows. Here's the thing.

I mean, we've told stories about breakups. We've had episodes where there were married couples who split the divorce. But continued business, eO products, Susan Griffin Black and her husband Brad, they continued business. Stacey's future.

Stacey's future. They continued business after divorce, all the recorded billion dollars. You guys were worth value at $1.0 billion dollars at this point. Was every party that just that, you know, kind of what we're doing and what we're going in?

I mean, I didn't do an insider to every time I was saying, this thing is growing. And let's just stick this out. I mean, I think the challenge is that it's not as if there was a little way to decide what the right path forward is. There's no one thing that's just wanted to give us money.

The whole cost was, you know, a fine strategy. The question was just how dependent you wanted to be on the continued goodwill of investors. It sounds like you were tired of going out raising money. You didn't want to do that anymore.

I don't know, but I think you want to raise money from a position where you know what you're trying to do. And for us, you know, it wasn't clear that the business model would work in a way that we could just flip a switch and be profitable. Yeah. So that was a tough year for you.

2015. There was an article in business insider and it was about the sales team. It was not that year. And it was allegations that, you know, the team members of sales team were using Adderall even cocaine.

They were under immense pressure. They were working all the time. And I'm not saying you were even aware of anything. You may not even be aware of it, but I have to think that that'll really alarm you and maybe even embarrass you.

Yeah. There were a number of articles in 2014, 2015. I didn't absolutely get everything right. But otherwise, what we can say is that, you know, at the time, there's not a kind of large sales team and we're getting very quickly.

And, you know, maybe it was too focused on, you know, hitting targets and not focused on not focusing on creating a strong culture. You know, the stories from six years ago from time to time, you know, from candidates and really, every time this happens, it's like a gut punch. Yeah. Because we know we're a completely different company now on so many levels.

But clearly, you saw that and knew that you had to change something. Well, yes, I, I, I, I, I was like, let's go fix it. We are a technology company, but we had set ourselves up too much about execution instead of putting wins and really too little about being adaptable and learning and building the trust required to try things that, you know, have the risk of failure. It's one of the first things I did is to change our core values.

The exercise, those behaviors, you know, one of our values is adaptable and comfortable. And everyone is probably for perfection. Learn as before masters, right? And we only kept really one value constant.

The other patient's first and personally that that was more of the culture that I thought was right for, is Octo, to succeed on many dimensions. So you take over the company and you got high valuation, but you're still not making money. And you know that you've got to change your own business model, you're never going to make money. And from what I'm saying, this is sort of the beginning of what you have internally, this is the second founding of the company.

That is right. That is right. And that basically happens in 2018, you, you launch this new business model where instead of the 3000 dollar membership fee, basically you would charge doctors a lot less, like 200 or 300 bucks. But then every book you would take a cut from that book and some more of the travel agency.

Hello, but we don't charge for a new patient booking. So the existing patients to our practice, we, we make free. But yes, there was a fundamental idea. And, you know, it sounds like such an obvious thing to do, but here was the problem with it.

And why, why we thought we were going to be able to see to try this. Our best customers that have been on for a very long time, they got lots of bookings. And if we start charging them for a bookings, their prices go up very significantly. So in some cases, 10 times more.

And that seemed completely insane to us. And in particular, it was when we talked to other companies that were gone through similar changes and even pricing experts. Their number one advice was make sure whatever you do, never charge your best customers more. And for us, it would be precisely the opposite.

And the thing that was counterbalancing this in our mind was maybe be able to bring on a lot more doctors because the barriers to entries now much lower. That was, that was the back and forth in the team to figure out whether that's where the path we want to go. So this is still a risky strategy because you're depending really on new bookings because the $200 increase from back lower. And I have to imagine in year one, you just are dropping a revenue in year one of this kind of second-founding, right?

Well, it's from a risk profile worth that right there. The, the worries is that you lose all your best customers in with it, all the bookings that they're used at the beginning. And so we needed to be ready for a very significant drop in bookings and revenue. And the second challenge was here that, you know, the beauty of this push-mo, is that we got all this money upfront, right?

And now, the one we were getting paid after the booking with a third day, they were doing so. We had a huge working capital requirement to make that happen. So did you see a drop in revenue in 2018 when you rolled this up? No, we didn't because we actually didn't see the doctors leave the way that we had anticipated.

In fact, you know, while we had very much worried that they would be upset and some of them certainly were upset. We were providing so much value to them that the one was said, you know what, what took you so long, I knew it was getting a great deal all along. So that worked really well. And we had piloted in Georgia initially in April 2018 and then that had worked in this.

And we had a lot of collateral for a few weeks later, that worked too. And then we went to Washington State and again, they paused the results. And out of these three states, they said, okay, great, we know this works. It's rolling out in our largest most important market that go to New York.

And that went terribly, horribly wrong. Yeah, the doctors in New York not only were so pissed off, they actually I read, uh, mounted a changed dot org. Um, petition, I don't know what it did to end this practice or something. They were really mad.

And they were really, really mad. And I guess you guys responded. You said, all right, we won't roll this out of New York for a while. Yeah, in New York, we facilitate roughly one in five, a new patient doctor relationships in the entire city.

And so the economic impact of providers in New York was much greater than for the providers in Georgia throughout our Washington. So, yes. So, give you my sample, there's a dermatologist in soho and he paid $100 to the total $10 to $10 to $50,000. And under the new pricing model, his cost was going to go out from $30,000 to roughly $340,000.

Wow. So what was your response to that? And he seemed pretty reasonable, uh, concern. Yeah, so after the conversation with the dermatologist, I actually put down the phone and I thought, you know what, he's right.

And so, um, I paused and then we regrouped and we did a couple after the things during the time. We just went on listening to her. You know, we talked about providers, we got their feedback and we adjusted our traditional scientific providers how much longer grace period to decide, you know, whether they want to listen to the new model or not. And then so then we re-alchered New York six months later and went dramatically better.

So the strategy works. And you see results from the strategy pretty quickly, what was in a year? Yeah, we were in a year. We had finally had some incredible metrics.

I was really going better than we expected in our wildest dreams. Our existing client churn went down to essentially zero. I mean, people sort of tire and we've just got no one really left the service. And we were adding more and more providers because the better attention was owned.

And so in 2019, we began growing properly. So it sounds like 2019 was really a banner year. 2019 was a fantastic year. And honestly, we had so much momentum coming into 2020.

And it felt like it worked really hard for three years and it's profitable. And the guy was the limit until it was in. Until March of 2020. And that's really maybe the third founding of the stock.

Well, I won't ask you about March of 2020 because your business is based on people booking with doctors and going to doctor. I have to imagine your revenues must have plummeted like every other industry. and doctors officers are still in most of the country slower to our trivial patients coming in. Absolutely.

So when the lockdown started happening, we saw in-person bookings declining anywhere between 50 to 90 percent by the end of March. Yeah. And I surprised. And low than vice-versa was getting was to sort of lay off people and make sure that we hung her down to whether the storm.

But I saw an opportunity to build with most of us. So I thought, well, we should be there for our patients. We should be expanding into telehealth and then I need every team member to help me do that. And so we really went all in and supporting videos.

And our opportunity began redesigning the tire marketplaces of Porto-Cairn. And so we actually released the doctor video service and we made this available to any physician whether they are on doctor or not for free. And by the way, had you like a plan to do this? How long would it be?

I mean, I'm not imagining if you said in February, I really want to focus on telehealth. Would you expect that by May, would it be ready to go? Absolutely not. I think what has been really fantastic to see is how we really finished two years of roadmap in two months.

Wow. And it's great because it's just because it's a window on about the next phase of the lockdown movie. I'm really looking forward to that. In my mind, we're at the point where Amazon started from going selling only books to also adding CDs.