Lessons from Tom Lee: building tech-enabled primary care services from 0 to IPO
Tom Lee, Founder of Galileo, One Medical and Epocrates.
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Welcome to our first episode of Pear Healthcare Playbook! Every week, we’ll be getting to know trailblazing healthcare leaders and dive into building a digital health business from 0 to 1 (in this case IPO!)
You may be wondering, there are so many healthcare podcasts, why are we starting another one? Many first time healthcare founders need to think about how to sell to payers and land a pilot or get their first 100 patients, as pre-seed and seed investors at Pear VC, we'd love to create a playbook for them to learn from other healthcare leaders who have done it before. We’ll be focusing on building at day zero and are open to covering specific topics you have questions on!
We’re super excited for our pipeline of guests such as CEOs and Founders across Healthcare Infrastructure, Medicaid and Health Equity, Women’s Health, Mental Health and Healthcare at Home.
Our first guest is Tom Lee, Founder of Galileo, One Medical and Epocrates. Tom is currently the CEO and founder of Galileo, a modern medical group committed to making quality health care affordable and accessible to all.
Galileo raised a Series C round from Foresight Capital, with previous investors including Oak HC/FT, Redpoint, and DNA Capital.
Prior to Galileo, Tom also founded One Medical, a national leader in tech-enabled primary care that went public in 2020 and Epocrates, a medical reference app still widely used today. On top of all this, Tom is also a board certified internist who completed training at Harvard's Brigham and Women's Hospital.
Building Epocrates, first medical app in Apple’s mobile platform
You can’t really study entrepreneurship, you just have to dive in and do it.
Tom Lee’s entrepreneurial drive was born out of necessity, not choice. Tom started Epocrates, a mobile medical reference app (acquired by athenahealth) in Stanford Business School class with his two co-founders, Jeff Tangney and Richard Fiedotin. Tom shares that context mattered for Epocrates, born in the dot com boom with an extremely hot funding environment at the time. For the founders of Epocrates, it was about cutting their teeth in what it meant to build a startup and building the foundations of derivative companies, OneMedical and Galileo, as well as his co-founder Jeff Tangney’s future company, Doximity.
Epocrates users surpassed 1 million users by 2010, including 40% of physicians in the United States, and is still widely used today. Upon introduction of the new Apple iPhone, Epocrates became the first medical app on Apple’s Mobile Platform.
Tom shares that he went to business school to design the services of healthcare differently, carrying a vision for OneMedical even in the early Epocrates days. His energy and focus was around redesigning services to impact the actual experience of care from a quality and affordability perspective.
Building One Medical, a trailblazer in tech-enabled healthcare services
Tom went on to pursue his grand vision of redesigned primary care with OneMedical. At the time, Epocrates had not become liquid and was still growing and scaling; when Tom left, he had to build One Medical on his own dime, starting with a small doctor’s office.
Building a service business is hands-on work— don’t be afraid to dive in and do the work yourself.
Tom came to understand what it meant to run a service business by doing it himself. “With software, you can go into a room, build something, and then launch it and just watch it continue to propagate. With services, it's much more day in and day out activity. The people need to be taken care of, and you really need to make sure that the organizational culture and service execution is strong.”
Tom tells people that in the early days, he was the administrator, the receptionist, the physician, the blood draw person, the accountant, the website designer and more. He would meet you at the door, take you back, and do your blood work. (Some of those original patients are still OneMedical patients!)
In Tom’s opinion, it's difficult to fully understand the nature of a service business if you haven't done it yourself. People underestimate how hard it is to execute services, especially if you haven’t been on the other side of the table. For Tom, these details and learnings helped build the early kernel of what OneMedical would become, and it allowed him to speak credibly with team members about how to do X, Y, and Z.
Bootstrapping is sometimes essential in a brand new category.
At the time, no one in venture capital was investing in healthcare services, let alone primary care services. Tom had to bootstrap it for the first two years to a credible point where he had paying customers and margins that made it more venture worthy. Tom wanted to attract tech VC and Tom shared that Bruce Dunlevie at Benchmark took a bet on Tom and the company and vision and really spawned the whole generation of venture capital funded healthcare.
Understand labor costs is crucial for building in the healthcare
Tom emphasizes how important it is to acknowledge labor costs when understanding the healthcare industry. People are attracted to healthcare because of the mission and the size of the industry, but the complexities of tapping into the TAM can’t be underestimated. In Tom’s opinion, it's easiest to generate substantial TAM and make the most impact through service businesses, and to understand service businesses, you have to understand labor costs.
Tom shared that compared with pure SaaS solutions where the technology cost is zero, in healthcare, if you have too much of a tech mindset, then you might end up with a lot of concierge services that cost more, which may not truly innovate the cost of care.
When it came to getting their first 100 patients, there was no Google Maps and ZocDoc was still nascent at the time. Now that we live in the digital information age, new startups are more ubiquitous, but it’s also more competitive. When comparing One Medical’s growth vs Galileo, Galileo is able to grow 5X faster due to better distribution channels.
Building Galileo, a value-based provider against Medicaid and underserved populations
Tom’s serial entrepreneurial spirit continued with Galileo, where he’s currently building for underrepresented populations that OneMedical wasn’t as well designed for. Galileo is a value-based provider against broad populations and partnering with aligned payers and employers to reduce the cost of care and increase the value. Tom shares that Galileo will cross the threshold of 100,000 lives soon.
Service execution experience pays off.
As a digital first model that can scale, the team wanted to design Galileo as a higher quality of care model in general. They wanted to change the nature of how doctors made decisions, how to measure and manage chronic conditions, how to integrate behavioral and social factors into the care decision making process - which needed a completely different structural chassis to do so. Galileo has a lot more capital and the channels of distribution are a bit more clear, but also more noisy.
Tom shares that Galileo can now take advantage of more sophisticated software and data tools and harness it to effective use. In addition to technology tools, Galileo’s team also has much more experience on the service side of things and ultimately, improve outcomes and cost of care and do it much more reliably across broad populations.
Serving the underserved populations effectively with SDOH
There are aspects of care that can leverage technology, but for those services that cannot be done online, the most expensive 20% may cost 80% of the dollar. If patients can’t get to certain appointments, reconcile medication, they have a lot of risks. Most doctor’s don’t know what’s going on after the prescription has been made, and for Galileo managing everything that happens between office visits and doing it at higher fidelity was crucial in a value-based arrangement.
Building in Medicaid is challenging because it is state to state and a more complex population. Tech is part of the solution but not the only part of the solution here.
Tom was very humble on why Galileo has traditionally been more quiet: “We don't really tend to focus too much on shouting from the hilltops. We're just kind of nuts and bolts focused on moving the needle. We still think there's a lot that needs to be moved first, before you start talking about it.”
Advice for building a successful healthcare startup
Healthcare startups have less room to be sloppy and fail fast— be deliberate.
Tom believes that particularly in healthcare, there's not a lot of room to be sloppy and fail fast. Different markets and different industries are going to lend themselves to different styles. Tom shares that if you're trying to innovate in healthcare, being more deliberate, more strategic, more reasonable, and more disciplined reduces the need to pivot, which I think is expensive in a slow moving industry like healthcare.
Look at product market fit from multiple dimensions.
Tom shares that a common pitfall in healthcare is to be too abstract with product market fit— the resolution of the product market fit and visioning needs to happen iteratively more quickly. When Tom started Galileo, he had a broad vision, but there was low resolution on the idea. Test the resolution of the idea against the broader strategic frame and make sure those two are consistent.
Unlike a pure consumer market, in healthcare, you're dealing with the end consumer with their own bizarre incentive structures,the purchaser distributor, regulatory frameworks that might have a different goal and purpose, and more. Because of that, Tom reminds people to look at product market fit from two or three different dimensions as well.
Being mission and impact driven is a key recipe for success.
Tom emphasizes the importance of being motivated by impact and mission, but simultaneously financially sophisticated, not naively going after mission by itself.
Leverage the expertise you already have to recognize the white spaces in the industry.
Tom recognized the flaws of the healthcare industry because of his medical training. Leverage your expertise in a space that’s meaningful for you, and you’ll already have a head start compared to the average entrepreneur and the discipline to understand what the real business is.
Tom feels that most of healthcare is purchased in bulk through large entities— paying attention to that, there’s a lot of whitespace.
Listen to Tom’s full episode for more insights on building digital healthcare businesses, reaching underserved populations, and the landscape of healthcare tech. Follow Galileo on Twitter, Instagram, and LinkedIn.