Finding a Market Opportunity and Going For it with Sufian Chowdhury of Kinetik
Last Updated: By TRUiC Team
Summary of Episode
#52: Founder and CEO, Sufian Chowdhury joins the podcast to discuss his fast growing and essential startup, Kinetik. Committed to serving the underserved, Kinetik is a non-emergency medical platform which connects patients on medicare or medicaid with transportation services. Sufian dives deep into the logistics of Kinetik, including the origins of Kinetik, how he gained his clientele and the funding of his business. He also proves valuable insight into the significance of mentorship, networking, and removing ego from the process of building a business.
About the Guest:
Sufian Chowdhury stumbled into the concept for his startup, Kinetik, by mere chance. After a friend asked for help organizing an endless excel spreadsheet into a database for medical transport, Sufian had questions. He learned that there was no central billing platform for medical patient transport services and car services may have to use a portal, email or even FAX to send invoices to the insurance companies for reimbursement. Sufian realized the need to build a platform to centralize this data and simplify the billing process. Armed with that knowledge, Sufian put Kinetik in motion.
Podcast Episode Notes
Introducing Sufian Chowdhury and Kinetik Healthcare! [1:10]
Sufian explains Kinetik’s origin story and describes how a valuable nugget of advice from a mentot helped him to see the value in creating Kinetik. [3:40]
What was the initial vision for Kinetik and how did it shift? [10:37]
The road to gaining customers was a long and arduous one. Sufian explains how determination, scrappiness and avoiding building a ‘custom dev shop’ enabled Sufian to gain the client base that he has. [13:05]
Sufian shares how Kinetik is currently funded. [21:15]
How did Sufian gain so many mentors? He also provides some words of advice to help build relationships that can be used in any aspect of life. [24:51]
Kinetik had explosive growth in 2022. Sufian expands further on the funding of Kinetik; what is a bridge round?; and how building a mission driven company has helped Kinetik gain the funding that they have. [28:25]
Sufian explains whether Kinetik is changing their hiring strategy based on the current state of the economy. [39:13]
The things Sufian wished he knew about raising money before he started. [43:48]
Sufian divulges what is next for Kinetik. [45:32]
What is Sufian’s #1 piece of advice for new entrepreneurs? [49:33]
Where to find Sufian and Kinetik online and how to support the company. [51:20]
Full Interview Transcript
Ethan: Hey everybody and welcome to the Startup Savant podcast. I’m your host Ethan, and this show is about the stories, challenges, and triumphs of fast-scaling startups and the founders who run them.
This week we’re talking with Sufian Chowdhury, founder of Kinetik Healthcare Solutions.
Kinetik is bringing change to the non-emergency medical transportation industry, which primarily serves those on Medicaid, using an API and digital platform.
Kinetik is solving a really interesting problem. One that seems to have been overlooked for a long time. And one that will greatly improve the lives of an underserved community.
And of course I couldn’t go on without noting - Kinetik is yet another example of a business opportunity that was hidden, buried deep inside of the overstretched spreadsheets of their users. As a recovering spreadsheet addict I have a special place in my heart for these kinds of startups.
Quickly before we get into the show, remember to subscribe to the podcast if you’re enjoying it! That’s the best way you can help us get the pod in front of more cool folks just like you.
Alright, I had a lot of fun with this one and I think you will too. Let’s jump into my chat with Sufian.
Sufian, how are you doing today?
Sufian Chowdhury: I'm doing great. I'm excited for this. Thanks for having me.
Ethan: Thanks for being here. I'm stoked for this as well. Let's start off really easy. Can you tell us what is Kinetik?
Sufian Chowdhury: Yes. So, Kinetik is a non-emergency medical transportation technology platform that connects health plans, their patients with the appropriate transportation providers to deliver the proper level of transportation services to them.
Ethan: What a buttoned-up answer. That's awesome.
Sufian Chowdhury: All right.
Ethan: All right. What is the problem that Kinetik is solving?
Sufian Chowdhury: Yeah, so the non-emergency medical transportation industry, a lot of folks don't really know about it unless they're affected by it. It's primarily sponsored by Medicaid. So, if you're on Medicaid, you'll most likely know about it. And a lot of the folks who us, it's folks that are going to dialysis centers for their daily check-ins, and so on and so forth.
And so, it's about 300, 400 million rides a year. You're looking at 20,000 local transportation companies, and we're talking about stretcher vans or wheelchair vans. They have a lot of sedans going around, picking up patients that are both on Medicaid and Medicare Advantage programs, and they'll take them to their medical appointments.
So, that's basically the industry that we're solving for. And all the operators of the 20,000 transport companies, there are a ton of health plans, hundreds of health plans throughout the country that have members ranging in the tens of millions that receive this service.
And you have brokers who basically broker these deals to. They work with insurance companies. They sit right in the middle between the transport companies and the health plans where they'll go and find appropriate transport company. The transportation companies have, on average, about a dozen or so drivers in their network that will go and pick these patients up.
So, very fragmented industry. Today, they still communicate telephonically or via fax. So, we're trying to digitize this non-digital marketplace. And so, that's basically the premise and that's what we're solving for.
Ethan: Yeah, I think we've heard this a couple of times, but anytime you ever hear the word facts you know that there's a business opportunity, just like sitting there, low-hanging fruit, and if you've can find a way to go take it, then let's replace those faxes.
So, which parts of this chain of industry or whatever, however you want to say it, which parts is Kinetik touching? I mean, are you guys on the phone setting up these rides or are you a software system? What is the product that Kinetik offers?
Sufian Chowdhury: Yeah, so Kinetic, it's really unique in the way we started the company. It wasn't necessarily... The vision we have today is so different, and the vision we started off with. And I think that's any company that ultimately becomes successful, you've got to know when to pivot and listen to the market and the demand for the products.
When I started it, and this, it's such a unique story, it was literally from the back office of a local transport company in Brooklyn. A friend of mine, Chanel Hernandez, he was operating and he owned a business, A&S Transportation based out of Brooklyn. Go there. He's like, "Hey, I really need help with this database thing. I can't track my payments. I go in, I see the largest Excel sheet I've ever seen." And I'm like, "What is this?"
And then, he goes to me, "Well, the way it works is, I have all these rides that I have to fulfill. I have a hundred plus drivers, they're picking up patients, they're dropping them off, and then I have to build insurance companies and I'm waiting about 30 to 45 days to get paid." And I'm saying to him, "You don't have a central billing platform here." And he's like, "No, I work with about five different insurance companies. And one of these insurance companies requires me to use a portal, another one via fax, another one via paper invoicing." I'm like, "This is a disaster."
And so, for the next 12 months, I quit everything. I sat in the local back offices of local transfer companies throughout Queens, Brooklyn, and the Bronx, I found out they all have the same problem. And the first 12 months, we built the first revenue cycle management platform for transportation companies. So, it had nothing to do with the actual delivery component of it. We built a payment platform that allowed them to get paid on time.
So, instead of waiting 45, 60 days to get paid, through our system, they were getting paid in 21 days, and they were able to really track all their payments for the first time, which historically they were tracking it on this massive Excel sheet. And so, that really became the entry point over the years by pivoting and listening to the market.
We've built the other side of the platform as well, which was on the booking side that allowed health plans to book these rides into this network of transport companies. And when the transport companies are done delivering these rides, they're then able to use our billing platform to build insurance companies.
So, we created a booking platform on one end that allows the insurance companies and brokers to book these rides into the network, and then a billing platform in the backend. And I'll tell you some cool stories around how this all came about.
Ethan: Yeah, it seems like you found an entry point that had a massive pain that could be solved. And now, you're using it to become more vertically integrated as you build more products for these same folks. I think that's a great way to start. I see one other thing. This goes along with the fax machine. Anytime you see somebody who's just stretching Excel just as far as it will go, it seems like that should be a light bulb that's like, "Hey, there's a business opportunity here."
But I want to go back to one thing you said, you said for the first 12 months, dot, dot, dot, I quit everything, and then sat in these back offices. When you say you quit everything, I'm assuming that means you quit your job and you were only focused on this. And I think I also heard the word, we, so who is ‘we?’ Did you both quit your jobs? Am I just making a lot of assumptions here? I mean, and if all those things are true, how did you know that this was something that was worth quitting for and just going headfirst into this?
Sufian Chowdhury: Yeah, so prior to this, I was actually, the name Kinetik comes from a different company that I was building. And so, I quit that.
Ethan: Ah, gotcha.
Sufian Chowdhury: Yeah, so I was always dabbling. Prior to this, I did work in healthcare consulting, a lot of financial analysis with different health systems and helping them save cost and build out their network. And so, I had a pretty decent understanding of healthcare on a macro level.
Prior to Kinetik, I was actually building... I always get frustrated. And one of the biggest lessons I've been taught, and this was about when I was 16, 17, a mentor of mine said, "Every time you have a problem, write it down." And there are two types of people in this world. There are people who complain about problems. There are people who will take that problem, and then come up with a solution, be the person who comes up with the solution.
And so, I had this journal I carry around with every problem. It was just a crazy... Anything that bothered me, I'd write it down. And so, I was stuck in a parking lot and I was building this platform that would connect all these vehicles to Waze, so you could have more accurate GPS signals. And this is back in 2015. The GPS’s are way more sophisticated today, especially last five years.
And so, I oftentimes get stuck behind sanitation trucks and school buses, especially in New York City. And so, when I wanted to do was track them and then ping that into Waze, and I called that company Kinetik, the energy of motion. So, I was collecting all of that.
And so, when I came across this problem and saw that that's what I was trying to solve for initially, and I think every founder that really think about the problems they're solving, I think I was solving for a problem that I had that the world probably didn't care for as much. Whereas, when I saw the problem that my friend had, it was just not him, it was 20,000 other transportation companies, and that was a real business.
So, I pivoted everything. And inherently, I'm a lazy guy, so I kept the name. It's really hard to think of a good name. So, I kept the name and I pivot the whole idea. We, as in my two co-founders, Mahbub and Atif, one's a CTO, one's a Chief Product Officer. They were fresh out of college, and I met them through all these college conferences. And so, yeah, they dropped, I don't know what they were doing, I guess courses. And I dropped my previous company to start this.
Ethan: That's awesome. And so, you already had some co-founders, and they were like, "Yeah, let's do this. Yeah, let's jump and make it happen." So, it seems to me that you were introduced to this problem by someone who you knew and that the road towards a solution and understanding what type of product it was that was going to be the solution. I mean, I guess maybe I shouldn't assume with that, was that a two plus two equals four type of thing? Or was it like a, let's really look into this problem and see what it takes to fix it?
Sufian Chowdhury: Yeah, no, it was really just, none of it was deliberate at first. The mission and vision of our company became a lot more clearer about a couple of years into it. When we started, even the first year, it was really to build a revenue generating business that could fund all my other crazy ideas. I never thought that Kinetik would be the idea that became as big as it is today. The intention was never that.
And so, for me, what I was doing is, I grew up, my father in the restaurant business. And so, for just understanding basic economics is so important, understanding that when you sell something, you can't sell it for less than you buy it. And so, just having core business knowledge helped me tremendously.
And so, when I started this business, it was really just to build a product, not invest a ton of time or money into it, and then create a revenue generating engine that can support all these chaotic ideas I had in my head. Then, what happened was, as we dove deeper into it, you realize just the true nature of pain points faced by all the different stakeholders, and then there are aspects of it that became very personal, and then you make it your mission.
And so, it wasn't a mission that I initially started off with. It was a mission that just gravitated towards because you were able to relate to the people that you were serving with the product. And so, that's where I think it just obsession took over to build something.
Ethan: Is it fair to say, and I apologize for using dirty language here, but is it fair to say that you were trying to build a lifestyle business?
Sufian Chowdhury: No, I might give off that vibe. But I think I need to work on my lifestyle, it works next. I should start that next.
Ethan: Yeah, there you go. Something that allows you to take a vacation every once in a while.
Sufian Chowdhury: Yeah, yeah, exactly.
Ethan: All right. Let's jump into customers. There was something in your company profile that caught our attention. And so, I'll read the quote, "It took five years to get 50, and then three months to get from there to 100. The initial customers were hardest to get. The first customer was the absolute hardest to get." And, of course, all those numbers, the 50, the 100, those are talking about customers that you've gotten.
But I want to talk initially about this very first customer. And if you can't use names, that's fine. But can you tell us who was this first customer and if there's any like, if they were the hardest ones to get, I'm sure that there's a story in how you ended up getting them to actually sign on the dotted line.
Sufian Chowdhury: Yeah, so I didn't know how crazy the taxi industry in New York was, or I think any small business in New York, it's pretty chaotic. And so, when I went in, he was a friend of mine, I told him we could build a product. He's like, "No, everybody's promised me that they could build a software. All I need is for you to do it." Actually, the first six months, all I did was listen to him and hear him out. And he told me to build something. And it was the absolute wrong product.
I remember, and I had burnt through personally $50,000 the first six months because I was employing engineers, et cetera. And I go back, and he's like, "Well, I don't want this because it doesn't have this." And I'm like, "Okay, this is where I need to sit down and do market research myself." And then, I asked him, "Can you find me anybody else?"
And so, I found a couple of other transport companies in Brooklyn and Queens, and the Bronx who's back offices I'd sit in and observe them myself. And then, we built out the solution the next 12 months, which became the revenue cycle management that got to the market. It got so crazy because it was a payment product. Nobody, especially, you're dealing with Medicaid, you're dealing with payments, small businesses. That's what made it very complex and is a bureaucratic element to it. There's a trust factor. Small businesses inherently don't have a macro level understanding of the domains they're serving.
So, there were a lot of different challenges that we had to overcome. But I remember when we finally built that product out and we built the product out, we submitted the claims and he said, "I'm not going to pay you until I get paid because I still don't believe it." It works, right?
Sufian Chowdhury: We submitted the claim, everything is good. And they finally got paid 21 days later to which she wrote me a check. And so, that was the first one. And then, I'd literally have to take that check to the next taxi company in Brooklyn and be like, "Here it is. It works. I could do the same thing with you, another 45 days to get the next one." And that's just what it was. I remember I ended up in Buffalo doing this thing.
So, customer number four was in Buffalo because one of their friends had a thing. So, all of a sudden, I was flying to Buffalo, the worst place... Whoever is from Buffalo, I love people in general, but it is not a place anyone should live. So, I fly three times a week and I think that's what I used to question, "What am I doing?" I was building all these creative things and here I am and sell software to transport companies. And there's obscure marketplace that nobody knows about.
So, customers number five to 12 are probably the most painful. And then, you start growing and word of mouth and all the rest. But yeah, the first couple of years were painful. And you're burning through money doing this. It makes it even more painful.
Ethan: Right. Yeah, we were talking a little bit about doing scrappy things before the show started, and you didn't even mention having to fly to Buffalo. I mean, ew, right?
Sufian Chowdhury: Yeah.
Ethan: I'm just kidding Buffalo.
Sufian Chowdhury: Yeah, Buffalo, I mean, rural parts of America is where this company took me. I'm telling you, so ethnicity wise from Bangladesh, my parents are from Bangladesh. And so, I think in some of these towns in America, rural towns, I was the first Bengali man to land there. That's how rural it was. And I'd be like, "What am I doing here?" I was in the middle of Oklahoma. I never thought I'd be in the middle of Oklahoma.
And so, you look back, it was pretty exciting simply because of how... Never in my wildest imagination would I thought I'd go there, but blessing in disguise to get to see the world through a very different lens.
Ethan: Yeah, absolutely. It's a totally different ballgame. You're not getting stuck behind sanitation trucks and school buses. You're getting stuck behind Amish Wagons and combines, basically.
Sufian Chowdhury: Yeah. But some of the nicest people in the world, though they live in the most rural parts of the country.
Ethan: So, you've now learned this and I'm wondering what the key takeaway is from listening to your customers and hearing what they say when they're asking for a product and knowing how to actually turn that into the product that needs to be built to actually solve their problem. What's the geometry that you have to put these problems through to solve for that?
Sufian Chowdhury: Yeah, I think just solving for a common denominator as opposed to just solving with one customer. So, when you go out to talk to 10 or 12 or 15 potential customers, your job as the builder needs to find a common denominator in which they can buy into as opposed to customized solutions. And so, otherwise, you'll become a custom dev shop really quickly.
And so, for us, that's what I focused on, especially after the first experience, the first six months. I ventured out to more and more transport companies. And so, that's how I was able to figure out that common denominator had nothing to do with this massive Excel sheet or custom routing or this or that. The common denominator was they weren't getting paid on time, and they didn't have a billing platform.
They were all using different mediums to send claims and invoices. How do we centralize that? And that took off. So, yeah, look for the common denominator amongst many as opposed to one problem that only one enterprise has.
Ethan: I've never really heard characterized as the... It becomes very easy to become a custom dev shop. I've never heard it said like that before. And it really makes me think that there is a tight line or a tight rope that you have to walk when the advice out there is all listen to your customer, listen to your customer, build what your customer wants. But it sounds like that's not the answer. You have to be able to take in that data. Yes, don't ignore it, but you have to be able to synthesize it and create an actual useful outcome as opposed to just ask for A, receive A...
Sufian Chowdhury: Right.
Ethan: So, I think that's really good advice.
Sufian Chowdhury: Yeah, that goes right into valuation and scalability. Your company cannot scale if you have to do a lot of custom dev work, don't really get the valuation on your company if it requires that much customization.
So, I think what they should say is, customer is plural in the same industry, solving for the same problem. Otherwise, you want to leave to everybody... And also, for us, because we didn't start off with this mission to change NEMT, we didn't, I had no idea what NEMT was. I was simply building a solution, again, to generate revenue, so I could do all these creative things.
So, that's where, for me, I guess that's how... Because it started the way it did, I had to go out and find what the problem was and who the customers were, as opposed to somebody who might be mission driven, might already have identified their customer group. And so, that might be a different approach. But really, how Kinetic started, I had to take that approach of finding a common denominator amongst many customers and trying to figure out what I'm solving for on the fly.
Ethan: Gotcha. Yeah. And I know you've said it once before, but I'm going to say it again. NEMT, Non-Emergency Medical Transport, correct?
Sufian Chowdhury: Non-Emergency Medical Transportation, yup.
Ethan: Okay, fantastic. All right. So, you said a magic word and it is going to lead us into a different conversation that I wanted to have with you. You said valuation. So, let's talk about everyone's favorite subject and that is money. So, I know that Kinetik has some really big things on the horizon for 2023. But before we talk about the future, can you tell us how Kinetik is currently funded?
Sufian Chowdhury: Yeah, so it's primarily funded through angel investors who are high-net-worth individuals looking for deals that are basically in the early stages and a few small family funds that have invested in Kinetik over the last five years. We've had multiple rounds of funding of which they all participated in, and we've raised $20 million to date.
Ethan: Gotcha. And that $20 million, actually, there is something that I missed that I need to ask about. You have not just built this one product you've built. I think, what was it, two or three different products now?
Sufian Chowdhury: Yeah, for the same industry, right.
Sufian Chowdhury: There are multiple stakeholders. So, we're building up product lines for different stakeholders that are basically connecting this fragmented marketplace.
Ethan: Gotcha. So, that's what that $20 million has gone towards. I mean, for angel funding, that's quite a bit. You must have had a ton of different conversations.
Sufian Chowdhury: Yeah. So, you definitely have to have a ton of conversations. So, how it got started for me is a mentor of mine, Ken Peters, he introduced me to his brother and his brother Barry Peters basically, has a history of deal making on Wall Street. And he was retired at that time, didn't really want to participate in anything, and kept nagging him and nagging him.
And I initially raised the first $25,000 from Ken Peters and a few of his friends. And that $25,000 was what we built after I exhausted probably more than over $100,000 of my own money. And that $25,000 felt better than my own money simply because you got external validation.
Ethan: Oh, yeah.
Sufian Chowdhury: Yeah, so that was really good. Brought that in, extended the runway for about four months at that time. It was just three or four of us, just squeezing away, building away. And built up enough, I guess, benchmark numbers to get very excited. And so, Barry, as a career deal maker, I did not leave him alone, and nor did his brother for about 18 months.
And then, Barry brought in Tom Turner who became a board director, and then James Bellinson. And then, that just, I mean, I got in and said now, some of the top P firms in the country, but the CEOs who are investing privately in Kinetik, and then when we're ready for the institutional rounds, their funds will come in.
So, there's just a lot of resilience and not giving up and connecting the dots. We're all connected to someone who has money, and that's just the reality. It's getting that person to see it and it's very hard. It takes a lot of resilience. And then, once you build that network, then word of mouth spreads and more people want to come into the deal.
Ethan: All right. So, you've got me interested. I know I said I wanted to talk about money, and we'll get back to that. I will put a pin in it right here. But you've mentioned mentors a couple of times, was Ken Peters the mentor who told you to write all your problems down?
Sufian Chowdhury: No.
Ethan: Okay. So you've had multiple different mentors.
Sufian Chowdhury: Yeah, I was lucky. I mean, Jonathan Weidenbaum was another one. So, I've had so many... I'm so fortunate to have as many mentors. I've always sought help. I realized that I didn't know much from pretty early age. And so, I was just inherently curious, which is one of our core values in the company.
So, I was inherently a curious person. And so, for me, I just go college professors, high school teachers, anybody and anyone that was doing remotely anything interesting. I just asked to get coffee with them and learn from their experience. I was just so interested in how people just got to where they were in life.
And I think when you get to that point, your motivation becomes helping others that are seeking help. And so, it's not very hard to find mentors. But yeah, mentors, I think, are absolutely pivotal for everybody. Just sounding bored, someone you could talk through about things. Someone who can guide you in a world where you could get lost pretty quickly.
Ethan: See, you said something really interesting there. Interesting. Be interested, which is essentially what gets you into those rooms, being interested in what your college professor or something. That's an awesome place to start, by the way, because I think a lot of people are intimidated to reach out to these big fancy people with the names that everyone knows.
But yeah, I mean, this global network exists. So, if you can get in with a high school teacher or a college professor who can end up leapfrogging you into those people who may be more specific to what you need, that's an awesome way to do it. But back to being interested, I think that there's a quote out there and the quote is, "To be interesting, be interested." And it seems to me that you're not going to get passed on. Nobody is going to pass your name on if they just think that you're out to get something or something like that. So, really taking an actual interest in these people, even if they're not the "final goal" of the person you're looking for. If you are interested, you will be interesting and they will want to pass you on to that next level. So, I think that's really cool.
Sufian Chowdhury: There's a really good book, a lot of people probably read this, and your peers, How to Win Friends and Influence People. And the author talks about one particular conversation where he barely had any words to say at this party, and the person he was talking to ended up saying at the end of a 20, 30-minute conversation, I don't know how long it was, I forget this, it was years ago, I read it. But that was the most interesting conversation she'd ever had. Meanwhile, he's not said much.
And so, I think for you genuinely, you need to show a ton of interest in what others are doing. Be curious. And also, when you present yours, like you said, you can't say, "I need this or that." Let them determine what they need to give you, you need to show them why you are the person that's going to solve this problem, and you've got to exude a passion in a way which they've never seen. And I think that's worked very well in my favor.
Ethan: Excellent advice. Excellent advice. Okay, I'm coming back to the pin. All right. So, we were talking about funding. You let us know that Kinetik is funded on some big angels, but let's talk about the future. What's going on in 2023? What are you out there doing?
Sufian Chowdhury: A lot. So, we're really excited. So, last year was a monumental year for us. Open book, so I'll talk about it. I don't know if I'll get in trouble with the board, but it's okay. We were at half, we closed the year at half a million ARR in 2021, and this past year we did $8 million.
Sufian Chowdhury: So, it was a massive growth year for us. We went from about 20 employees to 100 employees. And so, now it's building up the organization and operations to support all of this. It took about five years to get the industry, to see what Kinetik building on the infrastructure side where historically health plans or even brokers, the way they managed this program was retrospectively.
Let's say, I'm a health plan. I would hire a broker to manage this program. They'll hire a whole bunch of transport companies. Transport companies complete these rides, and then send me an invoice. The only way I'll know what happens to my patient population of the members that I'm managing from a health plans perspective is when I got an invoice 45 days later.
So, they were managing this program retrospectively, and what Kinetik is doing for the first time, it's creating this real-time experience where the health plan, when they request rides for their members, or even the brokers in this industry, we request rides for their members. They have full visibility into the transport company's network, similar to how we use Uber or Lyft today. You get to request that ride, you get to see the vehicle moving and coming to you. For the first time, patients are able to have that experience.
And just going back, since we're on that, our mission and our vision. Our vision is that any patient anywhere can request a ride, and they could see how many rides they have allotted for them from their insurance company. They could request that ride, whether it's a wheelchair or a stretcher van or a sedan. They get the ride and instead of it charging their credit card, it charges their insurance in real time. That's the vision we have.
We need to work with existing players in the marketplace like the health plans, like the brokers, like the transport companies or the Ubers and Lyfts of the world like the drivers. And we've created this platform where now we're connecting all the stakeholders. And so, that's what we're trying to build. It's going to cost a lot of money as it has. So, we're doing another bridge round to get to the series A, which we're looking at in the $50 million range.
Ethan: Can you tell us what a bridge round is?
Sufian Chowdhury: Sure. Basically, it bridges you to the next round. So, tech companies, when you're building technology, when you're building infrastructure, there's a lot of upfront cost associated with it. And once you penetrate a marketplace, you start monetizing the service, then you do the ramp up and revenues, very typical. Tech company build out.
So, we're at that point. We're about to hit that inflection point, and we need more investments to get to profitability. And so, for us, a bridge round, basically, as you're negotiating or as you're building the storyline and narrative for the institutional investors, you may run out of money or you need to extend that runway.
And so, what a bridge round does, it helps you extend your runway as you raise your institutional round or the next round of financing. The institutional investors have different metrics that they look for compared to angel investors or family funds. So, the type of investors vary and what they look for varies.
And so, a bridge round is very appealing to an angel investor or small family fund who may not have a chance to get into the institutional round because oftentimes, an institutional round, you'll have two or three funds that just wrap up the whole thing.
Ethan: All right. At the risk of sounding ill-informed, could you say that it's like an extension of the previous round without having to go through all of the different negotiations and valuation and all that good stuff of a new round? Or is that not the right way to think about it?
Sufian Chowdhury: Sort of. I mean, it's just deal making, right? At the end of the day, fundraising is deal making. Selling a product is deal making. So, it depends on where you are. If you have a ton of leverage, for example, we completed our last round last year around this time, and the valuation of this is going to be basically a discount to the next round.
Now, last year's valuation was at a particular point, given all of our accomplishments in the prior years. This year we've grown substantially from half a million to $8 million, in ARR. So, for us, we wouldn't price it at last year's price point. We're just going to do a discount. And oftentimes, when you're raising money from angel investors or family funds who aren't familiar with the space, you'll raise it on a convertible note, which basically converts into the next round, but at a discount.
So, we're not necessarily piggybacking off of last year. You would have to do that if you didn't accomplish much and you're about to have a down round or all that. But because of all the things we've accomplished, we're fortunate to not have to extend last year's, rather we could come up with a more lucrative deal for the existing stakeholders where it's a discount to the next.
Ethan: Cool. All right. Thanks for explaining that. So, then let's talk more about this next round. You said this was going to be your next round, your next big round is your A round. And depending on who you ask, you may either be unfortunate or, for even other people, maybe crazy for raising or trying to raise around in 2023. But obviously, everybody's got to do what they've got to do.
And it sounds like you are in an excellent position. You're able to show this massive growth that you may not be in those... You may be insulated a little bit from the market forces that are happening right now. What are you seeing out there? As you're looking, you've got your eyes directly on it, you know you're going to be raising, what are you seeing out there in the VC markets maybe differently than what you would've expected to see last year or the year before?
Sufian Chowdhury: Right. I think, for us, because we've been in stealth mode for quite some time, if we raised money last year or the year prior from institutions, we'd have gotten absolutely ludicrous valuations and all that stuff. But for us, we've never been in the game of trying to raise money because valuation is high. Ultimately, for every company, supply and demand prevails. And the intrinsic price of that company will be its intrinsic price, and that's that.
I think too often, founders get too caught up in the valuations and how much they need to raise and so on and so forth. And forget just day-to-day execution. And because we've executed quietly in stealth mode, what happens, venture capitalists, they also raise a lot of money during that time.
So, VCs invest money into tech companies, but all these funds also raise money. So, they have a ton of capital sitting there. They're just more cautious now in what they put the money in. So, in times like this quality prevails, and that's why every founder should build quality companies and products and not just build things off of ideas that may or may not work.
So, you're going to get funded. And so, a lot of these, we're talking to all the top venture funds that are out there because they see that the company has substance and it's not just an idea that they're about to fund. They're about to fund something that has legs. And now, it's just a matter of running with it.
Ethan: Right, right. And it sounds like you never had the idea yourself, and you were never forced into this whole now taboo, somehow idea of growth at all costs, just grow. It doesn't matter what your business model is. Just grow, get more customers, get more users, you can monetize later. It sounds like you never were anywhere near that trap.
Sufian Chowdhury: No, I think for me it was always building a good business. I could care less about these absurd valuations raising from all the big names. For me, what's even similar to how you build a company and culture is important amongst the employees.
When you build a board that needs to seep right into that culture of the board you have, and also your investors, all of it is aligned because that's also a team of people you're managing, your investors, and they need to buy into the company's culture.
So, for the top, maybe the best venture capital funds in the world are not a cultural fit for us and vice versa. So, it's not getting too caught up in all of that, just staying focused on the fundamentals of business development. Do something that's very mission driven, get people to buy into it, you'll be fine.
Ethan: So, in one of the conversations that we were having before this interview, you mentioned something about… that you like to structure deals where they benefit both the startup and the investors, can you say more about that?
Sufian Chowdhury: Yeah, absolutely. I think it's deal making. For me, I'm in the precarious position where you represent employees, you represent the board, and you represent investors depending on where you are negotiating. So, for you, as CEO it's a balancing act. When you're raising funding, you're raising money, so that you could pay employees market rates, or you could pay them more than market rates, or you could pay towards benefits that they're looking for.
They're working from home. Can you support that? Can you buy them desks at home? Can you give them tickets to come to the main? All that stuff you're considering, but then also at what cost? There's a cost to everything. And what does that come at a cost of borrowing that money or bringing that money in from the investor's side.
And it's a very delicate balance of finding that right, and you'll never... It's an art, right? It's saying, "Okay, I'm okay with it. I'm okay with dilution of 25% here," because the investment we make in employees will bring back 10x growth on the other side of the equation. So, that's how I look at funding, deal making on all sides.
Ethan: Gotcha. Speaking of employees, we've seen... There's been a lot, there's been a lot that's happened in the past few months. Obviously, we've got interest rates going crazy, which has just caused all these bonkers things to happen. But we've also got VCs buckling down, saying to buckle down and ensure that you have a strong cash position into late 2023 or 2024. I've even heard as late as 2025, that you need to assume that you need to have cash until those points.
And then, we've also, and who would've ever guessed that something like this would happen? We've got Elon coming into Twitter and slashing 50% or whatever it was of employee count, which seems to have created some switch in the brain of a ton of different CEOs and founders who are then on top of all the other market situations. They're now seeing him, the richest man in the world, or the smartest guy in Silicon Valley or whatever you want to say, coming in and saying, "We can run Twitter with several hundred people. It doesn't need to be several thousand people."
And all this being said, it is leading to more lean teams or in some cases layoffs. And you all have grown quite a bit. With all those things being said, are you thinking about hiring or team size, team makeup any differently than you have been in the past?
Sufian Chowdhury: Yeah, so it's always good to see what's going on. And again, from a very macro level and industry wide, and of course, a lot of companies don't need as many employees that they have. But during good times, you're hiring, you're feeling positive, you're feeling great, and you feel you're going to invest a lot more in R&D, and you want to tackle the world. And during bad times, you then stop investing in those initiatives and then focus on your core market offering.
So, that's just cyclical and it happens every cycle as it goes down, as markets go down, this is very common place. So, for us, it's good to know all of this, but we can't hinder growth. We're going to raise the money we need to build the business we need, to successfully get it to profitability, and that will…
So, we're building it based on what's needed in the company. Bad times you'll have lower valuation. Good times, you'll have high valuation. For work, it's way out, like I said, over the course of decades. And oftentimes, companies should not be seen as, "Hey, I'm building it for five years and I'm out." You're building the infrastructure and you should, at least for me, have a business that will outlast me or my tenure as a CEO at this place.
So, for me, it's always been a very long-term plan. And if it's a very long-term plan, you won't really get too concerned with these, month-to-month or year-to-year trends because your vision is longer term horizon 10, 20 year vision. It will take time. It will, ups and downs, will work its way out. We're hiring. We're slated to hire over 100 people the next year. So, whoever is looking for a great place to work, reach out to us.
Ethan: Awesome. That's great. I think something that you've mentioned a couple of times before is that, it really comes down to being mission driven as opposed to just wanting to build a company that makes money. And if you care about the mission and you care about the problem that you're solving, and the people for whom you are solving the problem, then like you said, maybe smooths out those month-to-month things, and hard times are still hard, but at least you're not questioning, "Why am I doing this?"
Sufian Chowdhury: Right. Yeah, exactly. Because those companies that are slashing folks, they're going to hit their numbers, they'll go back, they'll get more investors, their market cap is going to go up, they'll go raise more money, and they'll start hiring again. So, it's just natural cycle of it. For you, it's just understanding all this and how it impacts you. It will definitely impact your business.
But again, longer term horizon, building things quietly and slowly, no need to get on every publication because you're dying to get on it. Just putting your head down and working and just taking an egoless approach to building stuff will probably help you survive all this chaos.
Ethan: Was there something that you wish that you knew about raising money, about funds, about using those funds? Is there anything that you wish you knew before you launched Kinetik?
Sufian Chowdhury: Yeah, I feel like all the things I've done the last five years, I could probably do it in a few months in fundraising now. So much. I think initially, I always wanted to build a tech company. I was always a very business driven person, and I always wanted to raise money. But I wanted to raise money, but I didn't know what it meant.
I was such a novice when it came to it, just, "Oh, I'm going to raise money." But you don't realize that you're making a deal and it's all deal making, and your vision is a commodity, so all of this, I didn't know. I didn't know the art of deal making at all. I think, "Oh, I got to just go in and sell them on this and all that." It's really, and deal making, what I learned is a sales approach. When you're doing enterprise sales, we're an enterprise sales where if you want to close a deal with a broker or a health plan in our space, it can take anywhere from six to 18 months. Same thing with fundraising.
There are companies that will invest in you after building two to three years of relationship with you. There are companies that will invest in you within six months. It's literally the art of deal making and relationship building. And when the time is right, the investors will strike.
Ethan: I think that's a really good answer. All right. We're going to move into some of the wrap up questions because I know that we are almost at time, and you've got lots of fun things to do. Let's go with a real easy one. What is next for Kinetik?
Sufian Chowdhury: So, Kinetik, we really want to bring this to the hands of patients. I think for me, growing up, I grew up in some crazy town here in Jamaica, Queens, very rough. My family, we didn't have much growing up. We were on Medicaid as well.
So, a lot of these patients are on Medicaid. And I look back at when I was on this program, when I was a child growing up, you didn't question the status quo at all because it was given to you, you already felt guilty for being in these programs, so you're not going to question it.
The reason I say this is because today, if a Medicaid patient needs a ride, they need to request it 72 hours in advance. That's the status quo that we're challenging. In a world where everything, it takes you five minutes, two minutes to get your Uber, Lyft ride. Uber Eats comes in 20 minutes. A healthcare ride is taking you 72 hours of advanced booking.
And so, that's in a way unjust, unethical, and solving for that. And not just for this year, but for the coming years and for Kinetik to bring it to life, which is that any patient, to respective of being Medicaid or Medicare or where you fall and in terms of wealth, you deserve a very good experience, especially when it comes to your health.
I want to be able to make you get that request in, get that ride within 20 to 30 minutes, maybe a couple of hours, and go to your doctor's appointment and not have to book it 72 hours in advance through five different phone calls.
Ethan: Thank you. Thank you for building an experience that the people that truly need it. I mean, they truly need it, and not necessarily in a lot of cases, is it just a bad experience. But in some cases, these people don't have, they don't get to have that experience. They just don't go to their doctor's appointments because whether they either aren't aware or the roadblocks are too high to make that call, to send that fax to go, to get their ride. Some people just can't get over that hump and they just don't go to their dock and that's bad.
Sufian Chowdhury: Yeah. I mean, it causes all sorts of havoc upstream in the greater healthcare world. But also, going back to the rural part, when I was going... A quick story, rural, I was in Oklahoma requesting a ride, Uber ride, 30 minutes, shut it off, turn it back on. I was thinking something's wrong with my application.
Next one, 35 minutes, I open up Lyft, 40 minutes, I go to the hotel concierge. I'm like, "Hey, what's wrong here? My Uber app isn't working properly." And they're like, "Oh, no, no, it's on average about 45 minutes."
Ethan: Oh, my gosh.
Sufian Chowdhury: For you to get your ride in parts of America, we're spoiled by living in major cities and metropolises as in rural parts of America, rural pockets, it can take you upwards of 30 to 45 minutes to get an Uber ride that you're paying for. You'll not get a ride that's subsidized by the government, period. And so, that is a sad reality of the world that we don't see because we don't live in their shoes. And so, that's, I think, monumental for us to be able to break that barrier.
Ethan: Yeah, absolutely. I mean, this is not a term that I think a lot of folks that live in these bigger areas understand, but next town over, like your ride is coming from the next town over, meaning that they're on a... They're coming from one small town with a gas station on a 55-mile an hour back road to your small town with another gas station. That's what makes those two things towns, is that they each have a gas station. So...
Sufian Chowdhury: Exactly. Yeah, maybe more people need to take road trips across America, and I think you'll... It's very humbling.
Ethan: It really is. It really is. All right. What is your number one piece of advice for early stage entrepreneurs?
Sufian Chowdhury: Don't get caught up in the hype. Suppress your ego. Build something of substance, do it with good intention. Don't have an ulterior motive to do what you're doing. Again, it's so easy to get caught up on, "Oh, I raised this much, or I made it to this publication, or I did this or that." It's not about you. And if it's about you, you're going to fail ultimately. And even if you make it, if you win it, despise you.
You don't have to be liked by everybody, but do everything you do with conviction, it's going to work its way out. Do it long-term. Markets are going to work themselves out. Do it quietly. Don't have ulterior motives. Focus. Build a product that is a problem not for you, but for industry of people and find good people to surround yourself with, and investors and the money and the team, and all the rest will come.
Ethan: If there's just one of those traps that you see most people fall into, which one is it?
Sufian Chowdhury: Ego.
Sufian Chowdhury: I mean, ego is the worst thing for anybody, let alone an investor or CEO. Nobody wants to work with somebody. You've seen it. You can't build a great culture with somebody who runs it with tremendous amount of ego. Ego is great. There's always negative connotations around you. Ego is great if you could filter it properly towards passion and not towards... It's all about me. So, yeah, ego for sure could kill you easily.
Ethan: All right. Where can people connect with you online and how can our listeners support Kinetik?
Sufian Chowdhury: Yeah, so I have always been a very low-key guy. I don't have social media.
Sufian Chowdhury: Actually, I was forced to open it by my great marketing leader here. She's sitting there laughing. So, LinkedIn I think is the best way to stay in touch with me. I'm trying to be more active there and try to share as much as I can there. So, Sufian Chowdhury Kinetik, you'll probably just find me there. Our website, Kinetik.care, a new one is about to pop up in about 30 days.
So, you guys will like what you see. And how to support Kinetik, I think it's an enterprise solution, but voice your concerns if you are on Medicaid or if you know somebody that's on Medicaid, voice your concerns to the health plans around the fact that it's 72 hours and that they should look towards moving away from that and not letting this status quo prevail. So.
Ethan: Awesome, great advice. And for the folks listening, that is Kinetik with a K, at the beginning, and the end. But don't worry about spelling it because all you need to know is startupsavant.com/podcast where you'll find all the show notes, links and everything that we talked about in today's show. Sufian, thanks for coming on. This has been a lot of fun. I think there's really good solid and actionable advice here. Thanks. Thanks for bringing it.
Sufian Chowdhury: Yeah, thanks for bringing me to this podcast, really appreciate your time, and I hope everybody got something out of this.
Ethan: Alright that’s going to be it for this week’s episode of the Startup Savant Podcast! Thanks for joining us!
Remember that alongside the audio-only version of the show, we also release the full-video versions over on YouTube! So if you haven’t checked that out yet, be sure to get on it.
Alright folks, we’ll see you next week! Until then, go build something beautiful.
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