Bootstrapping Using Services: Evariant CEO Bill Moschella (Part 4)

Sramana Mitra: When you went to raise from this Manhattan firm with healthcare industry folks out there, what stage were you in? Did you already have a product? Did you have customers?

Bill Moschella: We actually did. By the time the raise goes down at the end of 2011, we had a decent customer base. We got a good handful of customers who were using it, love it and are giving great feedback. We actually had started to build modules and additional products. We were already in the process of cross-selling them. From an investor perspective, they’re like, “It seems like this could be a hot market. It’s starting to take off. These guys are selling quickly and as they build new products, their customers are buying.”

Sramana Mitra: What was the pricing model of your product? >>>

Bootstrapping Using Services: Evariant CEO Bill Moschella (Part 3)

Sramana Mitra: What form did the idea take? When you decided that you were going to build your own product, you said you observed the gap in the CRM space within the healhcare market, what format did this idea evolve into?

Bill Moschella: It evolved into what it still is today. We built a healthcare CRM platform that’s powered by analytics.

Sramana Mitra: Who is the customer?

Bill Moschella: Hospitals and providers. The story behind it is very simple. There’s a problem of rising healthcare cost. >>>

Bootstrapping Using Services: Evariant CEO Bill Moschella (Part 2)

Sramana Mitra: At what point does the strategy change? You described one strategic change which went from pure services to multi-year contracts and then to reselling other people’s software. What’s the next major change in strategy?

Bill Moschella: The next major change in strategy happened somewhere around 2007 where the reselling of original equipment manufacturing of other people’s software actually became more attractive than doing any of the services work. We became system integrators as opposed to doing agency services. We’re still doing some of the agency services work, but it was a means to get to the selling of the software. We weren’t selling our own software yet. We were selling other people’s software. >>>

Bootstrap First, Raise Money from Kleiner Perkins Later: William King, CEO of Zephyr Health (Part 7)

Sramana Mitra: You raised $15 million in this round?

William King: Yes.

Sramana Mitra: That’s all the financing that you have raised so far?

William King: Correct.

Sramana Mitra: Tell me a bit about how you framed TAM for your business. What is the TAM model that you’ve been using?

William King: I’ll just give you a couple of numbers here. The worldwide pharmaceutical market was worth $956 billion two years ago. It will be well over a trillion dollars now. We looked at the revenues from a cost standpoint. How are they being generated? In particular, what we looked at is a >>>

Bootstrap First, Raise Money from Kleiner Perkins Later: William King, CEO of Zephyr Health (Part 6)

Sramana Mitra: This, by the way, is also a trend. For the longest time, the buyers of IT were IT departments of corporations. Today and going forward, the buyers are much more going to be the business users. The marketing department, for instance, is becoming a huge buyer of IT and other departments as well. Everywhere in the organization, there are SaaS capabilities that address specific problems. The uptake of SaaS solving specific business workflows is huge outside of IT. IT is no longer the largest buyer of information technology.

William King: I love hearing that. You get to look across the landscape. That’s certainly what we hope. We’re seeing it in our buyers, but I love that that’s a trend. Another thing that we’ve done that I’m so proud of is we democratized the data. First of all, we wrangle all the data. We do all the heavy lifting. For the BI tools, when you talk to people who use them, they say, “75% to 80% of our time is spent wrangling the data.” 15% to 25% of the time, they’re actually looking at it and analyzing it. What we’ve been able to do is take that effort out and then present it in a way that a business user can make good use of. That is so powerful. That is where we get a lot more buyers. >>>

Bootstrap First, Raise Money from Kleiner Perkins Later: William King, CEO of Zephyr Health (Part 5)

Sramana Mitra: That’s the beauty of this bootstrap first, raise money later model. You’re going out to raise from a position of strength as opposed to weakness. You’re not begging for money. You’re in the negotiating position. In any given time in the market, there is more money chasing fundable deals than fundable solid deals chasing money. If you are in that position where you have bootstrapped to a certain level of validation, success, and customer traction, the likelihood of you calling the shots in negotiation is high.

William King: Exactly. I appreciate that commentary. One of the things that was important to me is our mindset of not creating a one-off product. I’m here in Silicon Valley, but I think I’m unusual in the standpoint that I’m from Princeton and I worked for a traditional company. We’ve always focused on truly building a company. That is one of the most important lessons I’ve learned at J&J. The credo, culture, and this idea of creating sustainability—these are core tenets that made a deep impression on me. What I wanted to do was go out and >>>

Bootstrap First, Raise Money from Kleiner Perkins Later: William King, CEO of Zephyr Health (Part 4)

Sramana Mitra: What was the customer segment that you were going after and what was the pain point that you were solving for them?

William King: We’re a technology company first that is focused foremost on life sciences. Simply put, we wrangle this universe of Big Data and put it to use for pharmaceutical companies. What does that mean in practical terms? It means there’s a lot of weakly connected and even disconnected data that exists in the health ecosystem. A great example would be information about physicians, patients, and hospitals. You’d think that there would be strong correlations. What we found is that data is weakly connected or not connected at all. >>>

Bootstrap First, Raise Money from Kleiner Perkins Later: William King, CEO of Zephyr Health (Part 3)

Sramana Mitra: What year does that bring us up to?

William King: I left London at the end of 2008.  It was great to learn about business, marketing, and management. The other thing that I’ve always been interested in is the world of technology, given all the devices that we have. The thing that really struck me at J&J was the staggering amount of data that we would purchase and generate. Obviously, a company of 120,000 employees and $60 billion in revenue will produce a tremendous amount of data. When I was in London, I became very fascinated with data. I’d always pay attention to data throughout my career. In fact, one of the things that I’ve learned early on is how critical data is in decision-making. Oftentimes at a big pharmaceutical company, you don’t know the outcome of your decision for many years. Think about drug development. It’s a 10-year cycle. It’s very expensive. >>>