Joe
And we are back on SeedFunders podcast. It’s been quite a while. And a lot has changed since our last episode. Dave has actually moved to Miami and been crisscrossing state, growing SeedFunders, making deals, meeting startups. And he’s actually not with us today, but will be with us again in the next episodes. But who is joining us today is Mark Engelen from RxLive.
Mark
Good to be here.
Joe
So Mark, you’re one of SeedFunders earliest investments, and by all accounts, a real success story. And so I want to jump back and trace your journey both in meeting SeedFunders partners before SeedFunders, during SeedFunders, after SeedFunders. And you’ve been a real cool story and a success story. So congrats on that.
Mark
Thanks, yeah. So the story started in downtown St. Pete, maybe four and a half years ago, where for folks who don’t know, RxLive is a business that I started with my spouse who’s a clinical pharmacist, and our whole thesis is around integrating clinical pharmacists into physician organizations. And so just by virtue of networking here locally in St. Pete, we met a couple of individuals, Sean McNamara and Bob Kropp, Doctor Robert Kropp and sort of presented them a napkin and we sat at, you know, one of the bar tables at Casey’s outdoors and sort of pitched them. And they were our first checks to sort of seed the business from the very beginning. And were deeply involved, you know, from the start. And then, at the height of the pandemic, we were struggling as many startups were for capital. And by virtue of their relationship with SeedFunders, they introduced us to the crew, and we had an opportunity to pitch and then SeedFunders was there at a really important phase in our life cycle, leading around for us. Then allowed us to bring in additional capital who were looking for a lead and provided a really important platform for us to get through what was a very difficult time for a lot of tech startups.
Joe
And before we get into that, let’s dig a little bit into RxLive. Can you give us a 101 on it?
Mark
Yeah, sure. So we think that the next decade of clinical pharmacy is going to look very different than the previous decades. So most people know a pharmacist as that individual sitting behind a counter to Walgreens dispensing medications. But what most people don’t realize, or maybe they do is that these are PhD level trained clinicians. They can convey incredible value to you in terms of managing your health, in particular, if you have very complex medication regimens. And our whole thesis is that when pharmacists are integrated into a multidisciplinary team process, so think about health care today, you now have behavioral health specialists, and nutritionists and social workers and a pharmacist is a really important part of that team. So RxLive takes that and uses technology to basically bring that at scale to primary care and other physician organizations. And what we’ve also done is, in addition to building a network of pharmacists, we’ve built a tech platform, kind of a software package to manage all the workflow, the clinical documentation. And then we’re in the early phases of a data strategy where we think that these pharmacists looking at very complex clinical problems and data serves the basis as a really important training tool for an algorithm ultimately, that helps to optimize medication regimens. And so our model is really threefold across delivery of services, selling of a software platform to enable this type of work, and then an analytics framework to improve the delivery and reduce the variability of this type of work.
Joe
That’s great. And we sort of distill out the specific value prop, or what the clinician or excuse me, the pharmacists bring, is it drug mix, is it that they’re connecting with the patient to some extent, even after the primary care folks or sort of what role do they play in the treatment?
Mark
Yeah, it’s an insightful question. So one of the hardest things in healthcare is getting workflow right. Lots of companies have fallen by the wayside because they can’t figure out the right timing and workflow and integration of the doctor into this mix. So what we have figured out over the past three and a half years is that positioning of pharmacist consultation to happen before an upcoming office visit. So I want you to think about, hopefully not yourselves, maybe your parents who are on 10 or more medications, they have a relationship with Doctor Smith, and their introduction to RxLive is such that they get a letter from Doctor Smith and actually a voicemail from Doctor Smith inviting them to participate with Doctor Smith’s pharmacist before their upcoming primary care appointment. And that’s really powerful, because then our pharmacists spend 30 minutes with that patient, they walk through the regimen. And our kind of output to that is we look at clinical optimization. So are you on the right mix of drugs, the right dosing? Are there opportunities to discontinue drugs because lots of seniors take so many extra medications that they don’t need today? Is there a drug missing? Is there a simpler way to take maybe one pill a day where there may be on three or four pills a day? So that’s kind of the clinical side. Then there’s the behavioral side, right? Like, how are you thinking about your motivation? Are you getting it from the right pharmacy? Do you fundamentally understand your disease? And then the third piece of the puzzle is really around financial, “Are you financially optimized to get your drugs at the cheapest cost?” And then, “Is the system optimized to get you the cheapest mix of drugs for the system overall. And we essentially look at all of those and make the recommendations back to the physician before they see you. And then they can address those changes in the office visit.
Joe
So the big portion of that value is provided by the platform, as an aide to the pharmacist.
Mark
Absolutely, yeah. So Doctor Kropp, always schools me and we’ve worked a lot on positioning around this. But clinical pharmacy is both a scientific discipline as well as an art, because communicating with patients, teasing out the challenges. And what the platform is really designed to do is to reduce the variability in how clinical pharmacy is practiced and to reduce the variability in common sense, protocol driven medication models. And then also make sure that we’re consistently having conversation around medication adherence. And then to the extent that there’s financial opportunities to save costs, and making sure that those are flagged by the pharmacist as well.
Joe
So if we look at this through the eyes of the pharmacist, this is a departure from the production, high volume slinging pills, filling orders sort of thing. You know, now they’re jumping into interactions and 30-minute consultations. And as with all of this stuff, is there the right code for it, so that the insurance company can digest it? So how does this sort of change the nature of being a pharmacist? And who are there specific flavors of sort of pharmacists, that would be a better fit for using this type of platform?
Mark
Yeah, so let’s take a step back and talk about big picture first. So there is an acute shortage of primary care providers in the country today. And we think that there’s about 200,000 pharmacists across the country. And they can be a really good supplement to the shortages we see for primary care. But the challenge is, like you’ve just mentioned, they’re all in retail settings. Although there is an emerging sort of function within healthcare called ambulatory care pharmacists that are deeply embedded within these practices. But most of these are at larger academic medical institutions. The business model around integrating them is really well, very immature. And there’s also I think, a little bit of elitism, I think about those types of roles. So you have to go through a postgraduate residency, after pharmacy school to be in a lot of these roles. And what we’ve now shown is that through technology, through doing these things over telehealth and using kind of video and phone based models, we’ve taken this cohort of community based pharmacists who traditionally operate in retail in their off hours, and delivered very high quality clinical work without having to have postgraduate residency, but then obviously, aided by the software platform and the technology. And so there’s just been an overwhelming interest level from the supply side of our network. The pharmacists in doing this type of model, because it’s highly rewarding. It allows them to make extra money on the side, they can operate now at the highest and best use of their clinical licensure that they weren’t able to do before. And so certainly pre-pandemic, we just got flooded with resumes for every open part-time position, because it’s a 1099 network that we’re building. And that slowed a little bit during the pandemic, but now we’re back to sort of pre-pandemic levels. And you know, there’s just a huge interest in the model.
Joe
And then how about the payer side of it? How do the financials fall?
Mark
So we started our journey by sort of pairing a pharmacist telehealth visit to code. And those types of business models, while viable and interesting, are relatively low margin. And what we’ve been able to do over the past three to four years is focus a lot on collecting outcomes data. And we actually published our first peer reviewed paper in the Journal of Telemedicine and eHealth, in January. And what we showed was that our model and this sort of team-based approach and virtual integration of pharmacy drove statistically significant reductions in hospitalization rates. And so with that proof point in hand, we now shifted our business model. And we go to these physician organizations, and in particular, those that take risk in their business model. So they’re part of an accountable care organization, or they’re being paid per patient by a Medicare Advantage plan. And we now charge a subscription. Then we charge a per member per month subscription that turns the business model on its head. Turns it from a 60-day payable cycle based on a code to a predictable upfront monthly recurring revenue that feels a lot like SAS, it actually starts to look financially a lot like SAS.
Joe
That’s great. Can you can you dig in a little bit to how that change happened internally? That’s a big change, right? So what was sort of the evolution?
Mark
It was always the goal to sort of get there. Obviously, we wanted to be a sophisticated tech company with a sophisticated tech business model, to accompany it. But in healthcare, it takes time to prove value. And so from the earliest days, and this is one of the big pieces of value of our SeedFunders partners, so Doctor Kropp and Doctor Heller, who sits on our board, had always coached us from the very beginning to have that focus on collecting data to publish a paper, and then to collect data with our first sets of customers to be able to articulate these points of value. And so, given that feedback, and that coaching, we did that, and have successfully now built a portfolio, the outcomes metrics that then support that price point.
Joe
And you mentioned Doctor Elliot Heller, who is a SeedFunders partner who came on to take a board seat as part of the SeedFunders investment, which obviously trailed after the introductions from Doctor Kropp and Sean McNamara. So can you talk a little bit about their involvement? How deeply have they been involved in RxLive since then? And how’s that experience been?
Mark
So Sean and Bob, were deeply involved in RxLive from day one. Shawn took a board seat in those early days. Bob was a board observer, I think. They were both involved in the business on almost a weekly basis in those very early days. And then Bob and Elliot in particular, are still involved on a weekly basis. So my co-founder, Kristin who’s in the clinical team committee meeting every single week, but Bob and Elliot attend. And both of them have been instrumental in shaping not only the platform and technology strategy, but then like, we also mentioned the analytic strategy and the outcomes-based strategy, Elliott continues to serve on our board till today. So he’s deeply involved as is both Bob and Sean, in all of our board cycles, giving us advice from governments to fundraising to introductions. I don’t think RxLive would be where it is today without the support of those three local St. Pete members of the SeedFunders community.
Joe
That’s great. It’s a great example of everything SeedFunders intends to be.
Mark
Yeah, and it’s the perfect demographic. It’s these partners coming in from out of town, in many cases, building their lives here, and then just bringing value to the community of young tech entrepreneurs that are trying to build businesses here. And so the talent and the expertise exists. And SeedFunders is just one of those vehicles that exists to formalize the transfer of both capital and knowledge now to this emerging cohort of entrepreneurs in the city.
Joe
And from that springboard we’ll say you’ve raised another dollar or two.
Mark
We have, so you know, following the SeedFunders round that, like I mentioned earlier, was just a lifeline for us in the storm that was COVID. We then used that to hit a number of additional milestones. We then raised another million and a half dollars in safes from pretty meaningful institutions. So we joined DreamIt, which is a huge venture accelerator platform based out of Philadelphia, one of the top five accelerator platforms in the country, I think. They’ve invested heavily in us. And then it’s not publicly announced yet, but fine for this community. They all know about it anyway. But we raised a $5 million Series A round and that closed, the first tranche of that closed in April. And it is being led by a very sophisticated venture capital team based out of Boston that only focuses on digital health investments. And fingers crossed, we’re closing the second tranche of that later this month with some pretty major strategic powerhouses, including a fortune 15 company, as well as some institutional health center or health system innovation funds.
Joe
That’s fantastic. That’s got to feel good.
Mark
It feels great, you know, and we’ve tried to be really capital efficient. And I almost think, to our detriment. If I’d started this journey, with the knowledge that I have now, I probably would have raised more early on. And it’s easy to say, and it’s easier to do as a second time entrepreneur than it is, as the first. But we raised about $3 million to get us through what amounted to almost three and a half to four years. And now we finally have the opportunity with the capital in the bank to have up to two years of runway, but with deep, deep investments in the commercial function, and our technology function. So the big thesis and the milestones are not only financial with this next round, or with this current round. It’s really about transforming RxLive into being a deep tech company, investing in AI and spending hundreds of thousands of dollars on data science, to take these algorithms to the next level. And then really take the application to the next level to be a true enterprise grade technology platform for the industry and to be the dominant standard for the industry.
Joe
Well, I’d love to dig into that just a little bit. I had a conversation with a pretty well-known investor recently. And she said that not spending enough was a big problem because A, you have to be fast. You’ve got to go big and large to really push through the muck, so to say. And so you’ve had a similar experience. So if you were to articulate why you wish you would have spent more, how you wish you would have spent more and raised more? What would that serve you? How will that serve you?
Mark
You know, I think our story was complicated by the pandemic clearly, right? As it was for lots of entrepreneurs. And I think we would have been in different position had the pandemic not happened. We would have probably been a year faster in our maturation cycle. But I think a lot of young entrepreneurs think about burn and think about money as a preservation of survival as opposed to a tool to grow. And that’s a big mindset shift that I think only as an experienced entrepreneur, you start to bring to the table. Because if you’re good, and you grow, and you’re solving the market problem, and you find product market fit, then capital will find you, right? And capital found us, because we think we’ve sort of hit those important milestones as a seed stage company. So if I were to do it again, I would have certainly invested more in sales and marketing at a much earlier stage, maybe not so much marketing, but certainly sales. We didn’t hire a full-time salesperson until we closed the A round. And that was just last month. I’d done all of the commercial activity myself. So I think that’s probably the principal domain, right? And I think if you look at the studies out there, I was having this discussion with an ally and angel investor of mine. The data suggests that more sales and marketing-oriented startups, you know, sort of get to that next phase, then more product-oriented ones, because they go to customers, and they just get people to say yes, and then they sort of figure it out, right? They build the product to the customer problem. And then they organically fit into product market fit, as opposed to people to try to over engineer that first MVP.
Joe
You know, obviously, it’s some combination of both and probably different for different people. But would you say that that is more often because people’s mindset isn’t expanded enough to really feel that they belong? Or that they are going to get to that huge place that they could with this with this big effort? Or do you think that it’s more often that they’re product based, and they’re that’s just what their expertise is, and so they avoid some of those other areas, because of that?
Mark
I think everybody dreams big. Like, you know, I don’t think I’ve really met an entrepreneur who doesn’t have the vision on their product. Sometimes the market isn’t big enough, you know, to generate that level of, you know, sort of big vision, I think more often than not, it’s just an experience thing, you know. Like a lot of people in industry who are building products as startups recognize problems, because they’ve got deep expertise in that industry. But they might not necessarily know how to commercialize that expertise. You know, sales is also the hardest thing to do in business. It’s why they get paid the big bucks when you do it successfully. You know, it also does depend on domain. So like we talked about earlier, to have credibility and in healthcare, you either need a Rolodex with a track record or you need outcomes based data to prove it. And I suspect that’s true in a lot of other industries as well. So I think it just depends, but I do think that sales is really the hardest thing to do in business. And, you know, having that sort of sales mindset is a critical skill that you need at the early stage of a startup. And whether that needs to come from a founder, or be part of the founding team, or be driven upon them by advisors or others, you know, it’s a critical ingredient in the recipe.
Joe
Make sense? And, you know, one of the things I think that’s neat or useful with RxLive, is a lot of larger health related startups need to sort of penetrate at a system level to work. They need to get this level of adoption across different players that are sometimes disparate ror full systems that’s really hard, because there’s just a lot of barriers to entry. But it seems like our next live has the ability to just go in, it will sort of and bolt on in certain places, and you can sort of grow incrementally without needing that huge push through to be successful.
Mark
Yeah, it’s a good observation. So I think we learned a lot going through our DreamIt process. So I don’t know if you’re familiar with DreamIt, but Adam Dakin, there’s the managing director of our healthcare. And, you know, because they know digital health so well, they have a really great fluency around how to attack all of these organizations. And a lot of DreamIt companies do what’s called a land and expand strategy, where they go in and they isolate sort of very specific problem to be solved, they demonstrate success and then grow into it. And, you know, a lot of their portfolio have taken that strategy. And we’re still very early right we’re just starting that journey with larger health systems. But that’s definitively our tactic, right? Where we would go in and we don’t call it a pilot. We call it a paid trial to purchase. It’s actually with very defined timeframes, parameters, KPIs around what success look like, you know, that are agreed upon. We get these organizations to share their data as part of a contractual relationship with us. And then we can actually benchmark success. The other thing that we’ve learned over time is the persona at these different health systems is very important as the entry point. So we initially wanted to attack the Chief Medical Officer, the Chief Population Health Officer, which is a new role that’s emerged in health care. And what we found over the past six months is actually the pharmacy function itself is the most efficient entry point for us. Because like we were saying earlier, pharmacy is always seen as kind of a cost center. And what we’re doing is we’re shifting the orientation of these pharmacists from being a downstream cost center who always are on the receiving end of referrals, to being a revenue driver and a big player at the population health table. And we’re almost like giving tools to these pharmacists to be the hero ever had before. And so we’re returning these people who’ve always wanted to do more now into passionate advocates with the ability to do more, which is a very powerful psychographic, as well.
Joe
That’s great. So the year ahead, you know, you’ve got costuming, this next tranche closes, knock on wood, which it should, what’s the next year look like?
Mark
So it’s all about investment. That we’ve already taken our burn and almost doubled it, you know, with the two areas that we’ve signaled so deep investment in sales and marketing, deep investment in engineering and data science. We’ve got a very defined product market fit. So we even prior to the investment has we had good line of sight into it. We invested heavily in an account-based marketing strategy where we isolated the top 600 accounts across the country that had exactly the business model and scale and size and profile that we thought would drive faster sales cycles. So we’re now originating probably two to three meetings a week in the target group, which is amazing, you know. All with an average potential cheque size of 100 to $200,000. And so it’s all about execution. It’s also about building out our team. So we’ve just hired a VP of Sales who’s just kicking ass if I can say that on the on the podcast, came from GE Healthcare. And before that he was employee number nine at a pharmacy startup. So just great domain expertise. We just were last week up in Dublin, Ohio talking to Cardinal who is that fortune 15 organization that we’re building a strategic relationship with, both as a distribution capital partner as well as the customer for us. So it’s, you know, a lot more of the same. So we know who we’ve got to target. We’ve now got the people and the tools to be able to target them. And it’s about hitting our financial milestones to get to the B round.
Joe
Wonderful. Well, very much appreciated your insights. Love the, I’ll call it a SeedFunders success story. So really cool to hear that, and you picked some good folks, to surround yourself with.
Mark
And if I can just convey thank you, to the whole SeedFunders organization. Like I mentioned, the ability to raise capital locally was huge as part of our lifecycle. Wish we’d done it at a better valuation. But you know, that’s another story. But the support of the community, the injection of not only capital, but also knowledge and time and passion has just been invaluable for RxLive. And we wouldn’t be here without SeedFunders and the team.
Joe
Wonderful. Thank you.
Mark
Thank you.
