Startup Physicians

Think Like a Founder: A Venture Lens for Startup-Minded Physicians with Christopher Poole

• Alison Curfman, M.D. • Season 1 • Episode 23

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In this episode on Startup Physicians, Chris Poole and I discuss the challenges and insights related to building startups in the healthcare sector. We emphasize the importance of starting with a clear problem, understanding unit economics, and evaluating market viability. Chris shares his journey from being an entrepreneur to a venture leader, highlighting the non-linear paths many take in their careers. The discussion also covers the significance of validating business ideas and the role of physicians in entrepreneurship.

Episode Highlights:

[00:00] - Introduction to Healthcare Ventures
[02:42] - Chris Poole's Journey in Venture Capital
[05:34] - The Non-Linear Path of Entrepreneurship
[07:56] - Identifying Problems in Healthcare
[11:13] - From Idea to Viable Business
[13:55] - Understanding Unit Economics
[19:02] - The Importance of Market Validation
[21:45] - Building a Sustainable Business Model
[26:34] - Closing Thoughts and Resources

Alison Curfman:

One thing that I see physicians do is get really excited about a problem because they feel it so deeply, they experience it. They see their patients experience it, and then they get some idea of a solution. So they say, You know what they need? They need better, you know, access to educational materials, or they need a better this or that, or they need a device or and then they really get started, kind of in their own discovery process of trying to figure out how to make this solution work. And kind of a undirected sales, like, oh, maybe I could sell it here. Maybe I could sell it here. Maybe I gave this person to pay for it. And they're putting a lot of their own capital into an idea to try and just like, see if they can get it to take off, and I've seen physicians who have put, you know, six figures of their own money into a concept they still don't know whether it can actually generate revenue. Welcome to StartUp physicians. Please Like and follow our show to join our community of physicians who are reimagining healthcare delivery. Hi everyone, and welcome back to startup physicians. I am really excited today about our guest, Chris Poole, so I just want to share that most of the physicians who listen to this podcast are at some sort of an inflection point. So they've identified real problems inside the healthcare system, problems that they've lived and worked through, and they're starting to imagine what solutions could look like. But here's the challenge, going from a powerful insight to an actual viable, investable company really requires a different set of tools, and there's a gap between I know the problem and I've built a solution that works financially, and that's where a lot of well intentioned ventures can fall apart. And I was having this conversation with Chris, so I'm joined with Chris Poole today, who is a healthcare venture leader and a CEO of a startup, who brings the venture lens on how companies get built, what investors actually look for, and why, getting clear on your unit economics early can really save founders months or years of wasted energy. So first, I want to start by saying thank you so much for joining me today. Chris, thanks for having me. Allison, awesome. So I'd love if you could start out by just sharing a little bit about your background and journey in the venture world and what sorts of things you've contributed

Chris Poole:

to. Yeah, absolutely. I would probably start by saying that, you know, my career has been one where I've largely followed my passion and interest and that's led me to becoming an entrepreneur, probably first investor, second, but I've had the good fortune of being in the investor role twice early in my career, with a family office. We invested in healthcare, a couple other industries, early, early stage. That was a great experience. Was there for four or five years, started as an associate, left as a principal, and that really gave me a very strong foundation as it relates to how I think about and evaluate startup opportunities. From there, did the business school thing, decided I want to start a company, went on to co found a virtual care company in GI called minify health. We basically started that from the ground up in front of a whiteboard, was eventually compelled to take over what was an early staffing company at the time called mid level u we rebranded under Thrive AP and created a virtual residency program for a PPS. That was an awesome opportunity in time, sold into hospitals, and was really my first role, sort of as CEO. Learned a lot and was kind of heads down, and got approached about joining a venture platform called 20 5m health. It was a studio in partnership with 25 Madison Apollo Global Management and life point. And then the goal was innovating, leveraging like point as a place to identify and build problems, or sorry, identify problems and build solutions and launch startups. Did that for a number of years, and then ultimately, sort of made the decision long term that I prefer to operate. And so I joined a company, post Series B, company called hatch. We're doing some interesting stuff. We're a growth enablement platform for specialty practices where we were able to create scalable access, advanced routing and deep insights into the referral sources and trends within the within a specialty group. So excited to be here, happy to talk about those experiences, or just generally, building startups.

Alison Curfman:

That's awesome. I kind of chuckle, because in in the startup world, saying you. Like to operate is very different than in the physician world. So people are probably like, is he a surgeon? But no. So operating a company, so being an operator of a company, how would you define that?

Chris Poole:

I mean, it's to me, candidly, like the difference between a VC and an operator is like a basketball coach and a player like all of the highs, the lows, the sort of intensity of innovating and building startups exist within the startup and the operating team, the executive team that's leading the company, whereas in venture, you're kind of playing a support role, whether it's capital or other forms of support at a distance. And, you know, ultimately, I like working with customers. I like the creative side of envisioning solutions. It's a in some days, it feels like it's a young person sport. I definitely feel like, you know, I've, I don't, I don't have a ton of graying hair, but what I do have is probably attributed to operating but it's great. I love it, and I think, you know, this is largely what I want to do for the rest of my career.

Alison Curfman:

That's awesome. I The other thing that struck me when you're describing your career background, it's, it's probably so novel for physicians, is it was not linear, right? It is not like, well, I did this, and then the next step was I did this. So I did medical school, and then I did internship, and then I did residency, and then I did fellowship, and then I was an attending 10 years after starting all of my everything. And that's when my career started, and I worked my way up an academic ladder. It's like, so many of us are so used to this, like, well, there's only one next step. There's only one next step. And I think what's so cool for me about having so many people in my network like you who have all of these rich experiences, is that you have worked with so many companies, both as an operator and as a VC, and you've gotten such a broad viewpoint on ways to do things and what works and what components are needed. And I just think that for me, being a physician who took a very linear pathway until I got into the pepc world, and then it's just been like kind of all over the place. It's very refreshing to get to interact with people like you who have all of these kind of interesting perspectives.

Chris Poole:

Yeah, it's a really interesting point. My brother's a physician. He's an orthopedic surgeon, and, you know, he's been marching down a very structured, you know, linear path since we were kids. I think it really started, probably in middle school, whereas I had no clue what I wanted to do. Looking back, I was always entrepreneurial, but we didn't have entrepreneurs in our family, so a lot of the things that I was interested in, in doing, even in high school, was really kind of misunderstood. And so I don't think I realized how much of a natural appreciation and love for business until probably that I had until probably, you know, 2223 so I think the other thing I would say is, like this lifestyle, you deal with a lot of ambiguity. It was quite shocking for my wife early on. I think she's been sort of beside me through the sort of ups and downs and and so now we're kind of weathered for the lifestyle, but you know, there's nothing that's more rewarding. I've never felt so alive than I have when I've been building companies, and particularly those that are that, are, you know, going

Alison Curfman:

well, yeah, and I think of the camaraderie I felt with you when we first met, I don't know, I think a year and a half ago or something, when we were both kind of in a transition state. We were both like, you know what? I'm, I'm, I'm leaving my job and I'm going to do something different. Haven't quite figured it out yet. Like, it actually takes a lot of a like, confidence in yourself and a leap of faith and an understanding of, like, I know a lot of things, I can figure out a lot of things. And so it's been, it's been fun to kind of watch you over your transition year, moving into new roles, and I'm building new things, and that's just not a normal thing to do for physicians.

Unknown:

Yep, yep, I can see that.

Alison Curfman:

So when we caught up recently, there were three or four points that we were really getting excited about that, I think make a ton of sense when you're talking about building a company. And I'll say them now and then maybe we can go through each of them. But what you told me is that first you have to start with a problem. So you can't just be like, Oh, I made the software. Where's the problem that I could apply it to? So you start with the problem, and you need to understand deeply what the problem is, who it affects, how it costs money, where all the inefficiencies are really, get that problem understood, and then identify, like, what is a potential solution. Sometimes it's going to be like a multi layered like brainstorm, like we could do this to solve it, or we could do this. To solve it, and like exploring multiple pathways of solutions, until you do more discovery and get an understanding of like which solution might work. Point number three is the one that I think we'll spend the most time on, which is understanding your unit economics, which is probably a concept that most physicians are not familiar with, and then understanding your total addressable market, which is called the TAM, which is also something that I don't think physicians necessarily think about when they have an idea or want to develop something, but when we go through those four things, those were things that we aligned on, that like as people who have built companies have seen the importance of each of those steps, and I want to start with the point that you made about starting with a problem, because I think that this is where physicians have a little bit of a superpower, is that we live this every day in our in Our practice, and I have no problem finding the problems. Like, I can think of a ton of problems that are costly or bad for patients or bad for clinicians. And I think that's where my journey really started. Was like, look at all of these issues for children with medical complexity. These kids and their families go through so much, and they are, you know, this tiny fraction of the pediatric population that accounts for this massive amount of spend, because they spend so much time in the hospital, like there's a really good problem to solve. And I knew that because I lived it, I took care of so many of these kids. And so what I encourage physicians is that, you know where the problems are, and that gives you this, like, huge step up when it comes to building business. What are your thoughts there?

Chris Poole:

Yeah, I absolutely. I there. There are frameworks that you know, expect we'll talk about today, that I don't think are, like, groundbreaking, but they're simple, they're tested, and they frankly, just work in terms of, how do you take the concept of a problem and run it through a structure to where you can determine, is this something that I can build a viable business around? Now, there's different types of businesses. You know, entrepreneurs can build. You've got lifestyle businesses, you've got venture scale businesses, I think, as private equity continues to evolve, you've got businesses that probably wouldn't attract venture dollars, but if you can scale to an inflection point, you know, I don't know, maybe a couple million dollars of revenue, you've got kind of small cap private equity that will will come in and buy it or capitalize it for additional growth. So building a successful company, there's, there's several paths, I think the one that gets the most attention, and some, in some ways, is probably over glamorized, is venture scale, you know, but, but that doesn't mean that, you know, you can't find a business that's compelling, that solving a real need and build a great, a great business around it that's outside of venture.

Alison Curfman:

Yeah, absolutely. And when you're evaluating your company more from the venture side, what do you think is the difference between a great idea and a great business?

Chris Poole:

Probably what I would say is there's, there's probably a couple things that come to mind within venture. You need a large market, right? Because you need to be able to sustain a very, very high growth rate, and you want to be able to grow revenue to, you know, a large degree we're talking, you know, in some cases, maybe billions of dollars, depending on the the industry or segment within the industry. And so if I think about, kind of the building blocks, I almost envision, like a pyramid, in terms of, like, these are sort of the core questions that you want to answer, and you've got sort of your foundational sort of questions, and it sort of stacks from there. And if you're fortunate, you know, you can sort of make your way from the bottom to the very top of the pyramid in terms of, like, how you conceptualize or think about the business opportunity, if we just sort of walk through that in terms of really quickly, from a VC perspective, the problem. What is it again, if I don't agree with you as an investor, if I don't agree with you as an entrepreneur, around the problem, there really probably is nothing more that we need to talk about, right? I think the appreciation for the problem, and a lot of times this is influenced by the degree of complexity, the pain of the consumer, how widespread the problem is, but generally speaking, do we agree on the assessment of the problem next the solution? Is this the right solution? Is it the right solution in the eyes of the VC, more importantly, what information? Validation, or validation do we have from the customer that this is the right solution, right? And want some validation there? VCs will have an opinion, but generally speaking, they're going to pay most attention to the customer, and that's going to kind of dictate, ultimately, where they where they fall, and then we get to the market, and this is where it becomes quite critical for the VC. So you want large markets, this is where you do addressable markets. And you can find these decks all over the internet, you know, and it's whatever is a $50 billion industry. And really what that means day one is that this is like a really large space for us to build a company in. And so with many startups, you have a minimal viable product within the industry. You build it, you deploy it, and then you grow it in terms of sales, but then you expand beyond just that MVP to build solutions sort of in and around that. So from a VC standpoint, I think the market becomes the most one of the most critical points of consideration for an investment.

Alison Curfman:

Yeah, so you touched on a lot of things there, which I think is so valuable. The problem I'm kind of tracking along with my own experience. And everything that you're saying is really syncing with what I experienced. But the problem was what kind of brought me together with the firm that was wanting to solve this problem. I had already been working with complex kids. I had already actually developed a solution that I felt was economically viable in a value based model, and had published that. But the firm had also decided, like this was a problem that they wanted to do discovery on, and that's how we ended up connecting. I think that when I brought a solution of a model, a clinical model, which a lot of doctors don't even realize that some of their ideas and like, how they run their clinic, or how they offer services, or how they like, you know, kind of move patient through a system of support in a new way. It is actually potentially a clinical model, which is an actual product that you could create. But where we got hung up was the total addressable market, and this was like a big sticking point with my firm, because they were used to working on Medicare companies and Medicare versus Medicaid? Well, obviously, there are way more sick adults in the country than Sick Kids. Huge difference, like, you know, 100 billion dollar market of like, sick adults that need chronic care management. But of course, have like, a bajillion competitors, because there's a lot of people working in that space, versus maybe like $8 billion of spend for chronically ill children on Medicaid. But nobody was really doing anything in that space from a VCP side of things, and so I it was actually like a tough sell, like I remember in the early days the firm was like, there were a lot of people at the firm that were like, I just don't know that this is gonna work. I don't know it's gonna I don't know if there's enough there, there like, I don't know if there's enough market for you to capture. I don't know if there's enough savings for you to generate. And that really gets into the unit economics, which is something that we'll talk more about, but, and it was a tough sell, until we, you know, really got our first contract and and then the rest has been really interesting journey. I mean, we've we've expanded a lot, and then we've actually been able to show with the model that we've been able to drastically reduce hospitalizations and costs, and so, because our unit economics were right on paper before we launched, and we had a really, really solid model to follow, the company's doing very well, but all of those steps that you talk about is, you know, Obviously something that, like, I spent months on each one of those trying to get buy in from all the right people and get the right people to believe that this would work. And you can't fudge it like there were variables that it's like, well, how are we going to capture enough market? How are we going to actually get the right information to know how many kids would qualify for this? And like, you actually have to do real calculations and get real data. And so that's like a lot of what firms do, and early stage companies do is trying to get the real answers and talk to the right experts, because you only have so many internal people at a early stage company, you've got a couple of founders. So another point that I want to make to physicians is that we rely so heavily on external consultants and advisors in that stage to really help de risk a concept. And so that's another opportunity for doctors as. Consultants and advisors to really come to the table and be like, Is this a real problem? Is this a solution that would help fix that? So,

Chris Poole:

yeah, I mean, I think a lot of as you sort of think about building the pyramid, you know, there's, there's a lot of research that you do, a lot of folks that you talk to to try to understand and sort of confirm or validate your understanding of of the problem and what the solution would look like and how it would need to work. And then the market, the business model, unit economics, etc, generally, when you think about and taking an idea from zero to one, it's really about conducting the first pass of the business model is at best, like directionally right, and could largely be wrong. And a lot of times, what VCs will look for is points of validation to suggest that there's something here, and it's market signals, it could be you've been developing a solution with the health system or practice, and the practice is well regarded within whatever, you know, specialty group or whatever that it exists in. And these are data points that they use to suggest, oh, you know, if the hospital is working with you on this, then it's likely that this is a real problem, and that you know that you have a captive customer to inform how you design your solution. And so those are great early kind of early tactics you can use to to kind of flush out the business and also build points of validation that I think will resonate with the investor community.

Alison Curfman:

And one thing that I see physicians do is get really excited about a problem, because they feel it so deeply, they experience it. They see their patients experience it, and then they get some idea of a solution. So they say, You know what they need? They need better, you know, access to educational materials, or they need a better this or that, or they need a device or and then they really get started, kind of in their own discovery process of trying to figure out how to make this solution work. And kind of a undirected sales, like, oh, maybe I could sell it here, maybe I could sell it here, maybe I gave this person to pay for it, and they're putting a lot of their own capital into an idea to try and just like, see if they can get it to take off. And I've seen physicians who have put, you know, six figures of their own money into a concept they still don't know whether it can actually generate revenue. And so that brings me to the last thing I wanted to talk to you about, which is really understanding unit economics, and what that looked like for me in my pathway was, you know, building this clinical model, basically in an Excel sheet. Like, this person does this for this many minutes, and then they get this resource, and then they get that. Like, what does it look like for the whole model of what all the resources would be needed to, you know, support complex kids, and then also building this financial model, understanding their claims data and how much we could reduce spend and and then, like, reconciling. I mean, it took months of these two spreadsheets basically became one giant model that so big, it would like, break my computer whenever I opened it, but ultimately getting to a point of, like, the unit economics worked, and it made the firm be like, yes, we're going to invest in this. And it made our partners or be say, like, yes, we will contract with you for this model, and I think that that is the foundation of a good business, is when the unit economics makes sense, yeah, before you start. So I'd love to hear your thoughts on that and your advice for people, yeah, so

Chris Poole:

a couple of thoughts, if we feel confident that we understand the problem and that we've envisioned a solution, and that's no small undertaking, candidly, really, and even really the market size, regardless of how we want to finance the business, but we feel like there's a sufficient market to build a sustainable business around. This is where we get into the business model. And there's all different types of business models. You have SaaS models, you've got transaction models. You've got within healthcare. You've got these emerging VPC at risk models, shared savings, et cetera. Once you understand your business model, that's where you start to back into the unit economics. And I like to a bit oversimplify the talking points here. And so if anything, as a viewer of the podcast, you may be at risk of having a bit of an oversimplified view, but I think it's a good place to start. The question you have to ask yourself is, when you sort of collapse the business into its smallest let's think of, I don't know, paper cups as an example, a manufacturer. Facility of paper cups. Will know it cost 12 cents to produce the cup, right? That's 12 cents of raw materials and inputs, right? This is before they have corporate overhead and they pay for 401 k's and office space, so on and so forth. They need to understand that they make a profit off of each cup. So if it's, you know, 14 cents to produce the cup, and they're selling it for 45 cents, then you know, we've got to spread there, right? And, believe it or not, that conceptually, that is often overlooked, and what new first time entrepreneurs often don't understand. This is why I think you see a lot of restaurants fail. This is true across all industries, regardless of where, where you're wanting to build a company, is they don't actually understand the input cost of a product. If it's a piece of software, you've got your sort of direct cost, you know, engineers, you've got sort of your variable cost, whether it's software tools that you use, your engineering team uses. I mean, you know, there's a litany of costs that go into software, and if you don't understand that well enough, and you're priced below your input cost, then that's one of the easiest ways to run a business right off of a cliff, because you're not generating any profit that even goes to in this case, we would be talking about gross profit that would go towards your corporate overhead cost, right? And so you really want to make sure that you understand your unit model. What is that sort of single piece of deliverable, cup, a software, whatever. What are the costs that go into it? And then ultimately, what will a customer pay for it? And some, sometimes there's, there are problems that customers have that they're willing to pay for, but it's not a big enough problem for them to pay you enough to generate a gross yes on your unit cost, right? Yes. And so I think the more that the entrepreneur understands that, the more it shows a mastery of them understanding their business from a business perspective, not from a sort of an inventor perspective, but truly from a business leader perspective. And believe it or not, I think that's one of the pieces. The earlier you can validate, the better as it relates to fundraising, because the greater the margin is, the less capital you would potentially need, right in terms of building that business, the more profitable the business is just inherently going to be. And then even when you think about selling the company years down the road, oftentimes that's based off of like an EBITDA figure, and if you have strong you know margins, then your exit value is going to be a lot higher.

Alison Curfman:

Yeah, that was so much great content in such a short spiel. I think that everyone should rewind and listen to that a couple of times. So that was so good. I think that we as creators sometimes want to add all the bells and whistles because we get excited about creating a product like I know that when I first made our clinical model, it costs too much. It was like there was so many resources that we had to whittle it down a little bit in our unit economics that we were anchoring around is called a pm, pm per member per month. Like, what does it cost per month for us to deliver services to one member and then and then, on the payer side of things, the PMPM, what will they pay per member per month to us to provide the service? So it was one number. Like, we would do all this work on all this. We would have so many conversations. We would get into the spreadsheet, we would change things, and we would change it on the model and on the on the journey and all this, and we'd get down to it, and we'd be like, Okay, what, what number did it spit out? So it's a really powerful exercise. I'm doing the same thing with my own son, who's got this little like bike shop that he like, gets these like, free bikes off Facebook marketplace that are beat up, and replaces some stuff and and then tries to sell them. And he's like, oh, I want to add kickstands and baskets and handlebars, streamers and all this stuff. And I'm like, Okay, well, if you want to add all those things, you need to go on and figure out, like, how much would it cost for you to buy 10 kickstands on, you know, Amazon or wherever you want to get them, what's the unit price per kick stand? And can you make sure that if people asking to add a kickstand, they're paying more than that, what you paid for it, because you want to add all the bells and whistle. You want to add a bell to the bike. Well, if you want your product, you do want your product to be great, but you also want it to have a margin. And so I love all of the things that you've shared. I think you have so much amazing knowledge related to business finance. You. I think that you know the company that you're working on now is an amazing solution for specialty groups. So if physicians are interested in learning more about your company, we'll put your your website in the show notes. But any last thoughts to close with,

Chris Poole:

I would just say most of what we've covered today is readily available via, you know, your common startup books and online. And so I think you know, beyond listening to this podcast, if you want to learn more, there's copious amounts of information available. But you know, for all aspiring or current entrepreneurs, the quicker that you can develop a strong understanding of kind of this framework for evaluating a business, the more time it's going to save you. You'll have fewer headaches, you'll raise capital easier. And so I really encourage everyone to take time to understand these core building blocks we've covered today. Well,

Alison Curfman:

thank you so much. Chris and I will also link Chris's LinkedIn in the show notes, if anyone wants to reach out to him. And for those of you who are interested in building your own business, I am excited that one of the things I'm working on right now is a physician incubator program to really be a bridge from your clinical insight into I know a problem, I think I have a solution and really helping guide people through this exercise of understanding your total addressable market and unit economics, which are all exercises you can do on paper without capital most of the time, it's like a thinking exercise. So if you are interested in that sort of thing, please join the mailing list and we'll keep you updated on that. So thank you all for tuning in, and I'll see you next time. Thank you for listening to startup physicians. Don't forget to like, follow and share. You.