Zocdoc: Oliver Kharraz

uh Cyrus ended up going door to door for doctor's offices. actually showing them a PowerPoint page and this is really a testament to Cyrus's Sheer will and determination. He just went to random doctor's offices? Yes, selling to doctors is one of the hardest things to do.

Why? Well, first of all, the office managers uh are trained to protect the doctor from people walking in and selling them stuff. So he got a lot of nose. He got a lot of nose. And yeah, a few times he was even escorted out by security, I really think. Uh one in a million could have pulled those off.

I'm N PR. That's how I built this. show about innovators, entrepreneurs, idealists, and the stories behind the movements. They don't. Guy Rose and on today's show

How two friends pounded the pavement in New York City to convince doctors to sign on to their new booking service, Zoc Doc. And how they grew that idea into a business valued at nearly two billion dollars. One of the most challenging problems for startups that offer to connect customers with service providers is what's known as the chicken and egg problem. This is the problem companies like Airbnb and Lyft had to solve.

Without home listings in the case of Airbnb or drivers in the case of lift. You'd have no customers. But at the beginning, neither of these companies had any customers, so convincing people to list their homes or drivers to offer rides to strangers? was not an easy thing to overcome. And Tony Shu, the co-founder of DoorDash, who was on the show back in twenty eighteen.

had the same problem when he started out. He needed customers who wanted food delivered to their homes, and he needed lots of restaurants to participate. But you can't get restaurants without the customer demand, and you can't get those customers without lots of restaurants. Same thing with class pass and birch box. You need Both sides of the market to buy in.

And back in two thousand seven. In New York City. Oliver Cariz? had the quintessential chicken and egg problem. He and his co-founder, Cyrus Masumi, were trying to launch Zoc Doc.

It's an online service that takes a lot of the pain and frustration out of booking a doctor's appointment. You can go online, find the type of doctor you need. Plug in your insurance and then book an appointment through a system. that's directly linked doctor's calendar. A super simple and smart idea, right? But back in 2007, Oliver and Cyrus had to convince doctors that this was a service worth paying for.

But then Why should they pay for it if there were no potential patients? And meanwhile, Oliver and Cyrus had to show potential patients that this was a service with lots of great doctors to choose from. And all those chickens and all those eggs? took a long time to bring together.

And then, after growing slowly and then quickly, Oliver faced his biggest growing pain of all. The realization that he had to completely revamp the business model of Zoc Doc if it was going to survive. A decision that was so painful, it actually led to the breakup of his nearly 10 year partnership with Cyrus. But

Let's start at the beginning. Oliver Carras was born and raised in Germany, mostly in rural parts of the country. His mother was German, and his father was from Iran. And came from a long line of doctors. For me.

It really starts. uh in some ways with my dad. and uh the time he grew up here did every reason to become a social activist. And uh and so he came uh to Germany from the Middle East When he was uh very young, uh around twenty and with uh no money in his pocket, uh No language skills.

And uh yeah, he had personally then worked a lot of odd jobs, but he eventually became A psychiatrist. But What has really Shaped me much more than being

Born in Berlin? is is this uh social activism that I that I saw him live and that he really made our family mantra, right? We we always talked about Talent brings responsibility.

And uh sort of the need to use uh whatever talent we had to help those uh around us that we can and and make a difference. Mm. Given that your father was Iranian and your mother was was sort of uh uh

German. Um and you be even though you were born in Germany. Did you feel? Did you feel as German as everybody else? So yeah, I

I didn't have a second identity. We only spoke German at home and um yet I uh as you say, I was also uh not always fully accepted. Um so if I give you an example, in my school there were twelve hundred students and you could pick out two they didn't look like everyone else and and I was one of them, right? And and even an enlightened country like Germany. That is noticeable. So

I had what I call a visual accent where people would see me on the street and and they would ask me how I learned to speak uh German so well and you know But they also it's cool that they'd skip my name when reading out scores because they weren't sure how to pronounce my last name. Uh and and I had opportunities taken away and you know even that was physically threatened. So I uh I think that really shaped me in in many ways because I realized very early that uh in order to be as successful as everyone around me.

uh, I would have to be dramatically better and then really work much, much harder uh than anyone else. And and so that really induced a very strong birth attack in me. For the record, Oliver is somewhat downplaying his work ethic because just out of high school, he actually started his first successful company. It was the early clunky days of the internet, and he designed a way to help people send emails more easily. And he wound up selling that business. Not for a ton of money, but enough to get him through medical school. But after practicing medicine for a couple years, Oliver realized he couldn't stop thinking about that first business he'd started. And

How he wanted to start another. So he quit his job in medicine. and took a consulting job with McKinsey. to New York.

That was my my goal was actually to start another company. That that's why uh I left Healthcare. But I I'd also realized at the time that I sold my first company far too cheaply, that I should learn more about business first. And and at McKinsey, I got exposure to balance sheets and P<unk>Ls and and and had a lot of uh very practical experience in what it means to manage a business. Uh and I I think very fondly of my time at McKinsey was one of my Better decisions. McKinsey, going to McKinsey is a little bit like going to business school. Although a lot of people at McKinsey have come from business schools.

Um in that you know. Many people go to business school Thinking they will find a co founder. Mm-hmm. Did you were you actively looking around at your colleagues to think Maybe I can do something with him or her, or you know, maybe that person.

Yeah, absolutely. And were you were you just thinking about different business ideas all the time? Well, i it is actually very hard uh to find uh good ideas. And and my definition of a good idea was that it needed to have uh a great mission. I wanted to make sure that we actually do something good and that we stay true to uh sort of talent brings responsibility, but I also wanted it to be a large market and to have a And and also I wanted it to be based on a contrarian insight, uh, because I thought that all of the best companies uh have that at its core.

Wow. She wanted mission. He wanted a company that could kind of dominate its field by building a mode around it, but was also contrarian. That's that's that's those are some interesting. Criteria. And and that's why I screened for several years and rejected pretty much every idea that that I came across.

Huh. And meanwhile, um, while you're going through all that, um, I guess you you meet this guy uh Cyrus Masumi who's another McKinse consultant and and just uh you just become friends, like he's just uh like somebody you like and and you guys start hanging out. Well, we got put on a study together that required us to travel globally and and if you've ever done that, it meant for us we were sixteen, eighteen hour days together for three, four

Five month uh uh on end. And we really uh got to become great partners in that and and what We realized that we had some

very complimentary skills. Yeah. Cyrus is one of the most charismatic and gregarious uh individuals should ever meet his very passionate. He could be more forceful, which sometimes was needed to be effective with clients. Yeah. And uh yeah, you've talked to me now for a little bit, as you can probably tell. I'm I'm more dispassionate and logical and more measuring. You're more German. I'm more German in in many ways, right? Uh that that also sometimes was effective with clients, right? But uh um And Cyrus is American, right?

He's American, yes. But that uh Yeah. closeness and and how we work together uh that really uh started a friendship and and we stayed close after the study and we caught up over lunch pretty regularly to bounce uh different business ideas off one another and you know I think we connected

because we had similar interests and because you know on on some levels, uh we were equally passionate about what we were doing, you know, Cyrus's passion was more visible. uh to others than mine, but we had worked close enough together that we both accepted uh the other as as a as a individual that that we could learn a lot from. pretty soon after you start hanging out with Cyrus that

This was the guy'cause you were you were on the lookout for a partner. Yeah, like I I I think I think it was was absolutely an option. I know uh the reality is that We had both founded companies before McKinsey and we both knew that we wanted to do it again. And Uh.

was always great about being uh very honest uh rather than just nice. And and I I value that a lot. Yeah. All right. So uh so this guy Cyrus, super charismatic, uh really smart. Clearly the the two of you start to to work together. And and what what kind of business ideas are Are you coming up with?

Yeah. We kind of fell in love with this new idea that came about at at one of these lunches where Cyrus told me about how he had recently ruptured his eardrum by flying with a cold. And then he found it very difficult to actually find a doctor and he had asked people for recommendations and he had called down his insurance directory uh listing, starting with the A's and some of these doctors weren't accepting new patients. Uh, some no longer accepted his insurance, one provider actually had passed away. And so he said, Well, why

Does it take me four days? to see a doctor when I'm in pain. Right. And and why can't this be much easier? Yeah. And We

Both uh Very quickly. uh realised the potential of this idea, yeah, from working at project in McKinsey, we knew that health systems were actually spending millions of dollars.

uh for marketing to grow their patient base. Because they had uh Wasted inventory, right? They had something that uh I like to call hidden supply. Yeah which is these last minute cancellations, no shows, reschedules uh that uh that that go to waste. And and then on the other hand, there were the patients who had a hard time accessing this. You thought it immediately clicked with you? You thought, My God, yes. Doctors. Appointments. Connect patients to doctors.

Yeah, I mean look it if you go through the four criteria that I had, right? It's a great mission, right? We're making one of the most uh personal needs uh more accessible for for patients. Yeah. We can help the patients to get in faster. We can help the doctors become more efficient. We can make the entire healthcare system more cost effective, keep people out of the emergency room. Things like that. And and it's a marketplace. So there is a there's a strong mode and and clearly anything in healthcare uh is a large market. And I think the contrarian insight that we had. uh was the fact that yeah, you know, like most people thought it's normal

that people have to wait uh twenty four days to see a doctor. Uh because there's a doctor shortage and and our Inside was really the no. Yeah, doctors have last minute availability because of uh these uh last minute cancellations, no shows, reschedules. And so uh I felt uh very good about this idea.

Mm. So So do you remember Like how long between the time that that you had that first conversation

Let's start this business. Was it like months or or weeks or days? Oh, was was weeks. Yeah, we uh what we what we started doing is actually Mocking up uh the site uh and how we imagined it back then uh in powerpoint and just the wire footage of a website uh wireframe exactly we would when we'd go to Starbucks and we'll chat up strangers and say hey here's a five dollar gift card uh give me your thoughts. You just go to people in Starbucks and get

Yeah, absolutely. That's that was sort of our market testing. They wouldn't they would be like, excuse me, this is a little weird. You're in my space. Oh, that that might also happen from time to time, but uh you know, there's lots of people in Starbucks. This is very un German of you, that's right? Because usually you would be sort of more tentative about doing that. Well, you know, I think uh there was a lot less uh rejection on this than you'd might think. People are actually quite open, I'd I'd uh uh sort of suggest you try this out, but if you uh if you're unthreatening and and look harmless as uh we probably did, uh then then they'll be pretty open. So you went up to people in Starbucks and you'd say, hey, um we're we're thinking about um a company here. Can you just look at this PowerPoint? We'll give you a five dollar gift card. And what was in the PowerPoint? The PowerPoint was just uh what we thought this website would look like, and we would ask them, is this a service that resonates with you? Yeah, would you use it?

And and we got uh incredibly uh valuable feedback here. Uh and and it really set us uh in many ways on the on the right track. Right. So At what point did did the two of you decide? Let's quit.

McKinsey. Let's let's pursue this. Probably a month or two after we initially discussed the idea. Did anybody say you were crazy for quitting? Oh, everyone. Everyone told us uh we're crazy. And we got a a lot of negative feedback on the idea too, right? People would say this is this just won't work. You know, the I would never pick my doctor uh on the internet or I already

Have a doctor. Uh or uh doctors wouldn't accept patients that But are looking on the internet. There were all kinds of uh projections that people had. when they were thinking about their own uh situation. But

Yeah, when when you talk to people in Starbucks, uh they actually thought about it uh much more positively. So we were encouraged enough to say, Well, this is this is going to work as long as we get out of our circle and if you don't ask McKinsey consultants and doctors, uh the the response will be better. Alright, so you are in your thirties at this point. And presumably you were making pretty good cash at McKinsey because you were probably you had no expenses. You were on the road all the time. So you know when you quit I'm assuming you had some money to Launch the business and probably live off for a while.

Yeah, so I I very deliberately uh had never raised my living standard to the money that they were paying me at McKinsey. And I had uh saved every dime. Uh so that I could um Yeah. be in a position where I can fund this and where I can afford not to take a salary for a couple of years. Wow. So so like a couple hundred thousand you saved?

Uh, you know, maybe I'm too German to discuss personal finances. But uh yeah, this is this is how I built this. I'm um radio. You're gonna tell everybody's gonna know the story. Yeah, I I had I had enough money uh to live off uh for for several years. Um, but I also uh Cyrus and I both uh financed the company early on out of our own savings. So that clearly diminished uh you know how much money we had left over after that. So now you both decide to quit. And you have some technical expertise,'cause you had you had done some coding, but this is next level stuff.

Were you able to be the technology founder and Cyrus was gonna be the The sort of the business founder. Uh absolutely not. So I I had coded, but at that point I had really not touched a computer for a long time. Uh we knew we needed to have a technical co-founder. And so Cyrus knew a guy named Nick Ganjo from the time.

together trilogy software and this is another company that they w both worked at together. Nick just brought a totally different perspective and really educated Sir Me. on a lot of things and and he was really the one who understood building a seamless experience for the consumer. And in s in many ways, Nick was sort of Zoc Doc's uh early genius. Did you uh did you have the name Zoc Doc from the beginning?

Not not initially. Uh we We went through several phases on on what the right name uh could be. For for a while we wanted to have a descriptive name, so we looked at physicians.com and doctors.com and we actually tracked down the owners of one of these domains and they wanted several million dollars for the domain name. And and we were funding the company ourselves, so that was uh completely out of the question. So then we just sat in a room and uh we brainstormed a list of fifty or a hundred names and and then started eliminating uh names until we arrived at Zoc Doc. What does it mean?

Well it doesn't mean anything, which was the beauty of it. Uh we could there were n zero search results. Okay. There's no meaning behind Zoc. There's no meaning behind it. And and you know, in hindsight, that was precisely the right thing to do because it uh it really it was a blank slate for us to fill with uh with meaning and and really build a brand around. There were exactly zero search results for Zoc Doc when we started it. And it it it resonated, right? Like once you know that It takes more than three weeks.

from picking up the phone and dialing for doctors till you actually see someone, you realize, oh, there's really not much else. that we have to wait so long for to get Uh and this is more important than most of these other things where you already have uh a fantastic access uh modes, right? If you imagine Yeah.

air travel work the way that healthcare works. There wouldn't be an expedia. There wouldn't even be a delta.com. There would be individual phone numbers for every plane. Yeah. Imagine if that happened. Yeah, half the planes would fly empty. It would be a massive pain. And that was exactly the state of healthcare. Uh before Soc Talk.

It is amazing that that That nothing like this was ever Out there in two thousand seven? Yeah, it look, it I think uh in many ways you couldn't have builded uh much earlier. Yeah, in the early days when we went out there, we were the ones installing internet in the doctor's offices. Yeah, we uh They they were uh many times.

Just migrating. from uh paper books to scheduling systems. We were sort of at the cusp of digitization for healthcare. We were just lucky In our timing. uh to get this right and and start offering the service when that uh also happened. Alright, so you decide to pursue Zoc Doc, and it's the three of you I'm assuming, really, just at the beginning. And were you working out of out of one of your apartments or did you guys rent space?

No, we we worked out of our respective apartments. Many times uh we came to Nicky at the nicest apartment, uh and and we could uh bring him a breakfast burrito and wake him up. Uh and and you know the the reality is that we originally had a pretty ambitious launch plan, right? So we got together around July we wanted to launch by December of two thousand seven. But then something interesting happened where Nick Uh send an email suggesting to look at what was then called TechCrunch 40. And you know, TechCrunch is is one of these is now a household name. But uh the the draw for us back then was there was a fifty thousand dollar prize. Now it's called Tech Crunch Disrupt, I think. Now it's called Tech Crunch Disrupt and it's a it's a major competition. It's a start up competition. We were the first class of the so it was was much less known.

B. budgeted two hours to fill in the application and really we just hand it off. We didn't think about it anymore. That that was in early July. In early August, we heard that we had been accepted, but there was a complication. we'd have to be ready by September eighteenth. Oh. That was

three months sooner than we had originally uh planned to launch. So you had a live website by September. That is right. That is right. With doctors. With doctors, right? So we actually debated for a few hours whether we should even uh try to go for that, but we we ultimately said yes, we can get the website working and we wanted to have enough doctors

Just to have a scroll bar so it wouldn't look pathetic. Right. And and so Nick and I coded night and day. Um and you know, Nick really busted his butt. He he did the patient facing side of the website and and you know there was the the programming side, what was potentially even harder because we were trying to launch a marketplace was to actually get the initial supply on there. And remember, the website wasn't there yet, so Uh Cyrus ended up going door to door for doctor's offices.

actually showing them a PowerPoint page and this is really a testament to Cyrus's sheer will and determination. If you think about What did means to really uh start a company early on. There's nothing to show, right? You maybe you have a PowerPoint, but there's no website, there's no patients, there's no other doctors, no social proof. Yeah. And it it has to run on passion. And I was very clear that that is Cyrus's uh superpower.

Mm. He just went to random doctors offices or he had like a list of doctors' offices and he started kind of walking Block. Well, there's a lot of walking involved. Yeah, we launched in Manhattan, so you can literally go down the street and you see uh the signs and and you walk in.

And he was basically saying, Look, it's a way to connect you to patients Um How was how many by the way, what was your objective? How many doctors did you need to sign up? To have this website look okay by September. Somewhere between six and ten, uh, was our goal. Okay.

So d just doable. It it is it it was extremely Hard. Really? is selling to doctors is one of the hardest things to do.

Why? Wha what were they saying? Well, first of all, it is very, very hard to even speak to a doctor, right? They they are being shielded, their time is very valuable. Their office managers uh are trained not to let anyone uh talk to them. to protect the doctor from people walking in and selling them stuff. Sure. Then secondly, they many didn't want to give up uh control over their calendar, which we asked them to do, right? We asked them to post times that a patient could uh book into it. And it was uh just a uh a far fetched idea for many of them that patients would actually uh do this. So he got a lot of nose. He got a lot of nose. But He'd go there and he'd just simply not leave.

until he got a chance to speak to the doctor and and you know, a few times he was even escorted out by security. I really think Uh one in a million could have pulled this off. I mean, w was he going to particular kinds of doctors or was he generally focused on On internists, general practitioners. Oh no, and so we began with dentists.

Um because our thinking was that uh people go to dentist most often and we wanted to make sure that we have an offering that is relevant for patients as often in their lives as possible. I got ya. So so eventually I'm assuming you do get what, six to ten, or uh how many did you get by September of two thousand seven? I think we launched with eight.

In the meantime, you And Nick were doing the Backend stuff, right? You were doing the That's right. And as you were building it, um

How did it look? So uh the bits that Nick built uh looked awesome uh for the time, I think. Uh and and it was quite impressive. We were uh very satisfied uh that we had a scroll bar, that we had a map, that we had back then already the insurance selector and uh a lot of feature that just uh weren't to be found really anywhere else. Yeah. Alright, so September two thousand seven.

You are ready to reveal This service. A tech crunch. And did all three of you present or did uh did Cyrus kind of We'll see the spokesperson.

So Cyrus uh and I uh presented, Nick stayed uh behind in New York to make sure that the left the website was actually up and running. Um this is in San Francisco that you went to. Yeah, we we flew out to San Francisco and uh so We launched Soc Doc in front of the eight, nine hundred people, a lot of them were journalists. Uh when the judges uh open up uh with feedback Guy Kawasaki who we new and and and and valued uh

as a vegetable for a for Apple. He to he came out and just said he he didn't get it, he would never use this in front of Everyone, right? His his direct quote was something like Honestly It would just never occur to me.

to go to any side and pick a doctor. That's really burnt in in my brain. And and what was worse is that he seemed to be right. You know, we didn't get a single booking that day. We were hoping that the this PR would get us sort of our initial batch of users, right? Because there are there's so many tech journalists there, so you you th you know, the publicity maybe would That was the hope. But

It it actually Took three days before we got our first legitimate uh patient and And in this entire first month we only got five bookings. Mm.

All right, so you come back from San Francisco. And You know, you had Guy Kawasaki say, I don't I'd never use this service. I'm sure he feels differently today. But may maybe then he's you know said that. But d did so did you come back feeling like Like

Dejected, like losers, or or were you excited? Like w how did you feel coming back? Well, you know, I think uh We were obviously hoping that we would eventually get more bookings. And you know, in the beginning we probably refreshed uh the bookings report a hundred times a day. But as we were thinking through this, what we realized it was really a typical

two sided marketplace challenge. Uh it's just a classic chicken and egg problem. You need the supply to uh get the demand and you need the demand to entice the supply. And for Zoc Doc. It was even trickier, right? When you think about it, healthcare is hyper local. uh and very complicated, so you have to match su t supply and demand. on a zip code specialty level and then we have thousands of insurances to take into account until we realized

that our odds of actually finding a patient that wanted what we had on offer. They're you know. quite low. And so the best Path forward was to uh methodically build up supply.

So we just we just kept going. We put up a huge map of Manhattan on the wall and then actually put little flags on it of uh where the doctors were that we had on the website and which insurance they accepted and we we we just We knew that perseverance is uh the name of the game. Why don't we come back in just a moment, how Oliver and Cyrus begin to drum up interest in Zocdok and how they even start to raise some money. after they figure out how to dress differently.

Stay with us. I'm Guy Roz and you're listening to how I built this. From N PR. Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's 2007, and Oliver, Cyrus, and Nick are basically powering through with Zoc Doc. Going door to door trying to convince doctors it's a valuable service. And the thing about doctors is, even though they're really smart and capable and we depend on them.

A lot of their offices, especially back in two thousand seven, Technologically? In the stone age. It was incredibly complicated to uh sync the doctor's calendars with ours.

Because none of the software was actually made to sink. uh where even in the places where we had uh things up and running, we would frequently Get feedback that well the the the appointment didn't happen because the doctor wasn't available. And we really couldn't figure out uh why this was the case because when we did screen shares with the office and we looked at their calendar and and our calendar it was identical.

Right, and we couldn't figure out why that's happening. So I ultimately decided to sit Next to the office manager. I went there and got to know him and his family shot me photos of his

Dog, I fixed the printer, I taught him better strategies to play Mind Sweeper. Still couldn't figure it out. Until one day the doctor would come out and she'd say, Hey David, uh I'm out next Friday. And then what does David do?

Does he go into the calendar? And block out next Friday. Yeah. Does he take a post-it note? Right on it.

Doctor out next Friday. And sticks this to his monitor, right? In the real world, these post it notes of course happen and and but once you know that math is your friend and you can start filtering this out. And that's one example. There were literally a thousand point one percent solutions that we had to figure out to make this work. Wow. That just sounds I'm getting exhausted just hearing about that.

Because this is like even this is like pre-Google calendars, right? Yeah, yeah, that was uh that was early days. And what we were extremely focused about around were making sure the experience was fantastic. And if something Went wrong. We'd we'd fix it, right? So

I was our customer service. Uh I personally would call the doctor and And confirm the appointment was all said and if it Wasn't I personally contact the patient.

to let them know, uh, and then I would offer them an Amazon gift card alongside with an apology. And there was actually one case where I didn't catch a patient in time and uh and they were already in the subway to the doctor and and so I I raised them to the doctor's office and picked up a bouquet of flowers on the way there. and and met them in person to apologize.

Uh, and and that was really a turning point where I said, Well, the service has to work and we need to be have this patient's first attitude in in terms of how it works completely ingrained in the company. Alright, so you uh clearly need to um kind of grow this. Um Were you offering this service to doctors for free at the time? Initially we offered it for free, but

we we eventually started charging fifty dollars per month. But say I'm a doctor. You come into my office and you say hey if you pay me I can bring you more customers. I would be skeptical. I would have said to you, you who who's I mean, who even knows about you? You're gonna you're asking me to pay you money. For phantom, you know, bookings for for m maybe no customers?

I mean did some of the doctors say that to you? Uh many. The this you summarize our sales challenge, right? It was very hard because even if we wanted to, we couldn't easily uh share how many patients uh their competitor down the road got. Like that uh was something that was Confidential. Yeah. Alright, so you are uh you got this chicken and egg problem'cause you got you don't have enough people signing up and you got skeptical doctors, but you know that this service could really benefit the doctors, but you also need them to pay for it, because otherwise you don't have a business. Meantime

At a certain point I'm assuming you guys start to think we better go out and look for money, if we're gonna really Make this thing work. Yeah, yeah, that that happened. So in the in the uh spring of two thousand eight, uh we we decided we should raise uh series A And we we make the rounds, we get in front of a number of the big name VCs. Only in New York or do you also go to Sand Hill Road in in Palo Alto? Sand Hill Road. Um initially we weren't very successful at all. Yeah, we got uh polite nose, yeah and uh and really no feedback until someone took us aside and told us, you know what, the idea seems good.

But your consultants. the perspective was that consultants can't get anything done. And uh what we realized is that uh even though we had both founded companies before Yeah, our McKinse Pedigree and our khakis and button down shirts. They were really hurting us, and so we went to the case.

It sounds crazy. Yeah, they know they were not pleaded, but uh but yeah, we we we after hearing that feedback Uh we very quickly uh just went to the next gap and bought jeans and t shirts and uh from then on the convos with the VCs went went a lot better. So you went from McKinsey consultant look to The sort of tech casual uniform of jeans and t shirts.

That that's exactly right. And we introduce not uh as MBAs and uh McKinsey consultants, uh, but we introduced ourselves as you know previous entrepreneurs that are starting their next company. But w was I mean w was anyone biting? Was it were the were there people who were like, Yeah, this is a great idea, I'm in. So I mean, interestingly enough, we had raised some money from uh friends and colleagues and and many of those They invested in us.

Business plan unseen, just based on the fact. That we uh were giving up our careers at McKinsey to pursue Zoc Doc. So that felt really uh great. Um and you know as we started uh changing how we appeared and how we introduced ourselves to venture capitalists, you know, we started to get offers and so in August of two thousand eight We ended up raising five million from Kostlaw Ventures, Bezos Expeditions, Mark Benioff. Jeff Bezos, and Vinod Kostla's uh all their fr funds are in. Which sounds like a lot, but for what you wanna do, it's actually

kinda limited because you still it seems to me in two thousand eight, even though you have five million dollars, a lot of money You still have this problem which is you've gotta get customers, you need lots of doctors with lots of options, but to get doctors, you need lots of customers booking through the site. So how do you Do that.

Precisely. And the these five million dollars were literally earmarked for making New York. Work. Right, make our first market work. But

Uh immediately After raising the money. The financial crisis head. Right. And uh you may remember there was this rest in peace uh memo that went around. About startups, right, yes. About uh startups uh never being able to raise money, rest in peace, uh good times. Yeah. So We got those drama buys to make the money stretch.

And we probably learned a lot during this time. Uh this was really our first go around making hard choices and We learn to be frugal and uh not to do things we can't afford and uh we we learn to not let money replace critical thinking and and creativity. But yeah, we continue to grind away at at New York. And at some point we felt well if you want to get to the next level.

We have to prove that it Zoc Doc isn't just a New York City phenomenon, right? we had to prove that it would work in a second city. Um But at that point. We didn't have the money uh to do this anymore. And by the way, you're still your approach was still the same. It was door to door. That's right.

Door to door. And how how are you building awareness about the e about the fact that Zak Dok existed? With customers, with potential customers. So we it was very, very difficult to get someone uh to the website. Yeah. But when they did They loved it.

Because it was such a step change from how healthcare uh used to work for them, right? They they used to have to pick up the phone and uh wait on hold and then play scheduling tetras with the office manager can you do Wednesday morning, no how about Thursday at noon, no about Friday afternoon, and and now they could do the same thing in a minute and have complete overview about the availability. Patients loved it and they told their friends. So we we started to get the word of mouth. going. New York.

uh really uh ticking up and we felt like okay, this this is going to work in New York. at a minimum, right? But we also realized that it took us a fair bit of time and money to get it going in New York and we couldn't with the money we had left from the five million, uh easily expand into a new city. At the same time. Raising money.

was going to be difficult because uh the next generation of investors wanted to see that it works in other cities as well. So we were a little bit in this catch twenty two. Uh we ended up applying to this uh force boost your business competition. Forbes Forbes has his competition. I don't know if they still do. Where they they give away money, right, to They were promising a hundred thousand dollar prize.

And And this time We won. And and you know what they did they gave us one of these large Publisher clearinghouse size checks. Uh and

Very useful actually. We used it to cover uh a hole in one in our only conference room, there there was a hole in the wall and we covered it with that tick. At this point you are you are working out of an office, not not an apartment. At this point we were working out of a Uh shared office space, yeah. Pre we work, yeah. Pre rework. Um So

They had given us this publisher uh clearinghouse uh size check, but they failed to give us The small check. for three months and we were getting really nervous whether we would still get it, but uh but ultimately uh we got uh that hundred thousand dollars And that's what we used to launch in our second market in D C in Washington, DC. And w did it require you guys to move down there, or were you did you hire'cause I'm assuming you had to m a lot of your early capital was going into sales. Like

Business development is hiring sales reps, is that right? That's right. We had a couple of sales reps at the time. In fact our uh very first employee ever was a sales rep. He's still with the company today. And uh He was great. He

figured out how to uh really charm his way uh to the doctor so uh there were no more security guards escorting anyone out. Yeah. When did you I'm assuming that even in two thousand nine, two thousand ten, and beyond you were not yet profitable. Far from it. Yeah, far from it, right.

Because it's a capital intensive business. Uh Yes. Yeah, we obviously investe heavily in customer service. We wanted patients to have a great experience. Uh and and we yeah, had uh quite uh sizable engineering team um because uh that was actually a major engineering effort. So what started to happen? When did you start to kinda see a real turning point. Yeah so we uh we we had launched New York successfully with with the years of hard work we've gotten it off the ground. We've transported that to DC and had worked well on DC and now we said well why are we not in more

cities and so we actually we raised a series B with Founders Fund. and uh we used this to expand off the east coast into San Francisco, then Chicago, and we just got better and better at it. So we we then ended up raising a series T in in in 2011 uh from Goldman uh and DST and We Primarily use this to grow our sales team and sign up more and more doctors and from 2011 till 2013.

We launched roughly thirty new cities. I read that by by twenty fourteen you would cover uh like forty percent of markets in the US, which is huge. I mean that's right, that's a huge number of cities. Um and in that year your valuation um of Zocduck went went past a billion dollars. I mean that's That's pretty remarkable. I mean you were kind of on this like really rapid trajectory and you had a a pretty straightforward model, right? I mean you were charging doctors a flat fee every year and then

uh they could take all the bookings they wanted. And I think that by that point, uh like by 2014, it w it was not cheap. It was expensive. You'd you'd really raise the price. It was like$3,000 a year, right? Um something like that? Yes, we charge doctors three thousand dollars a year. And And there was a flat fee.

no matter how many bookings uh Zoc Tok actually facilitated for them and and The reality was For some doctors They've got a lot of bookings. There was a great deal.

Yeah. But But there were also doctors that got a lot Fewer bookings. And for them that fixed cost was actually

too expensive and and some of them were starting to leave the service. And so we got into a situation that required us to invest a lot to stay where we are and then invest even more to continually uh grow our overall provider base, which means we had to build out a massive sales team to always sign up more doctors. Right. And Yeah, at some point uh during this time. Yeah, Nick.

Actually I ran an analysis that showed that It would uh take us several years. If ever for us to make our money back on on many of the doctors we signed up. Because you would have to sign up.

X number of hundreds of thousands of doctors. paying that amount every year. To make your money back. to to make uh sort of our the the cost of the sales team back. Wow. And

Yeah this Was clear that it is what make us dependent. on external capital. For or very long time. And now yeah, it'd say

Clearly. There are many companies that have taken sort of a grow fast at all costs approach. Uh and and they uh held on to this for an extended period of time. But Yeah, it clearly puts Octok into a a dependency to

uh investors and and uh their mindsets. Yeah. So Meantime. You know, I I'm I from what I understand.

There's disagreements. I mean there there are Yeah, well the leadership team, including Cyrus She He's I I think he's he's sort of his position is The flat fee model is actually the best way to go.

Is that a fair assessment of of his position? Yeah, I think I think that I think that's right, right? I mean there were Two fundamentally divergent ways how the business could go forward, right? One way was to continue

to work on optimizing the unit economics of our subscription model. And the other uh way uh was to think about how to make a more transformative leap and then find a new, more profitable uh and and more sustainable model. And Yeah, they're

Uh look, I can certainly understand. uh the reluctance in taking the sleep, uh very few companies. really change their underlying business model once they have a certain scale. and then live to tell about it, right? We we know the names of the companies that have done this, like Netflix. Went from DVDs to streaming, Adobe.

uh from box software to the cloud. But like there's there's not a lot of companies that that And uh and yeah, Zok needed to make a choice. uh which which direction I wanted to go. And

And I should say Oliver that that I mean this became Intensely personal. for you. Um Because you and Cyrus really disagreed on

on on the direction that the company should take. And then he stepped down. He he left the company. And you moved into the role of CEO. That's right. And I wanna ask you about this. Um You know, w one of the one of the beauties and the flaws of this show is its simplicity. I mean we talk to one person, or sometimes two. It's it's a single

narrative, and so we don't have Cyrus with us t to tell us what happened, but I want to ask you about this time because I mean th this was your co founder. This was your partner, um This was your friend. And he was leaving the company.

How did you feel at that time? Look, I I all I can say is was the very hard and very emotional period for everyone involved. Yeah. Um And uh was uh certainly a departure um

But Yeah, it was also true that given these two divergent choices, you you couldn't Uh not both of us could be useful to Zoc Doc. And I have to imagine.

That uh for for a period of time it was sort of the end of your friendship. Oh look, I mean we were Very close. uh yeah we're not only friends we had worked for eight years building Zoctalk together 14 hours a day and and uh we probably talked uh more uh to each other than to anyone else in our lives. Um but you know Sars and I are still in touch uh from time to time.

Uh and uh I think he's cheering uh from the sideline. He's still a presumably an owner of the company. Uh yeah, he's the shareholder. But here's the thing. I mean, we've we've told stories about breakups. We've had we've had episodes where there were married couples who split, who divorced, but continued the business. EO products.

Susan Griffin Black and and her husband Brad. Um They continued the business. Stacey's PETA chips, they continue the business after they divorce, sold it for a quarter of a billion dollars. You guys were w worth value to one point eight billion dollars at this point. Was was there ever a party that just thought

You know, God, look at where we're doing and look where we're going and I mean I don't know, did did you and and Cyrus Server sit down and say, you know, this thing is just is just growing and Let's just let's just figure this out. I mean I think the the challenge is that uh it's not as if there was an analytic way uh to decide uh what the right path forward is. You know the as long as investors wanted to give us money, growing at all costs uh was uh yeah a fine strategy.

The question was just how dependent you wanted to be on the continued goodwill of investors. It sounds like you were tired of going out and raising money. You didn't want to do that anymore. Oh not at all. But I I think uh you want to raise money uh from a position where you know what your alternative is. And and for us, uh you know, it it wasn't clear that the business model would uh work in in a way that that we could just flip a switch. and be profitable. Yeah.

So That was a tough year for you. Two thousand fifteen. There was an article in Business, I think Business Insider, and it was about the sales team at Zoc Doc that year. And it was it were some allegations that, you know, pe members of the sales team were using Adderall, even cocaine. They were under immense pressure, they were working all the time.

When you saw that article. Uh, and I'm not saying you were even aware of any of this. You may not even have been aware of it, but I I have to think that that article really alarmed you and and maybe even embarrassed you. Yeah my look uh There were

a number of articles in twenty fourteen, fifteen. Uh yeah, they didn't absolutely get everything right, but But what I certainly can say is that Yeah, at at the time, Dr. Kidd uh

very large sales team and and we were still scaling very quickly and Um yeah, maybe maybe the the it was too focused on Yeah, hitting uh targets and uh not focus enough on creating a strong culture.

Yeah, I I I hear these stories. from six years ago from from time to time and you know from from you now, from candidates and And really Every time this happens it's like a gut punch. Yeah I'm sure. Because because we know we're a completely different company now. Yeah uh on on so many levels.

But clearly you saw that and knew that you had to change something. Well yes, I look I I you know like there's a there's a couple of things about this, right? We are a technology company. But we had set ourselves up too much about execution and celebrating wins and and really too little about being adaptable and learning and and building the trust required to try things that Yeah, at the risk of failure. Uh and so one of the first things I did is to to change our core values, you know, to emphasize those behaviors. Yeah, one of our values is adaptable, not comfortable, another one is progress before perfection, learners before masters, right? And uh we only kept really one value constant, you know, patients.

first and and uh personally that that there was more of the culture that I thought was right for uh Zoc Doc uh to succeed on on many dimensions. So you take over the company, it's got a high valuation, but you're still not making money, and you know that you've got to change the underlying business model, or you're never gonna make money. And from what I understand, this is sort of the beginning of what you have internally described as the second founding of the company. That is right.

That is right. And that basically happens in In twenty eighteen, you you launch this new business model where Instead of the the three thousand dollar year membership fee. basically you would charge doctors a lot less, like uh like two hundred or three hundred bucks, but then every booking you uh you would take a a cut from that booking, so so more like a travel agency?

A little bit. We'd only charge for new patient booking, so the existing patients to a practice, uh, we we made free, but yes, that was the fundamental idea. And Yeah, it sounds like such an obvious thing to do, but but here was the problem with it and why why we thought it was incredibly risky to try this. our best customers that had been on uh for a very long time They got lots of bookings, right? And if we start charging them Per bookings.

Their prices Go up. very significantly. So in in in some cases uh ten times more. And and that seemed Completely insane to us. Uh, and in particular because when we talk to

other companies that were had gone through similar changes and and even pricing experts Their number one advice was Make sure whatever you do. Never charge your best customers more.

And for us. would be precisely Uh the opposite. Uh and the thing that was counterbalancing this in our mind was, well, maybe we'd be able to bring on a lot more doctors because the barrier to entry is now much lower. Um

That was There was the back and forth uh in the team uh to figure out uh whether that's really the path we want to want to go. So this is still a risky strategy because you're depending really on new bookings,'cause the two hundred dollar annual fee is dramatically lower. And I have to imagine in year one you actually saw a drop in your revenue. In year one of of this kind of Second founding, right?

Well it it's from a risk profile, uh worse than that, right? The the the worry is That you lose all your best customers and with it all the bookings that they used to be getting. Yeah um and so we needed to be ready

for a very significant drop in bookings and revenue. And the second uh you know sort of challenge was here that you know the the beauty of the subscription model is that we got all this money up front, right? And sure and now to one where we're getting paid. Uh after the booking uh with the with a 30 day p payment period. So we had a huge working capital requirement uh to make that happen.

So did you see a drop in revenue in twenty eighteen when you rolled this out? No, we didn't because we actually didn't see uh the doctors uh leave the way that we had anticipated. And in fact Yeah, while we had very much worried that uh they would be uh upset and and some of them certainly were upset. Um

we were providing so much value to them that that that one of them just said, you know what, uh what took you so long, I knew I was getting a great deal all along. So uh that worked uh really well and we had piloted in in Georgia initially in April 2018. And then uh that had worked. And so we we then rolled out in Colorado a few weeks later, that worked too. And and from there we went to uh Washington State. And again, very positive results. And after these three stays I said, Okay, great.

We know this works. Let's roll it out in our largest Most important market, let's go to New York and That went Terribly Horribly wrong.

Yeah. not only were so pissed off, they actually, I read Uh mounted a change.org. petition I don't know what to to to end this practice or something.

They were really mad. I mean they were really, really mad. And uh I guess you guys responded. You said all right, we won't we won't Roll this out in New York for a while. Yeah, you look. In New York.

We facilitate uh roughly one in five new patient doctor relationships in the entire city. On Zoc Doc. uh the economic impact uh for the providers in New York was much greater than for the providers in Georgia, Colorado, or Washington. And so to give you one example, there's a dermatologist in Soho and he paid under the old subscription model, he had 10 doctors, so he paid$30,000. And under the new pricing model. His cost was going to go up from thirty thousand dollars

to uh roughly three hundred forty thousand dollars. Wow. So what was your response to that? I mean that seems like a pretty reasonable A concern? Yeah, so look, after the conversation with the dermatologist I

I actually put down the phone and I thought You know what? He's right. And and so um I paused and and we regrouped and

Yeah, we did a couple of critical things during this time. Like the first one is we just went on a listening tour. Yeah, we we we talked to providers, we got their feedback. And we just adjusted our transition plan to give providers a much longer grace period to decide uh you know whether they want to transition to the new model or not. And then so then we relaunched New York.

uh six months later and It went. dramatically better. So the strategy works. And you see results from the strategy pretty quickly.

Like within a year. Yeah, we within a year we had uh we finally had some incredible momentum. Yeah, I was really going better than we had expected in our wildest uh dreams. Our existing client churn went down to essentially zero. I mean people still retire and and move jobs, but uh no one really left the service and we were adding more and more providers Uh because uh the barrier to entry was low and

Uh so in 2019 uh we began growing profitably. Mm. So it sounds like two thousand nineteen was really the banner year. Two thousand nineteen was a was a fantastic year and honestly we had

So much momentum coming into twenty twenty. And it feels like Hey, we worked really hard for three years and it's profitable and yeah, this guy was the limit until Until bam. Until March of twenty twenty.

Until March of twenty twenty. And and that's uh that's really Maybe uh the third uh founding of Zoc Doc. Right. Well I want to ask you about March of twenty twenty, because Your business is based on people booking with doctors and going to the doctor. I have to imagine your revenues.

must have plummeted like every other industry. Like I mean doctor's offices are still in most of the country. Slow or to or trickle of patients coming in. Uh absolutely. So when the lockdown started happening We saw uh in person bookings. Declining.

Anywhere between fifty to ninety percent uh by the end of March. Yeah, I'm not surprised. And lot of the advice I was getting was to uh sort of lay off people and and make sure that we hunker down to weather the storm. Right. But I saw an opportunity to build windmills, right? So I I thought, well we sh we need to be there for our patients. We should be expanding into telehealth and and I need every team member to help me do that. Uh and so We uh really went all in.

and and supporting uh video visits. And our product and engineering team began redesigning uh the entire marketplace to support virtual care. And so we actually uh released uh the Zoc Doc video service. And we made this available to uh any uh position, whether they are on Zoc Doc or not, uh, for free.

Yeah. And by the way Had you like had a plan to do this? How long would it would it I mean I'm imagining if you said In m in February they say, Hey, you know, I really want to focus on telehealth. Um, would you have expected that by May it would have been ready to go?

Absolutely not. I think what has been really fantastic to see is how uh we really finished two years of roadmap. In two months. Wow. And it's great because it's just it gives us a window on what the next

Phase of Zark Dog will be. I'm really looking forward to that. Uh In my mind We're at the point. Well

Amazon started from going uh selling only books to also adding CDs. We have just gone from doing only in person to also uh Doing telehealth. And uh I can't wait to see uh how this unfolds.

Mm. Yeah, it sounds like you um I I might be reading between the lines here, but um You

really admire and respect. your co founders, um particularly Cyrus and the work that he did to um to build this company. Um, but I wonder if um Do you think that you will

I don't know, rekindle your friendship. I I don't know. I me d is that something that is In the cards because uh a breakup is Is is emotionally h it's hard. I said really hard. Yeah, look, I uh uh do I think we'll work fourteen hours together.

Again, uh maybe not, but you know I I've gone uh through tougher breakups and and reconciled uh in my past and so I think we are uh we're in good shape and honestly, you know, we are uh meeting, we're talking from time to time. Uh yeah, we But uh Things to do and and places to be. So we're we're

Not hanging out all the time. Uh But uh but it's now also five years ago. Uh so um w we are uh we're much focused on making our joint uh baby successful.

When you think about Uh your journey. And uh All that's happened, do you how much do you think uh this has to do with Um with luck and how much do you think it has to do with with

the hard work you put in and in your your skills. Well, I'm gonna look. I I believe that there's really three ingredients to success. And in in the order of importance there are Luck. than talent, uh than hard work and

The only one that's completely under your control is how hard you work, right? And uh uh working harder gives you more shots on goal, uh it helps you stay on the top of what you your talent allows. And absolutely we started at the right time, the right place. So um What? But

I'm proud of and and all of that journey is only that, yeah, when we were wrong. And uh when we had to revise and uh when we needed the grit. to actually uh make it work. I oh we we lived up to that and and that's really

That's uh all that anyone can ask of themselves to do. That's Oliver Caraz, co-founder of Zoc Doc. By the way, remember how they originally wanted to call it physicians.com or doctors.com but couldn't afford the million dollar price tag to buy the domain name? Zoc doc датcom wasn't only available. The price they paid for that domain name?

Six bucks. And thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. You can also write to us at hibtnpr.org. If you want to send a tweet, it's at how I built this or at guy. You can also follow me on Instagram. That's at guy.Roz. Our show is produced this week by Jed Anderson with music composed by Ramteen Arablui. Thanks also to Julia Carney, Candace Lim, Niva Grant, and Jeff Rogers. I'm Guy Raz, and you've been listening. How I built this.

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