1. Build product

2. Sell product

At its inception, The Takeoff started because there are plenty of resources for students interested in investment banking and consulting, but not enough for those interested in startups. Over time, the newsletter shifted toward healthcare, but this piece is a return to our roots. I’ll break down the key roles across sales and engineering, so you know what’s out there and where you might fit.

Sales

The function of sales is to sell the product that engineering makes. Sales covers the full customer lifecycle, not just closing deals. There are a number of different roles within the sales function, which I break into:

1. Marketing: Generates top-of-funnel demand and brand awareness, creating the conditions for sales to happen through content, events, ads, or partnerships.

2. Business Development Representatives (BDRs) (Sales Development Representatives (SDRs)): BDRs prospect, finding potential customers and getting them interested enough to take a meeting with AEs. Prospecting falls into two buckets, and most BDR teams handle both:

   1. Outbound: Cold/warm emails, calls to contacts

   2. Inbound: Engaging with and qualifying leads who’ve raised their hand

3. Account Executives (AEs): Once a BDR books a meeting, the AE runs demos, handles objections, negotiates, and gets a contract signed.

4. Implementation: Once a deal is closed, implementation manages onboarding.

   • Forward Deployed Engineers (FDEs): Engineers who work directly with customers, writing custom code, building integrations, and solving technical problems specific to a customer’s environment. This one could go in the engineer bucket too.

   • Deployment Specialists: Similar to implementation and more operational than FDEs - configuration, data migration, and training to get customers live. Palantir popularized both of these roles.

5. Customer Success: Making sure customers stay happy, keep using the product, and expand their contract over time.

Engineering

The function of engineering is to build the product that sales sells:

1. Product Manager (PM): Decides what gets built and why. They translate customer problems into product requirements and prioritize what matters most.

2. Design (aka Product Design, User Experience (UX)): How the product looks and feels. Good design makes the product easy to use.

3. Software Engineers: Build the product across…

   • Front End: What the user sees and interacts with (e.g., buttons, pages, layouts).

   • Back End: The infrastructure and logic running underneath (e.g., databases, APIs, servers).

4. DevOps / Site Reliability Engineer (SRE): Keeps the product running reliably, managing infrastructure, deployments, uptime, and security, so the engineering team can ship fast without things breaking in production.

Conclusion

This breakdown covers SaaS companies specifically. Services businesses (e.g., consulting firms, agencies, staffing companies) have an operations function that doesn’t exist in SaaS. In a services company, the people are the product. In a SaaS company, the digital product is the product.

With over 160 specialties and sub-specialties in the US, there has been no shortage of venture-funded, value-based specialty care organizations over the last ten years. Examining these specialties, there are several factors that make for an attractive opportunity:

• High-cost: If the specialty is costing insurers and patients a lot of money, there is more opportunity for savings.

• Variable cost: If there’s a significant difference in the amount of money spent on different care pathways, there is more opportunity to reduce costs.

• Variable quality: If there’s a significant difference in the quality of care and patient experience across different care pathways, there is more opportunity to improve quality.

• Discrete condition: If the condition is clearly defined and self-contained, it's easier to attribute costs and outcomes to a specific care team, enabling cleaner accountability under risk-based models.

• Independent specialty: If the specialty is owned and operated independently, rather than by a health system, the independent specialists are more likely to transition to risk.

• CMMI model: The factors above contribute to CMMI’s creation of models, and these models spur innovation.

Throughout this piece, I will highlight the importance of the first bullet, high-cost, because specialties that drive disproportionate spend create the clearest opportunity for value-based models to meaningfully reduce total cost of care.

If a statistic in this section does not have a source, it comes from this PDF 👇

William Blair Report on Specialty Value-Based Care.pdf

Kidney care

Kidney care is well-suited for risk-based models because it is a high cost and discrete condition. In these risk-based models, nephrologists deserve accountability for total cost of care due to the discrete nature of the condition, which policy makers and CMS have recognized.

First, let’s take a look at the cost. Medicare is spending over $50B per year on End-Stage Renal Disease (ESRD), which is roughly 1% of the overall federal budget. The average ESRD patient on dialysis costs roughly $100K per year, and there are roughly 800K ESRD patients (68% of whom are on dialysis).

Next, looking at the condition, Chronic Kidney Disease (CKD) (the precursor to ESRD) affects roughly 15% of the population and is much more prevalent in Medicare (38%). Despite its prevalence, it is estimated that 90% of patients with CKD don’t know about their condition. Kidney disease is a discrete disease state where a specialized care model improves outcomes, reduces costs, and increases patient satisfaction. Deploying this specialized care model, nephrologists often are the quarterbacks of the condition as a relatively independent specialty (not employed by health systems). This dynamic is dissimilar to a condition like diabetes, where Primary Care Physicians (PCPs) manage the condition because of its prevalence, familiarity, and straightforward management protocols. In this care journey, nephrologists and care managers can positively impact care in a number of areas:

• Slowing disease progression

• Increasing optimal starts (beginning dialysis with a permanent vascular access already in place, rather than a catheter)

• Reducing hospital admissions / readmissions

• The movement from in-center to home dialysis

Due to the disease’s significant effect on the government’s budget and seniors’ health, policy makers have also stepped in to create change. The first wave of kidney care ‘hype’ started in 2021 with the 21st Century Cures Act and Kidney Care Choices (KCC). 21st Century Cures allowed all ESRD patients to be eligible for enrollment in Medicare Advantage (MA) plans (the Social Security Amendments of 1972 allowed people with ESRD to enroll in Traditional Medicare). Additionally, the enhanced kidney-specific, CMMI model, Kidney Care Choices (KCC) gave nephrologists the option to take on risk, similar to how PCPs take on risk for the Medicare Shared Savings Program (MSSP).

These policy tailwinds have created two primary business models in value-based kidney care: nephrology enablers and population health. KCC, the CMMI model, gave rise to many businesses focused on enabling nephrologists to take on risk, similar to what Aledade or other enablers do for PCPs (noticing a trend?). Most of these businesses create Kidney Care Entities (KCEs) (similar to ACOs) in Traditional Medicare. Businesses that only enable nephrologists are in the full-risk nephrology bucket. The population health bucket includes businesses that enter full-risk arrangements with payers, some of which also serve as enablers for nephrologists.

As one of the more advanced specialties in value-based specialty care, kidney care has received tons of funding from venture capital (and even newsletters). This funding and subsequent innovation has led to improved patient outcomes, fewer hospital admissions, lower costs, and an improved patient experience for thousands of individuals across the US.

Cardiology

The health and societal risks associated with cardiovascular diseases are significant. They are the number one cause of death around the world, killing 18M people annually and are responsible for 1 of every 3 deaths in the country. The financial burden is also substantial, representing the single largest source of spending among specialty conditions.

Digging into cost burdens associated with heart diseases, there is a significant opportunity for savings because of a high referral rate, their chronic nature, and cost-variation. About 15% of primary care visits related to cardiac conditions lead to a specialist referral, meaning that streamlined high-quality, low-cost referrals can have a significant impact. CMS reimbursement for outpatient treatments, like heart catheterizations, coronary interventions, and pacemaker implants, are a more cost-efficient method, often generating 50% to 60% of savings versus the acute-care setting. Cost-variation via over-utilization is also pervasive, as it is estimated that 35% of cardiac stress tests with imaging are clinically unwarranted. This cost-variation can lead to cost savings for risk-bearing entities and Medicare.

Making the transition to value more difficult, cardiology is a highly health-system-employed specialty. Even if a group is interested in moving to value, they might be constrained by the broader system’s fee-for-service (FFS) incentives. Typically, these ownership structures fall into 3 buckets across a spectrum from more aligned with a system to less aligned.

• Health system owned cardiologist: Full-time employee of health system

• Big cardiology groups: Affiliated with systems but independently owned

• Independent cardiologists: Fewer and far between now

A second important consideration within cardiology is the deeply co-morbid nature of the condition, where it is often less clear which conditions should be handled by PCPs and which should be handled by specialists (cardiologists, nephrologists, etc.). In a world of complex risk attribution and a lack of clarity on a ‘true quarterback’ for the patient, value-based cardiology is faced with a true financial and clinical challenge. CMMI has recognized this complexity in neglecting to create a model with the cardiologist at the helm, although there have been programs which have taken a more preventative stance.

A third consideration is that many states have limited access to certain medical procedures in more convenient and cost-effective outpatient settings. Over 15 states still have not followed CMS in making Percutaneous Coronary Interventions (PCIs) available in lower cost, outpatient settings. In those states, regulatory barriers remain that prevent the expansion of these services outside of traditional hospital settings.

Behavioral Health

Despite the expansion of human lifespan and increase in global GDP, mental health has largely declined in the US. This imbalance exists, in part, because our current healthcare system is built to incentivize volume, over preventative treatments like those in behavioral health. However, public awareness, a shift in stigma, governmental support, and rapidly increasing employer demand have created opportunities for innovation, specifically in value-based care, where preventative, behavioral healthcare is being prioritized to reduce the total cost of care.

“Based on the 2022 prevalence of adolescent behavioral health conditions and symptoms, the ripple effects of the adolescent behavioral crisis are estimated at up to $185 billion in lifetime medical costs and $3 trillion in lifetime lost productivity and wages.”

Behavioral healthcare is preventative healthcare for certain populations. High-quality, behavioral healthcare can not only reduce the severity of mental illness, but also reduce the cost of care associated with physical medical expenditures down the line. This correlation is only true within high-acuity populations, where patients tend to be under-resourced. For example, “a single patient with serious mental illness (SMI) is associated with ~$1,600 more in mental health spending and ~$2,600 more in medical spending compared to a patient with more common mental health disorders.”

Behavioral health organizations treating healthier and wealthier people are not well positioned to engage in value-based care (payment categories 3 & 4) because their mental healthcare does not drive significant downstream spend. These organizations are best positioned to engage in fee-for-service (categories 1 & 2) payment models. Organizations treating marginalized, under-resourced patients who tend to be higher-need (suffer from SMI / Substance Use Disorder (SUD)) are better set up to engage in value-based care because of the associated long-term reduction in total cost of care from preventative, behavioral healthcare.

There are four general categories for healthcare reimbursement: category 1: FFS, category 2: FFS with link to quality and value, category 3: shared saving models, and category 4: population-based-payments.

Companies in the bottom-left in the diagram below cater to this under-resourced patient population. As mentioned above, these patients tend to accrue higher medical costs over time, incentivizing health plans and providers to engage in shared savings models and population-based-payments. On the other hand, companies that cater to patients with less severe conditions and higher socioeconomic statuses generally fall into the first and second category, as they are not as costly to health plans.

Category 2: Quality Metrics

In some payment models within behavioral health, providers receive increased compensation for meeting specific quality metrics, and I’ll outline just a few of them below.

This approach is prevalent in treating low-acuity mental illnesses, where higher quality care may not necessarily correlate to reduced total cost of care. For instance, high-quality therapy for middle/upper-class college students with moderate depression is less likely to impact their future medical expenses, such as emergency room visits.

First, we’ll go through a few quality measures from HEDIS, a widely used set of standardized performance measures set by the NCQA (read more here):

• Effectiveness of care: Antidepressant Medication Management

• Access/Availability of care: Use of First-Line Psychosocial Care for Children and Adolescents on Antipsychotics (APP)

• Utilization and risk-adjusted utilization: Mental Health Utilization (MPT)

• Measures collected using electronic clinical data systems: Depression Screening and Follow-Up for Adolescents and Adults (DSF)

Provider organizations can also agree with health plans on more personalized quality metrics. Below are just a few examples that I’ve heard of but see more here:

• Therapeutic alliance: This metric refers to the collaborative, trusting relationship between a therapist and client that fosters a supportive environment for personal growth and change in therapy. There are a variety of methods used to measure therapeutic alliance.

• Appointment Availability: Provider organizations must have an appointment available within X number of days.

• Second appointment retention: X% of patients must have a second appointment with providers.

Categories 3 & 4: Shared Savings & Population-based-payments

The profits generated from shared savings models and population-based-payments rely on the providers’ ability to significantly decrease the total cost of care over a given period.

The majority of these cost savings are related to physical conditions (i.e. someone has a manic episode and breaks their hip). Hence, these contracts are more common for companies treating patients whose mental illness puts them at risk for physical injury, ER admission, and other costly treatments.

As mentioned earlier, high-cost-high-need patients tend to be under-resourced and historically marginalized by the ‘system.’ This lack of trust has led to a lack of engagement with the healthcare system and preventative care. Providers like Cityblock and firsthand have taken creative, new ways of engaging this population, employing community-based peers to meet patients where they’re at and re-instill trust in this system.

This under-resourced patient population tends to be qualified for Medicaid plans where individuals stay on the same plan for longer periods of time, as compared to wealthier individuals on commercial plans. Wealthier individuals on commercial plans often switch carriers every few years due to their employer. Because of this longer duration of stay in Medicaid plans, categories 3 & 4 are more attractive because providers and plans are more likely to reap the savings years down the line.

Conclusion

The advent of value-based care in behavioral health is still in its early stages, and it remains unclear which organizations and populations can benefit from it. With the pioneering work from companies like Eleanor Health and Cityblock, health plans are beginning to see the value that can be created from high-quality behavioral healthcare. On the fee-for-service side, providers who are serving the walking-well are at odds with payers, as their treatments are not reducing long-term costs.

This same dynamic shows up across other specialties as well. Simply put, value-based care works best when providers are treating high-cost, high-acuity patients where better care reduces hospitalizations, procedures, and/or disease progression. In specialties like nephrology, cardiology, and behavioral health, organizations focused on complex patients can generate real savings, rather than relying on gamification of benchmarks / HCC coding, while those serving lower-acuity patients see limited financial upside. When care improves experience without materially changing long-term utilization, fee-for-service remains the more natural fit.

Affordable Care Act (ACA) –  Also known as “Obamacare,” was a federal law aimed to expand health insurance coverage and reduce healthcare costs. 

State Provider Taxes – Taxes that states impose on healthcare providers (like hospitals) to draw down additional federal Medicaid matching funds; the revenue collected is then used by the state to qualify for more federal dollars, effectively increasing total Medicaid funding without raising general taxes.

Medicaid Employment Requirements – Policy conditions that require certain Medicaid recipients to work, volunteer, or participate in job training to maintain their eligibility for coverage.

Medicaid – A joint federal and state program that provides health insurance to low-income individuals and families, including children, the elderly, and people with disabilities.

Medicare – A federal health insurance program primarily for people aged 65 and older, as well as some younger individuals with disabilities or serious medical conditions.

As of May 24th, 2025, the One Big Beautiful Bill Act (OBBBA), has narrowly passed the U.S. House of Representatives by a vote of 215-214. OBBBA, championed by President Donald Trump, is a budget reconciliation bill which seeks to reallocate funding from healthcare and social programs. The bill aims to establish tax cuts and re-bolster other federal initiatives such as the American military and border security. Although President Trump has expressed the desire to cut the federal deficit, OBBBA raises the debt ceiling by 4 trillion primarily through the bill’s tax cuts to wealthier income brackets. Supporters of the bill argue that tax cuts will stimulate the economy by boosting investment, job creation, and consumer spending.

At the core of the bill are deep cuts to Medicare, Health Insurance and, most significantly, Medicaid. Key provisions include:

Below is a summary of the bill’s largest funding cuts. While not comprehensive, it captures the majority of reallocated funds. All estimates come from the Congressional Budget Office. 

• New employment requirements for Medicaid enrollment eligibility ($280 billion).

• Limits on state provider taxes—an indirect method states use to maximize federal Medicaid matching funds. Hospitals, for example, rely heavily on provider tax funding ($197 Billion – A generous estimate from an older, un-modified version of the bill which was more limiting).

• A suspension of federal Medicare and Medicaid centers to ease program enrollment ($82 billion). 

• Requires eligibility redeterminations for adults covered by Affordable Care Act (ACA) every 6 months ($53 Billion). 

• Stricter Medicaid enrollment verification through regularly updated beneficiary lists ($17 billion).

I've also noted the most significant changes for Medicare and Health Insurance.  

• Health Insurance: Institutes stricter eligibility and income verifications for low-income individuals ($101 billion). 

• Medicare: Suspends a rule which facilitates Medicare Savings enrollment. This will disproportionately impact low-income individuals ($84 Billion)

After reading these statistics, you may be curious… Why exactly would a president want to cut so much healthcare coverage? Take it from Jonathon Bush, co-founder of athenahealth and American technology entrepreneur: “hospitals aren’t in the business of pleasing consumers… they are in the business of billing insurers and government programs.” President Trump aligns with this point of view. Bush’s statement reflects the belief that the third-party payer system (insurance/government) disconnects providers from patients. In other words, providers, who are being paid primarily by insurance companies, do not compete for patients, but instead, for government and insurance contracts. Bush and President Trump believe that this dynamic breaks the feedback loop which, drives accountability, innovation, and efficiency within the healthcare sector. Thus, in reducing healthcare spending and coverage, Trump is in part hoping to encourage innovative, cost-effective, and specialized businesses that benefit the consumer. 

Nonetheless, leaders in healthcare have pushed back on Trump’s strategy of decentralization. Many decision-makers in the healthcare space regard the third-party system as necessary to ensure equitable access, manage financial risk, and maintain the complex infrastructure required for delivering high-acuity care.

Susan Dentzer, President and CEO of the American Physician group, criticizes the bill as being based on a misleading premise: cutting waste in the public sector. Instead, she argues that the bill’s core cuts target initiatives that millions of Americans rely on. Ms. Dentzer contends that these reductions are less about reforming the public sector and more about creating fiscal space for lowering taxes. According to her, the trade off, which primarily benefits high earners, is "inexcusable." Her comments reflect a broader concern of the American left that OBBBA shifts the burden of deficit reduction onto the country’s most vulnerable. All the while, the bill delivers financial gains to high-income tax payers.  

Rick Pollack, CEO of the American Hospital Association, publicly expressed that many hospitals—especially rural ones—rely on Medicaid to stay operational. According to the Chartis Center for Rural Health, Medicaid accounts for 9.3% of revenue for rural hospitals. With many of these hospitals operating on tight margins, Medicaid cuts could be devastating leading to cuts in staff and services. Rural hospitals often serve small, geographically dispersed populations, which means lower patient volumes and less revenue from privately insured patients

Jim Kendrick, CEO of the Community Hospital Core, notes that a weak hospital system could also cripple rural economies. Hospitals are huge employers and, more broadly, companies prefer to be in close proximity to hospitals to have healthier employee bases. Lastly, American families often choose to live near hospitals to have access to high quality healthcare. In turn, the value of real estate in the vicinity of hospitals is driven up. 

Urban hospitals too will be impacted. Dr. Mitchell Katz, CEO of NYC Health and Hospitals, cites that, yearly, 70% of the 1 million patients served by NYC’s public healthcare system are covered by Medicaid. Of the 16,000 babies delivered yearly, 97% are covered by Medicaid. Katz continues to argue that Medicaid is not a “blank check,” but a smart investment. These numbers underscore the importance of Medicaid in primary care, prenatal services, and chronic disease management for low-income urban populations. Dr. Katz argues that “preventative care reduces costly emergency room visits for non-emergency issues.” In other words, by cutting Medicaid, the government would likely increase uncompensated care burdens on hospitals. The result could be longer wait times, resource rationing, and poor health outcomes. 

Whether you are a proponent of a market-based healthcare system, or a firm believer in centralized healthcare delivery, OBBBA forces a reckoning with the fundamental tradeoffs at the heart of American healthcare policy. The bill compels the public to confront whether cost-cutting and decentralization can truly coexist with the promise of accessible, high-quality care for all.

Citations 

https://www.modernhealthcare.com/opinion/safety-net-hospitals-medicaid-mitchell-katz

https://www.modernhealthcare.com/politics-policy/healthcare-sector-slams-gop-medicaid-medicare-cuts

https://www.modernhealthcare.com/providers/community-hospital-jim-kendrick-lobbying-medicaid

https://www.foxnews.com/politics/dawns-early-light-battles-trumps-big-beautiful-bill-face-senate

https://www.cnn.com/2025/05/24/politics/house-tax-spending-cuts-bill-explained 

Where Does It Hurt?: An Entrepreneur's Guide to Fixing Health Care by Jonathon Bush 

https://www.houstonchronicle.com/opinion/outlook/article/trump-hospital-prices-healthcare-consumers-20351239.php?utm_source=chatgpt.com 

https://www.modernhealthcare.com/politics-policy/big-beautiful-bill-medicaid-medicare-pbms

If you’re interested in contributing, please reach out. I’ve linked the full page below and added an excerpt in the next section.

History of US Healthcare

In the early days…

Patients were mostly cared for by the domestic household or lay healers. The caretaker in the home environment was usually the matriarch of the family and maintained a close emotional bond with the patient. The treatment provided by matriarchs in domestic settings was often rooted in traditional care practices, including herbal remedies, home-cooked foods, and emotional support. Lay healers too rooted their practices in experience, tradition, and community knowledge. In the 1800s, most lay healers were apart of the Thomsonian (aka Popular Health) movement, which favored natural remedies over professionalized medicine. They believed in the body’s ability to heal itself and emphasized treatments using botanicals.

Thomsonianism arose as a reaction against the harsh and invasive medical practices of the time, such as bloodletting and the use of toxic substances like mercury. It gained significant traction among the working-class, who appreciated its simplicity, affordability, and independence from elite, professional physicians.

Despite its popularity, Thomsonianism faced criticism and legal challenges from the emerging medical establishment, particularly as physicians sought to regulate medical practice through licensing laws. By the mid-19th century, Thomsonianism began to decline, giving way to other alternative medical movements, such as homeopathy and eclectic medicine, which built on its ideas and sought a middle ground between traditional and conventional medicine. This pattern of alternative medicine rising in popularity, facing professional opposition, and either evolving or being absorbed into mainstream medicine has continued throughout U.S. history. Movements such as naturopathy, chiropractic care, and functional medicine have followed similar trajectories, often emerging in response to perceived gaps in conventional care and adapting to regulatory pressures while maintaining public appeal.

“There can be no good reason for keeping us ignorant of the medicines we are compelled to swallow.” - Thomsonian writer

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If you’re interested in contributing, please reach out. I’ve linked the full page below and added an excerpt in the next section.

Health Insurance 101

Why we have health insurance

Many people question the need for health insurance. Millions barely interact with the healthcare system and pay upwards of $10K a year, most of which is deducted from their paycheck. In this way, the system relies on healthy people contributing and covering the costs for those who need care - and ensures that when healthy people eventually need care, they won't be left without support.

At the highest level, it makes sense to have insurance protect against the “common hazards of life.” With and without a health insurance system, Americans have provided essential medical care to those unable to afford it, driven by our natural impulse to help those in need. The first hospitals were created because “there was no other option. Fellow creatures could not be allowed to die in the streets.” Today, the federal government reimburses hospitals for providing mandatory emergency healthcare services to certain uninsured, undocumented immigrants. In total, we spend over $40 billion a year on health care for the uninsured. Without broad coverage, individuals who forgo buying insurance while they are healthy might rely on “charity care” when they become sick, and the system will not be able to support itself. The book We’ve Got You Covered and many others argue for mandatory health insurance to solve this problem: “if we are inevitably going to respond when people face acute health problems without the resources to address them, it is better to formalize—and fund—those commitments up front.” In other words, by Edwin Chadwick:

“Once it becomes the recognized duty of the public to provide for the extreme needs of sickness irrespective of whether the individuals could and ought to have made provision themselves it seems an obvious corollary to compel them to insure (or otherwise provide) against those common hazards of life [otherwise] they would become a charge of the public.”

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“Higher-life-expectancy places didn’t enjoy a greater quantity or quality of medical care, or higher rates of health insurance coverage. Rather, higher-life-expectancy places had populations that smoked less, exercised more, and were less likely to be obese.” - We’ve Got you Covered

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Defining VBC

Feel free to skip if you’re familiar

There’s lots of hullabaloo on the definition of VBC (aka Alternative Payment Models (APMs), managed care, accountable care, etc.), so let’s start with the basics. In the US healthcare system, there are 4 primary payment methodologies. While folks in Category 2 like to say they’re doing VBC, in reality, categories 3 and 4 are the real deal and together make up 41.3% of all payments. CMS is hoping to increase this percentage and have 100% of Traditional Medicare beneficiaries in categories 3 and 4 (aka accountable care relationships) by 2030.

Category 1, fee-for-service (FFS): In the FFS model, healthcare providers are reimbursed for each service, test, or procedure they deliver. Each item is assigned a specific fee.

Category 2, fee-for-service with a link to quality and value: A hybrid reimbursement model combining traditional fee-for-service with value-based elements. Providers receive payments based on service volume while also earning more for meeting specific quality and performance metrics. For example, providers can get paid for reducing A1C levels (pay for performance), simply reporting A1C levels (pay for reporting), or adopting an Electronic Health Record (EHR) (foundational payments for infrastructure and operations).

Category 3, shared savings models: The provider organization and the payer establish a prearranged cost benchmark for treating a particular population. If the provider succeeds in delivering care that costs less than this benchmark, the resulting savings are shared between the provider and payer. These payments are often “gated” by quality measures. This methodology is common for Accountable Care Organizations (ACOs) in Traditional Medicare.

• Shared savings models with upside potential only are reimbursement models where providers share in the savings generated but do not face penalties for failing to meet cost or quality benchmarks, limiting their financial risk.

• Shared savings models with upside and downside risk also penalize providers for not meeting cost and quality benchmarks.

Category 4, capitated payments (aka population-based payments): Population-based payments give providers a fixed dollar amount for managing the care of a defined patient population; hence, these providers take on the all of the financial risk for this population. Quality metrics often enhance these payments. Early health plans were aligned to this payment methodology.

• Condition-specific population-based payments: Providers receive a fixed amount for managing the health of a patient population with specific medical conditions.

• Comprehensive population-based payments: Providers receive a fixed amount for managing the overall health of a defined patient population, covering all healthcare services and conditions.

• Integrated finance and delivery systems (IFDSs) (aka payvidors, vertically integrated systems, Kaiser Permanente): Combine both the financing and provision of healthcare services within a single organization.

VBC criticism is nothing new

In the late 1920s, Dr. Michael Shadid in Oklahoma City and Drs. Paul Ross and Don Loos in Los Angeles pioneered early healthcare payments models that pooled patient resources for prepaid medical care. Dr. Shadid raised money from rural farmers in order to build a hospital and deliver discounted care to invested patients. Meanwhile, the Ross-Loos Medical Group in Los Angeles provided prepaid healthcare to employees of the Los Angeles Department of Water and Power, focusing on prevention and health maintenance. At a time of need (the Great Depression), these efforts stabilized physician income by ensuring a standardized rate, all while aligning incentives toward prevention, as they would pay for poor outcomes and unnecessary treatments. As with many innovations, these efforts faced significant backlash from the medical establishment, particularly the American Medical Association (AMA) and local medical societies, who felt these prepaid models threatened physicians' income and autonomy by introducing fixed payments and administrative oversight. For these reasons, Drs. Shadid, Ross, and Loos were all kicked out of their local medical societies, although Dr. Shadid got redemption in an antisuit suit some 20 years later.

In the 1970-90s, the rise of Health Maintenance Organizations (HMOs) re-introduced a version of prepaid medical groups with federal support. After the introduction of Medicare and Medicaid in 1965, skyrocketing health costs became unsustainable, and the government had to step in. The HMO Act of 1973, championed by the Nixon administration, provided federal support to expand the HMO model. As HMOs grew in prominence, they encountered backlash similar to that faced by the early pioneers. Physicians felt that HMOs prioritized cost savings over patient care, restricting their autonomy with rigid regulations, referrals, and prior authorizations. Patients also criticized HMOs for limited provider networks and denials for certain treatments, leading to a public perception that profit-driven motives compromised the quality of care. In our current iteration of VBC, we have seen quality measures combat the rationing of care and consumer choice promote open networks.

Disclaimer: I got lots of love for all doctors. I don’t mean to be accusatory - just want to acknowledge you all as rational actors in a financial system.

Value-based care doesn’t necessarily give physicians the most autonomy. Managed care decreases physician authority by imposing guidelines, cost controls, and requiring approval for certain treatments. Physicians have fought for this authority for centuries and only recently established it in the early 1900s, and their desire to protect it is natural. In the historical FFS world, the physician profession relies on the value that incremental healthcare provides, but, as a society, do we want more healthcare or more health? We should prioritize the health that VBC aligns incentives toward and ask if more healthcare makes people healthier. While, of course, many treatments are life saving and promote health, medicine on the margin - particularly extra medical spending - often produces little to no additional health benefits. The RAND Health Insurance Experiment, conducted in the 1970s, randomly assigned over 7,000 people to different levels of health insurance coverage, ranging from free care to high cost-sharing. The study found that while those with free care consumed about 30-40% more medical services, there were no significant differences in overall health outcomes between the groups. Thus, we should not adopt a system that promotes more healthcare, especially given the high costs of that care.

In summary, FFS guides the invisible hand toward more volume, often driving up prices and providing more security to physicians, while VBC aligns incentives toward lower costs, allowing us to spend on services with higher ROI.

“Every healthcare expenditure is someone else's income” - David Epstein

The upside of VBC is significant

VBC and its increased collaboration between payers and providers decrease not only utilization of healthcare services, but also the unit prices of these services. These prices are at the root of what makes our system so expensive. Since the same organization is responsible for paying for and delivering care, it benefits from setting lower prices for treatments. This alignment fosters cost efficiency, bargaining power with suppliers, and streamlined administrative processes, contributing to overall savings. For example, in the 1990s, HMOs curbed the growth of healthcare costs by leveraging their bargaining power to secure more favorable prices. Between 1993 and 1999, the average annual increase in personal healthcare prices was 2.5%, marking a significant deceleration from the 5.7% yearly growth observed during the 1983-1992 period. However, the threat of horizontal market consolidation can limit competition and drive prices up. In this way, VBC lowers costs, but its success depends on promoting competition and antitrust enforcement.

In this version of VBC, we’ve already seen the cost curve bend. Optimists (like myself and Zeke) would say that Accountable Care Organizations (ACOs) contributed to the Medicare spending slowdown that we are seeing. These spending patterns have spilled over into private insurance with the commercial healthcare spending share of GPD coming in 1% lower than expected in 2022. Recent data from the CMS NHE 2023 report have backed up this claim. Skeptics would say that this slowdown is due to reduced access, the pandemic, and greater patient cost sharing. Nevertheless, individual programs and companies have been successful across cost and quality without benefiting from these factors. The Medicare Shared Savings Program (MSSP) and Maryland Total Cost of Care Model have delivered net savings while maintaining outcomes. On the private side, companies such as Astrana Health have proven profitability while reducing ED admits by 61%.

“Funny how the massive savings coincidentally coincide with implementation of Obamacare with cost-cutting measures and large portions of the population finally accessing health care prior to enrollment in Medicare. Such a head scratcher.” — Stephen from Columbus, Ohio

Currently, we spend approximately 17% of our GDP on healthcare, a full 8% above the average of other G7 countries. And it’s not like this spending is delivering incredible health outcomes. Reducing healthcare spending requires the reduction of healthcare prices, which VBC incentives.

The downsides can be solved for

As touched on above, VBC does not come without its downsides, and many others have thoughtfully touched on this subject from mainstream publications to the Out-of-Pocket Newsletter and the PCP Lens. These negative externalities are broken down into rationing care, administrative complexity, and risks of monopolization, all of which can be solved for.

One of the primary criticisms of VBC is the risk of restricting access to care. As providers are incentivized to reduce costs, they may be tempted to withhold necessary but costly treatments, leading to inadequate care for some patients. This downside of VBC (underutilization) is easier to regulate than those of FFS (overutilization) because VBC focuses on measurable quality metrics, making it clear when care is being rationed. In contrast, FFS incentivizes overutilization, which is harder to regulate due to the subjective nature of determining necessary services. While both models have challenges, VBC's reliance on data-driven oversight makes it easier to monitor and enforce care standards, minimizing risks of rationing. This oversight, however, does lead to administrative complexity.

VBC models require significant non-clinical resources, particularly in coding patients and tracking outcomes. This burden can result in inefficiencies and additional cost, especially as providers shift from the more straightforward fee-for-service model. Many VBC organizations simply make money from upcoding (or diagnosing patients with more conditions to get paid more), but this trend will hopefully be curbed by a new coding methodology. On the quality quality measure side, there is a growing consensus among policy experts that Medicare should move toward a streamlined set of quality measures that minimize arduous paperwork. Additionally, as technology becomes more advanced and seamlessly adopted, this administrative complexity will decrease.

VBC models require large amounts of upfront capital and encourage integration and coordination across payers and providers, which can drive monopolization. Larger healthcare systems may have more resources to meet the administrative and financial demands of VBC, potentially pushing smaller, independent practices out of the market. This trend toward consolidation could reduce competition, limit patient choice, and increase market power for large conglomerates, which will ultimately lead to higher costs and lower quality. Regulators and innovators must promote competition by enforcing anti-trust laws, building companies, and enabling independent physicians to take on risk.

Would you rather a world of over-utilization or under-utilization?

I would rather one with under-utilization, where our money is spent services that have a higher ROI, like education and healthy foods. There is a limited pot of money out there, and we need to be thoughtful about how we spend it.

Hey everyone! 

Lukas here with another edition of Takecare. Recently, I’ve been diving into a few of my primary areas of interest, behavioral health, and psychedelic medicine. In doing so, I’ve discovered some insightful resources that have assisted my learning journey and will hopefully help yours. Huge shoutout to Blossom for helping out with this piece - check out their website for research reports and insights on psychedelic science.

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Psychedelic Alpha

People: Josh Hardman

Description: A warehouse of information on the psychedelic space, including weekly recaps of news, research reviews, patent trackers, a legalization and decriminalization tracker, a stock & companies directory, sector landscape maps, and a job board.

Type: Business, Policy, Science

Medium: Newsletter, Website

Psychedelics Today

People: Kyle Buller, Joe Moore, David Drapkin

Description: A leader in psychedelic education, media, and advocacy, publishing audio/written interviews, articles, trainings, and much more. 

Type: Science

Medium: Podcast, Newsletter, Website

HealingMaps

People: Reilly Capps, Cody Shandraw, Cory Jones

Description: A guide to ketamine clinics and psilocybin retreats through vetted listings. High-quality education through verified blogs and medical information. 

Type: Science, Business

Medium: Blog, YouTube

Blossom

People: Floris Wolswijk

Description: Helping scientists, researchers, and enthusiasts find insights on psychedelics as a medicine with interconnected & contextualized databases, well-research reports, and timely insights.

Type: Science 

Medium: Newsletter, Website

Stanford Psychedelic Science Group 

People: Gianni Glick

Description: This Stanford Medical School interest group is publishing its webinars on the science behind psychedelics on YouTube.

Type: Science

Medium: YouTube

Business Trip

People: Caitlin Ner, Greg Kubin, Matias Serebrinsky

Description: A podcast operated by one of the leadings VCs in the space, interviewing a variety of founders, technologists, and scientists.

Type: Business

Medium: Podcast

Psychedelic Week 

People: Mason Marks

Description: A detailed look at the news, policy, and events in psychedelics with real-time reviews, opinions, and analysis. 

Type: Policy

Medium: Newsletter 

The Microdose

People: Malia Wollan, Jane C. Hu, Michael Pollan

Description: This newsletter is run by the UC Berkeley Center for the Science of Psychedelics (BCSP) and keeps you up to date on this ever-changing field with interviews and weekly reviews.

Type: Science, Policy, Business
Medium: Newsletter

Back from the Abyss 

People: Craigh Heacock MD, Chris Johnson

Description: A deep dive into powerfully moving patient stories of hope and healing, as well as topical explorations of psychopharmacology, psychotherapy, and psychedelics.

Type: Science

Medium: Podcast

The Psychedelic Scientist 

People: Manesh Girn

Description: Videos on the latest topics in psychedelic science and related areas of research, presented by a Neuroscience PhD student working in the field.

Type: Science

Medium: YouTube

The Trip Report

People: Zach Haigney

Description: Commentary and analysis at the intersection of psychedelic science, business, and policy.

Type: Business

Medium: Newsletter

Brom Podcast

People: Brom Rector

Description: The Brom Podcast covers the emerging psychedelics industry from a business, investing and social impact perspective. Episodes feature Empath Ventures' Founder, Brom Rector, interviewing CEOs, scientists, investors, and other change-makers operating in the weird, wonderful world of psychedelic medicine.

Type: Business

Medium: Podcast

Psychedelic Finance  

Description: Psychedelic Finance is the source for the latest financial news, company features, and interviews with the top minds and companies in psychedelics.

Type: Business

Medium: Website

Lucid News

Description: Lucid News provides informed, honest and transparent journalism that covers the growing integration of psychedelics into society and their broad implications for human wellness.

Type: Science, Business, Policy 

Medium: Website

Other outlets that cover psychedelics:

Double Blind, Psymposia, Reality Sandwich, Psychedelic Times, Lucid News, Chacruna Chronicles, Psychedelic Spotlight, Truffle Report, Shroom Investor, PSYTECH, PSYCH, JLS Fund, MAPS, Psychedelic Grad, Mind Notes, On Drugs, The Challenging Psychedelic Experiences Project, Psychedelic Press, drugs and me

About Me: I’m a co-founder at The Takeoff and formerly at Elion, SteadyMD, GreyMatter Capital, and Washington University in St. Louis.

I’m on Twitter @lukassteinbock and @_TheTakeoff 👋

Welcome to another edition of TakeCare. We’re going deeper into digital health and getting nerdy about scheduling this time. I’ll go over some background on the space, break down the buy vs. build decision, and map out the different vendors in the space (note: this piece is written to the audience of a digital health provider, which I know many of you are not). For more guides like this one and to make better, faster decisions for your tech stack, check out Elion.

Scheduling is yet another inefficiency in the healthcare industry, but vendors are finding solutions. You can book a dinner table online with a click of a button. Why can’t you do the same for scheduling a doctor’s appointment? Healthcare is much more complex than other industries... nothing new here.

Huge thank you to Brendan Keeler at Zus Health, Colin Morelli, Cavan Klinsky at Healthie, Mark Olschesky from Butterfly Network, and Eric Guroff at Ratio for giving some incredible feedback on this piece.

Background

There are three parts of scheduling: validation, slotting, and booking.

• For validation, providers need to make sure that they are seeing the right patients, which means confirming insurance coverage, prior authorization, and more.

• Slotting refers to finding the appropriate time for a patient in a clinician’s schedule. The scheduler or scheduling system must have full information on a doctor’s scheduling preferences, the variability of certain appointment times, and other factors that affect availability. It is not easy to do slotting well and/or automatically because these factors are highly variable.

• Lastly, there’s booking, which is the actual confirmation of an appointment in a particular time slot, while trying to avoid no-shows and double-bookings.

Due to the complexity of these parts of scheduling, we have been subject to indirect scheduling or having administrators coordinate visits between patients’ and clinicians’ schedules. In the ideal world of direct scheduling, where everyone can see a clinician's availability and book directly (like OpenTable), it seems like a win-win for everyone: doctors are able to see more patients, care navigation is more efficient, and administrators are working less.

However, it’s not a simple path there. Some doctors don’t want to see more patients and patients often cancel appointments. Additionally, appointments go longer than expected, and certain appointments take higher priority over others.

A perfect direct scheduling world is far away but there has been an influx of innovation recently. Health system platforms are starting to open up their APIs for other companies to use (ex. NexHealth) and ZocDoc is doing the same. Additionally, the CMS Prior Authorization API Rule and accompanying ONC regulation might be coming soon, which will allow for electronic prior authorizations. Let’s begin to dive into how these innovations can help your scheduling problems.

Build vs. Buy

Looking at this decision through the core competency framework, most of you are not trying to build your own scheduling platform in the long run. That being said, if you’re providing care in only a couple of states with a couple of clinicians, here is a scrappy way of making it happen (read more here from Mark Olschesky).

• The scheduling manager manually updates the appointment time in the provider-facing application and the patient-facing application. This method doesn’t work at scale but is the easiest to stand up and works for both direct and indirect scheduling.

Additionally, if you are looking to build off of an existing technology, Shilling is another solution to mention. They are an early-stage vendor with both direct and indirect scheduling capabilities looking to license out their technology or sell their company (as of June 2022).

Companies

Healthcare scheduling tools have a long and storied history, generating dozens of companies. Given that all aim to solve the same underlying issue, it can be particularly tricky to decipher the small nuances that separate them. To simplify, the four biggest questions you need to ask yourself are:

1. Am I a big or small company? A smaller company usually has easier problems to solve.

2. Do I want direct scheduling? Direct scheduling will allow patients to see live doctors’ schedules.

3. Do I want my scheduling platform to come from my EMR vendor? An EMR add-on will reduce vendor bloat but lead to less flexibility.

4. Am I a care provider or selling to providers (aka am I working on one EMR or multiple)? Working with multiple EMRs reduces the efficiency of using EMR add-ons.

Check out this program to figure out which solution works best for you. The following terms will also help you distinguish between each solution. Most of these vendors if not all are platforms.

• Managed services - the vendor outsources the service/technology end-to-end.

• Solutions provider – a set of software and tools designed to tackle a single, specific problem.

• Platform - platform solutions that offer a foundation that can address a number of use cases.

• Develop toolkit - the vendor simply provides tools for the partner to create on their own.

When evaluating scheduling solutions, it’s important to consider them from an operational lens and a product lens. One question is how good is the vendor’s technology. But another question is how well does that technology improve your operations. In the words of Colin Morelli, “Better scheduling decisions can have a massive impact on utilization management. Better utilization maps directly to top-line revenue increase, and/or cost reduction.”

 EMR-Based Solutions

You might be able to serve many of these needs out of your EHR. Some EHRs build out their scheduling platform internally while others use vendors, like Phreesia to satisfy their scheduling needs.

Pros: Using the scheduling inherent to your EHR reduces vendor bloat, which can simplify time spent on annual negotiations. Similarly, it's theoretically easier to stand up, as it’s built into your existing software.

Cons: However, scheduling is a drastically different job-to-be-done for different healthcare personas than EHR workflows like ordering or documentation. Additionally, these EMR add-ons are generally more rigid in terms of customizability and often have built-in assumptions that are not valid for newer virtual or value-based care models, such as multi-state scheduling or the assumption of fee-for-service charging.

Direct scheduling with Non-Healthcare-Specific Vendors

The easiest way to get started with direct scheduling other than the scrappy ways described in the build vs. buy section is to use a healthcare non-specific calendar app and manually insert appointment information into the EMR. This solution works for small companies with providers who are open to direct scheduling. The vendors that fit into this category are Calendly and Acuity.

Not being healthcare-specific comes with its downsides. The BD/Product people on their end won’t be speaking the same language as you. These companies also don’t have built- in workflows for insurance validation and should not be used for collecting Protected Health Information (PHI). If you plan on hosting any patient information on your scheduling system or integrating it into your EMR, these solutions don’t fit the bill. The use case here is for a small group of providers who need direct scheduling and aren’t willing to build something on their own.

(In)Direct scheduling with Healthcare-Specific Vendors

Next, there are healthcare-specific vendors that offer in-direct scheduling. Some of these are built for smaller companies and private practices, like Patientpop, while others are built to support larger volumes like BetterHealthcare.

As these companies don’t have the option for direct scheduling and have limited flexibility with company size, they’re less of a fit for the modern digital health startup with consumer-savvy tendencies. However, Mend offers a free version for smaller practices, with limited features (no direct scheduling). This option is fantastic for smaller organizations open to indirect scheduling.

Direct scheduling with Healthcare-Specific Vendors

On the direct scheduling side of things, there are a few healthcare-specific companies that offer both direct and indirect scheduling, making them a fit for a wide variety of cases. These companies include Source, Zocdoc, Healthie, Nexhealth, and Luma and usually offer other products in addition to scheduling. For a mid-size digital health company focusing on flexibility, these are your best bets. Below are a few of my favorite vendors and what makes them stand out.

• ZocDoc integrates with 150+ EMRs. They have been around since 2007 and know the game.

• Source’s bread and butter is scheduling which makes them stand out in the pack. In addition, they offer automatic task routing, drop-in messaging, and health data capture abilities.

• Healthie has a number of other best-in-class products, such as patient-facing white labels. They could bit a fit if you are looking to reduce vendor bloat.

• Nexhealth integrates with all major dental EMRs and a growing number on the medical side. Nex is a great fit if you are in the dental world.

Sources ⬇️

Nikhil’s interview with Sandy Varaktharajah

The Scheduling Conundrum

Real-time scheduling is the hardest healthcare interoperability problem

About Me: I’m a co-founder at The Takeoff and formerly at Elion, SteadyMD, GreyMatter Capital, and Washington University in St. Louis.

I’m on Twitter @lukassteinbock and @_TheTakeoff 👋

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Interview Guest: Zack Gray

Role: CEO at Ophelia

Previous: He’s a Y Combinator-backed entrepreneur, Columbia University-funded research scholar, and a Wharton MBA graduation speaker. Previously, Zack led customer acquisition for a residential solar startup, which he helped grow to $30M in revenue. He studied astrophysics and philosophy at Columbia University and received his MBA from The Wharton School.

Quick Note: This interview was recorded in September 2021. Please excuse any parts that feel outdated.

Interview Highlights:

In 2021, there were an estimated 107,622 drug overdose deaths according to the CDC which is the highest on record, 30% higher than in 2019. Innovators are trying to combat this by distributing test strips to see if a product has been contaminated with fentanyl, opening overdose prevention centers where users can safely inject, and prescribing drugs to combat addictions and overdoses. 

• The drugs involved in Medication-Assisted Treatment (MAT) market: Suboxone, Naltrexone, Buprenorphine, and Methadone.

• Why it’s difficult for clinicians to prescribe these drugs…

  • In order to prescribe many of these drugs, clinicians need an X-Waiver. Only 5% of clinicians have an X-Waiver as it is difficult to obtain.

  • Ophelia is also partnering with nursing schools to make this process easier.

• Lastly, a quote: “I would say, don't just run with an idea because you want to start a company. Listen to the market, and as long as you're seeing positive signals at each step, keep going, and eventually, you'll be further along than you may have thought.” 

Lukas: I would love to start with your background and steps leading towards Ophelia.  

Zack: I went to Columbia undergrad. I studied astrophysics and philosophy. I was fairly uninterested in business. I sort of knew business as a world in which the only real objective is to make money. And I wasn't all that driven by money. I saw lots of my smart friends going to work on Wall Street. It kind of felt like they were wasting their talent. Meanwhile, my father had just passed away from cancer and it was clear to me that there were more important problems to work on than trading stocks.

So I spent my undergrad career kind of intellectually exploring, getting comfortable with the big questions of life, working in physics labs for a couple of years and then, you know, increasingly became excited about startups as a way to make the world better. The core insight is not novel, but simply if you can figure out how to do good with people's money and also pay them a return, well, you can raise a lot more money and do a lot more good because the amount of private capital available is far greater than the amount of charitable capital in the world. So I went and joined a solar energy startup based in New York as employee number two.

I became the head of growth and then decided that startups were going to be my thing. But I had no real training in business. I've never looked at a financial statement, knew nothing about accounting, corporate finance, barely any accounting. So I decided to go to Wharton and get my MBA. And as I was getting ready to graduate, a girl that I had a very long, sort of on and off complicated relationship with but loved very much died of an overdose. And I immediately saw this as a problem that I wanted to work on but was skeptical that I'd be able to do much about it because I didn't have a background in healthcare. 

But then I started talking to physicians and people in recovery and business healthcare services professionals and essentially discovered that the problems here are not medical or scientific in nature. They're the kinds of problems that a startup can solve and they predominantly relate to access. So we have treatments that work extremely well. They reduce overdoses by 75%. They look like the treatment you get for depression or anxiety.

It's very similar to what people seeking treatment actually want, very little like what we traditionally think of as rehab. And due to these tremendous barriers, 80% of Americans struggling with opioid addiction are not getting any form of treatment at all. And the default solution from any of them is to buy the exact same medication on the black market from the same person who sells them drugs for literally thousands of dollars a month.

Meanwhile, this treatment is covered by insurance. So how are these things possible? It relates to regulatory barriers, behavioral barriers, economic incentives, just the sort of thing that a startup can help solve. The entire mission of the company is to take this treatment called medication assistant treatment, make it more accessible, and in doing so, make it easier for patients to choose clinicians over drug dealers.

Lukas: What is medication-assisted treatment (MAT)?

Zack: Medication-assisted treatment is a term that applies to other substance use disorders as well, including alcohol addiction. 

The three medications that are FDA approved to treat opioid use disorder are methadone, Suboxone, and naltrexone. Suboxone is the most commonly used. And the way that it works is it binds your opioid receptors to give you enough relief to relieve withdrawal and cravings, but not get you high, and also binds your receptors with a greater strength than other opioids. So if you decide to do some heroin, it won't affect you because your receptors are occupied by the Suboxone. 

Lukas: Do patients get addicted to Suboxone? And if they do, is there a downside to that? 

Zack: Addiction is the wrong word. Addiction implies a physical dependence that creates harm to your life. People take antidepressants for many years without any negative side effects. People take insulin for diabetes for many years without any negative side effects.

They're dependent on that medication, but it's not addictive because it restores normality, happiness, and health. And that's how we think about Suboxone. So if you're addicted to opioids, first of all, why is it an addiction? Because most people don't want to be addicted to opioids. It can kill you. You don't have a legal supply, so you're constantly running around looking for your next dose. You're spending tons of money. It ruins your family and your career and all sorts of things. That's an addiction. And if you want to stop using, you're going to go through a very intense withdrawal period that most people can't survive.

So 90% of people who try to stop using opioids without the help of medication are using again within three months. And so we know that at least early on, suboxone is critically important. How long you stay on the medication beyond that point differs by person. The research says the longer you stay on it, the more likely you are to not relapse. But certainly there are people that, for whatever reason, don't want to stay on the medication and they choose to taper off, and we'll help them with that. But the reality is a significant percentage of them will be back in relapse and come back at Ophelia in the future.

Lukas: Physician licensure required to prescribe these drugs is quite difficult to obtain. Is there any history behind that legal industry that makes it that way?

Zack: I think that it's easy to focus on the patient barriers but ultimately many of the patient barriers stem from supply side barriers which are caused by bogus regulation. So in order for any physician, any nurse practitioner, any physician assistant with a prescription pad and DEA license in America could prescribe you Oxycontin, Percocet or Pain Killer. In order to prescribe suboxone, you need a separate license from the DEA called an X Waiver.

Only 5% of clinicians in America have that waiver. 40% of counties in America don't have a single license prescriber. Once you have your license, you're capped at the number of patients you can treat, which in the first year is only 30.

And so if you go get a license to prescribe suboxone, but you can only treat 30 patients, but you're not really eligible for full-time hire at an addiction treatment program, so you probably go work somewhere else and not use your license at all. And so there is a huge shortage of eligible, qualified, trained prescribers and that directly leads to access barriers for patients. Now, our philosophy is that we need to utilize underutilized prescribers by creating a platform that allows them to work part time with the support they need to treat high risk chronic patients.

And that includes software, care, team, support for their panel while they're off the clock. And also we need to increase the number of wavered prescribers. And so part two of our strategy is partnering with nursing schools. We've got them certified as an X Waiver training program to increase the number of eligible prescribers and give them an avenue to practice if they want to for as little as 8 hours a week, even if it's not their full time job. 

Lukas: What kind of effort goes into getting in that waiver? How hard is it, actually? 

Zack: Well, for a nurse practitioner physician system, which is the majority of our clinician population, it's 24 hours of certification training and then an application process, and then you get the ability to treat 30 patients. And if you've done that for a year, then you can apply to increase your cap to 100. And then under special circumstances, you can increase it. You can apply to increase it to two several times. So yes, it's kind of annoying, but I don't think that the actual X Waiver licensure process is the barrier.

It's all of the other barriers, which is it's hard to treat this patient population. There aren't good platforms for them to use, and it's an additional step. So by default, you can't do it. You have to be motivated to do it in order to get either waiver in the first place. Yeah, it's not too hard of a problem to solve.

Well, one of the major problems in addiction treatment, as it's an addiction treatment education, is that more often than not, clinicians do not get hands on patient facing experience. So even if you go through your national X Waiver training program. You do your 24 hours online.

You don't actually talk to a patient. So a lot of people leave their X Waiver training feeling like they're not ready to treat patients who are at very high risk of serious illness and overdose and death. And so we want to be the training site for these schools so we can show clinicians what it's like to actually treat patients, make them feel comfortable, teach them best practices and give them a path to join the workforce if they're interested.

Now, our medical directors are physician researchers and clinicians at Columbia University who have worked with SAMHSA, the Substance Abuse Mental Health Services Association, for 20 years to design this protocol. So they know how to train. And they're a huge asset in helping to recruit and educate and oversee new clinicians who haven't done this before.

Lukas: What's one piece of advice you would have told yourself when you were first starting Ophelia as a founder?

Zack: I think the closest Ophelia ever was to failure was before I started business. You know, I had opportunities to I was graduating business school, I had opportunities to go work elsewhere. And had I woke up one day, got a great job offer, I might have taken it and never started on this journey. And I remember a close friend of mine from Wharton who went to work in healthcare investing in Venrock, went in for his final interview, and he saw a bunch of successful founders present.

And he came back to me and said, Zack, the only difference between you and these people is that they've managed to put 1 foot in front of the other for longer. So that night I went and sat down, wrote up a one page business plan, and from that point on was convinced that this thing needed to exist. And so I think starting very early, the advice to myself is have confidence that others aren't necessarily special. They're just willing to take risks and have the determination to see it through. And that's true even if you don't have expertise per se in your particular domain, because often the expertise you need is adjacent to that domain, which is why what you're creating doesn't exist at all, because there are no experts. And so I would say, don't just run with an idea because you want to start a company. Listen to the market, but as long as you're seeing positive signal at each step, keep going, and eventually you'll be further along than you may have thought. 

Lukas: And last question I like to ask all my guests, what's something that you as a founder take care of your own mental health? 

Zack: Yeah, I think the most important thing to do is to create boundaries and turn off at certain points. Chronic stress is a result of constantly being on. I'm more than happy not working on some weekends. I just took travel solo through to Colombia on vacation. I wasn't really checking slack, wasn't checking the numbers, because I was more than happy to take my mind off of the business, focus on myself, other things, with the realization that it would be good for me, it would also be good for the business, because I would come back recharge and with a refreshed perspective.

So there are plenty of things that you can do that founders on Twitter will tell you, like meditate and exercise, drink yerba matte or whatever. But ultimately, the most important thing is just make sure that you leave room in your life for other things. Because too much of one thing for too long will burn you out. And that's good for nothing.

About Me: I’m a co-founder at The Takeoff and formerly at Elion, SteadyMD, GreyMatter Capital, and Washington University in St. Louis.

I’m on Twitter @lukassteinbock and @_TheTakeoff 👋

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Guest Profile:

Interview Guest: Siddharth Venkatesh (LinkedIn)

Role: Product Management Lead at Anyscale

Previous: Prior to joining Anyscale, Sid was a Product Manager at Meta, where he managed Ranking & Relevance for the Facebook NewsFeed. Before Meta, Sid was an early PM at Rubrik, where he worked on launching multiple zero-to-one products, including their first SaaS application, Polaris. Sid has held various other positions in product management, engineering, and venture capital.

Quick Note: This interview was recorded via a Zoom call between Sid and Roshan (that’s me) in March.

Roshan’s favorite quotes from the interview:

• On building customer empathy: “As a PM, I believe it's crucial for as many people as possible within the organization to hear from customers directly. It's one thing for a PM to say that a customer has challenges or friction with a particular workflow, but it's another thing altogether to be on the call and hear that frustration and pain point from the customer directly.”

• On important traits of PMs: “Don't be married to your ideas. It's great to have a hypothesis-driven approach, but you need to know when to change course if something isn't working out. Great PMs are informed by data, not attached to their ideas, and they blend qualitative and quantitative inputs when making product decisions.”

• On working on an open core product: “I’m amazed and inspired by the passion and involvement from the Ray community. Unlike with “traditional” products that I’ve managed in the past, there is no separate customer feedback / validation stage because we hear from users at every step. Developers passionately advocate for feature requests, and share use cases we hadn’t considered.”

• On podcast recommendations (I was thrilled that Sid liked my rec!): “For podcasts, I love Lenny's Podcast, which you recommended to me.”

Roshan: Hey Sid, thanks for coming on. To start, can you tell us a bit about what Anyscale does?

Sid: Absolutely. Thank you for having me on.

So, Anyscale is the company behind Ray open source – the fastest growing open source compute framework for scalable computing. Anyscale was founded three years ago out of the RISELab in Berkeley by Robert Nishihara and Philipp Moritz, along with the director of the lab, Ion Stoica. Interestingly, this is the same lab where Databricks was founded. 

In terms of Anyscale’s mission, Anyscale is on a very ambitious mission. Our mission is to make sure that distributed computing is simple and flexible. We want to ensure that every developer and team can successfully build AI/ML applications without worrying about building or managing the underlying infrastructure. Said differently, we want developers and teams to focus on applications and not on the underlying infrastructure. To make this possible, we aim to remove distributed system expertise from actually realizing this value for each of these teams.

Going into more detail, as I said before, Ray is a unified compute framework for scaling AI/ML workloads. Ray essentially enables ML engineers and developers to scale their applications from their laptop to the largest of clusters with minimal code changes. Ray is Python native and integrates with the entire machine learning and data ecosystem. It provides a set of primitives that allow developers to parallelize their existing Python applications easily. Ray integrates with the entire machine learning and data ecosystem, including all of the different learning frameworks, all of the ML traditional libraries such as ScikitLearn, all of the different workflow, orchestration platforms, experimental tracking, and more. Ray essentially provides a set of primitives that allow developers to parallelize their existing Python applications easily.

Ray by itself has a flourishing community that includes leading technology companies such as Uber, Spotify, Shopify, ByteDance, Instacart, and more. Anyscale is a managed solution on top of Ray, enabling teams to accelerate the development, experimentation, and deployment of AI models from dev to staging to production without managing the underlying infrastructure. Anyscale is like Confluent for Apache Kafka or Databricks for Spark – a managed solution for the Ray compute platform.

Roshan: Can you discuss your background prior to joining Anyscale and how you came to join any scale?

Sid: So I started my career like a lot of other folks in the field, as an engineer. My first experiences were in traditional hardware companies such as Intel, Marvell Semiconductors, and Qualcomm. I worked on building wireless algorithms & optimizing performance for their chipsets. However, I eventually wanted to move into product management, so I made a brief stop in business school at the University of Chicago. After that, I worked at Success Factors, a human capital management product that was acquired by SAP. I then worked at Rubrik, a cloud data management company, where I was one of the earliest PMs. I worked on building multiple zero-to-one products, including their first SaaS application called Polaris. I know you were part of that team as well, and that’s where we met.

After spending around three years at Rubrik, I moved to Meta, where my role was to lead ranking and relevance for the NewsFeed. Essentially, my team was responsible for ranking content from the thousands of posts and pieces of content that we could potentially show somebody when they logged into Facebook. We had to ensure that content was interesting for them, and that it was personalized based on what the users wanted. I found out about Anyscale through some friends and was drawn to their mission and the challenging problems they were trying to solve, some of which I had seen firsthand. I was very impressed by the people and the cutting-edge work they were doing in AI and ML. I felt that if these problems are solved well, they have an outsized impact on the broader set of customers we are trying to serve. So for all of these reasons, I joined Anyscale ten months ago and I'm now a product management lead on the product team here.

Roshan: Let's double-click into what made you interested in product management. What was your path to becoming a product manager and what made you excited about product management?

Sid: People with engineering backgrounds or other professional experiences often have intriguing stories about their transition into product management. I genuinely enjoyed being an engineer. I loved coding and tackling various challenges. However, I was eager to play a more significant role in determining the product's strategy. I wanted to understand the rationale behind many decisions, such as how customers used our product, why we should build it in a certain way, and how to determine pricing. I found myself increasingly drawn to these types of questions.

As an engineer, my primary responsibility was delivering algorithms or code, but that role didn't provide much insight into these areas that excited me. I began participating in more customer conversations, and I discovered that I was more attracted to understanding the problems customers faced. I focused on how our technology could help solve those issues rather than concentrating on specific algorithms or coding aspects of delivering a solution.

In short, I became more passionate about understanding & addressing customer problems and enabling their success, more than the specific implementation mechanisms. Additionally, I realized that I enjoyed working with diverse stakeholders, such as legal, marketing, and sales teams. As an engineer, my opportunities to collaborate with these groups were limited. The combination of engaging with customers, identifying their problems, and working with cross-functional teams ultimately fueled my enthusiasm for product management.

Roshan: Going back to Anyscale, what exactly does your role as a product management lead at Anyscale look like?

Sid: As a Product Manager, I mainly focus on three key values: enhancing developer productivity, reducing TCO and data assurance.

So specifically, as a Product Management Lead at Anyscale, I concentrate on three primary responsibilities:

1. Developing new business charters and go-to-market capabilities to enable the key value drivers

2. Creating delightful zero-to-one experiences in the areas of data security, cost management, network & access controls, and governance

3. Hiring great people and fostering high-performance teams.

Roshan: How do you think about building a great product culture at Anyscale?

Sid: At Anyscale, we have an extremely customer-focused culture. The customer is at the center of everything we do. Given our stage, there's a strong sense of urgency, and the company is very scrappy. Our product culture is dedicated to moving fast, so speed is critical. As a product organization, we plan, drive alignment, and execute quickly. Anyscale also has a humble and low-entitlement culture, with talented individuals who are helpful and possess a strong team mindset.

This approach leads to building high-performance teams in three ways. First, we develop a sense of psychological safety within the company. When moving fast, there's always a chance that a bet we make might not succeed. That's okay; we learn as we go. We create psychological safety so that people don't become risk-averse due to the fear of making mistakes.

Second, we continue to develop empathy, which is a key aspect of any good relationship, whether it's between sales and PM or PM and engineering. Fostering trust and empathy is critical for building high-performance teams.

Lastly, once trust and empathy are established, we work on shortening feedback loops. It's essential for us to learn from each other by providing actionable, specific feedback that helps us improve week by week, month by month.

So, these are the three broad ways I think about creating high-performance teams at Anyscale.

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Roshan: That's interesting. Can you explain how you build customer empathy within your team?

Sid: When it comes to customer empathy, I think there are three different things that we've done in the past. First, many organizations have very clear distinctions between roles and responsibilities, where it's only the PM who's responsible for talking to the customer, and it's the role of engineering to build things out. We try to avoid that. As a PM, I believe it's crucial for as many people as possible within the organization to hear from customers directly. It's one thing for a PM to say that a customer has challenges or friction with a particular workflow, but it's another thing altogether to be on the call and hear that frustration and pain point from the customer directly. So, building customer empathy involves engaging a set of people early-on in the customer engagement process.

Second is shortening the feedback loop - we actively engage with customers and since Anyscale is an early-stage company, many of them have taken a bet on us. Having frequent touchpoints, making these customers feel heard, bringing them along on our journey, discussing with them how we're thinking through building features and prioritizing our roadmap, and getting their input helps us with user empathy as well.

Finally, let's say we've heard from a customer and have a set of requirements from them, either for a new feature or an improvement to an existing workflow. We have an amazing design team that is actively involved in design studies & customer validation. Conducting these design studies and observing how customers interact with the product goes a long way for us to understand the different friction points they have

So, these are three ways in which we, as an organization, can help increase user empathy.

Roshan: That's great to hear. I like the idea of getting everyone in the organization involved in customer calls.

Sid: That's a great way to build empathy –– one of the things we also do is hold weekly sessions where our PM, design, and engineering teams watch customer conversations together. During these sessions, we all sit together in a room, watch the calls, take notes, and identify areas for improvement based on customer feedback. This approach helps us maintain a shared understanding of the customer's needs and perspectives, which is essential for developing better products.

Roshan: What do you think is the key to great product and engineering collaboration?

Sid: One of the challenging aspects of being a product manager is finding a way to successfully collaborate with the engineering team. As a PM, you have an abstract business idea or feature in mind, and you're responsible for making it tangible. However, as a PM, you work through others to build it out. Collaboration is crucial and enables teams to do their best work together. I'll discuss three key aspects of effective collaboration.

First, building a culture of trust and empathy is vital for great PM-engineering collaboration. Establish an environment of mutual respect and support where teams can work towards a common goal. Spend time getting to know each team member, their roles, and their underlying motivations. Different engineers have different interests and career stages, so understanding their motivations is crucial. Additionally, providing information about why certain decisions were made helps build trust. It's important to reason out your decisions and communicate them to the team. Finding common interests outside of work can also strengthen trust.

Second, aligning towards a common goal focused on the end user is essential. Effective collaboration requires a shared focus on understanding and addressing the user's needs. Engineers can offer valuable insights on design problems or the feasibility of new workflows, allowing them to voice their opinions and ensure they feel comfortable expressing their ideas.

Lastly, having continual feedback is vital to ensure everyone's aligned on goals, priorities, and key metrics. In a supportive environment, team members can openly communicate when things aren't going well and rely on the PM to have the engineering team's best interests in mind during conversations.

Roshan: As this is the first open-core product you've worked on, how do you think about product management differently at an open-core company compared to the previous companies you've worked at, which weren't open-source?

Sid: This is a very different business model than my previous experiences, and is one of the main reasons I joined Anyscale. I've observed differences in multiple areas: 

Firstly, when working on open source, you interact with a passionate community of developers who are experts in the area and may have contributed significantly to making Ray successful. I’m amazed and inspired by the passion and involvement from the Ray community. Unlike with “traditional” products that I’ve managed in the past, there is no separate customer feedback / validation stage because we hear from users at every step. Developers passionately advocate for feature requests, and share use cases we hadn’t considered. By conducting the process in public, it’s higher in volume and frequency than anything I’ve experienced. This is a very different ecosystem compared to a PM who typically interacts with business stakeholders, CFOs, or sales teams. 

The go-to-market strategy is different since on the open source side, building a strong community, creating forums for collaboration and sharing knowledge, creating awareness & distribution through developer community channels, evangelism and partnerships to help expand reach and create new opportunities, are critical.

Thirdly, the decision of what features to keep in open source versus which ones to monetize is a balancing act between providing value to the community, building a sustainable business model, and competing in a crowded space. We need to maintain transparency, consistency, and clear communication to ensure our open source community continues to thrive and drive adoption, while still providing significant value to customers who pay for a managed solution.

Roshan: HashiCorp is also open-core so that definitely resonates with me and the work I do. One last question on Anyscale, do you have a favorite feature that Anyscale has shipped or will ship in the near future?

Sid: There are many exciting features, but one I'd like to talk about is called Workspaces. Workspaces is a feature Anyscale has built to help customers accelerate the development and scaling of ML and Python workloads. One key problem we've seen is environment reproducibility. The goal is to help developers iterate faster on models and a common, reproducible environment makes it easy for multiple developers to collaborate, debug errors, and allows new developers to continue existing projects.

Workspaces provides an integrated IDE experience, allowing multiple developers within a team to edit and run code, install dependencies, and monitor jobs, services, and resources just like they would on their laptop. It creates a shared environment for everyone to work together.

Additionally, Workspaces offers integrations with tools that developers are already familiar with, such as VS Code, Jupyter Notebook, GitHub, and Weights & Biases for experiment tracking. This allows developers to continue using the tools that make them efficient.

Lastly, we've made collaboration easy. Workspaces can be shared and cloned with a click of a button, allowing different users to access the same configuration and environment, boosting productivity. These capabilities make developers more productive, increase time to market for organizations, and simplify the entire process.

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Roshan: What advice would you give to young professionals looking to go into product management?

Sid: That's a great question, and one I hear quite often. Firstly, it's important to understand that product management is a unique role, and its responsibilities can vary across companies and even within different teams in the same organization. There are misconceptions about product management, like the notion that a PM is like a CEO of a product, which, in my experience, isn't accurate.

Product management requires influencing without authority and achieving success through others. In other words, PMs are never in control of outcomes, which can make the role stressful. However, it can be a fulfilling career for those who enjoy solving business and customer problems and working with diverse people.

To prepare for a product management role, focus on improving the following areas:

1. Critical thinking: Continuously question whether you're solving the right problem and consider the long-term implications and unintended consequences of decisions.

2. High agency and proactivity: Develop the ability to find a way to achieve your goals without waiting for ideal conditions, pushing through challenges and making progress.

3. Trade-off identification and balance: Every decision a PM makes involves trade-offs. It's crucial to think through and articulate these trade-offs, as well as the rationale behind each decision while considering potential downsides.

Focusing on these three areas will be beneficial when transitioning into a product management role.

Roshan: What do you think are the most important traits and skills of product managers?

Sid: The first one is developing deep user empathy. At the end of the day, it's crucial to understand what users are trying to accomplish and what constitutes success for them. Users might say they want one thing but in reality mean something else, so being able to empathize and understand their core needs is essential.

The second trait is cutting through ambiguity and providing clarity. With shifting market dynamics, macroeconomic situations, conflicting priorities, and changing competitive landscape, it's important for a PM to think deeply, reduce ambiguity and provide clarity for other stakeholders.

The third trait is ruthless prioritization. A PM needs to cut through the noise and prioritize effectively. This involves finding the right balance between long-term strategic aspects of the product and responding to immediate customer feedback. PMs should always consider industry trends, product positioning, potential partnerships, competitive analyses, and pricing.

The fourth trait is versatility. Don't be married to your ideas. It's great to have a hypothesis-driven approach, but you need to know when to change course if something isn't working out. Great PMs are informed by data, not attached to their ideas, and they blend qualitative and quantitative inputs when making product decisions.

Additionally, clear communication is vital. PMs work with many different types of stakeholders, so it's important to tailor communications and switch context instantly, depending on the stakeholder, to ensure the message is clear. These are some of the critical traits I believe a PM should possess.

Roshan: Outside of work, what hobbies occupy most of your time? How do you stay physically and mentally fit given the high demands of your job?

Sid: I have a five-year-old daughter who keeps me very busy with activities like swimming and dance classes. So, spending time with her takes up a lot of my time.

In addition, I'm deeply involved in nonprofit activities, which is another passion of mine. I've been engaged with nonprofits for over a decade, holding leadership roles in organizations addressing senior care, financial literacy, and computer education.

Roshan: Do you have any favorite books, movies, podcasts, et cetera, that have been a big influence in your life as a whole or in your work?

Sid: Absolutely, there are some fantastic resources out there, especially now that product management has become a more mature discipline. I'll share some recommendations across various formats since people have different preferences for consuming content.

In terms of books, some of the best ones I've read include "Inspired" by Marty Cagan, which is an excellent book on product management. Another great book is "Continuous Discovery Habits," which provides a guide on gathering requirements and understanding pain points during all phases of product development. It's essential to stay connected to customer experiences as a product matures, and this book offers valuable frameworks to help with that. Lastly, "Good Strategy, Bad Strategy: The Difference and Why It Matters" is a fantastic read on strategy.

For podcasts, I love Lenny's Podcast, which you recommended to me, so thank you for that. Another great one is The Skip Podcast by Nikhil Singal, who was the VP of the organization I was in at Facebook. It's tailored for more senior product management professionals, featuring many chief product officers, but it's an excellent resource overall.

As for blogs, Shreyas Doshi has a fantastic blog and Twitter account with insightful posts. Two other great blogs are by John Cutler, a product leader at Toast, and Gibson Biddle, who was a leader at Netflix.

If your audience is interested in courses, Shreyas also has a Maven course that I haven't taken personally, but I've heard fantastic things about it. It might be useful for some of your readers.

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We hope you enjoyed the interview with Sid. We had a blast recording it :)

You can find Sid on LinkedIn here.

Moderator: Roshan Chandna (Co-founder at The Takeoff). Associate Product Manager at HashiCorp.

I’m on Twitter @RoshanChandna 👋. Be sure to also check out The Takeoff on Twitter :)

If you found this Edition of The Takeoff valuable, share it with friends👇

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Interview Guest: Russell Glass

Role: CEO at Headspace Health

Previous: Prior to joining Headspace as CEO, Russ was the Founder & CEO at Bizo, a B2B audience marketing and data platform. Bizo was acquired by LinkedIn in 2014. Russ then joined the LinkedIn team as VP of Products.

Quick Note: This interview was recorded back in August 2021. Please excuse any parts that feel outdated.

Interview Highlights:

• Meditation has helped de-stigmatize mental health by removing barriers to access and reframing the problem.

• The synergies between Headspace and Ginger…

  • 30% of enterprise employees engage with Headspace (compared to ~5% for other mental health solutions).

  • Headspace is an effective customer acquisition engine for Ginger.

• Headspace Health has partnered with Cigna nationwide, expanded their Kaiser Permanente relationships in 5 regions, and partnered with AmeriHealth Caritas as their first Medicaid plan.

Lukas: Why is meditation such a great meditation entry point to therapy?

Russ: Anytime Ginger sends communications out to our employer customers. Anytime you mention the word mental health or words mental health, you have an automatic drop off in response rates. Because most people don't look at themselves as having mental health issues or mental health needs. Those who do are already getting help. The vast majority of people are going through life not really thinking they have mental health needs.

And so what Ginger has learned over time is you've got to communicate differently with those people. You've got to say, for instance, being a new parent is hard. Ginger can help. Not sleeping well at night can lead to struggles with stress and anxiety. Ginger can help.

And what you're doing there is you're destigmatizing through narrative. You're helping people say, “oh, yeah,” being a new parent is hard. They don't think of it as a mental health thing. But it is, right? The anxiety, the stress, the depression that comes along with new children. At times there are mental health issues, but you think about it very differently.

What I think Headspace has done beautifully is, first of all, created an incredible experience that people are attracted to, that they try for the first time. It's easy to get started. It doesn't take any heavy lifting. And the experience itself teaches people about the power of mindfulness and meditation, about how to do it, even if you only have a few minutes a day. And it helps people really understand the power of developing a practice and developing a habit that can really solve mental health issues before they become mental health issues. And I think that's what has made Headspace so successful.

Lukas: Behavioral health and mental health are different terms, but in a lot of ways the term behavioral health and even meditation destigmatizes the problem. I think back to mental health branding back like 5-10 years ago with the sad man or woman looking out a window in a Sepia tone. Now, it's totally changed. It's more vibrant. 

Russ: We felt like that was really important. And so when we rebranded, we've done a lot of work on exactly that. And how do you create experiences that people actually get drawn into and want to experience?

Headspace has taken it to a whole other level of really changing the societal norms of what this means. And thinking about your headspace and thinking about how to change the way you approach certain situations to really develop true mindfulness. They've done that in a number of different ways.

One is just some of the plugging into Netflix, for instance. Or we just launched today, actually a partnership with Waze so that you can turn on the Headspace experience in Waze, and it's mindfulness while you're driving and lowers the tension and anxiety. And Eve, one of our wonderful health coaches, can give you directions as part of this experience. It's awesome. If you take a step back, what is that doing? It's just normalizing people's thinking about mental health. It's normalizing how this just fits in day-to-day life.

Lukas: I remember some of the advice that you gave on taking care of your mental health last time. And you spoke about meditation, how even if it's not a formal meditation, you can take 10 seconds, 30 seconds in the shower to be present. And it’s the same thing with driving.

Russ: It's awareness. It's just being aware. What are you feeling? What are the emotions that you're experiencing? And don't judge them, just be aware of them. Just note that this is what you're experiencing. Breathing is obviously a very important part of it. We've evolved to have mechanisms for reducing stress and for managing cortisol levels and managing anxiety. And tapping into that is something people have done for literally thousands of years. Right. So it's pretty proven. It's like the ultimate original approach to managing health. And bringing that back into today's society, I think, is pretty awesome. 

Lukas: Yeah, I think we lost it there for a while.

Russ: There were a few moments where we got sidetracked. Although, to be fair, Western culture has lost it. There are many cultures around the world where it's been continuous. It's been part of their religion or part of their experience. For all the millennia, Western culture has gotten separated from it somewhat, and now it's kind of, how do we bring that back into day-to-day psyche? 

And I gotta tell you, though, I sound like that guy who's like, I love this razor so much, I bought the company. But I have to say, mindfulness and meditation has changed my life. My marriage, my ability to relate to my children. My whole just sort of day-to-day worldview is so much I believe, improved by being able to bring mindfulness to everything I do. And I'm not somebody who ever has really had mental health needs as you traditionally would define them. I've been fortunate to have a pretty steady state throughout my life. I've been pretty healthy, knock on wood, throughout my life. So if it can help someone like me who's been fortunate enough to be pretty healthy and not had serious issues, it can help anyone.

It can help anybody that thinks upstream. And I view it as protective because we're all going to face things throughout life. And so the fact that I've built a practice means that when I do have health issues or when I do have loss issues or I do have the things that happen as part of life, I feel like I have some protective capabilities to manage through those.

Lukas: Are there any other benefits of Headspace from the business side other than the lowering of the cost of customer acquisition and bringing customers closer to the brand at all stages of their life? 

Russ: I think there are a few areas certainly you've touched on what I would call a positive reinforcing flywheel, which is that when you've got millions of users and a brand as powerful as Headspace has, employees are also consumers. So as an enterprise, the ability to put Headspace as a benefit in place becomes a lot easier because your employees already know about it and you see very high activation rates of those employees. Most digital health companies have to do a ton of work, including Ginger by the way, have to do a ton of work to get people to use their products because for the most part employees have never heard of their products.

So there's constant lifecycle marketing that has to get done. Headspace has to do very little of that because the awareness is already there. And so you see these enormous engagement rates, 30% plus of an enterprise population will engage in headspace when it's placed by the enterprise. So you've got that positive flywheel there, but then you've got this next industrial logic component, which is that employers don't love a bunch of point solutions.

It's hard to manage a bunch of different solutions. One of the reasons is that what I just talked about, which is you have to communicate all these different things out to people and let them know that they're available. Two is just like all the contracts, all the management of those different vendors. It's complicated. And so the more of an end to end experience you can create, the more of a platform approach, the more an enterprise, the easier it is for an enterprise to buy. So by bringing these two things together, this is sort of part two of the logic, where you now have this full experience from those who are actually doing quite well and thriving, but can get some value out of mindfulness and meditation all the way to those now that Ginger can pick up that need a little more.

They need support, they need coaching to help create those new routines, help understand what's going on and build a plan to solve for it. And then for those who need more therapy, medication, management, psychiatry, we're there for them. That end to end platform is very valuable to an employer. So that's part two. Part three, then, is the ROI or the return on investment in economics of a Ginger/Headspace bundle that Headspace Health can bring to the table. If you think about it, Ginger today for not that much more, can bundle headspace. And now you have a product that for, again, not too much more cost will drive 3x the engagement, and thus will drive at least 3x the return on investment. So that kind of return and that kind of economic principle is really part three. So when you look at those three things, I would say that's the core industrial logic of this.

There's one more piece which is super important, but it's a little farther out. And that is all of the data that we now have access to that is used in a safe way, in a privacy centric way. It allows us to be predictive. So it allows us to say, based on what we're seeing, usage patterns to look like, based on what we're seeing this person say to their coaches and the experiences they're having, we can predict what care and what personalized pathway should this person be in, which just improves outcomes over time. And as you create feedback loops there. These two companies have the largest mental health data set in the world. There's not even a close second. So by using this effectively and using all the IP we've already developed around personalization of care, we think we can have an outsized impact on effectiveness and outcomes also. 

Lukas: You also launched a big deal with Cigna back in the spring, and I remember you saying that insurance plans were on your horizon last spring, and I'm very happy to see that materialize. Are you also looking to expand this part of the business as well as the B2B side? And how is Headspace helping there? 

Russ: The strategy here of starting with employers and expanding into health plans next continues to be an important strategy. And what we've seen is a huge amount of health care obviously gets consumed through the payers. So the payers are really driving a lot of the awareness of these solutions and the consumption of these solutions. And so because we don't just want to provide services to those who have great employee benefits, and we want to get into those who are underserved underprivileged and have less access, it's important that we expand into the payer side of the world. We've launched Cigna now nationwide, which is very exciting. We have expanded our Kaiser Permanente relationships. So now we're in five different regions around the country with Kaiser Permanente.

A few months ago, we launched Ameritas Health Caritas in the Mid-Atlantic, which is our first Medicaid plan. So, again, continuing to expand into these new audiences and learning what does it take to serve a Medicaid plan members that is generally going to be significantly underserved in the mental health space. 

Lukas: Yeah, there are obviously a lot of obstacles there. And there are reasons why companies, not just Ginger, take the direct-to-employer approach. The first part of it is selling to employers takes less time. There aren’t those long sales cycles. And once you refine that, you can go to the bigger health plans. What are the other obstacles in terms of selling into health plans? 

Russ: They're large, complicated entities. So cutting your teeth in the enterprise is important for a few reasons. One is there's fewer decision makers to get an enterprise up and running. Two is the incentives are much more well aligned in an enterprise where the enterprise in the mental health space, obviously employees are their most valuable asset and generally speaking, their most expensive cost is their employee base. Some of the stats right now is that one in five employees over the last two years have left their job due to mental health issues.

That alone is a staggering number. So if you're an employer and you're seeing the significant incidence rates of people that are having mental health issues, they're missing multiple hours per day, multiple days per year due to mental health issues, they're turning over, and they're leaving because of mental health issues.

It's a business continuity issue and so the incentives are there for them to spend some money on this. And that's one of the reasons why you see employers being a great place to start now the plans are aggregating tens of millions of lives of members. And so once you prove that this works and you have data that demonstrates the kind of return on investment, that's when you can go to the plans and they get very interested because ultimately they're looking at what are the ways to reduce the cost of care and provide services that people want to purchase.

Because insurance basically has two sells. They've got to sell the employer, or at least commercial insurance. They've got to sell the employer and then they have a secondary sell. They have to sell the employee on the benefits that they're providing at the price points they're providing them. So they both have to be competitive from a price standpoint, but they also have to have services that employees are excited about.

Lukas: And my last question, my favorite question that I asked you before, and I'll ask you again are there any new life habits that you've added into your daily routine to improve your own mental health since the pandemic?

Russ: I'd say the single most important one for my mental health is sleep. And my first startup, which not ashamed to admit was sort of an unabashed disaster, was complicated by terrible sleep habits. And I would go to bed thinking about all the problems that were going on at the company, and I would ruminate on it all night. I'd be up all night. I go to work in the morning and I have no patience.

I have no ability to function and cope effectively and make good decisions. The biggest change I made going into the next company was I never think about work when I'm going to sleep, ever. So I read; I'm okay watching a TV show. It doesn't affect my sleep, so I'll watch a TV show. Anything to get my mind off the day to day stresses of work. And so it's worked wonders for me and given me better sleep.

I also prioritize 7 hours minimum a night, so I will always get 7 hours. That's one, and two we've talked about. Mindfulness practice has worked wonders for me, not just for work, but for life and my relationships with my kids, with my wife, with my friends, but certainly my colleagues as well.

I do a lot of walking one on ones, so I get off of zoom, I get off my screen and at least three or four meetings during the day. I mean, I'm somebody who has probably ten to 15 meetings a day on average. So at least three or four of those I'm out in the sun walking with fresh air and then prioritizing some sort of cardio. So just getting heart rate up at least a few times a week.

About Me: I’m a co-founder at The Takeoff and formerly at Elion, SteadyMD, GreyMatter Capital, and Washington University in St. Louis.

I’m on Twitter @lukassteinbock and @_TheTakeoff 👋

About Me: I’m a co-founder at The Takeoff and formerly at Elion, SteadyMD, GreyMatter Capital, and Washington University in St. Louis.

I’m on Twitter @lukassteinbock and @_TheTakeoff 👋

In TakeCare’s first post, I’m sharing an updated version of my US Healthcare 101 Study Guide. I first shared this guide at the beginning of January and have received/incorporated feedback from the community.

If you would like to contribute, just comment on the Notion, and I’ll try to incorporate it! I’ll be sure to give you a shoutout at the bottom of the page :)

Study Guide

Together with other leaders in the space, we’ve created this guide to be used as a gateway for those interested in dipping their toes into the healthcare industry. Over the course of the pandemic and beyond, healthcare has seen an influx of talent because of the meaning and purpose behind the work. This new personnel, however, often does not understand the fundamental concepts of the US healthcare system. Accenture found that 52% of healthcare consumers are “healthcare illiterate,” yet 4 out of the 10 Fortune 10 companies are in healthcare. I saw a need for this guide and want to promote healthcare literacy for healthcare employees.

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As always, if you have any recommendations for interview guests, questions, or written content, feel free to shoot me a DM.

See you all soon! We have an interview with Russell Glass from Headspace and a collaboration with Clay Canfield from Sobriety Hub.

-Lukas

About Me: I’m a co-founder at The Takeoff, and have worked/learned at Elion, SteadyMD, GreyMatter Capital, and Washington University in St. Louis.

I’m on Twitter @lukassteinbock and @_TheTakeoff 👋

Over the last 5 years, Michael, Roshan, and I have all used The Takeoff to pinpoint our interests, each diving deeper into various subjects. Going forward, we’ll be posting content in different sections within The Takeoff’s newsletter, with Roshan’s focus on product management, and mine on healthcare.

The goal of my healthcare-specific section, TakeCare, is to be a gateway for those interested in the healthcare industry, educating those early in their healthcare journey on how the system works and what is happening in the broader space. In pursuit of this goal, TakeCare will act as a home for the following…

1. Introductory-level written content on the US healthcare system 

2. Written & audio interviews with leading innovators in healthcare 

3. Curated content with condensed insights

Click the button below to subscribe to all of The Takeoff's content.

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Once you’ve subscribed to The Takeoff, you’ll be able to manage notifications from particular sections in your account settings below.

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I’ll get things kicked off in the next few days - if you have any recommendations for interview guests, questions, or written content, feel free to shoot me a DM.

See you all in the next post!

-Lukas

About Me: I’m a co-founder at The Takeoff and formerly at Elion, SteadyMD, GreyMatter Capital, and Washington University in St. Louis.

I’m on Twitter @lukassteinbock and @_TheTakeoff 👋

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Guest Profile:

Interview Guest: Diya Jolly (LinkedIn)

Role: (Incoming) CPO at Xero, ex-CPO at Okta

Previous: Prior to committing to join Xero, Diya served as Okta’s Chief Product Officer, where she led the company's product team and was responsible for Okta's product roadmap and innovation. Before Okta, Diya spent over seven years at Google as VP of Product Management for YouTube’s Monetization and then for Google Assistant/Home. Diya currently serves on the board of directors for ServiceTitan and is an advisor to Amplitude.

Quick Note: This interview was recorded via a Zoom call between Diya and Roshan (that’s me) in March.

Roshan’s favorite quotes from the interview:

• On measuring success in product management: “Lagging indicators for product success are typically tied to revenue. If your product generates revenue, that's a clear indication that it's successful. The mid-level indicators for success are typically related to usage metrics, such as which features are being used in the product, and how frequently the product is being used overall. Early indicators of success are more subjective and might include feedback from target customers on whether the product is meeting their needs.”

• On building product culture: “In terms of building a strong product culture, deep customer empathy is important, along with metrics that are focused on business growth and the growth of the user base. The team should have a drive to learn and acquire knowledge, as they touch and interact with many different domains. No one person can know everything, so it's important to have people who are curious and eager to learn.”

• On what drew her to product management: “So my dad started a small technology business in India. It doesn’t exist anymore, but it was there most of the time I was growing up. Being the older kid, I would go to his workplace, sit in the back, do homework, and overhear various discussions. I found the ones about products, architecture design, and customer needs the most intriguing, and I realized that I wanted to do something similar. I think I was twelve or thirteen when I was like, “yeah, that’s what I want to do.”

Roshan: Hey Diya, thanks so much for coming on. So to start, what exactly does the role of a Chief Product Officer at a company like Okta or Xero look like?

Diya: Sure, thank you for having me. As a Chief Product Officer, my main responsibility is to identify what our company's customers want and determine how we can meet those needs. This involves balancing various considerations such as which target customer segments to focus on, what needs to be fulfilled, and what needs to be left out, not just for a single product, but also for an entire portfolio of products that we offer. As a product leader, I need to work closely with other executives because launching a new product requires the involvement of different departments because you need engineering to build it, customer support to support it, and sales to sell it. Many people think that as a product leader, you can go off and have your own product strategy, but that’s not true. Ultimately, I need the entire company to be aligned with and excited about our product strategy.

Roshan: Taking a step back, how did you become a product manager, and what drew you to this field?

Diya: Sure, I’ll go into the second part and then come back to the first part. So my dad started a small technology business in India. It doesn’t exist anymore, but it was there most of the time I was growing up. Being the older kid, I would go to his workplace, sit in the back, do homework, and overhear various discussions. I found the ones about products, architecture design, and customer needs the most intriguing, and I realized that I wanted to do something similar. I think I was twelve or thirteen when I was like, “yeah, that’s what I want to do.” I was interested in the interplay between the left and right brain, and I thought that product management would be the perfect field for me. However, back then, tech product management didn't exist. I thought my dad was just talking to his engineers, but really he was being the product manager since CEOs are like the product managers of small businesses.

When I came to the US for undergrad, I started studying computer science, but I realized a couple of things. One is that I had a slight eye problem that made it difficult for me to find grammatical errors in my code. So, I began looking for ways to get closer to the customer and the business impact. Product management was a new field then, but I was really interested in it. However, at that time, you couldn't be a product manager until you had an MBA. So, I decided to go to a strategy consulting firm and sell that experience as an MBA. I worked at McKinsey and then moved to Motorola as a product manager with one of the partners who had gone there to run a division.

Roshan: That’s a fascinating story about being interested in product management from such an early age. Now, going back to Okta, can you tell me about some of the things you worked on at Okta and some of the things you're most proud of?

Diya: Sure, I’ll divide this into three key categories. Number one, Okta was built in an era where password-based authentication was king, and our product was built in a way where passwords were super native and hard-coded in order to support that. However, with the advent of biometric authentication methods like Face ID and Touch ID, we realized the need to make Okta completely passwordless and biometrically enabled. We achieved this across multiple devices like Mac, Windows, iOS, Android, and Chrome, but it wasn't an easy feat given the complexity of authentication and verification. I'm proud to say that this move put Okta ahead of its competitors and the reception was phenomenal.

Second was taking the core Okta product and launching a full suite of products for employee sign-in. There’s this product we launched called Workflows which helped with security workflows, and a product called Identity Governance and Access, and these products broadened the Okta portfolio for employee sign in.

Third, we established a new business line called customer identity, which was a small segment when I joined the company. We grew it significantly, and then eventually we acquired Auth0 to expand it even further.

Roshan: How would a product or feature at Okta go from inception to market?

Diya: Products and features follow different processes. For a feature, we first look at what the customer is asking for. Then, our product area leader decides how to prioritize the set of features. Once we decide what to spend time on, we form a three-legged team comprising product management, design, and engineering. The team starts by understanding the specific customer problem and what they are trying to achieve, conducting customer interviews, building mockups, and testing them with customers. Then, engineering builds the feature, and it gets shipped. Generally, features have release notes and some learning but don't require extensive sales enablement or marketing, unless it's a shiny feature that needs highlighting, such as passwordless. In that case, we do some product marketing around it.

Products follow a different process. We start by looking at the strategy perspective and determining where we want to grow our business. We analyze which customers we want to solve problems for and what problems we can solve that will delight them. For example, if we want to solve problems for the world's biggest enterprises, we may target their auditing problems for security. Then we analyze the market size, the players in the market, and our ability to build it cost-effectively and within the time frame. Assuming we decide to proceed, we build a cross-functional team comprising product leads, product managers, engineers, sales, marketing, and sales engineering. The process is similar to that of a feature, but it's more complex and involves launching multiple features simultaneously. We start by talking to customers, specifying the features, testing them, and having engineering start building pieces of it. As we progress through the process, we start working with marketing to determine how to launch the product. Will we go to a trade show, make a big bang in the press, or do a closed beta until we're ready? We also do sales training, sales enablement, and work with sales engineering to onboard people. That's how we bring a product to market.

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Roshan: Seeing as you're the Chief Product Officer and leading the product orgs at these companies, how do you think through building a great product culture at a company like Okta or Xero?

Diya: That's a great question. In my opinion, a strong product culture is built on a few key factors. Everybody knows product managers need to be customer-obsessed, so that’s a given. But the best product managers are also obsessed with how to grow the business. The ultimate gauge of whether or not you are successfully adding value to your customers is if they are willing to pay for your product. So, when you are deciding which features to include in your product, there are many trade-offs to consider, and often they can't be quantified. The ultimate metric to measure the success of your product is revenue growth, which is a strong lagging indicator. Therefore, I encourage my product managers to have a general manager (GM) mindset. However, this doesn't mean that they are not technical. They need to have a strong technical understanding as well. So, you really need someone who is a jack of all trades.

In terms of building a strong product culture, deep customer empathy is important, along with metrics that are focused on business growth and the growth of the user base. The team should have a drive to learn and acquire knowledge, as they touch and interact with many different domains. No one person can know everything, so it's important to have people who are curious and eager to learn. Additionally, it's important to create a team culture that encourages collaboration rather than competition. In tech, everything is interconnected, so often the beauty of a product comes from two features working together to create something even better.

To build this culture over time, you need to find the right people who believe in the same values and incentivize them accordingly. You also need to have strong disincentives for things like territorialism. It's important to role model the desired behaviors as well. Lastly, you need to have your team's back and push them to do more and achieve more.

Roshan: How has the shift to remote work changed the role of product management?

Diya: I believe that for product managers who are not in a leadership role running multiple product teams, such as VPs or those at the IC level, director level, or early manager level, being in person with your engineering team and other product people helps a lot. Being able to get on a whiteboard and sit next to your engineering leader to discuss ideas or build things together is invaluable. Unfortunately, this has become challenging with remote work. For junior and newly starting PMs, the learning curve is harder, but people have developed ways around it, such as using Slack channels and other tools. On the plus side, remote work allows for more time to read and learn more deeply. For experienced PMs and leaders, I don’t think it makes a big difference. Yes, you want to see your team in person, form a relationship with them, et cetera. But I think you can do that by meeting once a week, biweekly, every month, or whatever. So I actually don’t think it has tremendously changed leaders’ lives.

Roshan: How do you measure success in product management?

Diya: Lagging indicators for product success are typically tied to revenue. If your product generates revenue, that's a clear indication that it's successful. The mid-level indicators for success are typically related to usage metrics, such as which features are being used in the product, and how frequently the product is being used overall. Early indicators of success are more subjective and might include feedback from target customers on whether the product is meeting their needs. Ultimately, success in product management comes down to how the product manager is thinking through the target customer profile, how the product will add value to the business, and how the product will be designed to meet those objectives. It's a craft that requires a lot of strategic thinking and decision-making.

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Roshan: What advice would you give to young professionals looking to go into product management?

Diya: Well, there are a few different paths you can take. I think having a technical degree can be tremendously helpful, but it's not always necessary. The best product manager I've ever known doesn't have a technical degree, but he did learn how to code himself. Having said that, a technical degree can help you communicate better with engineers. In addition to that, I would encourage young professionals to spend a couple of years coding to get a better understanding of what can and can't be shipped, and to get a sense of what the true blockers are. So overall, I would ultimately say that the best way to break in is to spend a couple years in engineering and then move to product.

Roshan: What do you think are the most important traits and skills of product managers?

Diya: The most important traits and skills of product managers include customer empathy, business understanding, tech understanding, EQ, influence without authority, and drive. For a starting product manager, it's important to have a desire to do everything that the team cannot do and to put out every fire. It's kind of like being the CEO of a startup where things are blowing up. Not exactly, but somewhat. An ownership mindset is also essential because ultimately, the success of the product rests with the product manager, whether they have authority or not.

Roshan: Outside of work, what hobbies occupy most of your time? How do you stay physically and mentally fit given the high demands of your job?

Diya: Well, I'm still working on that. If you think of life as a pie, and you think that pie has health, which includes sleep, workout, family, friends, work, and then whatever you want to put in, for short periods of time, anything can be unbalanced. But if it is unbalanced for long periods of time, you're not going to have the steam to go at stuff. The best advice I got from someone was that you can't balance everything all the time. The way you balance stuff is by focusing on one thing at a particular time and then coming back and focusing on another thing. So, for example, 10% effort in your friends and 90% effort in work might be fine for a month, but then you need to make up for it by giving 25% to 30% effort to your friends and 70% effort in work. So, you're constantly always balancing and prioritizing. I don't think there's a magic solution. As long as you know what's important to you, you can put it in the pie and you can gauge where you're at with that and what is the most important move right now and reassess that every so often.

In terms of staying mentally and physically fit, I think sleep is very important. Different people need different amounts of sleep. I'm a camel. I can store sleep and then deplete it and then I need to store it again. I work out, and I watch what I eat. You should always make time for those things in your day. Those really help you perform better.

Roshan: Last question, do you have any favorite books, movies, podcasts, etc. that have been a big influence in your work or in your life as a whole?

Diya: It's hard to pick one book, but I can recommend a few. Thinking Fast and Slow by Daniel Kahneman is a great one. I also really enjoyed Creativity, Inc. Quiet by Susan Cain is another good one. Accidental Superpower by Peter Zeihan is worth a read too. And lastly, Sapiens is a fantastic book. You can pick any of these and give it a try.

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We hope you enjoyed the interview with Diya. We had a blast recording it :)

You can find Diya on LinkedIn here.

Moderator: Roshan Chandna (Co-founder at The Takeoff). Associate Product Manager at HashiCorp.

I’m on Twitter @RoshanChandna 👋. Be sure to also check out The Takeoff on Twitter :)

If you found this Edition of The Takeoff valuable, share it with friends👇

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Since our last post, our whole team has graduated from college and is now in the workforce. Michael is an Investor at Insight Partners, Lukas is part of the Founding Team at Elion, and I recently joined HashiCorp as an Associate Product Manager. Graduating, starting work, and life in general got us all pretty busy, and as you’ve noticed, we put a pause on The Takeoff. 

Our mission at The Takeoff has always been to help students and other young professionals learn about startups & entrepreneurship, find roles at hot startups, launch companies of their own, and start making the world a better place for all. While we’ve solely focused on founders and investors for interviews in the past, over the coming weeks I am excited to launch a short series of conversations with product leaders at some of today’s most innovative organizations. These conversations will help our audience:

• Learn more about what the product org looks like at hyperscale companies

• Better understand what it takes to run one of these massive product orgs

• Learn how to break into product management

• And more!

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I am excited to kick off this series in the near future, and if you have any recommendations for questions we should ask or folks to interview, feel free to shoot me a DM.

See you all in the next post!

-Roshan

About Me: I’m a co-founder at The Takeoff, an Associate Product Manager at HashiCorp, and an alumnus of Washington University in St. Louis.

I’m on Twitter @RoshanChandna 👋. Be sure to also check out The Takeoff on Twitter :)

If you found this Edition of The Takeoff valuable, share it with friends👇

Share The Takeoff

Shekar Ramaswamy, a good friend of The Takeoff team, recently started a web3 newsletter: Coinsights. He covers topics ranging from the privacy implications of the blockchain to practical step-by-step guides on how to stake $SOL. Today on The Takeoff we are releasing “Liquidity is All You Need”, originally published on Coinsights, which I had the privilege of contributing to. If you enjoy today’s article, please consider subscribing to Coinsights to read more crypto content.

Welcome back to Coinsights! It’s been a while, but I’m excited to announce some exciting developments over the next few weeks. Stay tuned!

Today, I’ll be talking about one of the key components of the web3 ecosystem: exchanges. I recommend checking this article out on a large screen if you can, but it’s nbd either ways.

You’ve probably heard of the Nasdaq, a U.S. based exchange that enables people to buy and sell stocks. Exchanges are the backbone of any economy – at its core, an exchange is simply a system that allows entities to swap assets. If you squint hard enough, you can see how even your local grocery store is an exchange! Exchanges are the gas that keeps the economic engine humming.

Looking at web3, there are currently 10,000 cryptocurrencies! Plus, it’s increasingly trivial to create a new one in just a few hours. Therefore, it’s no surprise that the web3 ecosystem has its own set of exchanges that enable millions of crypto users to trade their coins and to keep up with the breakneck pace of innovation in the crypto world.

It’s clear that exchanges are a crucial piece of the web3 puzzle. So how do they work? Who are the major players in the space? What will make one more likely to succeed over another? Read on to find out!

Liquidity Is Everything

The most important concept in understanding exchanges is liquidity. From the all-knowing Investopedia:

Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. The most liquid asset of all is cash itself.

Let’s break this down into two parts. First, “the ease with which an asset can be converted into cash.” This part relates to an asset’s volume, which measures how much of an asset is traded during a certain time period. An asset with a lot of aggregate value moving between entities in a short period of time is a high volume asset.

More nuanced is an asset’s float, which traditionally refers to the number of shares that exist on the open market. This relates to the second clause of the definition of liquidity: “without affecting its market price”. That is, the higher an asset’s float, the less likely it is that selling that asset will affect price. Said differently, when high float assets are sold, supply remains high, leaving the asset’s price relatively unaffected.

In short, high volume ensures that you can trade an asset when you want, and high float mitigates volatility. These two qualities define a liquid asset!

One of the most confusing aspects of liquidity is that people use it to describe both individual assets and exchanges. People will often say that both Bitcoin (a coin) and Uniswap (an exchange) are liquid. So which one is it? Well, it’s both. As I just outlined, an asset is liquid when it has high volume and float. However, the measure of an asset’s liquidity can also more accurately be considered in the context of the exchange it’s trading on.

For example, Coinbase is a popular exchange, and as a result, many people trade Bitcoin on it. Therefore, Bitcoin is liquid on Coinbase, and as a result Coinbase is also liquid. However, if I were to create Shekar’s Super Bitcoin Exchange, nobody would use it! So even though Bitcoin is generally liquid, it wouldn’t be liquid on Shekar’s Super Bitcoin Exchange, and therefore my exchange wouldn’t be liquid either.

High liquidity is crucial for a healthy exchange. Transacting with liquid assets on liquid exchanges ensures that you can trade when you want at (relatively) stable prices. As you can imagine, this is a highly desirable property for any asset (and any exchange)!

The Order Book Model

There are two prominent methods that exchanges use to facilitate transactions using liquidity. The first is the order book model. If you were to ask someone to explain how an exchange works, the order book model would likely be their first thought – buyers and sellers each list a price they are willing to transact at and there is a process that matches each side. The most popular stock exchanges today, such as the NYSE and the Nasdaq, use the order book model, and some crypto exchanges have adopted this method as well. In fact, you can even see the order book model in action on Coinbase Pro!

Centralized Exchanges

In the crypto world, exchanges that leverage the order book model are described as centralized because all trades flow through a single entity (aka a “middleman”). Many of the most popular exchanges are centralized, like Coinbase and Binance. Furthermore, centralized exchanges store your private keys and therefore manage your coins for you. Strictly speaking, you don’t own the crypto you see on your Coinbase account – Coinbase does! In reality, you trust Coinbase to give you the crypto that you own (or the cash equivalent) when you ask for it.

If your “wait a minute this is web3 shouldn’t things be decentralized and hmm how come I don’t own my own crypto” alarm is going off, good! Centralized exchanges aren’t a “pure” web3 product – I’d argue that they’re more web2.5. However, it’s important not to write off the notion of centralized exchanges altogether. They are a comfortable first step for people diving into the world of crypto, and tend to support common features that we’ve come to expect for financial products in web2 like reliable customer support, insurance, and strict regulation.

The existence of centralized exchanges implies the existence of decentralized exchanges. But before we get there, let’s learn about the underlying tech: Liquidity Pools & Automated Market Makers.

The Underpinnings of Decentralized Exchanges

A liquidity pool is a market for a specific pair of assets and the associated price ratio. However, instead of a centralized exchange matching specific buy and sell orders, a set of smart contracts govern the market instead. Liquidity pools can be created for any pair of assets, such as ETH & USDT. True to the web3 ethos, anybody can provide liquidity and subsequently earn rewards (more on these rewards later!). 

Within a single pool, the ratio of the assets is maintained by an automated market maker (AMM). Many popular pools like Uniswap and its clones leverage a constant product market maker that use the following formula: x * y = k, where x is the quantity of asset A, y is the quantity of asset B, and k is some constant. This ensures there is a stable ratio of one asset to another. More reading on the different types of AMMs can be found in the appendix.

From Coindesk:

To understand how this works, let us use an ETH/USDT liquidity pool as a case study. When ETH is purchased by traders, they add USDT to the pool and remove ETH from it. This causes the amount of ETH in the pool to fall, which, in turn, causes the price of ETH to increase in order to fulfill the balancing effect of x*y=k. In contrast, because more USDT has been added to the pool, the price of USDT decreases. When USDT is purchased, the reverse is the case – the price of ETH falls in the pool while the price of USDT rises.

The relationship between x and y is represented by what’s known as a bonding curve:

The above graph is really just a representation of supply and demand. As the demand for ETH rises, the supply of ETH falls; as a result, the price of ETH rises. Similarly, since the supply of USDT rises because it is being used to buy ETH, the price of USDT falls. I encourage you to work out that example on a classic supply and demand graph for yourself!

As I mentioned earlier, anybody can provide liquidity to a liquidity pool, granted that they provide it in a specified ratio. But why should they? When someone provides liquidity, they become a liquidity provider (LP, not to be confused with limited partner) and receive LP tokens proportional to the amount of liquidity they put into the pool. When a transaction occurs, the smart contract takes a small fee (typically ~0.3%) and distributes that fee back to the LPs based on the amount of tokens they hold. This reward structure encourages individuals to provide liquidity and keep the whole system running.

A simple example:

• Say there is a USDC (stablecoin, so price = $1) / ETH (price = $2000) liquidity pool

• LP Alice puts in 2 ETH and $4000, and LP Bob puts in 1 ETH and $2000. Therefore, Alice has twice the amount of tokens that Bob has. Note that you have to put in amounts according to a predefined ratio; that is, Alice couldn’t put in more ETH without also putting in proportionally more USDC.

• Non-LP Participant Charlie buys 1 ETH. 0.3% of 1 ETH is 0.003 ETH, or $6. Alice earns 0.002 ETH ($4), and Bob earns 0.001 ETH ($2).

Note that the process of providing liquidity and earning rewards is very similar to staking, which I covered earlier.

Coming Back to Decentralized Exchanges

Decentralized exchanges (DEXs) leverage liquidity pools and AMMs to facilitate transactions. In fact, a DEX is really just a collection of liquidity pools that use a shared set of smart contracts under one “brand.” In addition, unlike centralized exchanges, you own your crypto and therefore are also in charge of managing the private keys that access it.

Today, Uniswap is the most popular DEX with $7.53B TVL as of this article’s release. Uniswap captured most of the DEX market early on, holding almost 70% of market share by September 2020. In the web2 world, a product gaining this much market share could spell doom for consumers by stunting innovation and removing the freedom of choice. However, in web3, consumer data and code is typically public, which has pros and cons as I’ve discussed previously. One of the pros of this accessibility is that it’s much more difficult (or impossible) for monopolies to form in the ways we’ve become accustomed to in web2. In fact, many web3 products have bootstrapped their Minimum Viable Community using this data in what’s known as a vampire attack.

Vampire attacks are purely a crypto/Web3 phenomena. At their highest level, a vampire attack refers to a method for sucking users out of an existing platform into a competing one by offering some kind of incentive (typically tokens).

Arguably the most famous vampire attack was conducted by SushiSwap in late 2020. SushiSwap launched a nearly identical DEX by forking Uniswap code. However, SushiSwap offered exciting monetary incentives to all Uniswap users by offering a new kind of token called $SUSHI that at one point provided over 1000% APY. Just as a vampire sucks blood from a victim’s neck, SushiSwap sucked a sizable amount of liquidity and trading volume out of Uniswap overnight: almost $2B!

As a result, Uniswap responded with a token of its own ~three weeks after. Alas, as with many products born out of vampire attacks, the SushiSwap hype quickly faded after early movers captured the high economic upside, which you can read more about here.

Since then, Uniswap has again captured upwards of 70% of the DEX market. Even though Uniswap is yet again the undisputed ruler of DEXs, the fact that Sushiwap forced them to innovate and quickly launch their own token is precisely why web3 can drive better results for consumers.

If the concept of vampire attacks sounds familiar, it's because they’re a common theme throughout Coinsights articles and more generally in the web3 world. For example, I covered $SOS in late 2021, which was created from a vampire attack on OpenSea. As a developer, the existence of vampire attacks is both exciting and frightening. On one hand, vampire attacks allow developers to quickly bootstrap communities without being beholden to incumbents. However, once developers actually develop a community, they must work tirelessly to maintain their moat.

The Tradeoffs

So you may be thinking, which type of exchange should I be using?

The answer is an extremely unsatisfying “it depends.” Like so many other facets of web3, there’s a tradeoff between convenience and ownership. For many people, using centralized exchanges is a perfectly good way to participate in the ever growing web3 world while still feeling adequate ownership over their crypto. However, DEXs offer greater ownership and economic upside for those who favor autonomy. If you’re curious to learn more about how to provide liquidity on Uniswap, check out this guide!

In the long run, I expect decentralized exchanges to keep eating into the market share of centralized exchanges.

Decentralized exchanges’ lower fees and other incentives will attract new users over more traditional exchanges like Binance and Coinbase. Furthermore, as we’ve seen with Uniswap and its clones, decentralized exchanges are forced to constantly innovate to keep market share. This by itself is why I’m most excited about web3: the consumer can benefit from the open nature of the blockchain, privacy concerns notwithstanding. Never before has it been so easy for us to earn ownership and influence the products we interact with daily. Onwards!

Further reading

For anyone curious to learn more, I’m going to start including a section of additional reading that dives deeper into the technical concepts in each article. I’d love to talk about these topics in the Coinsights Discord!

Downsides of constant product market making

Other types of market makers

Bonding curves

Impermanent Loss

Other popular DEXs: Curve, Bancor

Follow Shekar on Twitter @ShekarRamaswamy and check out the Coinsights Discord here!

I’m Roshan Chandna (Co-founder at The Takeoff). Senior at Washington University in St. Louis. Prev. Venture Capital Intern at Floodgate Fund)

I’m on Twitter @RoshanChandna 👋. Be sure to also check out The Takeoff on Twitter :)

I hope you enjoyed Michael’s most recent piece on B2B payments as a multi-trillion opportunity as well as his article on WashU’s recent influence in the tech world. I second this notion and encourage students who are thinking about it to learn by doing and jump into their passion.

Listen: Anchor | Spotify | Apple Podcasts | Google Podcasts

Today, we’re learning about addiction care and Eric Gastfriend, who after graduating from Brown, working in startups and gaming, and attending Harvard for his MBA, founded DynamiCare with his father John Gastfriend. DynamiCare provides addiction treatment based on evidence-based practice, where patients are held accountable through breathalyzers, saliva swabs, and peer-to-peer coach who has recovered from addiction themselves. Among other topics we discuss:

• The founding story of DynamiCare

• How DynamiCare measures outcomes

• How peer to peer coaches help patients

• The different channels of Dyanmicare

• Lessons learned about the US healthcare system

In a new feature to the newsletter, I’m adding a short blog post on a topic that was brought to my attention on Twitter. Providing care across state borders has always been a barrier to providing quality care, and PSYPACT is looking to remove that barrier.

• PSYPACT is an interstate compact that facilitates the practice of psychology using telepsychology and/or temporary in-person psychological practice.

  • The therapist must be giving therapy from a state that has enacted PSYPACT to a patient that is in a state that has enacted PSYPACT.

• Psychologists can practice via two methods

  • Telepsychology: Psychologists obtain an Authority to Practice Interjurisdictional Telepsychology from the PSYPACT Commission, which requires an active ASPPB E.Passport, which costs $440 upfront and has an annual renewal fee of $100. 

  • Temporary Practice: Psychologists obtain a Temporary Authorization to Practice from the PSYPACT Commission, which requires an active ASPPB IPC, which costs $240 upfront and an annual renewal fee of $50. 

• Participating states

  • Enacted: Arizona, Colorado, Delaware, Georgia, Illinois, Nebraska, Missouri, New Hampshire, Nevada, Oklahoma, Pennsylvania, Texas, Utah Virginia, North Carolina

  • Enacted, not yet effective: Kanas (effective January 1, 2022), Maine (effective October 18, 2021)

  • Enacted, under further review: Arkansas (effective March 1, 2022), West Virginia (effective July 6, 2021)

Sources: Fact Sheet about PSYPACT, What’s New with PSYPACT

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TL;DR Twitter Thread

Let’s get into it.

While much of the fintech and payments innovation in the past has been consumer-facing (digital-native platforms like Stripe; POS / terminal solutions like Toast and Square), B2B payments presents an extremely attractive market for upstarts and investors, alike.

Why?

• Existing payment flows & processes are vastly inefficient.

• 80% of SMB invoices are manual and paid by check. Other reports indicate that only 10% of B2B transactions occur online.

• 40% of B2B payments happen via check. This number is down from 80% in 2014. Though, there is still a ways to go.

• Buyers want the B2B payments experience to closely mirror that of a B2C experience. There is a need for the consumerization of B2B transactions, while still solving for the complexities associated with B2B transactions. 

• B2B payments volume is $120T+ today and is expected to rise to north of $200T by 2028. This is ~5x the volume of B2C payments.

• Businesses are largely required to offer payment terms such as net 30, 60, or 90 days (due to buyer demand), which allows buyers to pay up to X days after receiving goods / services, interest-free. These terms help buyers unlock cash flow / working capital, albeit, at the expense of sellers.

• Increasing threat of fraud means that businesses need to take more steps to combat such fraud. Most payment systems have built-in fraud protection.

• Invoices are not standardized and, as previously mentioned, are typically received in a manual format.

Digitalizing B2B payments can significantly boost productivity and lower costs for buyers and sellers, alike, while also turning payments “from a cost center to a revenue generator.” Other benefits of digitalizing B2B transactions include improved cash forecasting, speed of settlement, and straight-through processing to A/P or A/R and general ledger (as indicated by AFP’s 2020 Survey). 

What are B2B Payments?

In its most basic form, B2B payments is the process by which businesses make and receive payments. While this sounds rather similar to B2C payments (e.g., the payment experience when you buy a pair of shoes on Nike.com), B2B payments face a number of complexities that defer it greatly from the B2C payments experience and process.

Amidst these differences, many B2B payments solutions of the past have tried to cater a B2C-like experience to B2B transactions. And, while many business buyers expect a payment & checkout experience similar to what they would get in a B2C scenario, the complexities of B2B transactions and payment flows mean that these two processes cannot be identical. 

While Stripe provides a seamless, almost effortless payment and checkout experience for consumers, B2B purchases are much more difficult and nuanced. Consumers typically pay for items with credit or debit cards. Businesses, on the other hand, can pay for items via card, check, wire, ACH, cash, or one of several newer methods such as virtual cards and digital wallets.

Companies like Balance and Routable are capturing business buyers’ desire to have a B2C-like checkout experience, while ensuring that these experiences are still built for (and around) the complexities that make up the B2B purchasing flow.

Areas I’m excited about:

• B2B payment solutions for SMBs & mid-market companies. SMB-focused solutions like Bill.com and Libeo typically depreciate in value for companies with greater than $50m in revenue. Enterprise solutions, such as AvidXchange, are often too bulky and expensive for non-enterprise players. The result is that mid-market companies are frequently left underserved. By focusing on payment flexibility, high levels of automation, and the ability to handle complex workflows & scale, players can drive significant productivity growth in the mid-market and capture ample market share. Looking more specifically at SMBs, the value-add opportunities here are clear, given that 80% of SMB invoices are processed manually and paid by check. Companies that excite me here include Higo, Plooto, and Dimpl.

• Payment solutions for B2B marketplaces. Over the next decade, we are likely to see a sharp rise in B2B marketplaces. Companies like Faire, Ankorstore, and Provi are already leading this wave. As more B2B marketplaces continue to arise, the need for payment solutions catered specifically toward marketplaces becomes increasingly evident. Companies like Balance, Sprinque, and UNIPaaS offer payment solutions built specifically to handle the complex workflows and transactions inherent to B2B marketplaces.

• Virtual cards & spend / expense management platforms. In January, I published a post on the SaaS management space. These companies (Torii, Productiv, Intello, Blissfully, and Cledara, to name a few) help organizations manage SaaS spend, and the greater SaaS ecosystem, as a whole. While SaaS spend is certainly growing within organizations’ spend stack, it does not capture the whole picture. Companies like Ramp, Divvy (acquired by Bill.com), Brex, Airbase, Spendesk, Pleo, and Mesh Payments have all built full-suite spend / expense management solutions that help businesses better track spend and make payments (typically, nowadays, via virtual cards). Other exciting companies here are Float, Kodo, Teampay, penny software, Yordex, and Fuell.

• Unlocking working capital and cash flow for buyers and sellers, alike. As Deloitte pointed out in its exploration of B2B payments for the middle market, 55% of middle-market businesses find it challenging to maintain sufficient working capital. One potential solution here is buy now, pay later (BNPL) for B2B. While most BNPL value-add to date has been on the B2C side of things (Afterpay, Klarna, Affirm, etc.), I expect to see BNPL solutions start creating and capturing significant value in the B2B world, too. Hokodo, Slope, Resolve, and Tillit are a few early-stage companies that excite me here. Other exciting companies that are helping unlock working capital for merchants include Parafin (marketplaces) and Settle (e-commerce).

• Vertically-focused payment processors and PayFacs. Given the vastly divergent workflows across different verticals, vertically-focused B2B payments solutions seem poised to capitalize on driving workflow- / vertically-specific efficiencies and cost savings moving forward. Companies that excite me include MazumaGo (construction), Coast (fleet), Relay Payments (fleet), Shieldpay (legal and financial services), Ascend (insurance), and PayEngine.

• Cross-border payments. Cross-bored B2B payments provide a number of complexities and inefficiencies, including high costs and low speed. Uruguayan-based dLocal, which went public in June and has since risen to a market cap of ~$20b,  helps businesses manage cross-border payments and minimize operational costs. Earlier-stage companies helping businesses manage the many complexities of cross-border payments include HamsaPay, Staqq, and Fairexpay. Wise, Rapyd, and Ripple are exciting later-stage players in the space, too.

• Other. In addition to the areas listed above, I am excited by pretty much any other B2B payments company helping serve unmet needs and customers. The list of companies that excite me in the broader space are practically endless, but to name a few: Plug, Novo Payment, Tink, Lockstep, Likvido, Airbank, Weavr, Wyre, Dwolla, Upflow, and Zuro.

While startups will drive and capture significant value in the broader B2B payments space, don't sleep on the ability for legacy players to innovate, too. Card networks like Visa and Mastercard, Big Tech companies like Google, Apple, and Facebook, B2C fintech / payments companies like Stripe and Adyen, and banks like Citibank and Capital One are all poised to ramp up their B2B payment offerings, adding significant value to both buyers and sellers in the process.

Conclusion.

Seemingly, there is a massive opportunity to unlock significant value and efficiency for businesses via new and improved B2B payment offerings. I look forward to watching the space develop and getting to know some of the early-stage players building in the B2B payments ecosystem. 

If the last decade or so saw the rise of massive value add and capture with respect to B2C payments and checkout, expect the next decade to do the same for B2B payments and checkout.

While many software markets are winner-take-all / winner-take-most, given the many complexities and immense market size of the B2B payments space, we are likely to see numerous multi-billion-dollar outcomes.

If you are building in the space, reach out. I would love to learn more about what you are building and see how I can be helpful.

Note: while this post primarily focuses on early-stage startups, a number of more established B2B payments companies (and startups with significant funding) are also driving incredible innovation and value-add in B2B payments. Companies like Bill.com, AvidXchange, Coupa, tipalti, Melio, Stampli, Payoneer, and Finix Payments, to name a few, will undoubtedly continue driving significant growth and value creation in the ecosystem.

🧠 For furthered knowledge on B2B payments, check out some of the resources below:

• Goldman Sachs — B2B How the next payments frontier will unleash small business

• Chloé Giard (Eurazeo Ventures) — Mapping the B2B Payments Tech ecosystem - On the road to consumerization

• Eurazeo Ventures — B2B Payments: On the road to consumerization

• Not Boring — Melio: Disrupting the $25T B2B Payments Market

• Credit Suisse — Payments, Processors, & FinTech

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Thanks,

Michael

Written by Michael Spiro. Find me on Twitter @mspiro3, on LinkedIn at Michael Spiro, or visit my personal site to learn more about me.

Happy Friday! Before I get into it, I’m going to do something a little different here and provide a few resources that I found interesting from the past few weeks.

• Article: Telehealth: A quarter-trillion-dollar post-COVID-19 reality? by McKinsey & Co. 👉 Summary 👈

• Book: This is Your Mind on Plants by Michael Pollan. 👉 Summary 👈

• Podcast: Conor White-Sullivan: Networked Thought (Part 1) by The Quest. 👉 Summary 👈

• Podcast: Analyzing the ATAI Life Sciences IPO by The Business Trip. 👉 Summary coming soon 👈

Now to the interview…

Listen: Anchor | Spotify | Apple Podcasts | Google Podcasts

We got another behavioral health interview here where I speak to Jack Swain, Head of Clinical Operations for Mindbloom. Mindbloom's mission is to transform lives to transform the world, and it does so by helping people reach their full potential through science-backed, clinician-prescribed ketamine therapy for anxiety and depression. Mindbloom's fully-guided virtual treatment makes it an affordable, accessible, and convenient solution for the millions in the U.S. who seek continued growth in all areas of their lives.

Prior to Mindbloom, Jack led strategy and operations projects for the nation’s largest health systems as a Manager at The Chartis Group. He formerly worked in technology consulting at Accenture and received his MBA from Dartmouth’s Tuck School Business.

As Mindbloom’s first employee, Jack worked side-by-side with their Medical Director to develop clinical protocols, launch in-person and telemedicine care models, and build an exceptional team of psychedelic medicine providers.

I’m thrilled to release this interview as it is one of my personal favorites. Not only is Mindbloom’s mission one to admire, but also their culture follows that mission in a way that makes them destined for long-term success.

What we chat about…

• What a typical Ketamine session at Mindbloom looks like.

• How Mindbloom tracks outcomes in its therapy.

• Mindbloom’s newest outcomes study which is tracking hundreds of patients

• Building a company with your best friend

• The benefits of remote work

• What kind of people this industry needs

Here’s a YouTube video that gives you some more information on Mindbloom:

- Lukas (@lukassteinbock)

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Website: The Takeoff site

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We’re back. Michael and I recently graduated and have spent the month celebrating and traveling, hence the long break in posts. Although we will not be posting with the same regularity and Michael won’t be posting at all (he’s building something new!), there will be plenty of content to consume from Roshan, myself, and a few new contributors on the team.

Today, I’m excited to release an interview with Robert Bent, co-founder and CEO of Inward Breathwork. Before Inward, Robert was the founder of two tech companies in Roamly and INVI Energy and an employee at Ethereum. Based in Toronto, Robert has a sauna and cold bath in his backyard/garage creating a growing community that replaces drugs and alcohol with healthy connections. As this community came to a halt during COVID-19, Robbie turned to an online platform providing breathwork classes.

🎧 — Anchor | Spotify | Apple Podcasts | Google Podcasts

In this episode, we chat about:

• Robert’s prior experience founding a company and at Ethereum

• Robert’s prior experience with drug addiction

• How to be motivated by your intrinsic value of success

• What is Inward Breathwork?

• What is a dark retreat?

-Lukas