Pivot: The Tech-Driven Solution to Quitting Tobacco with David S. Utley, M.D.
Last Updated: By TRUiC Team
Summary of Episode
#45: David S. Utley, M.D. sits down with Ethan to share his story founding Pivot, a digital health company focused on reducing tobacco usage with a holistic approach emphasizing behavior change research. David walks us through his journey from a surgeon to an entrepreneur and shares advice on how to build partnerships and innovate.
David S. Utley, M.D. is the founder and CEO of Pivot, a digital health company helping users eliminate their tobacco use. Pivot has raised over $70 million, and David has over 100 published US patents. David is a seasoned entrepreneur and had previously been a founder at BARRX, which also raised $70+ million in VC funding before being acquired in 2012. He has also served on the board of numerous startups and continues to engineer new solutions towards improving health outcomes.
Podcast Episode Notes
From working as a surgeon to creating a digital health company [1:11]
Utilizing available research to build a network of strategies centered around reducing tobacco use [6:04]
Behavior change is not solved with one intervention, and Pivot creates a holistic platform that helps individuals build the resilience needed for behavioral change [9:02]
Targeting employers to get tobacco users on Pivot [12:45]
David’s trick for establishing partnerships — offering a better solution for a problem that potential partners are already trying to solve [18:12]
You don’t need to create a huge disruptive change. Sometimes you just need to innovate a neglected industry or an ineffective process [23:20]
How to find partners by filtering and selecting for those who want to work with you [26:25]
Raising 70+ million to launch a high-risk medical company [29:03]
David’s advice — hire people that know what they are doing. If you’ve never been a CEO, find someone who has the experience, and ask for help [29:55]
When to start looking for a CEO, and how do you know if you aren’t the right CEO? [33:10]
“You can only get about 50% of it right.” [35:44]
Investments that have paid off in the long run [39:41]
Pivot’s future expansion and how they plan on using their behavioral change model to tackle other avenues [43:11]
The quantifiable self movement — you can’t change what you don’t measure [46:31]
Ask for help! You don’t know everything, and all founders need to learn and grow [49:01]
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 are joined by Dr. David Utley, founder of Pivot, a smoking cessation startup that incorporates both behavioral change and health tech to deliver meaningful results to users looking to quit tobacco use for good.
With an exit of his former startup BARRX under his belt as well as over 100 published patents in his name, Dr. Utley had a lot of wisdom to share with founders. Specifically, founders that are starting and running their first startup.
Before we get into that, make sure you’re subscribed to the show on whatever platform you’re listening from. And, for more startup content, visit us over at StartupSavant.com.
Now, let’s hear from Dr. David Utley. David, how are you doing today?
David S. Utley, M.D.: Hey, good morning, Ethan. Doing great, thanks.
Ethan: Awesome. We've got a company called Pivot, previously called Carrot, and there's quite a bit of other stuff in your background, but I want to talk a little bit about the basics real fast. So currently, you are the CEO of Pivot, which has raised over 40 million. You are an MD, you're a surgeon, you've got more than 25 peer-reviewed publications in your name. And to top it all off, you've published more than 100 US patents, 65 of those have been issued. It's pretty obvious to me that you're a superhuman. So the question here is, how do you do it?
David S. Utley, M.D.: Well, that's a big question. With 35 or 40 years of career, I think that you just kind of start a career. You keep your head down and you become intensely curious about what you do for a living. You are very absorptive of all the stuff that's going on around you, the people that are your mentors, the people that are your peers, the people in the press, and the stuff that's going around in terms of the unmet need. I still remember being in the operating room and operating every day and going, "Wow. It would surely be helpful if this instrument, machine, device, et cetera, would do this instead of just this."
I realize there's a lot of companies and a lot of physicians, especially surgeons that have created all the products that I used in the operating room. And I'm thinking, "Okay. Well, that doesn't sound that hard to do. Let's go and try to be creative and improve the delivery of care." And then, when you're in... I've been out of med school for 33 years, and so you get a lot of time in the trench. You have a lot of time to be creative.
Ethan: So 33 years later, you're an overnight success.
David S. Utley, M.D.: No, not really, but thanks.
Ethan: All right. Let's talk about Pivot. What is Pivot?
David S. Utley, M.D.: We started Pivot seven years ago, and the original name was Carrot. Since you asked that a minute ago, we rebranded this year to Pivot Health technologies. Let me just lay the kind of groundwork. So tobacco use, all forms, combustible tobacco like cigarettes, vaporized nicotine in the last decade, smokeless tobacco, is the leading cause of preventable death and illness on the planet. So when I was at Stanford, I was at Stanford for 11 years as a head and neck cancer surgeon, and all of our patients used tobacco. And therefore, in mid to late life, developed advanced cancers related to tobacco. We operated on them, and did everything we could to preserve quality life and extend life.
But all of those cancers were preventable, completely preventable, if you had good upstream preventive services like tobacco cessation, but we didn't. We didn't have any services at Stanford to help people quit, but we could operate on you. The lung cancer guys would do the same thing, the vascular surgeons, the stroke doctors. We're doing all this end stage care when everything, if you moved upstream, you could prevent it. So I'm kind of thinking about how can you help people at scale to stop using tobacco with a real positive effective use? And 30 years ago, all we had was classrooms and telephonic coaching, and you don't do that for any mortal condition.
Tobacco has a 55% mortality rate. If you're a lifetime user of tobacco, you will die more than 50% of the time from the tobacco use. But we do classrooms and telephonic coaching. So the problem that we're trying to solve is the largest healthcare crisis on the planet. Just to put it into perspective, before we go into the, "Why is this method possibly and definitely the optimal path to help?" In the last three years since COVID started, 7 million people died from COVID. 7 million in three years. In the same period of time, 24 million people died of tobacco use. We talked about the pandemic, and we talked about the Operation Warp Speed, and we talked about vaccinations for all, but we're not doing anything for something that's three times more mortal. And now's the time, after building this product for the last seven years, we believe we can fix that.
Ethan: So the problem that you're solving is smoking cessation. Is that a decent way to wrap that up?
David S. Utley, M.D.: Yeah. We're trying to help people with evidence-based strategies, learn about their tobacco use, because tobacco is not just smoking cigarettes. It's also inhaling vaporized nicotine and chewing smokeless tobacco, which there's tons of the product around now. So we help folks learn about their tobacco use, and set a path to reduce their tobacco use, and then ultimately durably quit. Recently, up until us coming on board, most programs required that you join and set a quit date in the next two weeks and quit, and then they cut you loose. So we believe that tobacco use is a chronic condition just like obesity, diabetes, mental health, musculoskeletal disease, cardiovascular disease, because it is. It's a lifelong condition. We need to help folks from day one through their entire journey when they quit, and then help them stay quit.
Ethan: So what's the product or the service that is pushing towards this end?
David S. Utley, M.D.: I believe the team is humbly innovated tremendously on the delivery and the content and the user experience of our tobacco cessation solution. We didn't create the solutions, or the interventions, or the strategies. So we went to the Health and Human Services guideline. It's a peer-reviewed, gigantic clinical practice guideline. We learned exactly what works to help people quit. It's been proven in 8,000 peer-reviewed papers. We have tobacco trained coaches that service our users. We have FDA approved pharmacotherapy in the form of nicotine replacement therapy, quote, the patch or the gum and the lozenge, which we know help people quit. We have our mobile app experience, which is super rich with respect to cognitive behavioral theory, self-determination theory, which is helping people build self-efficacy so that they can, on their own, build the motivation to quit. It's called motivational interviewing.
We have a HIPAA-compliant community monitored to support folks. And then, I'd say because I come from the medical device world, the fifth component of the product, in addition to the app to coach the community in the pharma, is we have a medical device, much like a glucose meter or a Fitbit that measures something called carbon monoxide, CO, in the bloodstream via a quick six-second exhale breath. So think about a wearable, that if a user can just puff into the wearable every 4, 5, 6 hours, they can learn how high their CO levels are on their bloodstream.
You're not supposed to have carbon monoxide in your bloodstream. You hear about carbon monoxide poisoning? Somebody who's got a leaky water heater or a leaky furnace and people die from this. But if there's so much CO in a cigarette smoke plume that you inhale and it gets into your bloodstream, we can measure that in 10 seconds and then give that user a number and a color and feedback, and then link it into their phone and to their coach experience and help the user build confidence to change that number, meaning make it lower. So just like with Apple Watch, you want to close your rings, you want to get active. With Fitbit, you want to get to 10,000 steps. With continuous glucose monitoring, you want to stabilize your glucose. We do the same thing that's evolutionary with the first sensor for people that use tobacco.
Ethan: This is really a kind of behavior change business really. There's been quite a few of these for weight or for diet or whatever in the past several years, and I've heard motivational interviewing several times. In your expert opinion, do you believe that motivational interviewing is kind of the best path towards behavior change? Or do you need the other things like the biofeedback and whatever else is on top of that to be able to create this behavior change?
David S. Utley, M.D.: Yeah. I think you need every tool that you can possibly put in the toolbox. In surgery, it's called multidisciplinary surgery. You need support from the chemo guys, the radiation guys, the nutritionist, the physical therapist, the surgeons. You can't solve a chronic condition that's this dangerous and mortal with one intervention. A lot of people think, "Oh, are you like the patch?" I'm like, "The patch is a tool. The nicotine replacement patch is a tool in a box at Walgreens." People don't know how to use it. They don't know how to buy it. It's expensive. It's hidden behind the counter. So pharma is just a tool where you need to put it into a holistic vessel, and make sure a lot of people get exposure to it. So let me unpack the question that you just asked. You asked about this whole behavioral change market right now, the digital health market. We've been working on behavioral change in a tobacco using population now for seven years.
Our coaches help people understand their triggers, which are mostly stress and anxiety, which causes somebody to smoke, which causes somebody to get a big bolus of nicotine, which causes them to get a big dopamine surge. And they're like, "Huh." And then 10 minutes later, they're withdrawing again. And 30 minutes later, they're having another smoke, and it's a vicious 50-year cycle until you get a chronic condition that turns into an acute condition. We help with stress and we help people build the confidence and the resilience skills so that they can replace those trigger-triggered cigarettes with something that is not dangerous, like a walk or whatever. As we slowly get someone to change their coping mechanisms and build resilience, we can durably help somebody quit.
I'm getting to your self-determination theory and motivational interviewing question, that's a difference between getting someone to quit. Put them in a room, giving them some tools, telling them to set a quit date, "We're all going to quit next Thursday." It doesn't work, right? It's kind of like saying, "Hey, Ethan, I'd like you to run the Ann Arbor Marathon next weekend with me, right? Let's do it." You're like, "You're out of your mind, man." It's going to take some time. So motivational interviewing, the goal there is to build the core self-motivation to want to quit. And then, their little behaviors start to add up to reductions and real progress. And people are not being told what to do, they're telling themselves what to do.
Like getting up to train for a run or losing weight over time, it's all applicable. So one of the key things that we've done is, you asked about the rebrand of... We were Carrot and now we're Pivot. Pivot's a behavioral change company. We've been helping people with behavioral change for seven years, starting with clinical trials, and now we've been in the market commercially for the last two years. We split our brand. We rebranded the company as Pivot. Our tobacco cessation product is called Pivot Breathe. We're rolling out a stress and resilience product in the second half of next year called Pivot Flex. And again, I said, we've been helping our users with stress management, trigger reduction, trigger management, and resilience training, but we've been isolated those amazing services just to tobacco users, which is about 20% of the US population. We are now broadening that to a larger population.
Ethan: So you've got this excellent solution to this problem and this problem that so many people have, so what's your kind of path to getting people into your product? I guess, what's the medium in which you reach the large majority of your users?
David S. Utley, M.D.: So the solution is a digital solution on a smartphone that pairs with the coach, pairs of the community, provides this rich user experience of behavioral change, pairs with the sensor. And then in that user experience, you can order nicotine replacement therapy as part of your subscription for the product. So the vessel that we delivered in, or the medium, is the smartphone. But I think you were asking maybe a separate related question is, how do you get people into your program?
Ethan: Right, exactly. Am I just googling how to stop smoking, and then you guys come up and I win? Or do I ask my doc, and Doc says, "Hey, you should probably quit smoking. Go check out Pivot."
David S. Utley, M.D.: Right. Sure. So when you're talking about a chronic condition that's this dangerous... Tobacco kills a half a million people in the United States every year. Think about that, half a million people.
Ethan: That's a lot of people.
David S. Utley, M.D.: 60,000 people die from colon and rectal cancer every year. Lung cancer kills a little over 100,000, most of which are tobacco related. Tobacco's a half a million people every single year. So when you're thinking about the problem that size, and it injures so many more people, kids of smokers, spouses of smokers. Smokers get sick before they die. There's 50 million US adults that use tobacco. So one in six adults use one form of tobacco or another, and most people use tobacco when they use it, they use it at work. It's a huge problem. So we had to make a decision about what's the vector to identify those users, and make it really easy for them to join the program?
We could take the vector of pure direct-to-consumer like Noom, which is weight loss. They spent 15 years trying to figure it out. Finally, figured out in the last five years how to attract users. Pure DTC. It takes a lot of capital. We don't have that much capital. We decided we can't go pure DTC, but our product has to be an incredible consumer design product. Because the user has to say, "Ah, I really want to do that. And then when I'm in it, I really like it." So we had to figure out, "Okay. We're not going to market direct-to-consumer, but we have to have this killer direct-to-consumer product like an Apple Watch or a Fitbit." Okay. Now what do you do? Do you do where you go to docs, and you detail physicians like the big pharma companies do, and you have them prescribe Pivot for all of their one out of five, one out of six patients that come through the door that uses tobacco?
Then you say, "Well, who's going to pay for it?" I'd have to go detail 100 health insurance companies. I'd have to detail... That's big pharma, man. That's like Humira going out to gazillion people and trying to sell. We can't do that. So we decided to follow the path of some other really successful companies like Ginger for mental health, Virta for diabetes reversal, Hinge for musculoskeletal, where they identify the populations at risk. Most people that smoke have a job. And if you can go to some large companies that insure those employees that smoke and help them understand that a tobacco using employee has about $9,000 of excess costs to employ because their health claims are higher and their productivity's a little bit lower, that's-
Ethan: Is that a one-time cost or is that a per year cost?
David S. Utley, M.D.: Per year cost. So if I employ a really awesome distribution center forklift driver or a store manager that uses tobacco, their health claims are about $4,000 or $5,000 higher than a non-tobacco user. They take more PTO, more sick leave. They're more absent and less present at work. It's a chronic condition. We're not blaming anybody, it's just a fact. So if we can help those folks even reduce tobacco, much less quit, there's a forever annuity that gets paid back to that large employer. So we decided to go that route. So our job is to get as many people into the door, and then help them basically for the rest of their employment with that company.
Ethan: So what I'm seeing or something that's really interesting here is that you mentioned that they already had a solution for this problem for their users, but that it wasn't working. So you were able to come in and say, "Hey, we're solving the problems that you're already trying to solve better," which is a whole lot easier of a pitch than, "Hey, did you know that tons of your people have this issue and we can help them solve it?" I think that's a major advantage. So what you found here is that the companies that have this program but aren't properly serving their users are a true opening. How did this come up?
David S. Utley, M.D.: We were fortunate to meet one of the executives at a national benefits conference, and they came by our booth and they were really interested in what we were doing. They indicated that after 10 years of the prior service that was telephonic coaching, they just weren't happy with the enrollment rates and that they loved to see what we could do and what our product existed. They loved the tech. They loved the clinical trial outcomes. They loved the fact that we had a medical device that was proven to help motivate the users to quit. They love the user experience, so it seemed like a really good fit. And for the last two years, it's been a great fit.
Ethan: So then, is this something that... I mean, obviously, meeting an executive at a conference is pretty sweet, but you can't meet all the companies at a conference. Well, I want to make sure that we're taking it or thinking about this in a way that other companies can think about or maybe try to emulate as well. Do you see this opportunity for, "I have a better solution to a problem that needs to be solved or that you are already trying to solve"? I mean, do you see this as being a big opportunity for things other than smoking? I mean, obviously, we've got plenty of other things that are offered in these benefits packages. Is that the key? Do I just want to get my product into a benefits package, and then call it a day, I've won the startup game?
David S. Utley, M.D.: Yeah. Well, no, that's not that easy. You are definitely asking a couple of different questions. Some startups are doing something what I call as a paradigm change. They will go in and they will completely disrupt how something used to be done. So at my last company, which was BARRX, we were a surgical endoscopy company. And when somebody got early cancer of the esophagus, we would take out your esophagus. It's a surgical procedure. We came in with a completely different way to do it, where we go into your mouth, we use heat, we burn off the tumor, and you're going home and have dinner that night. Right? No esophagectomy surgery. That's paradigm changing. You got to prove to the cancer docs, prove to the surgeons, prove to the health... Huge 12 year effort, and it worked.
It was really successful and it really worked, and the outcome was great. That was just, "I'm going to invent something completely new and just turn everything on its head." Cardiovascular stenting for coronary disease versus coronary artery bypass 30 years ago, huge paradigm shift. Now, it's the standard of care. So what we tried to do at Pivot was not create some bizarre new way to help people quit. But just make it highly scalable, more attractive, user-friendly, user-centric, add a medical device which is evolutionary, but people don't go, "What the hell is that?" You got to fit into a niche that is… people are clamoring for. We know that tobacco kills and costs a lot of money. I don't consider us a paradigm changer. I consider us this massive accelerator innovator in a space that was completely dead. No one's innovated in tobacco, so think about that. How many ads do you see during the World Cup and during 60 minutes for drugs? All you see on TV is drugs. "Drugs for this, drugs for that." There hasn't been a new drug for tobacco users in 15 years.
It's called Chantix. That was the last one that came out and it just got pulled from the market for cancer risk, so no one's innovated. There's never been a medical device for tobacco users until now. That's crazy. So while we innovated and made things new and fresh, we abided by the practice guidelines. And you asked a minute ago, you go into an enterprise buyer that's got 50,000 employees, they're going to be one of three types. They're going to have a program, they're going to know what they bought, they're going to know how much it costs, how well it works, and they're going to be constantly seeking improvements. We love those people because we can show them for the same price we can exceed their expectations with enrollment, engagement, and outcomes. Then you have this middle group. I'm probably going to offend people here if I want to say this.
You've got this middle group that are completely nihilistic about tobacco cessation. They just want to know who smokes. They want to surcharge them for smoking. They want to add premium costs to those individuals that have this chronic condition. And they want to give them just something that barely counts for a tobacco program, like some sort of texting app or some sort of phone thing. Those guys won't talk to us because their eyes are not on the end game. The end game is helping as many people quit as possible, helping the company culture, retaining employees, helping their kids be healthier. That middle tertile, not interested. And then we have this third group, which I like, they're just naive. They have no idea what they have. They think they have a program.
Usually, it's some sort of EAP, an employee assistance program, or some sort of texting program. It's buried in the health plan. Nobody uses it. But they just haven't prioritized tobacco, so you have to go educate them. So from the first, second, and third, the first ones, they'll always talk to you. They love what we're doing. They might run us against the current program, we'll always win. The middle group, don't waste my time. And then the third group, it's more of an educational process. I still see hundreds of clients I've talked to, if they're in that third group, I'll say, "So what program do you have?" And they'll look, and the senior person will ask the junior person, "What program do we have?" The junior person will ask the next junior person, "Do we have a program? It's in the health plan, right? Let's get back to you, Dr. Utley, on what that is." So then it just takes longer, but all in the spirit of helping people quit.
Ethan: I know I'm going really deep here, but I think there's a lot of value in this model. This model of not going direct-to-consumer or not going in a different direction, but going to these large organizations where your benefit is outsized if one person signs a piece of paper. Let's talk about those three different types of companies. I mean, are you just basically casting an extremely wide net and filtering out the one or the two that you're not looking for? Or are you taking more of, for lack of a better term, a sniper approach, trying to figure out what these companies are before you reach out? Or what does the outreach program look like so that you find a ton of companies, A and B, and find the ones that you want?
David S. Utley, M.D.: Yeah. I mean, it's complex. I'd say our company focused on product quality, product outcomes, FDA regulatory claims, pilots, clinical trials. That's been our focus. We really only started commercializing a little less than two years ago. So it's a work in progress, but we have a B2B, small B2B marketing team that has incredible assets that we post on Google Ads and LinkedIn, and things like that. We also have our strong networking connections where we know folks and introduce us to this person, this person. Our investors help us. We don't have to have 1,000 clients. We have 35. I need 70 next year. I need 100 the next year. It's not boiling the ocean. We try to be selective.
And when we have a large client that comes to the table and says, "Yeah, give me a demo. I want to see this thing," we make sure we ask them, "What program do you have? How much does it cost? Do you like it? How many people are enrolling? What's the engagement level? How much support do you get from that other vendor?" And then we show them what we do with our clients, and it's always 10x. I'm like, "Listen, we could install in a month. We'll go right next to your current program. Let's just market internally B2C to all of your employees and their spouses, and we'll prove to you that this is a better solution. It's definitely more evidence-based in terms of the clinical studies." So that's one way we filter. We have some folks that come to us and say, "We just want to launch Pivot," and we just start the process. That's not very common, but it's nice to get those.
Ethan: So, let's talk a little bit about a previous company. You had mentioned it, BARRX. Started in 2003, over $70 million raised. This is a very broad question, but can you tell us a little bit about your experience with BARRX and starting and growing that company?
David S. Utley, M.D.: Yeah. If entrepreneurs are listening to this, this is the one advice I'd give them is... I'm 58 years old. I've started a bunch of companies. I've learned the hard way and the good way, what to do, what not to do, what to avoid. We started BARRX in 2003. We raised over 70 million bucks, and we built a company that was a paradigm changer. We had to do FDA, device development, product, clinical trials, health policy, policy with every single Blue Cross plan and every other large private health plan in the United States to pay for this, 400 hospitals using this, a thousand surgeons using this. It was a huge lift, huge amount of risk too. And the smartest thing that I did in the first year after starting the company with some colleagues is I hired my CEO. I hired a veteran CEO from the medical device world named Greg Barrett, who has become one of my closest friends and family members. He and I ran that company together for nine or 10 years until we sold it to Covidien. We sold it to Covidien for 420 million bucks. It was a great deal.
It was 11x multiple in revenue. And then I went, I was a chief medical officer at one of the big Covidien divisions for surgical endoscopy for almost three years. So lesson learned is if you haven't been a CEO, don't try to be a CEO, you're going to fail. You might get lucky. Hire somebody who knows what the hell they're doing to teach you what you're doing, because you'll stub your toe. You might be one of those one-in-a-thousand amazing CEOs that has never done it before and they create a billion dollar unicorn. But come on, that's a one-in-a-million shot. I was really, really lucky and humble that I got a chance to work behind it, and also had a great board there. And then for free, they paid me. I got to work at a large med tech company and do a bunch of M&A, and everything like that, so I learned. Just be a sponge, man. I was 50 years old when I sold that company. I was a sponge and worked there for a couple of years, learning how the big dogs work.
Ethan: I was going to ask more about BARRX, but you've given me something that... I have to go into this. Okay. So hire your CEO, don't be the CEO. Did you know that, from the very beginning, that your role wasn't going to be CEO?
David S. Utley, M.D.: Well, ego gets in the way when you're 37 years old and you start your company, or if you're 28 and you start your company, especially people throwing money at you and, "Oh, my God. You're the greatest and you're so cool. Oh, you've created this." And there are some men and women that, as 28-year-olds or 31-year-olds, when they start a company, they will succeed. Come on. You can name a bunch of them probably right now. All I'm saying is that if you play the odds and you want to be a sponge and you want to learn how to do things, hire either a board member that can act as your consigliere, and not just be a board member, opinion giver. But you pay them and they spend 4, 5, 6 hours with you every week, and they help you navigate the stuff.
I didn't do that with Pivot because I'd been in the sea. I've built a company and I knew what to do. I knew how to raise money. I knew how to build a product, and luckily didn't need that person. And still, Pivot is not an overnight success. We've been at it for seven or eight years now. So all I'm saying is ask for help from somebody that is not just a board member that will opine once a week or once a month and then leave. You need somebody in the seat with you.
Or if you can find an awesome, experienced veteran, gray-haired person that has done it. He's got a track record, worked in small startups, and worked in large companies. Greg, when I hired him, had been a group vice president of Boston Scientific for a big career. He'd been at Bard, you've been at ACMI. He knew Medtech, man, and I brought him in as my partner and it was great. It was awesome. Plus, it's easier to raise money.
Ethan: Yeah. That may be the answer to my next question: people that have earned that gray hair usually have earned it in dollars, and they're going to ask you for some dollars to come on and lead this venture that you're starting.
David S. Utley, M.D.: Sure, absolutely. Of course.
Ethan: And especially if you yourself are young or don't have a whole lot of experience in startups or business or possibly even the industry that you're going into. You said you waited a year, is this something that companies should be looking for from the very beginning, or do you think that there's a certain amount of hurdles that they have to clear before they start looking for a CEO? And then, maybe another question is how do you know that you're not the right CEO for this company that you're starting?
David S. Utley, M.D.: Yeah. I mean, those are really hard questions. There's no cookie-cutter answer to that. So if you have a really good board, if you ask a hundred venture capitalists, have they replaced a CEO too late because they were the founder and they were brilliant? Brilliant usually is the founder guy that created this tech thing, this MedTech tech thing, this pharma thing, so there's no founders that are dumb. I mean, they're all smart, obviously, self-driven, smart, they can attract people, they're compassionate. They're passionate and compassionate, so you never have a fault there. But if it gets to the point where, "Hey, this person's never commercialized a product.
This person's never run a study, a clinical trial that we need to do," or they're stubbing their toe in certain areas, it's harder for a board to replace a really, really driven CEO that wants to maintain the helm. It's much easier if that CEO, if they need help, there's 50 flavors of getting help.
They can bring in a consultant. They can bring in a full-time CEO. They can put an operational board member in that really spends time with them and tutors and mentors them. I guess my point is don't covet your seat. Owning 7% of a company at an exit when you brought in somebody as an awesome leader that helped you get there is way better than owning 16% of a failure. So a lot of these startup founders, they're all about the cap table and how do I maintain my ownership and, "These guys are doing this. I don't want to hire a CEO. I got to give 8%." I just think just be humble, and understand a lot of people need help to get over the finish line with these things. Whether the finish line is commercial success, funding, M&A, large corporate partnerships, whatever those are, they're hard to do.
Ethan: All right. I want to go into a quote here because I think it makes sense based on the last couple questions that we've had. The quote is, "You can only get about 50% of it right." That's a pretty simple statement, but there's probably a lot behind that. Can you unpack that a little bit for us?
David S. Utley, M.D.: Yeah. So you're quoting me, and I'm going to quote Yogi Bear, "I never said the things I said." I think maybe if I said that... I'll try to put it into context. It's really good to understand that you're not going to get every decision. Whether you get 90 right, which is pretty darn good, or 80 right, which is amazing. 50 right's probably a little low even though the batting hours are great. You'll be a rockstar in the lead. But just understand that you got to make decisions every day, and you need help to make those decisions. You got to pick the path that's best. You're going to look in your rear view mirror and go, "Doh, what was I thinking? Why did I listen to that person? Why did I think that was right?" I'll give you an example. We spent a bunch of money about four years ago as our product was wrapping up, we were starting to think about commercialization, and all the companies around us were really beautiful brands. If you looked at Thirty Madison and Ginger and I'm like, "Wow."
Just great attractive brands. These brands go into these enterprise buyers, and they put their stuff up on DTC. Amazing campaigns like Noom, you're attracted to them. They're like this incredible branded house. So we spent some money on some brand work, and it was really utterly awful and not usable. But it was an exorbitant amount of money, and I made that error. That was one of the 50 that we didn't get right. I wish I had hired a commercial team two years earlier than we did. That was a big error. But I was really focused on product outcomes, value, user experience, all that kind of stuff. Sometimes you make decisions, and it's the right decision at that time. You just hope it's not a sink-the-ship decision, because sometimes you can make a sink-the-ship decision. In MedTech, having an unsafe device, sink the ship, company's dead.
In pharma, same thing, recall. We're luckily not in that world. We're helping people. We don't have a risk component for our users. But if you spend a bunch of money, you go down a direct-to-consumer path and you don't build your enterprise path, and DTCs dead and you need 40 million to get back, sink the ship. I think at Pivot, I think we're batting about 90, about 900. In terms of making the decisions, we haven't had a sink-the-ship decision. The thing that hurt us the most during Pivot was COVID. Three years, enterprise buyers have really focused on what? Mental health, absenteeism, anxiety, work-from-home stress, loneliness, all that stuff is all that our potential buyers have thought about since we launched our product two and a half years ago.
Ginger's done great. Lyra has done great. All these companies in the mental health space bless their hearts, they've done just tremendous work, and they've grown to build multi-billion dollar companies. It's awesome. I'm hoping that now as COVID is settling, never going to be gone but settling, we have a lot more attention now to this growing... More people smoke tobacco now than four years ago. Why? Mental health, COVID, and vape. So we are in a really good seat right now in terms of the rising understanding of tobacco and the rising impact to try to really become like Ginger in terms of scale.
Ethan: Well, so let's talk about a little bit of... You said that you're batting 900, which you'd be in the Hall of Fame 10 times over in baseball.
David S. Utley, M.D.: Yeah, maybe it's between 50 and 90. I don't know. We'll see.
Ethan: Hey, you know what? We'll take it. We'll take it either way. The company hasn't exploded, so we're moving in the right direction. But you guys have raised more than $40 million for Pivot in the past five years. Can you tell us maybe some of the investments that you've made with that capital that have paid off the most, and then maybe one or two that didn't show the results you were hoping for or maybe even had a negative return?
David S. Utley, M.D.: Yeah. We've raised more than 40. It's like about 65 million. We’ve been in operations for seven years. All of these startups are very different, right? If you're a digital health solution that is software, you are very different than if you're a medical device company like us that has a digital solution and a coaching bank of team members and a pharma arm. So what we've had to do... We only have 60 employees, 6-0. So the majority of our 70 million-ish raised has gone towards hiring and maintaining and retaining awesome people. I'd say 80% of our spend is humans. The other 20 is G&A, medical device, and all sorts of stuff like that. So what we have built is an incredible digital solution/app with a really strong deep tech stack that's launched at 35 clients, gone through all the security, HIPAA penetration testing, SLA, all that stuff, and we're live.
You don't just launch a large health plan with like a GarageBand app. You can't because they just won't let you. They'd put you through the crucible to get in. So we've got the app and the beautiful content that's been built. We have a coaching team that coaches within the app, so they have to have their own CRM. We build a proprietary coaching CRM that enables the coach to very effectively coach up to 200 users. We have an API with a big pharma company that delivers nicotine replacement therapy to the user within two days. The right formula, the right dose, the right flavor, and we track all that stuff. We have the medical device, so we're a medical device manufacturer. We have seven people on our medical device team, and we work with a big OEM company to make the product. But we own it and design it, and we have to be responsible for it.
It's a complex web to put all that together, and make sure it's always working. FDA inspects us every year. We have to report on that. We've run seven clinical trials. We just published a randomized control trial that shows that we're more effective than the National Cancer Institute's digital health program called Quit Guide. We've run a bunch of studies, so it's this fear. So while it sounds like a lot, if you look at some of these companies that have raised 600, 700, $800 million through billion dollar unicorns, that'll probably all start to contract. But they've thrown a lot of their cash at just pure raw growth. We've thrown our cash at pure raw product excellence, and the next round of financing that we'll do next year is going to be on commercial growth. I don't know if that answered your question, but I think that I already said, I'm sad that we invested in brand, external brand. That's probably my biggest dollar mistake, and it costs us some half a month of cash or something like that.
Ethan: Gotcha. All right. We're running up on time here, so I've got just a few short questions left and then we will wrap. And maybe you've already answered this question, and maybe you've answered it in multiple ways many times, but I'll ask it again just so we get a nice wrapped up answer. What is next for Pivot?
David S. Utley, M.D.: Yeah. We did talk a little bit about... Pivot as a company is a behavioral change platform. We've been helping a segment of the US population who used tobacco with managing stress and triggers, identifying healthier coping mechanisms than tobacco using all the evidence-based around helping people quit, with the device, the sensor of the pharma, the coaching and the community. That's big. We've realized we can expand three of those solutions, coaching community and content, behavioral change content, self-determination theory, and motivational interviewing. We can expand to a non-tobacco using population, and we're doing that. We're launching at a number of our current clients in February, a product called Pivot Flex. Our tobacco cessation product is called Pivot Breathe. We believe that is a big unmet need. There are a lot of mental health companies in the market. There's a lot of mindfulness companies in the market.
We put ourselves right in between companies like Ginger and Lyra that are high acuity, medically-assisted therapy, therapist counseling, and lower acuity interventions like Calm and Headspace. We are stress and resilience. And about 65% of enterprise clients like ours have something in the stress, anxiety, burnout, resilience space. But if you asked like we did, 300 of them, in a large US study, "If we could give you a specific dedicated coach, and if we could give you validated emotional health scoring and report to you every month, and we can give you a HIPAA-compliant community for support, so people aren't alone, and we can provide all of this behavioral health content, and we will deliver it in the same stack that we do for our cessation solution, would you buy it? Is it different than all these other programs?"
And 80% of the clients that we ask said, "That is so much better than this program, which is like digital bot coaching, that we pay 10 bucks a month for. It's crap or whatever." I've been very disciplined. I'm a super specialized surgical or cancer surgeon. You only came to us if you had an advanced cancer that couldn't be taken care of in the community. So I look at Pivot Breathe as that super advanced cancer specialist. You don't go to this bot text cheap thing, you go to a really good program. I think we can take all of the things we've learned there, I know we can, and move that over into Flex and show that all of those same things work. Because we're already helping people with stress and resilience every day, so that's the next big thing.
Ethan: Well, I'm excited to see a whole lot more about that because I think, just like what you said, it's a massive problem, and having a great solution for it will be fantastic.
All right. Of course, the one more question that I was going to ask you earlier because I just can't get enough of this. Several years ago, there was a movement started called the Quantified Self movement, and your product, Pivot Breathe, really seems to kind of fit into that. First off, do you have any thoughts about the Quantified Self movement? And second, do you think that we're going to see more companies like yours or more products that allow us to better understand the different aspects of ourselves in order to optimize our lives?
David S. Utley, M.D.: I think human beings are innately curious about their own stuff, "What's my IQ? What's my heart rate? What's my fitness level? How much power can I generate on my Peloton? How many steps did I take?" And it's remarkable when you can measure something, create a loop, and let people have really high visibility to that thing, especially if they can control it. If you can somehow help somebody control it, it's great. It's different if you can't control it. So a friend of mine used to say, "You can't change what you don't measure." You can't. So if you're in a behavioral change program, you better measure it, whether you're training for a marathon, whether you're trying to help people quit tobacco, whatever you're trying to do, weight loss, digital scale. We know if you weigh yourself every day in a weight loss program, you have a higher likelihood of losing weight successfully.
Does your weight change every day? No. But you're changing it like you're... Tobacco is a really cool thing because your CO changes daily, hourly, as you use tobacco. So it's remarkable to me as a med tech guy that we've never had a medical device for 50 million US Americans that use tobacco and help create a behavioral change loop, a closed loop that the tobacco user can see their values. They have a hundred ways they can change their values, and then they can start seeing progress, build confidence, motivational reviewing, quit, and then share their quit data over the next 6, 7, 8 months with community and their friends, "Hey, I'm still quit. I'm 90 days out on green." So quantifying itself is huge if you do it right. It's got to be a beautiful UI, it's got to be a warm UX, it's got to be technically savvy. And then in our world, it's got to be cleared by FDA. This is a medical device, got to have FDA claims, and all that kind of stuff. I'm a big believer in closed loop.
Ethan: Sweet. All right. I'm excited. I love the quantified self movement. I'm all over it. I get new apps all the time, and then delete them and then get new ones, but it's awesome. All right. The last question we normally ask is for your number one piece of advice for early stage entrepreneurs, but you kind of hit that one earlier with hiring a CEO after about the first year or so or sometime. Is that going to continue to be your answer, or do you have another number one piece of advice?
David S. Utley, M.D.: I think my number one piece of advice is ask for help. Don't be an island. A lot of entrepreneurs aren't islands. They're the smartest person in the room. All of us have egos, and there's healthy ego and there's unhealthy ego. But my friend Greg, who I hired as our CEO at BARRX pulled me aside one day and goes, "Dude, you are the smartest person in the room. Just don't act like it." It's just great advice, and you don't know everything. I don't know everything. I still don't at age 58, and in the seat of Pivot now for seven years, I don't know everything. We're still learning every day. Be a sponge and understand that you need help. That's my advice.
Ethan: There you go. The more you know, the more you know you don't know.
David S. Utley, M.D.: Great. That's true.
Ethan: All right. This has been awesome, David. Thank you for coming on. Where can people connect with you online, and how can our listeners support Pivot?
David S. Utley, M.D.: Well, we're at pivot.co. The irony with CO and CO monitoring, but pivot.co. I'm certainly on LinkedIn under David Utley. Thanks for your time today, Ethan. I appreciate it.
Ethan: That’s going to be it for this week’s episode of the Startup Savant podcast. If you haven’t already, please rate and review our show on Apple Podcasts, it helps us reach more great listeners like you.
If you’re into video, check out the Startup Savant Podcast channel on YouTube. We’ll drop a link to that in the show notes as well.
Thanks for listening, y’all! We’ll see you next week - same time, same place!
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Pivot, formerly known as Carrot, is an innovative healthcare startup focused on tobacco cessation through technology and behavioral change.
Pivot: Working With Smokers to Quit for Good
Pivot, formerly known as Carrot, is an innovative healthcare startup focused on tobacco cessation.