I have some sad news to share. On Tuesday, we had to let 44 Redoxers go. That was about 25% of our team. In today’s episode, we’re going to go into the conditions that brought us to this place, how we went about making the decision to reduce the size of the team, and finally how we attach names to that decision.
My co-founder and Redox CEO, Luke Bonney will join me. As well as Raju Rishi, one of our board members. Raju is a general partner at VC firm RRE Ventures and led our series B back in January of 2017. Beyond sharing his perspective on the market and the layoffs he offers some relevant stories from his days as a founder. We thought sharing what we’re going through might be helpful as I know a lot of people in our industry are attempting to figure out how to navigate the waters through recovery.
And most importantly, I now know 44 friends on the job market. So we’ll get into who these people are and why you should contact us to hire them. If you’re hiring, reach out to [email protected] to get in touch. We’ll share positions with the alumni group.
The following is a transcript of the conversation.
Raju, what are you seeing across the market as the industry grapples with the pandemic?
Raju: The impact is pretty self-evident and I think most people would agree. Patient’s behaviors are shifting, they’re holding off on elective procedures, avoiding emergency room visits. We’re seeing sort of a skyrocketing and usage of telehealth and direct to consumer drug fulfillment has increased. And payers, frankly, are retaining vast surpluses.
As an investor, I look at things at the second and third levels. Like what’s the ramification of that impact that patients are holding off on these elective procedures and telehealth is blossoming? And the ramification [02:00] is going to be pretty profound in the midterm. Then there are some implications in the long term.
In the midterm, you’re going to see some consolidation of clinics and healthcare organizations. We’ve seen a tectonic shift in the regulatory environment because of what’s happened and potentially some of that will be permanent. We’ve made more strides in the last three months for a regulatory standpoint than we did in the last 10 years. Some of that is going to be permanent and some of it’s going to be pulled back, like how much people can charge for a telehealth visit, whether that’s concurrent with a face to face visit or not.
And then I think there’s going to be some durability in the tele-consult and direct to consumer for pharma models. So if you think about those sorts of ramifications of some of the impacts that we’re seeing, there’s going to be some implications for how we do business long term. Technology kind of has to lead the way, we’re going to need interoperability tools like Redox. That’s going to become more critical because we need to become more efficient at how we build. Information exchange can’t be done on a build and maintain your own basis. I think robotic process automation is going to be important because we may have fewer staff in these healthcare organization and clinician environments.
And I think new insurance plans are going to originate given a level of unemployment. So I know that’s a really widespread view of the COVID situation that is impacting healthcare. But I think there’s immediate impacts. I think there’s going to be ramifications of those. Then technology implications around those are going to be pretty profound. And I think Redox will ultimately have some benefit from that.
Niko: [04:00] Luke, the last couple of weeks have been the most difficult and Redox is history on Tuesday. Give us some background on where Redox is as a company and how we ended up in this position.
Luke: If we look, if we look back into 2019, we basically doubled the company in terms of our top-line growth and the plan was to do that again in 2020. Healthcare IT and digital health continues to be an area where there’s so much opportunity for innovation.
There’s so much opportunity for technology to have a significant impact and Redox as a, as an integration and interoperability platform, to support all those different technologies. We were in a position to continue to grow very quickly. So a big part of what we’re experiencing right now and why it’s so painful is we hired fantastic folks, fantastic Redoxers based on the plan and the approach we’d set forth.
And then COVID-19 happened. Obviously we didn’t, we didn’t make this decision right away. We basically looked at all the different ways we could cut costs while maintaining staff. But what really became clear is that this is a generational event.
Healthcare in the US has lost something like $200 billion. There’s been over 1.4 million healthcare workers that have been laid off or furloughed. Raju, you mentioned this, but a lot of us expected elective [06:00] procedures to come back much more strongly than they are right now. And that’s because of social distancing and our rising unemployment. So what’s become clear, is that in the short term health care while it might be recession proof, the phrase that’s being used now is it’s not pandemic proof.
We were faced with this, with this reality and understood that we’re not going to double the, the top line growth of the company this year. We need to be there for our customers while we weather the storm. So when that became clear to us, we really dug in and we said, well, what does this mean? What do we need to really think about? What’s the core of who we are and what we need to deliver on.
We looked at four key things. The first thing we did is we establish what we call our healthcare thesis. And it includes a lot of what Raju talked about, what are the trends that COVID-19 is accelerating? What are the trends that are being accelerated through regulation? And what does that mean for winners and losers in healthcare? And what does that new normal look like 12 months from now, 24 months from now? So that was kind of one piece of work.
The next piece of work was getting really deep on a core set of financial benchmarks. What’s going to be core for everybody over the next two to three years is we need to be really focused on running efficient businesses. Businesses where we’re really conscious about how efficiently we are growing. When we think about the investor market and the capital markets in the next couple of years.
The third area we looked at was our product strategy. And we knew we needed to focus on our core. And for us, our core is a developer experience and making sure that we needed to invest in a world class developer experience.
[08:00] The fourth thing we looked at was what does this mean for our go to market strategy? There’s two core parts here. Number one is doing everything we can to support our existing customers. And then number two is understanding where there are pockets of demand in digital health and healthcare technology. Things like telemedicine, things like diagnostics, things like remote patient monitoring.
We looked at these four areas and then we said, what does our expected growth look like now over the next 18 to 24 months? And that was the primary input into our updated plan. Which is what we use to make this really hard decision that impacted a bunch of people. It’s also a decision that we went through because we know that Redox is going to be needed today, but also Redox is really going to be needed even more so in healthcare’s new normal. That’s going to be more technology driven. We knew we needed to do this in order to be there for our customers today and overtime.
Niko: Raju, as an investor in Redox, as a board member, as our adult supervision, what’s your take on this? Are you, are you worried about Redox as a company?
Raju: Before I was an investor, I was an entrepreneur. I started three companies and I’ve had to make adjustments and resource adjustments in all three. I personally don’t know any company that has reached high thresholds without going through some sort of delta. Delta is a better way of putting it. Pivot is a poor word as we’re not pivoting our business. We’re just making some trajectory shifts.
I’ll give you an example on this. You know, about 15 or 16 years ago, I started a company called Rave Wireless and we were providing a pretty comprehensive [10:00] application into the higher ed marketplace so that they could have conductivity with their student population. The mobile phone was going to be the key and we created a set of applications and it was a suite of safety applications that notified you if something was happening on campus. There was an application to help you get tracked if you wanted them to, if you felt unsafe. We had an anonymous crime tip application. Then we had a whole suite of applications on academic and then student services and social. You can see where your friends were on college campus. And we were selling this as a giant bundle.
Then, a major inflection point happened in the higher ed landscape, which was the Virginia tech shooting. And then a few months later Northern Illinois happened. Every one of our prospective customers said to us, “Hey we really love this suite of applications that you’re going to offer us, but we really just need the safety stuff right now because safety has become so paramount.”
We wound up shifting the company to just offering the safety solution exclusive of all the others. And it turned out to be the best thing for the company in the end. I think Rave Mobile Safety now has probably half to schools in the country.
As a result of that, we had to let go of a bunch of people in the company because we had to shift gears toward what the market told us was needed. I let go a bunch of my friends and I let go a bunch of people that I spent a lot of energy recruiting and training and going to war with and in the end we had to skinny down the company and it was a [12:00] tough day when we went through. And I will tell you that I don’t know of one person that I let go in the end that I don’t have a good relationship with. And, and if that gives you any comfort, because I think people are mature and they kind of get it.
It’s a shock to the system when they go through it. But the reality is they come to grips with why it happened. These are intelligent folks. You didn’t hire folks that aren’t aware of what’s going on in the marketplace, in healthcare, the economy and where the business is. Every single one of those people that I let go, I still communicate with we’re Facebook friends. We get together at alumni events. It’s kind of crazy as it may seem, but the reality is just give it a little bit of time and you’re going to see like all of that Energy that you put into building the relationship and recruiting those folks and, going to war together, you don’t lose that. That’s, that’s a forever thing. Them not being part of the ride all the way at the end, it’s not going to take away anything about that.
Our shift at Rave was much, much more dramatic than what Redox has done. So I’m not worried in the least about this. I know great companies have to make trajectory shifts and deltas in order to get there.
Luke: Thanks for that, Raju. It is hard to think about some of that right now, but we can already start to see as we get through some of the grieving and pain, start to see that on the other side.
Raju: We invest in businesses based on five criteria: we look at the team, we look at the market opportunity, we look at the product market fit , we look at the competition, and then we look at [14:00] the business model.
From the team perspective, right, Redox still has a world-class superior team to any other player in the market that even touches this space so that hasn’t changed. The market opportunity has actually grown, but in a slightly different dimension. So rather than having a broad brush interoperability solution, we have to be more selective on where we’re going because the healthcare landscape is changing, but the market opportunity is not shrunk.
It’s actually growing the product. And in fact based on what we’re seeing, there’s going to be more demand for this product because there’s less resources in healthcare to build your own interoperability solution and manage your own interoperability solutions. And I think hospitals, clinics, and vendors are going to have to leverage technology providers that are solely focused on interoperability to do what they need to do so that opportunity and that product market fit.
On competition, I don’t know of anyone who does what Redox does better than Redox does it. And the business model was the area where we needed to make a little bit of adjustment. Give ourselves a little bit more running room. Cause we don’t know how long this pandemic would last and when the cure is going to come out.
Based on those five criteria, I’m not worried at all. I think we’ve done everything that we needed to do to give ourselves the room to be the dominant player in the market, but it really all starts with the team. And Luke, Niko, you both are here. We bet on you two as much as the rest of the team. We’re terribly proud to have invested, and we’re more bullish on the future of this business than ever.
Niko: Luke, what does the future of Redox look like? and where do we go from here?
Luke: The core of who we are and what we’re doing as it changed. The primary resource that we enable is [16:00] healthcare data. At the, at the very core of what we’re trying to do is make that healthcare data usable and valuable at scale. We do that by building the reusable infrastructure that healthcare needs. So the core of the foundation of who we are to Raju’s point, I think is needed now more than ever. And there’ll be greater demand for that in the future.
There’s kind of three core strategic pillars. That first pillar is. To orient our entire go to market strategy around those areas of demand in the market. And that’s exciting because. There are leaps being made. Telemedicine is a great example. How many people have we each talked to? Who’ve said, yeah, I had my first video visit with a doctor and it was great. We don’t need to go back into the office unless there’s a really good reason. So number one is by orienting ourselves around these areas of demand, we see that as a key strategy to both to support combating COVID-19, as well as putting in place infrastructure that’s going to be permanent and sticky and defining healthcare’s new normal.
Number two is a core focus on the developer experience. We’ve always felt that. Healthcare has never really been friendly or an environment that supports innovation. There’s very few, if any, organizations that really target and think about developers as the innovators as the core users, ultimately as core customers. So we’re doubling down on the developer experience. We want to make sure that developers love using the product. [18:00] We want to make sure that all the way from initial touch through to deployment, getting live at a health care organization and through to ongoing support, that the experience is what they expect. And the experience is something that makes them want to use Redox over and over and over again. That’s really exciting because being the place where we can bring together the innovators, the developers, the folks who are going to be building and scaling these technologies and healthcare, that’s what we’ve always believed in. Now we’re going to be able to focus even more on that.
The, the third strategic pillar is really making sure that from a financial standpoint, we’re as obsessed about our top line growth as we are about our efficiency. That’s important because we recognize that the overall macro environment we’re going to be working in is one where we need to have control over our destiny. We need to be able to take capital and put it to work in a very efficient way. So we’re getting really focused on how we can drive efficiency in our growth engine and how can we drive efficiency in our cash engine. Because we know that we need to be focused on how we can control our own destiny and make sure that we’re there over time for all of our customers, today’s customers and all of our future customers.
So those are the three key strategic pillars being highly vertical in our go-to-market, obsessing about our developer experience, and then really spending a lot of time thinking about how we drive efficiency in our core product.
Niko: The thing I love about the strategy is that by focusing on these verticals, we’re going to be identifying types of customers that are really ideal fits for Redox. And therefore we can develop a great experience for them and then drive efficiency in not only how we do things internally at Redox, but also how that translates to what customers experience from their [20:00] onboarding experience to getting set up on our API, to implementing a health system and how they work with us for optimization and roll out as they go beyond that. So I’m super excited about the changes that we see ahead of us.
Raju: When you have these massive moments in history, there are some lasting changes that happen. Luke touched upon it, he said, the telehealth utilization has gone through the roof and people are happy with it. And, and so there’s some amount of that that will remain and there’ll become a permanent sort of new habit. We’ve got the direct to consumer drug fulfillment: people are kind of happy getting their drugs shipped directly to their house as opposed to having to go to the pharmacy. I think there’s going to be a shift also in the clinical level, which I think dramatically impacts Redox.
Covid-19 is the first illness that I know of and I think in history where the collaboration associated with disparate pieces of data coming together to create treatments and vaccines is, I hate to use the word unprecedented, but it is unprecedented. The sharing of data and the speed with which it needs to happen is the thing that’s facilitating improvements and breakthroughs. The extent that clinicians sit there and say like, why can’t the data move? Why can’t I get access to data from location X or location Y or from specific software vendors out there in an easy, clean way? I think the demand is going to be there at the clinical level. That long game is absolutely in our wheelhouse and hours to sort of help facilitate it.
Niko: We talked through changes in the market, how that impacts how we think about growth going forward, how our strategies changed. All of those decisions are easy when compared to thinking about the actual people that are affected by us reducing our team. That’s by far the hardest part of this. Luke, can you talk us through who these people are that we let go and what we’re doing, to help them post-Redox?
Luke: This is absolutely the hardest part. This whole experience is seeing people that we really love and respect being hurt, and that’s just always going to be hard. It’s sad and there’s no real way to get around that. The one thing that I think we’ve been really focused on as we’ve gone through this is to look at our values. And I think our general counsel, Kate Criniti said it best “as a company your culture doesn’t get defined in the good times when you’re growing like crazy and everything’s working out. Your culture is defined in the hard times when you have to make really hard, painful decisions.”
The number one thing we needed to do is to make sure that we treated everybody as people, treat them authentically and do everything we can to help them. We now have a new job to build out our alumni network. [24:00] We want to tap into our networks, our customers, people like Raju, you and our board, to help get all these fantastic Redox alumni into great jobs at healthcare organizations across the country. One of the ways that I’ve really started to think about this is an alumni network from a Redox standpoint is really in service of our higher purpose.
Our purpose is to make the world’s healthcare data useful. For us to meaningfully achieve that is going to be way bigger than just Redox. When we can successfully take alumni and help place them at a technology organizations at innovative organizations across the market, this is one way that we can accelerate that overall change and as painful as it is, it’s something that I think we could be really proud of is the approach we’ve taken to do everything we can to help get these Redoxers, their next gig.
So that’s our main focus is to do everything we can to get them their next job and to leverage everything we’ve got to do it.
Niko: So if our listeners are out there interested in potentially meeting some of these people to fill positions that they might have open, what should they do? How should they get in contact with us?
Luke: in terms of who’s been impacted, all teams at the company were impacted. All the way from our product organization and our, and our software engineers all the way through to marketing sales and customer success folks. So I really do believe that if you’re a growing company looking for some great people hopefully there’s, there’s somebody we can, we can help you place. And that would be a win for everybody involved.
Niko: Obviously this wasn’t a fun episode to do, but I think it was important to talk through this and let our customers, let the people who follow Redox know and understand the position that we’re in as we had to make this decision. So thanks a lot for being here.
Raju: I’ve been a believer in this company for a long time, and I won’t go into the reasons why we invested for this particular podcast, but a lot of it has to do with the fact that health care is the cornerstone of a lot of the next generation of innovation that’s going to happen.
I don’t think anything has changed from that standpoint, so my feeling is that this company is going to be stronger and emerge as a victor in this space, longterm. I’m just proud to be an investor and along for the ride. I think the two of you and the rest of the leadership team, and frankly, the entirety of the company, one of the best investments I’ve ever made. And I’ll stand by that even through thick and thin. I’m really bullish on where, where this is going. And I know it’s a tough day, but just know that many, many companies need to go through this and emerge from this as a stronger company in the end.
Luke: Yeah, thanks for that Raju. I would just end by saying this is a difficult, painful decision. And one of the things that have really become clear over as Redox has experienced everything going on COVID-19 and the impact it’s had. The most important thing we can do is surround ourselves with really great people. People who believe in the company believe in us are open and honest and transparent and vulnerable. And Raju you’re one of those people the team is made up of, of those people. And when we’re surrounded by great people, it helps us move [28:00] through these really hard decisions that emerge on the other side, in a position to be more successful in a position to provide more help, to drive change, to really be there for our customers and future customers.
So I just want to thank you, Raju for everything you’ve helped us with and thank all Redoxers, current future, and alumni for everything you’ve done to be a part of what we’re trying to build here.
Niko: Hey everyone, Niko here again, we’ll post this in the accompanying show notes, but if you’re trying to hire anyone right now, please reach out. If you’ve worked with Redox, you know how passionate and hardworking our team is. Christine is working with our alumni network to help place 44 people into marketing sales, technical implementation, customer success, product management and people, operations roles. They’re gonna find jobs quickly, but we’d love them to work with our customers and friends, email, [email protected] to get in touch. Thanks for your support. Till next time.