How Redox Reached $14M Raised and 35 People Building the Healthcare API (Interview with Co-Founder Niko Skievaski)

Introduction and What Redox Does

Nathan Latka

00:01Good morning, everybody. My guest this morning is Niko Skievaski. He is the cofounder of Redox, the modern API for health care. He also used to do some work at Epic. We'll dive into both of those. Now, Niko, are you ready to take us to the top?

Niko Skievaski

00:14>> Yeah. Totally.

Business Model and Pricing Structure

Nathan Latka

00:15Alright. So start us off first, what is Redox and what's the business model?

Niko Skievaski

00:19>> Yeah. So 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.

Nathan Latka

00:36You must have the patience of mother freaking Teresa to deal with healthcare. Why on earth do you get into this market?

Niko Skievaski

00:45>> The warm and fuzzy answer is 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 get to talk to entrepreneurs, software developers who are building technologies that will actually impact patients' lives, make healthcare 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

01:08>> really see technology innovation in healthcare as 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 why we do it. It's, you know, you joke about it being taking a while in the health care space, and that's totally true, but someone's gotta do it, right? We've gotta see the innovation come from technology in this space, and so we're gonna see

01:34>> that over the next few years as health systems adopt more and more technology.

Nathan Latka

01:38And how do you make money?

Niko Skievaski

01:40>> Yeah, so we charge the software developers, but software developers charge the health systems. So we try not to get in the way, you know, are a middle man in between health systems and software developers, but we try not to throw another contract into the sales cycle with health systems. That is an 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

02:04>> know, they might be paying Amazon for hosting and then they will add on Redox for that API layer to get to health systems. It's kind of part of that infrastructure that a developer thinks about when they're building out their technology.

Nathan Latka

02:14And is this a pay as you go model or it's a monthly fee for a certain amount of API calls or what?

Niko Skievaski

02:20>> Yeah, so we thought about doing the number of API call model, but the sad reality of the healthcare data space is that it's often a fire hose. 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

02:44>> for the number of connections that they have to the various health systems.

02:48>> 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 where in the health system, that's one type of data. But if you also need to know, you know, the medication list for every

03:06>> type of patient, then that's another sort of data feed. So depending on the interface it scales a little bit.

SaaS Model with No Upfront Fees

Nathan Latka

03:11And is this a SaaS model then?

Niko Skievaski

03:13>> Yeah, absolutely. Okay. So we don't charge for statement of works or upfront implementation fees or anything like that. It's it's all SaaS.

Average Revenue Per Customer

Nathan Latka

03:20And 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?

Niko Skievaski

03:29>> A couple grand. So most people are connecting up to one or two or three health systems. Each health system connection is around a thousand dollars. Got that average of $23 per customer.

Founding Story and Background at Epic

Nathan Latka

03:41And the what's the backstory here? What year did you found the company in?

Niko Skievaski

03:45>> We founded it in 2014.

Nathan Latka

03:47Okay. And was this like right out of college for you? Mean, where were you in your life at this point?

Niko Skievaski

03:51>> 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 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

04:15>> data to make healthcare better, right? The amount of data that's 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 behaviorist aspect. And when I got to Epic, realized that they actually don't have the data. They the data is kept in the basements of you know, in data centers that health systems manage all around the country. So you

04:38>> 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

04:59>> of where the idea behind Redox came from. 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 where the idea came from is, let's do this in a scalable way. Let's make an engine that can scale across multiple health systems. Basically any health

05:26>> system, any electronic medical record, we plug into it and standardize the data so developers don't have to take on that task.

Nathan Latka

05:32And did you throw your own money at this as you built it or did you decide to go out and raise capital?

Early Days, Savings, and Seed Round

Niko Skievaski

05:37>> Yeah. Well we did a little bit of both which I think typically happens. Right? We 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. 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

06:01>> 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 out the company Luke. And for the first year of working on this, basically we made no money.

06:19>> Worked Is this 2014? 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 heads together, 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 round then. So at the very, Yeah. $350,000 at the end of

06:46>> twenty fourteen. That allowed us to hire our first couple developers. So we all paid ourselves basically the minimum we all needed to survive on for that next year.

Nathan Latka

06:54Which was what?

Founder Salaries and Team of Six

Niko Skievaski

06:56>> 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

Nathan Latka

07:12set You're up talking about the three founders, $3,000 per month?

Niko Skievaski

07:16>> Yeah. The three founders and the we hired pretty much three people in the next couple months. So this group of six we all paid ourselves exactly the same, $35,000. And you know it was a huge sacrifice for all of us because at the time everyone in the company had worked at Epic. Epic you know big tech company pays very well market salaries. You know very well in comparison to

Nathan Latka

07:36We're talking like 200, 150?

Niko Skievaski

07:38>> Yeah, yeah, 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.

Nathan Latka

07:46That's always the hardest part. How did yours respond? Are you with somebody?

Niko Skievaski

07:50>> Yeah, yeah. My wife, she worked at Epic also. She joined a startup after she left Epic. And so she understood here.

Nathan Latka

07:59It's a double risk. You're both in a startup.

Niko Skievaski

08:01>> Yeah. And so she understood you know the why we were doing this. And you know at the end of the day, sort of convincing that I had to do was, hey if this fails, if this doesn't work, you know we have about a year runway on this $35. Well on this $350,000 that we raised. If it doesn't work out, like worst case scenario is I'll get a job. And that's the kind of cool thing for entrepreneurs

08:27>> is literally worst case scenario you can go get a job. And typically entrepreneurs you know we have a background in some specialized skill set. We can go get jobs in different areas. I could go work in healthcare at a health system or with another health tech company. So that was my fallback plan was you know I'll get a job. No big deal.

Nathan Latka

08:46And Niko fast forward us. So I mean have you raised in total to $350,000 or have you raised more?

Series A Raise and First Live Customer

Niko Skievaski

08:50>> No we raised a couple rounds since then. So it took us about a year from end of November to about October 2015 to get live at our first site. 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 a patient's had, which is mind blowing to me. We integrated that application with Hackensack University

09:14>> 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 go live. It took us you know, ten, eleven months to get live with our first customer after raising that first round. That also coincided with us raising our series A. So I think we raised our A

09:38>> pretty early, but the problem we were setting out to solve was big enough that the traction 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 a 3,500,000 series A. Brought in some Boston investors who we really like, they're still on the team. And that was at end of twenty fifteen. So

10:03>> from then we really started ramping

Nathan Latka

10:06Real up quick, what were you got in terms revenue at that point when you raised the 3.5?

Niko Skievaski

10:10>> Well, we had that one live customer. So we were at about, you know, $1,000 or so. $2,000 a month in, you know, MRR.

Nathan Latka

10:18And was that was that a convertible note or a priced round?

Niko Skievaski

10:20>> It was a priced round.

Nathan Latka

10:21So how'd you how'd you approach the equity I mean, the valuation conversation with so little revenue, but clearly a big opportunity?

Niko Skievaski

10:27>> Yeah. So I 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 a day to day basis, and you know some revenue multiplier. So you can either raise based on your traction, or you can raise based on your potential. The the sort of exciting goose bump inspiring things that's in your business model. And for us, this raise was all about potential.

Nathan Latka

10:51Give me the goosebumps. What'd the pitch sound like?

Niko Skievaski

10:53>> The pitch was Sell me baby. There are a ton of innovations happening in healthcare right. Digital health is one of the fastest growing places for venture capital because so many companies out there trying to start something innovative in the healthcare space. But the common problem they have is sharing 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

11:19>> 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 innovate in the space. And 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 space that comes from the leading electronic medical record in the industry. So that's all the big, warm, fuzzy. And by

11:44>> 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 a 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 just the one live customer, we had probably a couple 100 developers who had signed up and basically made applications on top of our

12:06>> APIs. 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 drag 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.

Nathan Latka

12:23And Niko, we're running short here on so just a few quick questions here. That valuation, more or less than 10,000,000 post money?

Niko Skievaski

12:31>> It was right it was a little less. A little less.

Nathan Latka

12:34Okay. So you sold about 30% of the business?

Niko Skievaski

12:37>> Yep.

Nathan Latka

12:37Okay. Is all is that all the capital you've raised to date or have you raised additional capital? What what are you all in? How much total raised?

Series B and Strategic Investment from Intermountain Health

Niko Skievaski

12:44>> Yeah. So so fast forward to January, we closed another 9,000,000 series b round. And then literally today, I'm doing press pitches to announce 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 14,000,000 that we raised so far.

Nathan Latka

13:03That's great. And this episode won't go live for many many months. Who is that other additional investor?

Niko Skievaski

13:08>> So we raise money from Intermountain health 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 were being invented. They've always been an innovator. And from our perspective it's true validation from the health system side of our market. Yep. We've traditionally sold to

13:31>> the app developers, now it's the health systems side.

Nathan Latka

13:33Niko you said you were 14,000,000 all in?

Niko Skievaski

13:34>> Yep.

Nathan Latka

13:35Okay. And what are you at now in terms of developers using you? How many paying customers do you have?

Health Systems, Applications, and Platform Scale

Niko Skievaski

13:40>> So we're in about 100 health systems across the country.

Nathan Latka

13:43What does that mean though? Because you told me you price based off developers and how many Yep.

Niko Skievaski

13:48>> So 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 on average I'd say two or so applications per health system. So that's like 200 or so applications that are live and integrated through our platform.

Nathan Latka

14:05So is that 200 developers paying you then? Is that how I understand that?

Niko Skievaski

14:08>> Yeah, yeah. 200 application 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.

Nathan Latka

14:19Got it. And you said of those 200 developers, they on average will have maybe one, two or three kind of data connections. If, So if I, can I take 200 times 2,000 to basically back into your range of your monthly recurring revenue?

Niko Skievaski

14:33>> Yeah. Yeah. That's

Nathan Latka

14:34About 400,000?

Niko Skievaski

14:36>> Yeah. That'd be a nice back of the napkin way of I doing

Nathan Latka

14:38mean, that's healthy though. Right? So you're doing about $400,000 a monthly recurring revenue, 200 developers building these things. You're in about a 100 different kind of hospitals that have adopted you, $14,000,000 raised. That's good thing. That's why you look so young, right?

Niko Skievaski

14:51>> Yeah. From our perspective now, it's really just about how do we crank that? How do we get into more health systems faster? And really allow health systems to adopt innovation at a faster clip.

Churn and Customer Acquisition Cost

Nathan Latka

15:01Any churn, any developers that have started paying you and then had to leave, what's your gross customer churn monthly?

Niko Skievaski

15:06>> We've lost two. So not a lot. Yeah, and actually it was so the number that we care about is number of live connections between developers and health systems. We've lost two on that. And in both cases it was because the health system was running a pilot with that application, and they decided not to extend the pilot.

Nathan Latka

15:22How many of

15:23those total are there?

Niko Skievaski

15:24>> The 200?

15:25>> Yeah, yeah.

Nathan Latka

15:26Got it. That's great. And what are you paying to acquire a customer?

Niko Skievaski

15:30>> 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 talk 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 how many hours are we spending you know from a content marketing perspective and a customer onboarding perspective to figure out what

15:53>> that customer acquisition cost really is.

Team Size and Remote Work Setup

Nathan Latka

15:54So a lot of times when people have raised the amount of capital you've raised it's for two reasons, either head count or marketing spend. It sounds like yours maybe going more towards headcount. What's your team We're

Niko Skievaski

16:04>> at about 35 now.

Nathan Latka

16:05Ah, that's why.

Niko Skievaski

16:06>> Yeah. So it's mostly developers. We've got a big engine. We process a lot of very sensitive data, right? So 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.

Nathan Latka

16:25So 35 all based in Wisconsin?

Niko Skievaski

16:27>> 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 to 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,

16:52>> so they're looking to get an office. We have a couple people in Chicago and they're gonna open up a tiny office there too. But yeah, everyone's really comfortable working remotely. Hopping on video calls and you know doing video stand ups and things like that.

Acquisition Offer and Company Principles

Nathan Latka

17:04If Amgen or Pfizer offers you 40 or $50,000,000 for the company today, do you sell?

Niko Skievaski

17:09>> No. From our perspective, well in particularly because of those types of you know 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 company, and the reason why we decided not to do it was because we didn't think that the company that was acquiring us was going to be able to solve the problem as fast as we were.

Nathan Latka

17:32Why'd they want it?

Niko Skievaski

17:34>> They wanted it to add it to their product. So 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.

Nathan Latka

17:43Were they from the healthcare space or was it more developer and tech space?

Niko Skievaski

17:47>> Was from the healthcare space. 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. Yep. So we're a little principled behind that. But yeah.

Famous Five Rapid-Fire Questions

Nathan Latka

18:02That's good. Hey, Niko, it makes perfect sense, man. Let's wrap up here with the famous five. You ready?

Niko Skievaski

18:08>> I don't know. I don't know what this famous five is.

Nathan Latka

18:10I'm like, I have no idea what these are. They're easier than everything I've asked so far.

Niko Skievaski

18:13>> Okay. How about that?

Nathan Latka

18:14Okay. Alright. Number one, what's your favorite business book?

Niko Skievaski

18:18>> Oh, man. The the one I think about the most, way back years ago, I read a book called

18:27>> oh shit, I forget the name. Moments of Magic. It's like an eighties 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.

Nathan Latka

18:45Number two, is there a CEO you're following or studying?

Niko Skievaski

18:49>> So honestly, and it's cliche in the healthcare space, but my old boss at Epic, Judy Faulkner, 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 healthcare a better place. So we love that we were able to learn from her for so long, but also just as a founder she's an elusive creature.

Nathan Latka

19:14Epic is your $100,000,000 exit, isn't it?

Niko Skievaski

19:17>> Epic doesn't acquire companies.

Nathan Latka

19:18Really? It's part of their principle.

Niko Skievaski

19:20>> It's one of their core principles.

Nathan Latka

19:23Alright. Number number four, is there a favorite on or number three, is there a favorite online tool you have, like Acuity Scheduling?

Niko Skievaski

19:29>> I love Calendly. So the scheduling app are huge, right? Calendly's one of my favorites.

Nathan Latka

19:34Number four, how many hours of sleep do get every night?

Niko Skievaski

19:37>> Six. I have a baby.

Nathan Latka

19:38Oh nice, just one little one or more?

Niko Skievaski

19:41>> Yeah just one.

Nathan Latka

19:42How old?

Niko Skievaski

19:43>> He's 10, so yeah he goes to bed around seven. I work from like eight or so until midnight, and then he wakes up at six. So yeah he sleeps pretty good for a baby. But yeah I wake up with him around six.

Nathan Latka

19:56And I assume you're married then?

Niko Skievaski

19:59>> Yep, yep.

Nathan Latka

19:59And how old are you?

Niko Skievaski

20:01>> I am 30.

Nathan Latka

20:02Alright last question Niko. Take us back ten years. What do wish your 20 year old self knew?

Niko Skievaski

20:08>> 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 a company. And I think if I was 20 years old and I told myself that, you know, maybe I would have

20:25>> 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?

Nathan Latka

20:36There you guys have it from Niko. He wishes that entrepreneurship was even an option back ten years ago when he was 20 years old. Meanwhile, in 2014, launched his company Redox. It is the healthcare API. Got a lot of success early on. They're now 35 people. They've raised about $14,000,000. Over 200 applications inside over a 100 different hospitals from these developers that are building applications using their API to give value again to clients and healthcare providers.

21:0320 $2,000 ARPU on average per month. So doing somewhere around $400,000 in monthly recurring revenue. Only two people have churned. So almost no churn in almost all inbound growth to date. Again, team of thirty five based in Wisconsin. Niko, thank you for taking us to the top.

Niko Skievaski

21:17>> Thanks. Have a good one.