How Redox CEO Luke Bonney grew Redox to $181M revenue and 200 customers in 2024.

good morning everybody my guest this morning is nico steve ascii he is the co-founder of redox the modern api for healthcare he also used to do some work at epic will dive into both of those now nico are you ready to take it to the top yeah totally all right so start us off first what is redox and what's the business model yes sir redox connects applications so software developers with health systems our business model is essentially to license connections to various health systems so if a software developer is selling an application to five health systems we charge them five licenses to share data with those health systems on the other side you must have the patience of mother freaking Teresa to deal with healthcare why on earth do you get into this market the the woman fuzzy answers that it's important right you know as entrepreneurs we all say we're out there trying to change the world but the cool thing for us is every day we got to talk to entrepreneurs software developers who are building technologies that will actually impact patient's lives make health care more efficient make care more effective for patients out there so at the end of the day that's what it's really about from our perspective we really see technology innovation in health care something that's absolutely needed so our technology this API layer that enables the use of this data is a real core piece of that infrastructure so that's what that's why we do it it's you know you you joke about it being taking a while in the healthcare space and that's totally true but someone's got to do it right we've got to see the innovation come from technology in the space and so we're gonna see that over the next few years as health systems adopt more and more technology and how do you make money yeah so we charge the software developers the software developers charge the health system so we try not to get in the way in you know we are in middleman in between health systems and software developers but we try not to throw another contract into the sales cycle with health systems that is a unnecessary piece of friction that we try to avoid so we've become essentially a subcontractor to the software vendors another part of their technical stack you know they might be paying Amazon for hosting and they will add-on redox for that API layer to get health systems it's kind of part of that infrastructure that a developer thinks about when they're building out their technology and is this the pay-as-you-go model or it's a monthly fee for a certain amount of API calls or what yes so we thought about doing the numbered API called model but the sad reality of the healthcare data space is that it's often a firehose the health system will send hundreds of thousands of messages for every patient in its organization and you know we can apply filters but it's not often up to the application developer on the types of data that they're getting or the amount of data so what instead we do is charge for the number of connections that they have to various health systems and it is a monthly model so if you're connecting to one health system then it's one licensing fee and it increments from there based on the number of health systems you're connecting to it does scale a little bit depending on the type of data so if you just need to know what patients are wearing the health system that's one type of data but if you also need to know you know the medication list for every type of patient and that's another sort of data feed so depending on the interface it scales a little bit I mean is a SAS model then yeah absolutely okay so we don't sorry for statement of works or upfront implementation fees or anything like that it's it's all SAS and they pay again based off kind of per connection so what's the average kind of software vendor or data provider or software developer paying you per month Oh couple grand so most people are connecting up to one or two or three health systems each health system connection is around $1,000 so I've got that average of two three grand per customer and what is it what's the back story here what you're just found the company in we found it in 2014 okay and was this like right at a college for you I mean where were you in your life at this point yeah so I had been working in the in the corporate world for about seven years I did four years at Wells Fargo as an Operations Analyst and then went to grad school and then went to work at epic so the big electronic medical record company I actually went to epic to to get my hands on the data I went to school for economics so I wanted to try to understand you know what we could do to use data to make healthcare better right the amount of data that stored in electronic medical records has a ton of potential to identify you know trends in the data things that we might be able to intervene on from a behaviour aspect and when I got to epic realize that they actually don't have the data they the data has kept in the basements of you know in data centers that health systems manage all around the country so you know while I was there I really learned a lot about how epic does a lot for the provider workflow and how electronic medical records do a lot to help providers become more efficient but one of the challenges is is you know now that healthcare is digitized how do we get that data out of the basement into the cloud where software developers modern app developers can use that to become more efficient and that's you know a lot of where the idea behind Redux came from my my CTO and co-founder James he was helping startups as a consultant hook up to various health systems and basically doing the same project over and over again and realized why don't we you know build an engine to put this together so that's that's where the idea came from is let's say let's do this in a scalable way let's make an engine that can scale across multiple health systems it's basically any health system any electronic medical record we plug into it and standardize the data so developers don't have to take on that task and did you throw your own money at this as you built it or did you decide to go out and raise capital yeah well we did a little bit of both which I think typically happens right we hit the first the first it was probably two years after leaving epic where James and I were working together but not really understanding what to do with our hands um we we started a whole bunch of different companies really on a you know in hindsight it was really about discovering redox we started a co-working space we started we helped to start many health tech companies in the Madison area and eventually found ourselves with the utter realization that redox was the thing we needed to sink our teeth into we brought on our third co-founder to really round up the company Luke and for the first year of working on this we we basically made no money we we we worked on 14 yeah this is 2014 we worked out of that co-working space that I mentioned we started so we had very like next to next to free office space and put our head together right lip the cup lived off of savings and side projects and consulting gigs until we formed around this idea of building the scalable interface engine in the cloud we raised a small seed around them so that very yet 350 grand at the end of 2014 that allowed us to hire first couple developers so we all paid ourselves basically the minimum we all needed to survive on for that next year which was it was a so we literally came together and said okay everyone take your bills out and let's figure out you know what we need to survive and we were all very transparent with each other so I think it was around 35 K per person and so we and we all paid each other the same because we said every you're talking about the three founders about three grand per month yeah the three founders and the we hired pretty much three people in the next couple months so our this group of six we all paid ourselves exactly the same 35 grand and you know it was a huge sacrifice for all of us because at the time everyone in the company had worked in epic epic you know big tech company pays very well market salaries you know very well in comparison we're rocking like 200 150 yeah yeah and you know that ballpark so this was a huge sacrifice for everyone everyone had to convince their significant others that this was a good idea that's always the hardest part how did yours respond are you are you with somebody yeah yeah my my wife she worked to that pick also she joined a start-up after she left at baking so she understood here change to double risk you're both in a start-up yeah yeah and so she she understood you know the why we were doing this and you know the at the end of the day the sort of convincing that I had to do was hey if this fails if it's this doesn't work you know we have about a year runway on this this 35 grand well on this 350 grand that we raised if it doesn't work out like worst-case scenarios I'll get a job and that's that's the kind of cool thing for entrepreneurs is literally worst-case scenario you can go get a job and typically entrepreneurs you know we have background and some specialized skill set we can go get jobs in different areas I could go work in health care at a health system or with other health tech company so that was my fallback plan was you know I'll get a job no big deal and Nico fast forward a so I mean have you raised in total the 350 of you raise more no we've raised a couple Rams since then so it took us about a year from end of November to about October of 2015 to get live at our first sight so we got an application that it's an iPad app that measures blood loss in the operating room so they take pictures of anything that gets bloody and it measures how much blood loss of patients had which is mind-blowing to me we we integrated that application with a Hackensack University Medical Center in New Jersey so any it's actually any c-section so when babies are being born via c-section all the blood loss numbers get transferred from this app through redox into their electronic medical record that was our first goal I've took us you know 10 11 months to get live with our first customer after raising that first round that that also coincided with us raising our series a so I think we raised our a pretty early but the problem we were setting out to solve was big enough that the attraction of having one live customer and also having lots of applications the developers who are really excited about it the developer community who were you know rallying behind us allowed us to raise a we raised that 3.5 million series a brought in some Boston investors who really like they're still on the team and that was end of 2015 so from then we we really started radio real quick what were you got in terms of revenue at that point when he raised a 3.5 well we had that one live customer so we were at about you know a thousand dollars there so two thousand dollars a month and you know Mr are well you know it was that a convertible note or priced round it was a price Graham so how did you how did you approach the equity I mean the valuation conversation with so little revenue but clearly a big opportunity yeah so I feel like when you're raising you can either raise based on your traction so so how much how much money are you making on the day to day basis and you know some revenue multiplier so you can either raise up based on attraction or you can raise based on your potential the the sort of exciting goosebump inspiring things that's in your business model and for us this raise was all about potential it would be the goose bumps but what the pitch sound like the the pitch was Sarah baby there are a ton of innovations happening in healthcare right there digital health is one of the the fastest-growing places for venture capital because there's so many companies out there trying to start something innovative in the healthcare space but the common problem they have is sharing the data with the legacy systems at hospitals and clinics around the country redox opens that problem up we enable all these applications who you know some of which will inevitably go under but many will actually be adopted by health systems we are essentially selling pickaxes right so the people who are out there fighting trying to trying to innovate in the space and that's it that's a big grand vision we had a really great team we have a really great team to do that with a tremendous background in the in the space that comes from the leading electronic medical record in the industry so that's although big warm fuzzy and by the way we've done it once already like it's up and running and working and that's the potential that we're selling so it wasn't about the you know couple grand we were making a month it was about this potential of working with the army of software developers who are innovating in the space beyond beyond just the one live customer we had probably a couple hundred developers who had signed up and basically made applications on top of our API so they're hooking into redox and trying to sell their products into health systems so our go-to-market strategy was all about getting the developers first and then the developers dragged us into the health systems as they sell their products and that was a pretty unique go to market strategy as well that investors got excited about and they Co are running short here on time so just a few quick questions here that valuation more or less than 10 million post-money it was right it was a little less she's sold about thirty percent of the business yep yeah and is that all capital you've raised to date or if you raised additional capital what are you all in how much total raised yeah so so fast forward to January we closed a another nine million serious beat ground and then literally today I'm doing pressed pitches so now it's another million from a strategic investor that we're announcing on Thursday but that that was money in the bank a couple weeks ago so all in we're at fourteen million that we raised so far that's great and this episode won't go live for many many months who is that other additional investor so we we raise money from Intermountain health system they're a big regional player cover basically all of Utah going up into Idaho and the thing that we love about them is they're a huge innovator in the IT space they built their own electronic medical record back in the day when these things are being invented they've always been an innovator and from our perspective it's true validation from the Health System side of our market yeah we've traditionally sold to the app developers now to the Health System side finally you said you were fourteen million all in yep okay and what are you got now in terms of developers using you how many paying customers do you have so we're gonna about a hundred health systems across the country and I mean no because you told me you price based off developers and their connections yep so so these these health systems that are using us they'll have between one and four or so applications that they'll be running through redox so you know an average I'd say two or so applications per Health System so that's like 200 or so applications that are alive and integrated through our platform so is that 200 developers paying you then is that how I understand that yeah 200 applications software so these are like startups right so there could be a team of developers making an application telemedicine app or a remote patient monitoring app or patient engagement application got it and you said of those tournament developers they on average will have maybe one two or three kind of data connections so if right so if I can I mean can I take 200 times two thousand basically back into your a range of your monthly recurring revenue yeah yeah that's about four hundred thousand yeah I mean that's healthy though right so you're doing about four hundred bucks a monthly recurring revenue 200 developers building these things you're in about a hundred different kind of hospitals I've adopted you 14 million dollars raised that's a high that's a good thing that's why you look so young right from our perspective now it's really just about how do we how do we crank that how do we get into more health systems faster and really really allow health systems to adopt innovation at a faster clip any churn any developers that have started paying you and then had had to leave what's your gross customer turned monthly we've lost - yeah and actually it was the number that we care about is number of live connections between developers and health systems and we've lost two on that and in both cases it was because the health was running a pilot with that application and they decided not to extend the pilot how much of total are there the 200 yeah yeah got it that's great and what are you paying to acquire customer that's something that we're probably not as sophisticated as we should be on we have a pretty pure inbound strategy so we put out a lot of content we talked a lot about how we hope the world works from an integration standpoint and we let people come to us but we haven't really done the math of you know how many hours are we spending you know from a content marketing perspective and a customer onboarding perspective to figure out what that customer acquisition cost really is so a lot of times when people have raised the amount of capital you've raised it it's for two reasons either headcount or marketing spend it sounds like yours maybe is going more towards headcount what's your team size we're at about 35 now that's why yeah so it's it's mostly developers we've got a big engine we process a lot of very sensitive data right so this is this is clinical patient data that's going through our engine so a lot on the DevOps and performance side and we're a developer platform so documentation and things like that to support the engine are really critical so 35 all based in Wisconsin most of us I'd say two-thirds are in Wisconsin we have a workforce that you know people can live wherever they want but most of us choose to live here because we actually like Madison surprising is a lot of people but yeah we really love it here but we have developers in basically coast-to-coast now we have a small office in Portland with two people in it we have a small group of three in Austin so they're looking to get in an office we have a couple people in Chicago and they're gonna open up a tiny office there too so but yeah everyone's really comfortable working remotely you know hopping on video calls and you know doing video stand-ups and things like that if am jenner Pfizer offers you 40 or 50 million bucks for the company today do you sell no from from our perspective well well in particularly because of those types of you know these are pharmaceutical companies I don't think they're well suited to solve the problem we're trying to solve we did have an acquisition offer really early in our in our company and the reason why we decided not to do it was because we didn't think that the company that was acquiring this was going to be able to solve the problem as fast as we were why'd they want it they wanted it to add it to their product so they had a they have a really great product that needs to integrate with health systems and it would have been something to add to that to make them go faster were they from the healthcare space or was it more developer focused and tech space yeah I was from the healthcare space uh and I think that's you know at the end of the day if we were to get acquired it would be because we believe that the acquiring company would be able to do this faster and better than we could on our own so it we're a little principle behind that but yeah that's good Nikko it makes perfect sense man let's wrap up here with the famous five you ready no idea what these are they're easier than everything I've asked so far okay how about okay all right number one what's your favorite business book oh man the one I think about the most way back in like years ago I read a book called forget the name moments of magic it's like an 80s business book about a Scandinavian airline like totally not a not a cool one at all but it was it was just about customer service and that really stuck to me like never letting customer down going above and beyond and I think it's just very easy fundamentals of making customers happy number two is their CEO you're following or studying so honestly in its cliche in the health care space but my old boss at Epic Judy Faulkner she's she's a self-made billionaire a private company has 10,000 employees and I just really respect the work that she's done to grow the company and stay true to the mission of making health care a better place so we we love that we were able to learn from her for so long but also just as a founder she's an elusive creature epic is your 100 million dollar exit isn't it doesn't require companies so early it's part of their principle yep it's one of their principles interesting alright number number four is their favorite on our number three is our favorite online tool you have like acuity scheduling I love calendly so the kids my favorites number four how many hours of sleep to get every night six I have a baby oh no one day one little uh nerd more yeah just one Paola he's ten months so yeah he goes to bed around and I work from like eight or so until midnight and then he wakes up at six so yeah he sleeps he sleeps pretty good for a baby but yeah I wake up with him around six and six I assume you're married then yep yeah and how are you I am three all right last last question Nico take us back ten years what he was your 20 year old self knew I didn't know about entrepreneurship I thought I was gonna be an economist so I went to school I went to grad school for it thinking that I could be an economist and you know analyze things all my life and it's just not work that's cut out for me I didn't even know or think about starting the company and I think if I was 20 years old and I told myself that you know maybe I would've started a company sooner but then again maybe I wouldn't be where I am now so it's kind of a hard question but I think I would have gone back and said hey have you ever thought about starting something rather than you know working at a big bank there you guys have it from Nico he wishes that entrepreneurship was even an option back ten years ago when he was 20 years old meanwhile at 2014 launched his company redox it is the healthcare API got a lot of success early on there now 35 people they've raised about 14 million dollars over 200 applications inside over a hundred different hospitals from these developers that are building applications using their API to give value again to clients and health care providers $22,000 rp1 average per month so doing some around 400 grand a monthly recurring revenue only two people have churned it's almost no churn and almost all inbound growth to date again tiba 35 based in Wisconsin Nikko thank you for taking us to the top thanks have a good one