Incumbent software companies in healthcare historically blocked everyone from building on them.
Here's how @nexhealthHQ broke through and built a platform for other developers:
"Everything comes down to incentives. They’re not incentivized to be an open platform and give you access.
What are they incentivized by? They're incentivized to keep their customers paying you and generally happy with them. Some honestly don’t even care about the second part.
Our job is to make sure that those same customers love us, want to use us, and give the incumbents no choice but to either tolerate us or partner with us.
What do these incumbents have that we don’t? They have direct relationships with these practices. So in terms of what we build, we built software that was genuinely useful for the practices. Something that either makes them money or saves them money. That has to be the incentive for the practice owners.
As long as these practice owners value our product, they become dependent on it. It has to be so good that they can’t live without it.
And as long as we can quickly gain enough mutual customers with each of these systems, the incumbents will have no choice but to partner with us or support us.
Here’s an example. You look at a company like Henry Schein, one of the larger ones. They’re like the Epic of dentistry. We have something like 10,000 mutual practices with them today.
At first, we don’t have a partnership with them. We go directly to the practices and the database. Or if it’s cloud-based, directly to the browser.
Initially, they tried to block us, because we had maybe 100 customers with them. Then in 2023 they went as far as sending a mass email to their entire customer base and showing a pop-up in the product, to half the dental space, telling them not to use NexHealth.
It was terrifying at the time. I was like, “Well, I guess it’s some brand awareness,” because no one even knew who we were at the time.
And then over time it’s evolved to being neutral, to now, "hey, maybe we should partner.”
So over time that problem, where they were very hostile and really just trying to kill us, has been solved.
The reason it’s been solved is because there are 10,000 practices out there that use NexHealth for their scheduling, their payments, their paperwork, their patient communication.
And for Henry Schein, the question is, do we want to turn off 10,000 practices that really rely on NexHealth for their day-to-day operations? Are those practices going to be happy?
Of course not. So we started with our SaaS product to first gain that incentive alignment one way or another. Of course Henry Schein isn’t happy about it, but their incentive is now aligned with ours to a degree. Both of us just want to support our customers. So it probably makes sense for us to at least talk and maybe partner with each other.
Taking that approach of building a SaaS product, making sure it grows as quickly as possible, and then releasing the API product means our SaaS offering lets us actually protect the API product, and make sure no developer that builds on top of our API gets disrupted by these incumbents."
Video
Turner Novak 🍌🧢 (@TurnerNovak)
New @ThePeelPod with @alfromnexhealth
Today @nexhealthHQ infrastructure serves 89 million patients and 81% of new AI healthcare startups are built on it.
But at one point, the company had $4k in the bank, a maxed-out Amex card, and was on the brink of running out of cash.
I sat down with Al to talk about why 75% of dentists still run a server in their closet, the reason innovation is so hard in healthcare, and why AI value will accrue to chips, models, and the action layer.
Full episode here + links below.
Timestamps:
0:00 Healthcare skipped 3 platform shifts and went straight to AI
4:10 75% of dentists still have on-prem servers
10:05 How data interoperability holds back healthcare innovation
16:02 Why everyone blames Epic
20:15 Building the developer platform for healthcare
24:36 Why everyone fails to fix the problem
29:11 Fragmented markets enabled developer platforms
32:32 Working as a receptionist at a doctor’s office
36:13 Building a prototype on Twilio
39:15 How incumbents went from blocking to partnering
46:05 Canvassing Soho dentists door-to-door
53:47 Reverse-engineering 40-year old databases
56:21 Funding NexHealth with side hustles for two years
57:30 The scheduling wedge no one could match
1:02:20 Raising $391k from professors and customers
1:03:46 Running out of cash, why customers kept churning
1:07:45 $4,000 in the bank and a maxed-out Amex
1:11:12 The $36k pre-pay that saved the company
1:13:24 NexHealth’s three businesses today
1:20:18 Payments and the “admin-day” problem
1:26:15 72% sales win rate
1:28:27 The term sheet signed the week before COVID
1:30:26 Spending half the Series A on an acquisition
1:33:47 Raising $176M they didn't need
1:37:28 Why starting before 2022 is an advantage
1:42:22 Where AI value accrues: chips, models, the action layer
1:44:55 81% of AI products are built on NexHealth
1:48:24 Staying patient for three years after ChatGPT
1:51:25 Competitors building on their API
1:54:02 “We’re a tech company, not healthcare company”
1:56:09 Hiring from outside healthcare
1:58:34 Shoes, email over Slack
2:01:21 What AI changed inside the company
2:04:16 Inspiration from Microsoft in 1977 - 1990
Video
— https://nitter.net/TurnerNovak/status/2082854053516615920#m