Zakipoint Health Revenue & Funding (2024)

hello everyone my guest today is ramesh kumar he's the co-founder and ceo of zaki point health the sas healthcare analytics and cost management platform for self-funded employers romesha's expertise in the field of technology data science and value-based healthcare as a successful entrepreneur with an exit to an aim listed company he also holds a ba in uh mechanical engineering from oxford uk and another one from u pen in operations research and has completed unit i have opm program at harvard business school sorry unit one there rahman are you ready to take us to the top sure absolutely looking forward to it all right well healthcare is obviously tough you're all in on it walk us through what the company does and how you make money sure so the customers we're focused on are self-insured employers what that means is these companies take employee healthcare risk so they pay for each claim and they typically tend to be 250 employees or more so they have a huge challenge around not knowing what's driving their healthcare costs you know where the risks are in the population and whether people are going to efficient places of care whether it's lower cost and high quality places or they're using er versus they're using uh telemedicine service so they have really no easy way of knowing where their costs are what actions to take and how to really engage their population to tell them hey you're better off using this versus that benefit so what we do for them is we bring all of their healthcare data into one place their medical claims pharmacy claims biometric data and using some of our proprietary predictive analytics and embedding some of the solutions solution partners we're able to show where the costs our risks are what actions they could take and also from our platform they can then run campaigns that are personalizing the messages to individual employees to help them better um utilize their healthcare benefit plan and are we talking like teams of 10 using you mostly or teams of 1000 or 100 what's kind of the average customer in terms of team size sure so the employers are typically 250 employees and above uh who tend to be self-insured our average client at the moment is about 700 employee company okay interesting and and so how do you make money are they paying you a sas fee correct so we have two tiers for a product uh the first tier is uh what we call a dollar per employee per month and with a minimum and then the second tier is three dollars per employee per month so uh on average we'll be making anywhere between 12k on the low end for a lower tier product to 36 000 uh dollars a year for our second tier for our product okay so kind of a thousand bucks a month is kind of minimum correct i'm interesting and that's typically with the team of about 700 on your lower tier dollar per user product correct interesting um what's the big difference between the dollar versus three dollars so the difference is the second t allows the employer to do the member communication member outreach and personalize that message through text email and mobile portal almost like an hr tech kind of platform they're built in yes it's a benefits communication benefits optimization for the employees yeah interesting okay put this on a timeline for us when did you launch the company uh about four years ago november 2014. and and where was your head when you came up and said you know i want to go after the hardest industry in the world healthcare i mean what were you doing at the time uh so and i loved as you mentioned in your description i love data i've been an entrepreneur in the data index side of things and i've been trained in data analytics so i was really pondering over what can i do with my skills rather than help coca-cola and heineken sell more beer and more coke using data science i rather use my skills for something more meaningful so that was really my first kind of driver and then i was actually trying to get my parents to be healthier and trying to engage them in their healthcare kind of choices and i found there's a tremendous mess and lack of transparency for individuals you and i have no idea you know where things are what things cost and how much they're at a retail outlet versus a mail order location versus a telemedicine service so that really got me going and thinking about the challenges and then you spend a lot of time in healthcare you you know bounce around and finally i got to a point where there's a business model there's a customer who has a pain point and we can do something meaningful with the uh data kind of side of things that's good now over the past four years of all this in mind how many employers have you scaled to how many are on the platform so we have about 110 right now okay 110 and then break down your current team today and how they onboard these customers is there an inside sales approach or what's it look like sure so our go-to market is worthwhile clarifying that and it's kind of evolved over the last four years and where we are locked in right now we sell through third-party administrators so these are the companies who will administer these claims for self-insured employers can you name one just put a face to it so you could see cigna as a big end cigna aetna united these are some of the much much larger third party administrators there are so many small ones out there in the country in lexington kentucky there might be somebody you know uh john smith administrator and they are our customers um our route to market so they will basically have 50 100 200 employers on their platform and so we are focused on selling to them they embed our product and they offer it as part of their administrative what's in it for them do you pay my kickback so with the two tiers the first tier is more of a differentiation they need in the market in order to win customers be able to provide better analytics reporting cost containment and so that becomes embedded into their offering uh to differentiate the second tier is what they upsell and then they'll make 30 on top i see so if they drive you one of these employees pay or employers paying you a grand a month or about a dollar per employee average teams that have called a thousand people they're getting no kickback on that correct they're only but they're embedding that one dollar into their overall administrative fees so the end the end employer is never actually seeing you know your you know zaki point health a dollar per employee not yeah so not the dollar but the second tier the three dollars that's what they are seeing sorry my point is the the end the end customer has no idea they're paying you because aetna and united roll up your fees into their price point correct i see interesting is that is that it that must be a big kind of disadvantage not to own the relationship directly to the end customer yeah i think it's been a challenge we did try to sell direct we did try to sell through benefit consultants through corporate wellness companies over the four years we've kind of tried all kinds of go to market and while we had more access to the end customer but the employer of this size does not have the bandwidth to kind of deal with somebody like us and selling one at a time was just not scalable so uh finding tpas as a way to sell to a lot more employers but also to ingest the data in one one go makes it a lot easier for us to scale sure are you bootstrapped or have you raised capital we've raised about just short of a million dollars from angel investors okay uh a million bucks and how many people on the team today so we are 17 people uh split between nepal kathmandu nepal and uh boston nepal and boston why nepal actually my co-founder is from kathmandu nepal and uh he built a company in healthcare analytics uh built a team of about 300 people in nepal uh prior to this so we thought this is going to be you know take two for him uh and for me um i've always been uh fascinated by how you can leverage the skills in offshore kind of setting as well very interesting okay so 17 people boston nepal and are you guys at break even yet are you still burning cash no so we are break even that's great when did you hit that milestone that's a big one yeah so we hit probably like uh late last year okay so like call it november 2018. yeah that's great so any plans to raise additional capital to fuel growth or you're happy where you are no so this is a really exciting time we have kind of figured out the model we figured out the you know revenues growing we're getting customers so now we are looking to bring on board some serious kind of talent on the team and uh you know increase our burn through that and do a 3x in terms of revenue growth over the next 12 months so we are right now just starting to uh work on raising three million dollars from venture capitalists or strategic investors okay would you ever consider venture debt or you definitely want to do diluted vc i actually have looked at the revenue-based debt uh and i'm just not quite sure 100 whether we can get enough capital through that that was the main kind of yeah yeah typically those folks will only give you up to like four or five six sex your mrr which obviously doesn't get you to the three million but um it's obviously non-dilutive though which is nice yeah so i might actually do just do like if i'm if i'm able to get a little bit through that and then the remainder could be equity-based yeah yeah yeah i'm seeing a lot of entrepreneurs do that that's interesting you'll have to come up come back on in a year and let us know how that goes sure um tell me more about so you want a 3x year-over-year moving forward would you would you grow out over the past 12 months we did just about 3x in revenue as well okay that's good and now can i take the 110 customers you have today you said kind of minimum a thousand bucks a month that'll put you north of 110 grand a month right now on revenue is that about right so it's a little lower than that because of the deals we had to structure so we are just crossing a million arr in fact we've gone past it that's about 84 grand a month then yeah that's great so if you 3x that year over year that means about a year ago you were doing what about 25 grand a month something like that yeah healthy has most of the growth come from adding additional seats to the old customers or have you added brand new customers no brand new customers that was the the big kind of growth we have also successfully uh up sold through our partners as i described you know we're not selling direct and through partners once we have deployed we're able to get new customers that they either are acquiring or customers that they have not deployed it across as well churn's critical how do you measure churn especially when you're selling through essentially a reseller yeah it's a bit complicated for us you know i was thinking about this prior to this call as well uh we've probably lost uh one customer uh who just didn't want to use our platform anymore over the course of four years but we've lost more um because our partner loses a customer and in which case you know there's very hard for us to kind of stay and provide our product to the end customer so that's kind of how we lose customers we've also gone through a little bit of uh business model evolution and change and the go to market so we're just in the process of discontinuing one of our partners because they're not core to our growth can you quantify your churn today are we talking 10 percent annually or what so uh it's less than that it's uh in terms of logo churn you're probably looking at five percent uh in terms of revenue it's zero net revenue uh china's what about gross what about gross revenue um no it's gross revenue is growing because we are learning we're getting new customers so no no gross revenue churn so gross revenue churn you would not look at new customer ads you just look at lost revenue from the cohort that signed up a year ago that's also uh uh negative in the sense that we're not in revenue yeah but it can't be negative until you add back expansion you're like i understand what you're saying you have net negative churn i get it but the way you get that is you add back expansion and it more than covers what you lost when you just look at gross revenue churn before adding back expansion do you know what that is i don't have a good view on that but it's actually not negative because we have actually sold our next year for a product which i was talking about to some of our customers and that's allowed us from our existing customers to get higher revenue even though we've lost those five percent logo logos yeah i totally understand that again it's okay it's just it's a measurement it's a measurement thing all that matters is your expansion revenue the cash you're generating from the same cohort more than makes up for lost cash from that same cohort yeah there's an area we needed to spend a little bit of time yeah sure yeah no but it makes sense did i understand you correctly you're pulling two years of contract value forward at the beginning of the contract when you say two years of contract value forward if i sign up with you today am i paying am i pre-paying for two years no uh we pay we charge our customers quarterly or monthly and uh we typically sign a three-year deal okay got it very good and then what about cac so to sign a new thousand dollar a month customer what's your all in or kind of fully weighted cat look like today so we we haven't uh calculated a per employer level particularly since our focus now is through third-party administrators where we are acquiring the entire book of business or a good portion of the book of business and if you think at that level um our arr per customer ranges between 400k uh for a partner like you know one tpa to about 600k of arr um it probably it costs us about 80k to acquire that partner between sales commissions to other commissions to marketing that we're doing okay and and again if they were to make up 300 to 600 grand in arr and you're currently doing about a million that means you have what one or two of those partners today so we have five partners today and we are kind of transitioning some of that okay so five partners you're adding one you're subtracting another that would mean each one's doing what about called maybe 200 grand in a or for you yeah um interesting okay cool and you said you're basically willing to spend one fourth of that so you're spending call it you know 40 grand or something like that to get a 200 000 uh a partner that's going to bring you that kind of arr yeah so yeah about but uh 20 yeah of the year interesting very good that's like what that what is it a four month four month five month payback that's obviously healthy so yeah uh good stuff all right um let's uh let's wrap up here with the famous five number one what's your favorite business book so this year i love the book uh the power of moments um it's by don heath and chippies yep number two is there a ceo you're following or studying right now uh i've always been fascinated by steve jobs number three what's your favorite online tool for building the company uh trello and number four how many hours of sleep to get every night seven to seven and a half okay and what's your situation married single kids married uh three kids wow and how are you uh 45 last question what do you wish your 20 year old self knew so uh if you combine your passion and your you know desire to do something to build um and you pursue that it actually allows you to be patient for things to happen when they need to happen because in entrepreneurship you can't need to be patient but at the same time you can have the intensity and the the drive to make things happen and move move mountains so uh boils down to really if you're 20 year old just find what you really want to do and put your best effort into it guys be patient but intense zaki point health launched in 2014 today about 110 employers using them average team sizes have called 700 800 people they're doing about they just cost eight one million dollars in terms of ar they've raised about a million bucks looking to raise another three million right now we'll see what happens economics are healthy net negative revenue term team of 17 between boston and nepal as look as they look to scale through third party partners all right very good ramesh thank you for taking us to the top thank you thank you for your time