How MedStack CEO Balaji Gopalan grew to $3.8M revenue and 90 customers in 2024.

hey folks my guest today is simon woodside he's the co-founder of medstack which is helping secure platform for digital health he's got a cs degree at the university of waterloo and as part of the apple core operating system group uh engineering program manager before that simon you're ready to take to the top i am thank you nathan all right so what tell us what med stack is are these hospitals that are paying you for hipaa compliance solutions or where are you playing we definitely uh are dealing with hospitals and insurance companies but they are at one remove from us so we our direct customers are digital health app makers and then they in turn are selling to hospitals and insurance companies so give me an example of a customer can you name one or two sure give you a couple so one is a really cool company called keratin and they're in neonatal intensive care units and they are operating a system that manages bottles of mother's milk which is critical that these are being they have to be um always go to the right person at the right time without too much delay so that's a pretty mission critical system with a lot of availability requirements and another really awesome customer is called inkblot they are doing digital health or sorry well yeah they're doing digital health therapy so it's like remote telemedicine you know one-on-one with real people um psychological therapy psychotherapy and they're pretty big um they were just bought by an insurance company uh green shield so yes and simon what are these companies paying on average per month to use the technology yeah so the average is uh you know there's definitely quite the range um from small to large but kind of like typically between you know our average is going to fall like 1500 to 2000 us dollars a month okay so that's up significantly since our last interview in april of 2020 almost double the arp who you told me back then are you moving upstream on purpose um yeah i mean it's we're not no so so we're not trying to exclude small companies i would say um we've had a lot of companies grow on the platform we've had new companies join that are bigger uh we have changed our pricing model um so we've moved to a more of like a sas pricing model where we have like a base set of tiers and then the variable component is is much much much smaller so it's basically like because we're hosting like we're a hosting platform you know we just passed through the price of like a virtual machine or a database instance um so yeah we've just adjusted our pricing and we've had a bunch of customers grow a lot too understood so how many total customers are you working with today i think it's around 90. 90. okay yeah you told me 70 about a year and a half ago so you've added about call it 10 20 more which is great um and then can i mean can i multiply those together 90 times 2 000 bucks a month you guys are what 180 grand a month right now in revenue that's about right yeah we're just we're just shy of two million ar so it's like probably a little bit less than that but uh we'll we'll be hitting 2 million are uh by the end of the year i love stories like this i don't know if you remember you know our first interview was back in the middle of 2018. do you remember that well so yeah so you interviewed my uh my ceo business partner co-founder biology uh yes i think twice now right yes oh okay that was him not you got it it was him yeah so i'm the cto uh very cool so you know i did i did get some of the numbers and make sure i had them right but i'm more i'm more expert in other parts of the business well i just love i should have begged you to write a check back in 2018 because uh bellagio shared back then you guys uh we're doing about 30 000 a month in revenue you're now five times as big here uh four years later so this is a this is an exciting story now simon have you been able to do this funded by customer growth after your 2.4 million seed round in 2019 or did you raise more uh we've raised more yes so we actually just completed a raise of 3.1 million and um uh so that was uh led by blue ventures and telus one of our previous inventors uh investors as well but yeah i mean we're making good money as well so i mean you know theoretically we might have been able to go uh revenue positive but uh you know we want to grow like we see a huge huge huge opportunity like you know you say a billion dollar opportunity like it's bigger than that you know and so we want to continue to grow quickly uh and that that meant you know and we have some great and and you know some of our investors are great partners as well so they open doors for us and you and you and bellagio are the two co-founders right you just split 50 50 at the start so i mean yeah so me and paul co-founded the company yeah back in 2015 2015. okay yeah so so yeah so obviously just managing equity right i mean you don't want to take money unless you really have a good use sport to drive that growth because you two are both managing dilution i mean most people in their seed round are selling about 20 of the business is that sort of where you guys came in at i don't have the exact numbers we've done well though like you know we're pretty much on target in terms of what you'd expect okay so got it so yeah you were right fifteen twenty percent range yeah yeah yeah we're in that ballpark yeah yeah yeah yeah so you're talking like 15 million dollar valuation something like that pre-money yeah so again why i mean that's a lot of dilution right if you believe it's gonna be big that's a lot of dilution you absolutely needed that 3.1 million or how did you go through that rationale well like i said we didn't absolutely need it we could have gone revenue neutral but we wouldn't we wouldn't be growing anywhere near the way we can with the capital so that's definitely a factor um but the other factor is just that you know like one of our new investors is is a cyber security investor um the other lead investor for this round is telus which is uh known as um as a as a big canadian uh well the biggest i think canadian tele communications operator but they are also a huge health division um so they have a huge uh digital health or you know emr ehr operation so both of those really help us uh they we have like good board members who are really helping us out connecting us with partners that kind of thing gives us a lot of credibility as well you know we're in a trust business like what we're doing is enabling our customers to be trusted by their customers so all those hospitals clinics insurance companies need to be able to trust them to curate or to to handle their protected health information with with due diligence with security with privacy and so for us trust is paramount and so having these kinds of backers is a big value for us understood what's the team look like today how many folks full-time yeah we're 15 now 15. we've been growing rapidly since we raised and are you so so where do you intend to invest most of that money or is it just a signal you want to send to the market and say look you can trust us we raise all this money we're not going to shut down tomorrow it's all going into people what kind of so you know it's staff so like you know we're we've just like doubled or more than doubled you know we're just doubling our engineering team um how many are total engineers today uh silver it's uh nine on our engineering team today including me and we're still gonna add a couple more by the end of the year um and so like we're we're scaling up that operations and engineering team slight reliability engineering application support engineering core engineering all that stuff um you know we want to scale we need this the platform to be scalable you know it already was a highly scalable platform but our goal is always to again trust right so we want to stay ahead of the market so like the way we approach security is you know most people are like you have a security team our whole company is a security team you know people say you know what's your what's your scalability we have built the whole product you know we've it's like over engineered effectively um and we need to continue to do that so always be ahead of the game so that we know you know so we don't have problems um i kind of harp it on a point on a broken record or something here but you're good it's super important for us 15 folks nine engineers hiring when you guys look at retention right of these of these kinds of customers you're working with what doesn't that dollar retention look like year over years above 100 yeah yeah yeah it is nrr is over over 100 it's pretty it's very good well i so i would consider very good compared to others like somewhere in the 140 range are you that high oh yeah uh no i don't think we're quite there i think it's i don't know i think it's it's like 1.1 or 1.2 something like that okay so like 120 percent that's i would say that's that's that's like above average uh but some i mean it's crazy when you look at a lot of evaluations happening today some of the evaluations where you're seeing 40 and 50x multiples are ones where net dollar retention is like 150 even if revenue growth overall is slower but your ndrs are really high that's by far where the premium valuations are happening today so i'm actually surprised that you guys did you guys run a competition on on the seed round i'm actually surprised that you did this at 15 million i've seen with your same comps raising it like 30 and 40 pre it sounds like you optimize for strategics here though strategics and the other things i want to say nathan is that it's like the the business we're in is not currently like a sexy vc area you know it's like platforms were kind of super sexy like maybe 10 5 10 years ago right now it's not as much um i mean what's sexy is what's sexy as you went from fifty thousand bucks a month and revenue a hundred fifty thousand bucks in revenue in the last 18 months who cares i mean the more niche you are the better the more vertical you are the better the bigger moat you can build i don't i don't agree with the statement that you're in a not sexy space we are uh i mean i think we are i love it uh i wouldn't be anywhere else and the other thing is you know we're canadian companies so we don't get the silicon valley if we were a silicon valley company yeah we would have uh it would be a different story but you know what well i mean no no one's in silicon valley right now everyone's behind their zoom screens anyway did you i mean i guess what i'm asking did you run a process or was this the one term sheet you looked at that you you went with uh yeah no i think we had multiple i i'm not sure to be honest i i know that we had we had some balaji handle all that he's the ceo right i'm the cto i don't i don't do i'm not the front line fundraiser yeah fair enough yeah i think we got we feel we got a good deal talk to me more about we feel we got a good deal so what's next what's next on the engineering side of things what's the next product look like product release you know a big um big push for us is like multi-cloud support so um we want to have the ability to support like aws and azure we're pretty pretty focused on azure right now um aws is a big deal for our customers and so that's like the big push probably one of our biggest ones um but always it's like scalability so like right now for example um with azure we like we're hitting quota limits because we're running like a lot of resources i mean you know it's like 750 different vms and databases which may not seem that much for some people running enterprise stuff but we were certainly getting quota limits and so we had to like re-architect around how they some technical stuff around subscriptions they have so um the other aspect of it is that's really important is you know what is what do our customers really value and in the end like i mentioned trust so how does that come through what it comes through is our customers go to sell to a um you know insurance company or hospital and they get a they go into an assessment process so the the hospital says okay here's a questionnaire our security team our our compliance team provides questionnaire to the customer so let's say they think blood or karen or any of our other customers and there could be 150 questions i just actually i'm working on one right now it's 330 questions so it's not small um we we provide a lot of guidance to our customers on those questionnaires so we can we can pretty much tell them how like we can so we provide guarantees and this is what really differentiates us from like in amazon or in azure is you know for for mestaq firewalls are on by default and our customers can't turn them off we encrypt all uh incoming communications by default you can't turn it off we back up everything that our customers have and you can't turn it off there you guys have it i feel like if you're if you're looking at using med stack you want to hear from simon talking about all this tech stuff that i do not understand so simon this makes a lot of sense i'm glad to get the second half of the story here with you coming on but we're out of time for now let's wrap up the famous five number one what's your favorite business book high output management by andy grove everybody should read that it's classic number two is there a ceo you're following or studying um toby uh with shopify he's amazing number three what's your favorite online tool for building the business i mean i'm just checking out almanac right now it's uh we're just trying it out but it's pretty cool almond act number four how many hours you sleep to eat every night around nine hours of sleep okay and what's your situation simon married single kids i'm sick okay no kiddos how old are you uh 44. 44. last question something you wish you knew when you were 20. i wish i knew when i was 20 i don't know you know i'm not sure if i'd go back in time and change anything no nothing you would change just something you wish you knew uh i wish i knew how to get good coffee back then you couldn't get it around here this is really for someone else who's listening today who might be 20 years old what's something they could learn from you right something you wish uh sure okay that's that's that's that's a reasonable question um i think uh you know i hadn't kind of opened my mind at that point i was very tech oriented i hadn't opened my mind to the possibility the interest of like designing and developing businesses as a real uh there's a really interesting uh mental exercise something you can really get into and work on sort of using your your brain and not just kind of it's not just like smoothing it's like a lot of really hard work and interesting design development activities guys digital health applications use medstack.com for privacy and security compliance growth rate's impressive here 18 months ago doing fifty thousand dollars a month in revenue now doing over 150 000 a month in revenue almost about to break two million dollar run rate it looks to scale 3.1 million dollar seed round recently sold 15 to 20 of the business as simon scales up here they've got a nine folks in the engineering team hiring fast total team 15 has looked about other products for these digital health applications simon thank you for taking us to the top you're welcome thank you david one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m central to 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Intro you're gonna love this interview just got done editing it i'm glad i got it live for you i'll be in the comments for the next 30 minutes hanging out answering any questions you have in fact leave a comment below about data points or what you think is going to happen to the company and i will respond to every comment additionally if you're just loving the content click the thumbs up and i will go and check out your profile as well and give your videos some love as well in the meantime enjoy the interview About MedStack hello everyone my guest today is balaji gopalan he is the ceo and founder of a company called medstack focused on uh he is an educator and thought leader in the platform and software product strategy and is passionately driven by the role of technology in addressing societal problems medstack supports many digital health companies in protecting patient and as protecting the patient and has been awarded accolades in the canadian advanced technology alliance and tech crunch all right bellagio you ready to take us to the top i am indeed all right so give us a real example here because health you know health tech stuff people sometimes don't understand how is somebody using you and who is using you yeah that's right so our customers are companies building digital health solutions which is any kind of product that deals with health data in the cloud and health data could actually be something biological such as a condition or prescription or even just something that identifies the patient their address their appointments etc if you're a company dealing with any of that data working with someone in the healthcare system a hospital an insurance company public health organization clinic network etc they will require you to meet certain standards that they are beholden to from a legal perspective for protecting that patient's data those companies companies doing things like telemedicine at home monitoring health care scheduling even things like diet and fitness trackers and then more complicated things like monitoring medical devices they use us as a infrastructure with pre-built commitments and guarantees for to their customers of how they're handling the data in the cloud and what policies they are following we help them with all those guarantees we answer all the questions for them and then we provide them an infrastructure that's pre-defined with security and privacy protocols built in so that when they use this as a back end all those guarantees are actually met because of the virus Moving digital there's a lot of health care flows right now moving digital your business should be exploding right now it is indeed yes yeah uh i mean i'm i i need to be careful how i characterize it but i think the thing that i'd like to say is in this uh crazy situation we're in this pandemic a lot of people suffering we're fortunate that we have innovators who are building solutions we can take advantage of uh to solve some very very specific things pertinent to the pandemic the first is as the healthcare capacity gets strained with so many people going to the emergency department the importance of telemedicine and video consults with doctors not just for coping 19 testing but for any medical condition have suddenly become far more important especially if you consider maybe the patient or the physician themselves are in quarantine how do you continue with that engagement secondly things like using ai for genomics analysis and dna analysis to determine a vaccine and find a cure that has suddenly become more important companies that that do home monitoring for chronic conditions so that the patient doesn't have to go to their specialist if they have a heart condition or diabetes as much or as often because they have systems at home that monitor the condition that's become more important and then finally things like um remote testing devices for the virus itself which may be using a cloud-based technology in the back end and the data from the patient to determine if they actually have it there's a lot of companies working on building things like that and all of this requires data in the cloud and all requires trust because as soon as this mass adoption of this digital health technologies is coupled with a breach the public trust and the trust of the healthcare enterprises will be dropped and that will grind everything to a halt but is it isn't that less of a question of if and more of a question of when i mean if russia can get into like government accounts and emails right now and let's say all of us are now at home and we have you know let me come up with some device the device that you know the hospital will put on your finger to test like your oxygen levels in your blood let's say we all have one of those at our home and we transmit that weekly via digital you know channels to our healthcare providers let's say that gets hacked are you saying your technology basically is what sits in between there and tries to keep that safe yeah yeah so i mean anybody who's in it who's the security technologist will tell you that unhackable is a myth right so everything can be if you work long and hard enough at it what our technology does is provide the right kinds of assurances that says we are tracking who had access to the data when they accessed it how they accessed it from a back-end administrative perspective we're managing the the the giving of the rights and the removing of the rights of access to the data the data backups the infrastructure data security and the monitoring for such things as security incidents so we don't assume that that security incidents will never happen we provide a system in place to make sure that we know that they're happening and to reduce the likelihood so you don't necessarily have a bunch of cybersecurity experts that you pay on your payroll trying to prevent hacks what you're trying to say is you're going to document everything so if a hack does happen it's clearly documented well it's more than just documentation we have a system that monitors the infrastructure so that it knows automatically and provides us an alert if there is an untoward event interesting okay very good so last time Customers it came on was back in july of 2018 you said you were serving about 45 customers at that point how many customers are you serving today uh close to 70. okay it's been yeah yeah probably 70 by now uh obviously the last couple of months have been or last month last few weeks have been pretty interesting for us from a dynamics perspective um and we've had a lot of not only new customers come on board but a lot of growth with our existing customers and i think the big things that have happened since we last spoke uh there's been a number of pretty important changes the first one obviously we raised some financing at the end of that year um and that was used to completely from the ground up rebuild our product so how much raised to date uh total raise to date is uh 1.8 million Raised okay so you raised about 1.3 million after our interview yeah well sorry one pay 1.8 was the raise and then we'd raised half a million before that oh god yeah so 2.3 total um since the life of the company and uh and we used that we used the raise to rebuild a new product called med stack control which delivers all the same privacy and security commitments we delivered to those original set of customers but now introduces a lot more power for them because the problem was before they would need to work with us if they wanted to make any iterative changes to the technology architecture to support their app a bigger server a different server a different kind of framework running on the server all the security stuff we were handling but their ability to iterate was limited because it was a concierge service through us med stack control is a completely self-service machine driven system so they have a console they can log in they can add and delete administrative users and change and grow and shrink the infrastructure as they need so we launched that at the third quarter of 2019 it's the only thing we're selling now uh it's completely changed our kind of sales cycle and then we've also introduced a new business model that's more in tune with our value proposition this is actually a very recent development um but uh but it's worked very very well for us so now we're saying you know what you're paying for is med stacks assurances all of the policies all of the support for the questionnaires we're actually have a little bit of a national language processing element that helps us answer those questions as well and that's our sas fee on top of that we simply pass through the underlying cloud infrastructure cost that you actually use with a very small markup on top for the security technology that we had on top and that's our newest model customers are still you know average rpo still about 700 bucks a month it's grown a little bit because of the new business model but that's very very recent so we're probably close to a little bit over eight now maybe 850. okay 800-ish i mean so can i take 800 Monthly recurring revenue ish per month on average times those 70 employees i mean you're doing like 50-60 grand a month right now in revenue yes we are okay and that's up from like 20-30 grand a month about 18 months ago yeah so healthy growth now to drive that growth did you burn through that full 1.8 million or do you still have some of that cash in the bank we are doing a seat extension right now a lot of that was put towards the building of med stack control uh and some uh some marketing experience we did we've done a recent shift to a more inbound focus strategy which is actually working well for us uh and uh we've done a lot of sort of cleanup of our operational costs and infrastructure efficiency how much of these how much is the extension for uh the extension is a half a million Currentvcs okay and so i mean what is that like right now you're in the middle of a recession you're going back to your current vcs and potentially a new one saying hey can we get a half a million extension i mean how do you get that done in today's environment yeah it's it's not i i won't lie and say it's it's easy it is certainly challenging but what i think people are looking for is you know where do if you're an investor where do you go right now um with with so many companies that are cash unfortunately they hold cash but people are looking also for what's going to be the next thing and so we have had actually a good amount of interest from people saying well what is this digital health thing that everybody seems to be gravitating towards and what are you guys actually doing with it uh and you know fortunately we're in a situation where you know we're still running pretty lean actually very very lean um what does that mean like are you profitable today no we're not no okay so what does lean mean like less than 100 a month burn uh yeah yeah there are boats okay we grew the team we we shrunk it a little bit uh we found some efficiencies and optimizations of where we wanted to actually focus our resources so now we're a team of seven uh we were a little bit before um and uh and we're looking to bring on a couple more in the next uh in the next you know a couple of months uh probably stay up at that level for the major part of the year uh the other big thing that we did wait those two things are opposite are you staying at seven or you're hiring more we're hiring a couple more in the next few months and then we'll stay that that way for the rest of us i see how many engineers do they have seven how many engineers of the seven uh bet half okay so caught three four and then any quota carrying sales reps uh one one okay fair enough Extension yep interesting okay so so a couple questions on the extension right why do an extension it's gonna obviously be pretty dilutive i imagine um yeah it depends where you know we where we we've come up with terms that we feel are favorable to the current environment taking into account the growth that we have we're not being terribly aggressive uh it's not a massive raise you know we're we're looking at a half a million dollars basically the reason we're doing the extension is there's things we want to achieve to put us in a better position for a series a and that was a decision even before the current crisis actually hit uh you know we want to cross the 100 company mark we want to cross the millionaire our mark we want to have a few companies of a larger size which i think tells a bit better better story and we're getting some of those in now uh so um the the you know finances from the raise were used to build med stock control the other thing that they were used to to do was to achieve some very very complicated and important industry certifications which we now have and have done in a way that actually our customers can inherit large parts of them for their own certification activities which is pretty significant would you ever look at raising this capital not on an equity basis but raising debt we looked at it because we are a company that services very small companies on a sas month-to-month basis we don't have very large ar which is sometimes required for a debt uh type of transaction so that's uh we're exploring all the options right now but that's sort of been the surprise that we've actually sorry you're saying because you're less than a million dollars in ar the debt providers won't don't want to do a deal with you no it's more it's more of the fact that what they're looking for is to collateralize on longer term contracts that are much bigger whereas our contracts are less than a thousand dollars and they're months to month right so which is which is pretty typical of a developer platform type company yeah i mean i i know many debt providers that don't care about how big the contract is what they care about is customer concentration risk so they they don't mind if if you have a thousand customers paying a dollar or one customer paying a thousand what they care about is that not one customer makes up more than 30 of your monthly revenue which you don't have we don't have that yeah so we have had a number of conversations with some debt providers and some of those are ongoing as well yeah interesting all right let's The Famous Five wrap up here with the famous five number one favorite business book favorite business book right now hard thing about hard things number two is there a ceo you're following or studying uh the ceo of following i'm studying uh probably semester i gave you last time uh the ceo of shopify and i think some of the things he's doing in the current environment are pretty admirable number toby uh number three what's your favorite online tool for building the company uh online tool for building the company still slack number four how many hours i sleep to eat every night not enough five six okay and situation married single kids saying uh married two kids who are over there kind of doing homeschooling right now and how old are you i am 47 47 last question what do you wish your 20 year old self knew uh what i wish my 20 year old self knew was uh how important it would be to constantly be questioning the assumptions that you have yep guys good stuff again the company medstack playing in the med and health tech space trying to make sure that information sent from patients back to the healthcare providers is safe and secure and the document and the data access is well documented they've grown their company from 300 grand in ar up to 600 700 grand in ar today hoping across that million dollar mark here in the next year or so they've raised 2.3 million to do it looking for a five hundred thousand dollar extension right now as they continue to scale out onto their product maybe bring on two or three more people seven on the team right now three engineers one sales person burning about a hundred thousand dollars per month balaji thanks for taking us to the top thank you very much nathan appreciate it you guys know i fight like heck to get these data points for you from these ceos that rarely do these kinds of shows if you want more shows like this make sure you subscribe right now we're trying to get 10 000 youtube subscribers by the end of september here 2019 and it would mean the world to me if you clicked now to subscribe additionally i've got two more great interviews for you if you want more data points from the world's leading sas ceos click and watch one of them right now