February 22, 2022
[00:00:28] Aaron Martin: Well, hi and welcome. This is Aaron Martin. I’m the Chief Digital Officer for Providence and also run Providence Ventures. And I’m happy here today to have Derek Streat joining me. I am a part of the Day Zero advisory council, advisory council member, and really excited to talk to Derek. In the Day Zero series, talking to a whole group of founders, this is the best part of my job by far is talking to kind of founding CEOs about, obviously their companies is part of my role at Providence Ventures, but really, really excited about kind of opening the door for other folks to hear what these conversations are like and that kind of thing. So, Derek, why don’t you real quickly just kind of introduce yourself to the group watching and we’ll kind of take it from there.
[00:01:15] Derek Streat: Sure, thanks, Aaron. I’ve been looking forward to this as well. We spend, so much time of the day is talking about healthcare, and I know we’ll do a little bit of that here today as well, but it’s refreshing to talk about some other things as well. So I’m looking forward to it. Derek Streat. I’m a technology entrepreneur. I started my career in investment banking, but quickly, pretty quickly, got the bug. And so I’m on my sixth venture-backed startup at this time, DexCare, which is a company that I am the CEO of.
[00:01:37] Aaron Martin: Now, full disclosure, I’m on the DexCare board. Providence is an investor. And we also worked with Derek to kind of incubate it and spin it out. But before we go there, talk about your first role as a founder in a company. Bring me into the room about, what was it like to kind of make that first decision?
[00:01:55] Derek Streat: Well, as I mentioned, I started my career as an investment banker and was kind of into finance stuff, even through high school and college and things like that. And so I thought I was on that track and I saw the movie Wall Street and thought, hey, that’d be pretty cool, to get involved in that kind of stuff. And so I did that and I pretty quickly found, I was in that for about five years, two different firms, I pretty quickly found that, as I was spending more and more time, first as a junior analyst and eventually as the VP with different companies, you’re spending time with the C-suite as you’re banking companies to raise money or buy or sell other companies. And so, as I was spending more time with CFOs and CEOs, I found that there was something lacking once the transaction was done, because banking is very transactional. And so, I’d watch them go off and do cool things like build a company. And then, I would go sit in a room with a bunch of lawyers and work on the next one or something. It just was not that exciting. And so, eventually cajoled one of my partners at the firm we were at at the time to go start our first company. And it was, in a nutshell, I can tell you it was a glorious failure, but an awesome learning experience, and, even though it didn’t work out, it put me on the path to then, make this my career choice going forward.
[00:03:02] Aaron Martin: It’s interesting. When you and I met, we met at your prior business, which was sold to J&J, and then we somehow lured you into the DexCare thing. And what was interesting to me is, when I was talking to you, there was no even inkling or thought that you were going to do anything else but be the CEO of another startup.
Is it just one of these things where, once you’re in, you’ve done this six times, you can’t think about doing anything else, because it’s just in your DNA or tell me a little bit about that.
[00:03:36] Derek Streat: I think there’s just some sort of table stakes. People that are entrepreneurs, whether you’re successful or not, that there’s sort of common traits among folks. And I certainly had those, probably a higher risk tolerance, a desire to…honestly, starting companies, there’s a bit of selfishness to it as well. Why should get to go out there and do something that probably isn’t going to have a return for your family or anybody when, you could just go out and bank money and keep everything stable and make your parents happy. ?And so there’s a little bit of that that goes into it as well. And then the other thing that really, I just realized pretty early on is that I think a lot of times people don’t think of business as like a creative kind of thing, but at the end of the day, the people that really want to be entrepreneurs, and I’m this way, is you have to build something. You have to create. You’re not comfortable if you’re just consuming. Now, psychologically, why that’s the case? I don’t know. But, I think everybody has this in them. Some people choose to apply that to starting a business. Some people choose to apply it to creating some piece of art or something like that. But at the end of the day, I think there’s something very human about needing to create and my skills just lined up with creating a business as opposed to something else. I actually wish there were other things I could create, but it turns out this is one that I’m fairly good at. And so, once you kind of figure out how you can create something and I think which is very just kind of ingrained in all of our DNA, then that becomes addictive. How do I create the next thing? And sometimes what you’ve created actually isn’t that cool. It’s not that cool. And a lot of people don’t care about it. Doesn’t sell. But you can still go back and say, yeah, maybe there’s this blob of stuff, but I created it. Like, it didn’t exist before and I made it, and I’m proud of that because I went ahead and did that. And so that’s always been a drive for me to actually create and build.
[00:05:25] Aaron Martin: One of the really interesting things about your career is, when you kind of created these startups,and it’s rare to see somebody who’s had three very different scenarios that I can kind of think of. One was like, de novo, your idea, you started it, that kind of thing. The other was spinning out some IP, if I’m not mistaken, out of a university setting, and the third was kind of co-collaborating with us at Providence to kind of take something that was pretty scaled internally, and then kind of expand the vision and spin it out. Can you talk about those three different scenarios and kind of compare and contrast, like what was different about those three different scenarios?
[00:06:05] Derek Streat: Yeah. Yeah, it’s a good question. We talked about this a bit when we were talking about me coming on to help out with DexCare. I would say another scenario is, I’ve also done a couple where I’ve done a EIR stint inside of a venture firm. And that’s a whole different experience where it’s six months of white boarding things out with really smart people to eventually, kind of, get something birthed. And they’re all different, but they’re all the same too, in that this is another thing I think that’s sort of an important aspect of being a successful entrepreneur is, while it’s a selfish endeavor, you also need to sort of check yourself at the door as well and understand that this isn’t happening if it’s just you. I mean, I think there’s lots and lots of examples, probably more examples of entrepreneurs flaming out when it was like, their way or the highway. Part of the benefit and the curse being an entrepreneur is you have this vision, you think you can see something not for what it is today but for what it can become. And once in a while, a Steve jobs emerged and they’re right. and everybody else is wrong, and they can go ahead and do that. But most of us sort of mortals, the statistical chance of you being right is pretty low. So therefore I’ve always believed that you’ve got to do this with the help of others. And so I’ve always, I guess, thankfully been able to sort of check that at the door. And so the first company that I did, which was sort of a GroupOn for college students in 1996, when it was very hard to compete against the paper coupon book, so hard that it was impossible for us to actually do it at the time, believe it or not. That was an idea that, even that one, I would say, my co-founder and I kind of generated that ourselves based on what we observed in the space. Doing these inside of a venture fund, it’s six months of white boarding stuff out. You have lots of ideas, but it’s not like you’re really going to make it happen with just that. The university, I was luckily able to find a professor over there who had had four years of validation of a scientific method that we could then productize and work together to bring it to market. And of course, in DexCare, you all had done a lot of work, not only in ideation, but in productizing and validating. So, a lot of those things were in place. This also lines up well with kind of the age old, do you bootstrap or do you raise capital to fund what you do. And again, in the same vein, I’ve just always thought that, yah I could try to come up with the idea, keep it all in my head, and fish in a little pond here and try to keep it all for myself, or I could actually leverage all these other really smart people out there, apply what I’m good at, leverage what they’re good at, get a bigger, let’s not fish in an ocean, and get a giant fleet of vessels out there to figure this out. And not only does it have a better chance of turning into something meaningful then, but it’s just a lot more fun to do that. So, the commonality in all of them have been, they’ve been different, but they’ve also been the same in that it’s always checking yourself at the door and leveraging other people to get where you’re trying to go.
[00:09:01] Aaron Martin: When I talk to founders, there’s kind of two groups. There’s the kind of inventors and then the hunters, right? So the inventors are, they really care whether or not it’s their idea, their original idea. Now they’ll collaborate and expand it, et cetera. I’ve met a few folks that are like, for me to get passionate about it, it’s got to feel like it came from me. And then there’s the hunters, which I would kind of put you into the category, where they’re out there looking, kind of scanning the environment and seeing good ideas. Let’s start off with the C-SATS piece, since that’s relevant in healthcare. Tell me a little bit about that story. You kind of took it out of, I guess, academia and made it practical. So talk about what it was and what it did and what it became.
[00:09:45] Derek Streat: Yeah. So on that one, the precursor to it was I had another healthcare company that I had done prior to that. It was an NLP company in the medical research space. And my co-founder, my tech co-founder there, had spent some time spinning something out of a university, kind of a predictive analytics company in the travel space. And so he had gone through an experience there and it was fun. Whether you’re the inventor or the hunter, it’s kind of the ideal place to kind of scratch your entrepreneurial itch. I spent about a year cavorting about campus meeting with a bunch of scientists. It’s like you open up a door and there’s lightning shooting all over the place, just crazy stuff going on, ninjas performing feats behind doors and stuff. It’s like you’re looking at all these science experiments to then see if something could actually be productized. Most of them are science experiments, but you know, once in a while you find something to be productized. And the volume is so large that they have some decent hits. And so to your earlier point, I did tell them up front, coming in, like, I’m on a mission to spin a company out, not to mentor, things like that. And so got hooked up again with this guy Dr. Lendvay, who had validated this really cool idea, that he could quantify surgical skill, literally how surgeons moved, in a very objective way. And furthermore, kind of the big innovation was, do it with a bunch of people analyzing these surgeons that were laypeople, knew nothing about surgery. And what he did in a nutshell was he broke down skills into, literally the left hand, right movements of surgeons that anybody, even not versed in surgery, could understand. Like you could look at how somebody is moving and tell whether he’s shaking or not, or left, or right-hand dominant, things like that. I was able to then correlate that to outcomes and then use this statistical power of large number of reviewers to then get to what turned out to be a highly predictive score of whether or not this surgeon was going to have a case that led to a complication or worse. So that was really cool. It had been validated in the medical literature. But to your point, it was still an academic project, but it looked like we could productize something there and take it to market. Started in research budgets, which aren’t particularly fruitful, but not too far down the path. You mentioned Sean O’Connor, who was also the co-founder of DexCare with you and I. We brought him in over at C-SATS and he really quickly helped us figure out how we could attach what we had learned with that methodology and product to actually return an investment within the health system, which turned out to be, hey, you kind of woke us up here to realize we were in the highest value, highest margin kind of production line of the health system, being in the surgical suites. And at the same time, there’s a ton of risk. And so we started uncovering risk budgets, malpractice budgets, and operational budgets, and things like that that enabled us to do it then essentially create this sort of operational surveillance system that ultimately got used, and still is, by five of the 10 IDNs in the country. And it’s part of Johnson and Johnson, sort of one of the lobes of their digital brain that powers their smart implementation, robotics, platforms and things like that now.
[00:12:42] Aaron Martin: One of the things I always enjoy hearing you and Sean talk about is like some of your kind of war stories from kind of selling into health systems. It’d just be great to just hear like, what are some of the kind of tips and tricks that you guys learned in terms of selling into health systems that really matter, both at DexCare, as well as at C-SATS.
[00:13:00] Derek Streat: When we started C-SATS, we had a lot of people tell us, you’re basically doing every possible thing to stack the deck against you. Not only is it healthcare, you’re selling the health systems, which are the hardest of the group. And within health systems, you’re selling to the people that don’t at all want to be told what to do. They’re the fighter pilots of the space. So you’re doing that. And really, you know, we had lots of excuses, but the reality was it was because our subject matter expert was a surgeon. And so like, you go where the current is taking you. It turned out that that turned out to be, we kind of lucked into it being a really good move at the end of the day, because it’s kind of like, if you start at the top, like everything gets easier. And so we eventually were evaluating, able to figure out where kids might be on the autism spectrum, to kind of nursing performance, all other things. And really everything else was easier after going through that. And then it also helped us then inform how we approach other business within health systems, bringing products like DexCare to market. And so I would say a few things on this front. One, there’s just some basics that you have to have, I would say, just to be in healthcare in the first place. So kind of in the whole spirit of sort of checking yourself at the door. Like a lot of people, I would say myself included, I spent 10 years in ad tech before I came over to this space and social media. And the first healthcare company, they’re all hard. The first one was really hard because a lot of us come into the space thinking, hey, over here in these other spaces, we just, we made some software and then turned this dial on this thing here and just implemented it and everything was better. And in healthcare, that’s all true technically. But then the, as you know, the political will and the infrastructure and the legacy just grinds it all down. And so I think the first thing is you just have to have the basics of persistence and willing to take the leap and risk tolerance and all that kind of stuff. More specifically for health systems, I think there’s a few things. One, I’ve seen a lot of people make the mistakes of not really kind of paying enough attention to return on investment inside of a health system, even a nonprofit, giant nonprofit, like you’re part of Aaron. And I know you get this. You still have to run it as a business in order to…The margin drives the mission is how it goes. And so you still have to be able to do that. So I think it’s really easy for folks not to put the work into really proving and validating out ROI in order to make sure that you can access budget. And it’s gotta be relative ROI. I mean, the other trap I’ve seen people fall into is, we’ll show you an ROI, and an ROI that typically tied to some quality improvement that you realized down the road sometime, which is good, but not, it’s probably not going to win against something that can do that, but can also make an impact right now as well. So hard and it’s got a soft ROI. I think people miss that a bunch. Another thing is I think that it’s easy to look at health systems in particular and get scared off by the long sales cycle and all that overhead we all know about. And we’ve been pretty good at getting what can be an 18 to 12 month process down to 9 to 12. And so, very fast for healthcare, but it’s still 9 to 12. It’s glacial for a lot of other spaces. But I think, when you look at that, it looks like we’re doing things faster. I guess we are doing things faster, but it’s no less work. I think the other mistake people make is they’ll often serialize things as they’re going through. You’ll find a physician and then hope that that physician can get you to somebody else and get you to somebody else. Selling in a health system, it’s so multi-stakeholder. Like, there’s a hundred people you’ve got to get on this literally. And there’s only one that can buy it. But the other 99 can kill it. And so you’re never going to get there if it’s like one to the next and the next. You’re gonna hit a lot of dead ends. So you have to parallel process clinical, administration, ops, the service line owners, which are kind of the business owners. You have to do all that and essentially get them lined up and keep everybody sort of moving at the same pace. And then the final point I would make is, and I learned this the hard way in my first healthcare company, which did work out, but it was sheer luck because we were trying to consumerize medical research, which nobody wanted to have any part of. But then we got lucky that providers were using the same search engines that consumers were, and they actually wanted a better search engine for research. And so we got lucky that that worked out there. But what I learned in that experience was we were very proud of the fact that, we’ve instilled on, like, we’re outside of the IT org. You don’t have to like talk to anybody in the health system to do this. You can just start using this. It’s on Google, blah, blah. And that’s a problem because health systems like yours, Aaron, spend billions of dollars a year on infrastructure and people, and it would be insane, insane, to not leverage all those people in the infrastructure and investments in order to build on top of that. And so you have to respect, kind of like Cartman in South Park, respect the authority. You have to be able to do that. And we finally learned that with C-SATS and now DexCare, couldn’t be more integrated into the health system at this point. And so, that’s helped lot as well.
[00:18:01] Aaron Martin: The point I would also make is there’s this big theme now about re-platforming healthcare. And what you got to understand is there is a ton of very entrenched technologies that are kind of not going anywhere. It would be incredibly expensive to kind of replace. And then the other thing too is is you kind of earn the right to become a platform over time by delivering kind of the near term value. So, you’ve got to come in with a very kind of sharp kind of, what is generally a point solution. And then it expands from there. And the successful companies I’ve seen have started off with very kind of point solution, very sharp ROIs, very sharp kind of value propositions. And then they kind of, over time they have a small story and a big story, right? So the small story is, this is the thing I’m going to do for you for the next six months. This is the big story. You’ve got to have both because if you only come in there with a small story, the people like me will be like, well, this is going to be very point solution. I’m going to have to maintain it. It’s not going anywhere. Why would I do this? And you’re basically going to become like a temporary thing to them. And they’re not going to invest a lot in integration. But if you have a longer kind of story, they’ll make the longer-term kind of investments in your space.
[00:19:17] Derek Streat: I was just going to add to that because I think it’s a super important point you’re making. And you know, you’ve had the front row seat on DexCare longer than I have, that I think that’s exactly what we’re doing with here and able to come in at a certain service line, then sell the larger platform. What that also does though, is it does create a very uncomfortable situation for a lot of entrepreneurs. And this is where I think, to be successful with health systems, particularly, you’ve got to get over it, which is because you have to do exactly what you said on ,both vectors, you have to co-design that future with them. That’s a fine line to walk, right, because you go too far, you’re still in vaporware you can’t deliver on. And at the same time, if you pull back too much and don’t co-design with where they’re going to go, then you’re not going to be able to win that in the first place. So you got to do that too, which is really hard. The upshot of all this, by the way is, there’s a silver lining to all of this, right? The nice thing about health systems is it’s a lot of big brains, right? Very smart, well educated people. It’s not hard to find somebody in the health system that wants to innovate with you and do something. Now, whether or not they have budget, which is why you got to get the other hundred, but you know, if you do the work, the entry points can be actually quite easy. And then ultimately, you want to be able to not only kind of leverage that kind of, innovative mindset, but then kind of grow on top of it as well. And once you’re in, like what becomes that rate limit or getting in, it becomes a competitive moat on the outside because the vast majority of other people won’t put in the time or effort to go through all of that work and paint the short and the long-term vision, and the ROI, and multi-stakeholder, and parallel process, and all that stuff we talked about.
[00:20:48] Aaron Martin: I think you and I had the last external meeting I had before we got locked down in COVID, if memory serves and I think it was the day that we kind of shook hands and said we’re moving forward and that kind of thing. And what was incredible about working with you, and then eventually Sean, was the most resilient, two dudes I’ve ever kind of worked with, kind of in the midst of a crisis. From your perspective kind of jumping into, now, you’ve been selling the house systems. You’ve been duly warned as to how we operate. What were some of the dynamics you were thinking about in terms of like, okay, now I’m going to take this thing and kind of help this very big organization spin out an important technology?
[00:21:34] Derek Streat: Yeah. So it was a crazy time. And there were definitely, I think we were all going through, and in some ways still are, but certainly it was definitely more kind of new at the time. We were all going through just the personal aspects of just how are we going to live life and take care of families and all that kind of stuff. It kind of comes back to the earlier question. There’s something about starting an endeavor, and this was a little different because you already had good traction on it. But we still hadn’t started the company yet. We still needed to do that together. And there’s something about Starting something, back to that creation that I think actually is cathartic and helps get through those situations. My wife Kels will tell people when they ask her, spouses of other budding entrepreneurs or whatever, how do you manage, how do you deal with like all the hours and the craziness of the startup? And she says, look, those are the easy times. The really hard times are when he’s in between start-ups because he’s just grouchy and not fun to be around. And that’s a problem. And so I actually think that it really helped me personally to have the focus of a new creation, basically. It probably would have been harder, honestly, if we would have been, a ways down the road. The other thing about these start-ups, no matter how much you think you have it dialed in, as you know, at the beginning, there’s going to be something bad that happens. Like, it just always does, like there is something. But when you’re starting it, there’s no downside, right? It’s all the future, where we’re going. And so it was actually really helpful for me personally to be able to focus and create during that time. I think if I wasn’t, it would have been harder on me. And then of course from the business standpoint, I mean, you had a lot of the original vision that set it up well, so that anything digital health related,.. .ironically COVID was like one of the best things to happen for that particular type of business. And then of course, that then provided the opportunity to step back and say, okay, well, now that everybody’s doing this, how can we be different? How can we approach the market in a different way and be more, truly more of a platform and an operating system that makes these things work as opposed to just the point solutions. And so, COVID in a weird way helped me personally focus and get through it better. And I think also that opened up an opportunity in the business that probably wouldn’t have been there pre-COVID because there was less of a need to make all of these digital assets work that we’re now focused on doing that orf.
[00:23:56] Aaron Martin: If you could go back to, kind of Derek Streat from kind of 10 years ago, or maybe even your first, when you’re first thinking about starting something in healthcare, what’s the advice you would give yourself? Like what’s the kind of, hey, check this out. Be warned about this. Definitely do that. What are the things that you would kind of advice you would give yourself?
[00:24:18] Derek Streat: Yeah, I would say, never lose sight of, the opportunity to do something that really matters. You know, I mentioned the first kind of 10 years that I was building companies, they were in the ad tech space and it just became hard to kind of tie to the value of the work and not the monetary value, but the value to society. And then I kind of went on a period where I then spent two years doing microcredit work around the world for people living on less than $2 a day to just do it. So I was searching for something and then I got into healthcare. I found healthcare as a way to make that impact as well. So I would say, never lose sight of that. I think that’s one of the things that enamors people to get into in the first place. So it’s easy to lose sight of it when somebody tells you, and oh, by the way, we’re gonna try everything we can do to not allow you to do anything in this space and put all these roadblocks in front of you. So never lose that. And then I would say then at the same time understand that and just keep reminding yourself that you’re going to have to do the things that we just, you know, if I had that foresight, we’re gonna have to do the things that I mentioned earlier to actually get through this. If you do parallel process and you do understand that this is still a business at the end of the day, for better or worse, it just is, and you understand those things, that you do get to the promise land, right? And the promised land is, you’re working on a mission that truly does impact lives, to your point, Aaron. You know, I was just looking at the volumes we’re running through DexCare now, which, that’s the business term for look at all these patients that we’re serving. And it’s up to a million a year now at this point as a run rate. So it’s really moving. And so you get to the promised land, which is that, plus now, you’ve gotten over the hump and you’ve done what 99.9% of the other people wouldn’t have the fortitude to get through, particularly if you’re selling to health systems. And now all of those rate limiters are now competitive moats, right? So you’re on that other side of the equation. It’s not like the work’s done because there is still somebody else out there with more money and resources to do it. And again, lots of big brains in healthcare. So, you know, you’ve got to stay on it and still continue to deliver value. But you can get to that point. I think being an entrepreneur takes a lot of fortitude and resilience. And then there’s being an entrepreneur in healthcare that is like, it’s just a different level. And so, if I could see the future getting into it, that would have been helpful.
[00:26:45] Aaron Martin: Yeah. It’s the difference between, running a 10K and the Tough Mudder.
[00:26:50] Derek Streat: Yeah, yeah, exactly. Yeah. Yeah. And there’s nothing wrong with…
[00:26:54] Aaron Martin: Different.
[00:26:55] Derek Streat: The 10K right? The person in the 10K could run a lot faster than you. You spend all the time doing the Ultra or whatever. But you know, if you’re trying to do the Ultra, then healthcare is probably the ultra, right? That’s the place to go.
[00:27:10] Aaron Martin: Right. Well, Derek, hey, thanks so much for taking the time to speak with me about this. I know folks that are kind of viewing this are going to get a ton of value around some of the advice that you gave. And I really appreciate the time.
[00:27:24] Derek Streat: Yeah. Well, thank you, Aaron. I appreciate it as well. And thanks to the Day Zero folks as well for hosting. I really appreciate it.