Arif Nathoo, Komodo Health: $3 Billion Valuation
In today's episode of Unicorn Builders, we speak with Arif Nathoo, CEO and co-founder of Komodo Health, a healthcare data technology company that’s raised more than $400 million in funding.
Arif’s Story
Growing up outside of Houston, Arif spent his early years volunteering at hospitals and obsessing over math and science. He went to Harvard Medical School with the full intention of becoming a doctor but during medical school, something changed. He says: “ I got so fascinated by the way that technology and data were changing how healthcare was practiced, and I decided that I would take a little bit of time, figure out what it is that I wanted.”
He got a degree in public policy and became excited about the intersection of policy and healthcare which eventually led to a career in management consultant at McKinsey where he developed a deep understanding of the problems across life sciences companies, payers and providers.
After six years, Arif was ready for a change and quit his job. Alongside his co-founder, Web Sun, he founded Komodo Health in 2014. They've been growing at breakneck speed ever since.
Our conversation dives deep into the early days of Komodo, challenges they’ve faced building the company, GTM philosophy, and much more. From our conversation, here are the top takeaways founders can learn.
#1: Just shut up and build.
"We kept ourselves silent between 2014 and 2018. Prior to 2019, you really found nothing about Komodo. We just didn't talk. We never gave interviews, we never talked about what we're doing because we're like, we just want to build a business.
This is my advice to anyone that runs a seed or Series A or Series B company. In the enterprise space, consumer is a little bit different, but in the enterprise space, just shut up. Like nobody wants to really listen to you or hear it from you because you haven't built anything yet.
And even today, I feel very shy because I feel like we're still early on in this journey. I'm still inning one and I'm talking more about it, but I still feel like we're so early."
#2: Become obsessed with your problem.
“I have a very arcane skill which is that I have a very deep appreciation for the way that healthcare data gets generated and how it flows across the system. And by understanding that, I've been able to help the team develop a deeper appreciation for how we construct what we call our healthcare map. And we love calling it the healthcare map because it's a map of human health and outcome. We want to trace the patient journey to do it in a way that obviously deidentified and is designed for studying these problems at a public health level. It takes a certain kind of obsession with understanding. Is what I'm seeing real or is it biased in some way? And how do I then stitch together different events and how do I correct for the bias that exists in the data?
This is something that I happen to be obsessed with and it's one of the things that has allowed us as a business to really get into this conversation, I think even at a national level on how we improve healthcare.”
#3: Obsess over revenue and profit, not valuation.
“I believe this company should be doing a billion plus in revenue. And valuation is completely irrelevant. And it's not about hitting some number, it's about how much revenue are you generating, how much profit are you generating and how are you rewarding this journey with you that believe in this? And so we don't set any valuation metric because that's the whims of the market. What's not the whims of the market though, is how your business performs. Because that is a reflection on the whole category. It's a reflection on how you compete within that category. And so for us, the belief is really rooted in this idea that we can build a very important, a very scale business one step at a time. And so that's the work that we're doing. And we continue to have that thesis.”
#4: Transform an existing category with a differentiated business model.
“We are changing the business model and an existing category. And we look at that category and we say even in the US there's $20 plus billion dollars that has been spent here. Now we're coming in with this full stack thesis. We go from the data to the AI to software.
We sell the software in more of a classic enterprise SaaS model, but it's combining both analytics and data and how it operates. And that is in this $20 billion plus category. But its entire way of operating is totally different than how people procure things today. So even though it's an existing category, the nature of how things get purchased, the offering, and how it competes, and as well, who the buyer is and the user is different when the way that these layers are purchased or procured today.
And that's what's different about it. And we think by taking a totally fresh view of this category and changing the business model here, we can return a ton of value to our companies that are spending way too much to procure these layers separately and return value to patients by creating outcomes that are better for them”
#5: Know your personal number.
“My co-founder Web and I sat down one day and we said, okay, when you hit a certain personal number to finalize it or retire, what would that number be? We both wrote a number on the napkin, and both of our numbers were in the seven figure range. And we're like, if I had this much money, we would be happy, and we would write off to the sides of it and say that we accomplished major things.
And what's amazing is that as we went through the building of Komodo, we realized, one, that as we kind of got to a number that we were very personally satisfied with. It did nothing to change our desire to change healthcare. “
#6: Leverage evangelists to bring your innovation to market.
“You have to find the evangelist. I believe any product that is successful in the market has to find the people who love it, who want to use it, who advocate for it, who bring it to their colleagues. And we have folks within these large enterprise healthcare companies that love Komodo. They go to bat for Komodo, they speak about Komodo, and they evangelize us in their own companies. And that's the start of a conversation when somebody on the marketing team that's using Komodo software to deeply understand the journey of a patient is then telling their colleagues and analytics, it's telling their It team, it's telling their manager that we use Komodo to actually identify this unmet need. And we think that if you were to go address it would have this kind of impact on our outcomes as a business.
That, to us, is exciting. And those evangelists have helped us actually navigate the complexities of these large organizations that tend to be very siloed and layered in the way that they operate.
I always joke that it's really not great products that win, it's just less sucky products that win. I think the reality is that it's the evangelism around your product that allows you to have the right to have the next conversation, to push the next sale.”
#7: When you challenge the status quo, don’t expect people to get it right away.
“What we do is inherently threatening to large IT teams in these big companies. It's threatening to legions of analysts who are starting to learn that their world can be replaced with generative AI. It was really threatening to a lot of consultancies who said well, we make so much money answering this question in a bespoke way every time. Why would you ever create software that could automate this? And I think that is the problem with driving technology in a new category. You're saying a piece of software can replace a bunch of data and infrastructure, spend a lot of people's jobs that depend on making these things really complex and a lot of people who answer bespoke questions but that I can automate because the questions I was saying they just have to do with a different population of patients.
And if I can find ways to bring that scale to the problem then maybe I don't need to hire legions of people to answer these questions. And I think that being told no had a lot as well to do with individuals self interest.”
#8: Tame your impatience.
“I think I had way too much impatience in my early days. I know founders thrive on being impatient. Generally speaking, that's what drives an action. But I do think that in the early days, I wanted to drive a change faster than society would let me change it. And I think I would have told myself to just calm down massively and go deeper in my meditation and yoga practice and spend more time just reflecting on things. And I think I could have benefited from a lot of that advice in the early days. I joke and I tell people I was terrible CEO the beginning and my co-founder Web confirms that. And pretty much everyone I knew has confirmed that I'm better now. It doesn't mean I'm great. It means I'm better now.
And the realization that there are certain things that it takes to build a company, there are certain conversations that have to have you're ultimately building the blocks that make a company great. Take the time to do that, because whether your company survives a year or a decade, it's those building blocks that make the biggest difference to your future success. And I felt like in some ways we did that, but I felt I was always charging faster than I should have at that time. And I would have told myself, hey, reflect more, take more time. Use it to really think about how you want to build a team that you believe will take this problem and address it at scale. So that's the single biggest piece of advice I could have given my younger self.”