How Drchrono CEO Michael Nusimow grew to $23M revenue and 6K customers in 2018.

hello everyone my guest today is michael nusimov he believes that technology can make healthcare more efficient more personalized and help provide healthcare to many more people he co-founded his company dr chrono with daniel uh sorry danielle uh kevin theos in january 2009 and built the first ever native ipad ehr app so we'll jump into it today michael are you ready to take us to the top yes very good by the way is it daniel or danielle so it's daniel kivatinos oh that's your co-founder's name all right what's the company do what's dr chrono do so um what dr chrono does uh we kind of built the world's best uh electronic medical record focused on the ipad and iphone and that was uh our first real breakaway product that we launched right around when the ipad first came out in april 2010 and what an electronic medical record is is everything that a doctor needs to do at the point of care with a patient when they're in the exam room with the patient they can do all of that work on an ipad or or even on an iphone although an ipad is it gives a little bit more real estate to do a good job and those are the types of things like viewing a patient's complete medical history viewing a list of the patient's medications they're taking their ongoing problem list and also it's really critical that they document you know so instead of writing down on paper what's going on with their clinical visit or sketching down notes um or using a desktop computer or even a laptop they're able to do that on all three touch screens on the ipad and everything else they need to do at the point of care they can do on the ipad without paper without a laptop including ordering labs and radiology for the patient viewing those results sending prescriptions to any pharmacy in the us including controlled substances which are powerful pain medications we're certified with the dea to send such powerful prescriptions through the ipad and iphone so michael who's actually paying for this though is it a hospital or the provider or who so we sell into what's called the ambulatory clinic market and uh it's a little confusing to people outside of healthcare because ambulatory actually means everything outside of hospitals i know ambulances take us to hospitals but ambulatory is you know the patient ambulates in and ambulates out they walk in and walk out so anything where you know any clinic when doctor you know when the patient is not staying overnight you know so regular doctor visits pediatrics and even things like ambulatory surgery centers where you go in and get surgery and kind of hang and go home and just to finish the product we you know that's kind of the tip of our spear product is the ipad ehr which is the clinical tool um and our big upsell from there kind of the shaft of the sphere the follow-through is something called revenue cycle management uh which is often shortened to rcm and basically that's all of the work involved in getting the doctor and clinic paid from the insurance companies and the patients so it's really kind of end to end submitting a claim dealing with rejections modifications all the way through you know several insurances you may have and all the way to the patient balance at the end so it's kind of that end-to-end care of the clinical tools but also the follow-through and our upsell where we generate the revenue is by taking a percentage of the revenue that we help the doctor and clinic earn from the insurance so there's no that's the only revenue that's the only way you make money there's no sas product underneath underneath this or anything um so that's definitely the most important to us we do just sell our software as a sas product um and that's where we started the business and the rev cycle has really evolved in the last couple of years and going forward as being kind of our preferred model because i think it's where we deliver the most value we can generate more revenue and i think solve a deeper problem and kind of i think of it as making it zero work for to get paid with insurance which is a huge hassle so michael sorry just i don't want to get too far away from the revenue stream for a second so so just be clear right now if you look at the your revenue over the past 12 months what percent of that is is sas would you say um so probably around two-thirds of our revenue is still just from sas software okay that's pretty healthy and so what do people pay what sorry the ambulatory kind of services there what what on average what are they going to pay per month or per year for this just the south side the software side uh an average software per provider license would be roughly around six thousand dollars a year okay okay so that that feels like you know not too crazy not too cheap doable for most people yeah and one of the reasons i mean one of the challenges with that is there are only so many providers in the us so it's kind of a smaller market than you might think there's about a million people with an md in the united states and only about 700 000 of those mds who you know people in us who have a medical degree actually practice medicine today the other 300 000 are retired or in research or i don't know what they're doing but what and what penetration what penetration do you have in that market a lot of those entities are in hospitals which you can't sell to i'm sorry what penetration do you have of those 700 000 um so we have about 30 000 healthcare professionals so that's kind of beyond the mds to include the nurses and other staff members and professionals who use it so we can sell this some people who are not md's for instance nurse practitioners physical therapists kind of anyone you know uh including chiropractors and anyone who really sees a patient and submits a claim to insurance we can can use our software and the empties are probably more valuable because they generate more revenue and kind of have harder problems but you know in the modern you know if you look at an urgent care center which is a great example of an innovation in ambulatory care um you know they they're a lot more efficient than an emergency room and they don't just rely on doctors when you go to an urgent care you're much more likely to be seen by a nurse practitioner or um a medical a physician's assistant or medicine and they can really do most of what you need so it's kind of becoming a broader market so michael sorry so how many providers then are currently you know paying customers of what you've built yeah so we have about uh 6 000 providers and about 30 000 you know paid users overall okay what's the difference though so i don't understand the difference so if i like for example if i take six thousand times that six thousand that six thousand per year price point you said that will put you right now about three million bucks per month in revenue is that accurate um you know we're we're probably at around uh a 23 million dollar arr rate right now okay uh so probably is a factor of kind of discounts and that's including our ref cycle business which has you know where we're taking a percent of revenue and we tend to make several times more revenue than just software yep okay that's fair but so so of those six thousand customers then if you're kind of at a 23 million run rate two thirds of that is pure sas the other third is kind of the other services that you provide each you're making a call 300 400 bucks a month per 6000 customers something like that yeah and i you know and i would segment that because the rcm business which is about a third of our revenue and has been growing really fast that's only about 10 of our customer base so to us we have different customers that are worth you know probably a pretty wide range of what they're paying us we might have a small practice paying us you know 100 bucks a month for their software and then we might have a of course medical doctor where we're doing their billing where they might be paying us you know uh eight to ten thousand a month for ref cycle services so they could there could be a lot of variation of course yeah yeah of course you'd expect that right any big customer base um so if you're at 23 million bucks in ar today help me understand growth where were you about a year ago um we've been growing at about 50 year-over-year so i believe we ended the year last year with about um around 15 million in uh arr so you know we've been targeting about 50 year-over-year growth uh for the last couple of years and we've been on a pretty good trajectory with that and have you been able to do all this bootstrap or if you raise capital so the first several years of the company probably 2009 when we first started working it through 2011 we were bootstrapped in 2011 we joined the y combinator incubator and actually relocated to california from new york um and and starting in 2011 when we started raising funding to date we've raised about 16 million in venture capital through a seed round in a series a yep and you said you very specifically said venture capital do you have debt on the company as well um yeah i think we've used uh some venture debt uh along with our seed round and with our series a round so that's something we're able to use to kind of supplement um the that equity financing probably another two and a half million in debt yeah as part of those rounds yeah that's great um and when did you launch the company what year yeah so we started working on it uh in 2009 and that's kind of when we launched our first web product and uh we were bootstrapping it uh me and my co-founder were building the product and selling it and trying to do all the jobs at the company and uh we got a lot of success in 2010 when we launched our ipad app i think that was something that really set us apart dot you know about way back in april 2010 um when the ipad first launched there about 300 000 pre-orders for the ipad and was limited to like two ipads per household or customer and about 10 of those 30 000 of those were sold to physicians so really early on physicians kind of saw that ability you know in circa 2009 2010 less than three percent of doctors in the us were using any kind of emr it was really not used a lot there were still lots of paper charts and there was a set of government incentives called meaningful use that paid out 30 billion dollars over the last 10 years to really just giving incentives to doctors to start using ehr tech like dr chrono and others and that really created an explosion of ehr vendors um and we kind of you know there are kind of two ways we're writing then you know the explosion of kind of mobile tech with the ipad and also the explosion and just ehr tech at all because you know we went from an area where you know as i said 10 years ago less than three percent of doctors were using any kind of sure ehr today where you know medicare puts that somewhere around 85 percent of providers are using this tax so in 10 years it's been a pretty massive period of adoption across a few hundred vendors in that space and it's still changing drastically because 10 years is not that long of a time it's still a relatively young industry last few questions here before we wrap up this video is we're out of time at what team size say what are you guys at so today we have about uh around 103 people in the u.s uh we have around 70 people in california uh most of those here in sunnyvale and silicon valley and we have a a pretty large team on the east coast with about 30 people in baltimore maryland great so 103 people total california and baltimore very good and then um economics wise so you know cac do you do you have fully weighted attack for these customers you know what you're paying to acquire them yeah we target and i think it's a pretty good uh benchmark i've seen a lot of sas businesses which i still think of ourselves at heart um we target to recoup the acquisition costs in the first year so kind of blended marketing and sales costs our goal is to always get that acquisition under a year of our customer lifetime value yeah so good if you're if your average contract value six grand you'll spend six grand to buy them or get the customer yes and then what about churn are you above 100 net revenue retention or um yeah for the last uh i think it's been around eight of the last nine quarters we've had uh a negative net churn so we've been able to expand our user base beyond what we've churned um i definitely think and you know for for us about 60 of the gross churn that we do have is what i'd call involuntary churn uh which is you know a practice shutting down providers leaving a practice um and i think that's kind of a reflection of the market we're selling into and a broader change in the market where you know when we started the company 10 years ago probably 60 uh somewhere between you know more than 60 percent of providers were in these smaller one to five provider groups and today uh or at least in 2017 i've seen data that you know that's more of a share of about 40 of providers and ambulatory are in these kind of small smb one to five provider groups and a lot more of those providers are going to join larger practices you know kind of in the mid market from say you know six to 100 providers and even the really large enterprise market where you'll see it's very popular in california places like kaiser and sutter health where there's kind of these big hmos that employ lots of physicians so there's kind of a change in the industry we're seeing where providers are joining larger groups from medium to really large groups um and also i think that's normal for a lot of smb businesses you know they're a little more fragile they tend to have more uh churn than enterprise customers and larger customers and tend to have less you know um it makes sense michael you're right you're right i mean that's a brain just i hear all the time so that seems super fair super healthy to me um let's wrap up here quickly with the famous five one word answers if you can number one what's your favorite business book um uh i would say one of the my most recent favorites is the hard thing about hard things i thought it was really honest about you know what the startup experience is like number two is there a ceo you're following or studying right now yeah i think uh i actually was listening to a bunch of podcasts i've heard this before but mark benjoff i think is a great ceo from what he's done with his company and even just how consul is a good head first company and a good role model number three what's your favorite online tool for building the business um you know i'd say my favorite tool right now is actually inbox which is kind of sad because it's going away but the gmail inbox tool yeah sure which is gonna be sunseted soon but number four i know you have a new one there how many hours sleeper you get every night um so i really try and get about eight hours of sleep at night uh it's not always straight eight hours through sure but i try and i right you know average around eight hours and situation i think you're married how many kids do you have and i have one yes we just had our first newborn he's 10 weeks old and how and how old are you uh some 39 39 last question michael what do you wish your 20 year old self knew um you know i think you know i kind of at 20 well 21 i kind of graduated college and went to work and you're had a great time living in this idiot i really love but i do wish i knew the kind of opportunity that was out here in silicon valley although i was 20 in 2000 which was right before a big market crash but i do wish i had kind of thought of that earlier in my career is to come out to silicon valley and kind of get involved in the startup scene out here guys there you have it out of silicon valley maybe sooner faster get more of that exposure earlier on launched his company back in 2009 they've now scaled about 6 000 customers they're working with you know calling you know paying between 300 400 bucks per month doing about 23 million bucks a day and run rate ended last year at about 15 million bucks in ar so healthy growth they raised 16 million bucks to grow the company 2.5 million additional and venture debt to help scale there as well over 100 net revenue retention team of about 103 people between california and baltimore as they look to scale dr crona chrono in the ehr space again management medical api platform michael thanks for taking us to the top thank you nathan thanks