Skip to content
The Twenty Minute VCThe Twenty Minute VC

We Built Our Own Salesforce in Months. Here's Why We're Cancelling the $600K Contract | Curative CEO

Fred Turner is the Founder and CEO @ Curative, one of the wildest stories in tech. Fred scaled a COVID testing business from $0 to $5BN in revenue and took the team from 7 to 7,000 employees in just 9 months. They did over 206,000 COVID tests in a single day and signed contracts in the 100s of $Ms with several of the largest states. Today, Curative is a unicorn health insurance business taking on the incumbents for one of the largest markets in healthcare. ----------------------------------------------- Timestamps: 00:00 Intro 01:07 – Meet Fred Turner: thrill of winning vs. fear of losing 02:01 – Why he couldn't have built this business in the UK 03:40 – From cattle genetics to sepsis to Covid (the origin story) 07:54 – Pivoting into human diagnostics and at-home STD testing 14:43 – Founding Curative on a sepsis thesis, before Covid changed everything 18:44 – Covid hits: pivoting overnight into mass testing 27:03 – Building an "orthogonal supply chain" to scale testing 10x 30:44 – $5B in revenue, brutal margins, and losing money on vaccines 35:32 – The pivot to health insurance after Covid winds down 41:39 – How AI agents replaced entire back-office departments 45:48 – Is SaaS dead? Cutting Salesforce and 80% of SaaS spend 1:13:06 – Subcritical: building a fundamentally safer nuclear reactor ---------------------------------------------------------------------------------------------- Subscribe on Spotify: https://open.spotify.com/show/3j2KMcZTtgTNBKwtZBMHvl?si=85bc9196860e4466 Subscribe on Apple Podcasts: https://podcasts.apple.com/us/podcast/the-twenty-minute-vc-20vc-venture-capital-startup/id958230465 Follow Harry Stebbings on X: https://twitter.com/HarryStebbings Follow Fred Turner on X: https://twitter.com/FredTurnerBio Follow 20VC on Instagram: https://www.instagram.com/20vchq Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok Visit our Website: https://www.20vc.com Subscribe to our Newsletter: https://www.thetwentyminutevc.com/contact ----------------------------------------------- #20vc #harrystebbings #curative #founder #ceo

Fred TurnerguestHarry Stebbingshost
Jul 18, 20261h 29mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 1:07

    Intro

    1. FT

      Lockdowns had just started. Everybody was starting to freak out. There was basically nowhere to get a test. So our chief scientific officer had, in his spare time, developed a COVID test. I think our peak day was 206,000 people tested in a single day.

    2. HS

      I'm so excited for a freaking wild story today. Fred Turner, co-founder and CEO of Curative. This is an English founder in the Valley who scaled a COVID testing business to $5 billion in revenue. Then he had to scale it all back. It did not last post-COVID, for obvious reasons. Today, he turned it into a health insurance provider that's worth $1.3 billion. And in the show, he says some pretty wild stuff.

    3. FT

      And the company went from about 7 to 7,000 employees in those first nine months. We did two and a half million vaccinations. That was another service we did. We also lost a ton of money on that. That was a terrible business. We're cutting about 80% of our SaaS spend this year.

    4. HS

      What's the single largest contract you signed?

    5. FT

      Ready to go?

  2. 1:07 – 2:01

    Meet Fred Turner: thrill of winning vs. fear of losing

    1. HS

      Fred, I'm so excited for this, dude. You have the most wild story, and I heard it from Justin first-

    2. FT

      Mm

    3. HS

      ... uh, and then from Anil. So thank you so much for joining me, man.

    4. FT

      Yeah, thanks for having me.

    5. HS

      Now, I always find it very telling. Entrepreneurs are often kinda compelled either by the fear of losing or by the thrill of winning.

    6. FT

      Mm.

    7. HS

      If I were to ask you which one drives you more, what would you say it is?

    8. FT

      Uh, thrill of winning. I feel like during, um, certainly during COVID with what some of, uh, what we built at Curative, I got kind of a taste for the, the speed at which you can move when everything is, like, is behind you and all the momentum is behind you, and, uh, I've been chasing that, uh, ever since.

    9. HS

      I mean, that is the biggest tailwind that one could have ever expected. [laughs]

    10. FT

      [laughs]

    11. HS

      We're gonna get to that. You actually grew up in the UK.

    12. FT

      Yes.

    13. HS

      And then you moved to Silicon Valley very young. 17?

    14. FT

      Uh, 19.

    15. HS

      19.

    16. FT

      Yeah.

    17. HS

      Okay. Could you have built the business that you did in the UK?

    18. FT

      No, definitely

  3. 2:01 – 3:40

    Why he couldn't have built this business in the UK

    1. FT

      not.

    2. HS

      Why is that?

    3. FT

      I just think the UK doesn't have, like, some of the, the kind of infrastructure for, um, for startups and investing of, like, that many people that have kind of done a startup before and then are willing to invest in the next generation, particularly investing in younger people. Like, when I found ... I tried to raise a venture round in the UK, um, and I couldn't even get meetings. This was when I was, like, I was 18. I was in, like, first year of college, and I was doing this startup on the side, and I couldn't even get meetings with ... I think I got, like, one fund to take a, an associate meeting with me. [laughs]

    4. HS

      Naturally it went very far.

    5. FT

      Y- yes. And, and so it just, it seemed like people were more investing, like, purely on credentials. And this was a while ago, right? This was, this was, you know, more than 10 years ago. But it seemed like people were investing just on, oh, well, you came out of this university. Um, so if you, you know, you're an undergrad, like, how could we possibly look at this? This doesn't make any sense. Whereas you go to Silicon Valley, and it was like, well, what's the possibility here? What could you envision in 10 years if, if everything succeeds? Like, how big a company could this be? And it, it just, it was a very different mindset, that they were optimizing for how to get the best outcome, rather than I always felt like in the UK it was sort of optimizing for, like, mitigating the, the worst downstream outcome.

    6. HS

      Yes. How do I not get fired?

    7. FT

      Right.

    8. HS

      Yeah.

    9. FT

      Right.

    10. HS

      I totally get that. [laughs]

    11. FT

      [laughs]

    12. HS

      That's very funny. Um, okay. And so we decide to move to the Valley.

    13. FT

      Yeah.

    14. HS

      Great. Um, how does ... 'Cause we go from sepsis detection, no?

    15. FT

      Well, cows to sepsis to-

    16. HS

      Can you just walk me through how we go from cows to sepsis to COVID, just so I-

    17. FT

      Yes

    18. HS

      ... understand this?

    19. FT

      Yeah.

  4. 3:40 – 7:54

    From cattle genetics to sepsis to Covid (the origin story)

    1. FT

      So my first company that started-

    2. HS

      I've never said that statement before-

    3. FT

      [laughs]

    4. HS

      ... on a 20VC episode, by the way.

    5. FT

      There we go. It's a new, a new phrase for you. Yes. So, um, I went from, uh, initially cattle testing, uh, through sepsis to, to COVID. So it started off my first company in the UK, which was called TL Bio Labs at the time, basically sequencing dairy and beef cows to predict various traits about the animal from an early age. So it started off with beef. You can predict that certain cows are gonna have more musculature, um, from an early age, and some cows can have too much musculature, and then they have trouble giving birth. And so there's, like, an optimum that you're shooting for. Um, and I found this, like, completely by chance. I won, uh, the UK National Science Engineering Competition and, um, like, was on TV a little bit. And this farmer reached out to me because he wanted help testing his cows. And he was sending his samples to the Netherlands, and it was taking weeks, and it was terrible. And I initially told him, like, "I'm not interested in cows." I was interested in human genetics at the time. Um, like, "No, thank you." Um, and then he kinda kept pressing, and he, like, sent me samples with a check at- attached to the front. And I was like, "Oh, okay. Like, this is interesting." And so I did the first batch of samples for him, and then all of his friends started sending me samples, and so it kinda grew from there. And this was all still in the north of England. I was in the first year of, of college at the time. Um, and, uh, we started branching out into dairy and predicting how much milk animals would make. And I tried to raise, uh, the first venture round for the company in the UK. Didn't get very far, and so ended up, uh, going to the US for the US AgTech Investing Conference in San Francisco. It's my first time in the States. Never been before. Um, and it was, like, my last-ditch attempt to try and raise some money. And I met a bunch of VCs. Didn't raise any money, but I did meet a guy who had just finished doing Y Combinator. And he was like, "Oh, you need to apply to YC. That's, like, that's what you need to do. You need to move the company to the US. You need to apply to YC. Like, that's the only thing you can do here." Um, and I was, like, familiar with YC, uh, but had never applied.

    6. HS

      What year was this?

    7. FT

      This was, like, the end of 2015.

    8. HS

      Okay.

    9. FT

      Yeah. So I went back to the hotel room, and it turned out, like, the application deadline was six days away. So I was like, "All right. It's meant to be." So did the application, you know, got the interview, came back for the interview, uh, and then moved to, uh, to Silicon Valley for the summer '16 batch.

    10. HS

      Pause. How was the interview? Who was it with?

    11. FT

      Tim, Jeff, and somebody else. Yeah. It was, I mean, it was all a bit of a blur. It's very fast.

    12. HS

      And then you found out you get in.

    13. FT

      Yes.

    14. HS

      You move to the Valley.

    15. FT

      Moved to the Valley, and then it was the same, you know, pitch, the same company. We were doing, uh, mostly dairy testing at that point, so testing dairy cows to try and predict, uh, their milk yield, which for farmers is actually very valuable 'cause they don't make milk until they're 18 months old. And so from day one, all your animals have to have a, a calf every year to keep making milk, so your herd doubles every year.

    16. HS

      Is this still the same Curative company?

    17. FT

      No, this is a completely different company. Yes.

    18. HS

      Okay. I was about to say, God, my-

    19. FT

      [laughs]

    20. HS

      This is why our investing is so difficult because-

    21. FT

      Yeah

    22. HS

      ... like if you hear a founder pitching milk yield optimization-

    23. FT

      [laughs]

    24. HS

      ... and I, I'm sure it is like logistically a big TAM, I'm sure.

    25. FT

      Yeah.

    26. HS

      It's-

    27. FT

      Well, not big enough. That was the problem.

    28. HS

      Okay.

    29. FT

      Yeah. So, so we did this, went through YC, and we raised a seed round from Andreessen.

    30. HS

      Raised a seed round from Andreessen?

  5. 7:54 – 14:43

    Pivoting into human diagnostics and at-home STD testing

    1. FT

      and so that was my kind of first foray into healthcare. Uh, we actually first launched a high-throughput STD testing lab, um, yeah, which was ... And we launched an at-home STD test. It was, that was tons of fun.

    2. HS

      It was really rare.

    3. FT

      [laughs]

    4. HS

      I, I, I didn't, I used to run a lot when I was young and my knees were wonderful, uh, and I used to love how I built this 'cause they would ask the questions like this, which is like how do you go from, like, cows and musculature on cows and milk yield optimization to at-home STD testing?

    5. FT

      [laughs]

    6. HS

      Like [laughs] it doesn't feel that natural a jump.

    7. FT

      Yeah. On the back end, it's more natural, right? All of these things have DNA in them, and so if you're, if you're looking to do better DNA testing, you're just looking for markets where people care more about that. And anything human, people obviously care a lot more about, are more willing to pay for and are much larger markets. And so we sort of did like a market first approach of, you know, where, where could there be interesting things, and we narrowed in on, uh, antibiotic resistance in STDs as being, like, a particularly interesting area where they're getting harder and harder to treat because you get more and more antibiotic resistance. And if you're doing the DNA testing, you can predict what the best drug is gonna be early, treat with that drug, and then you're not using the most aggressive antibiotics.

    8. HS

      Do we have more STDs than ever?

    9. FT

      Yeah. Yeah.

    10. HS

      [laughs]

    11. FT

      [laughs]

    12. HS

      This conversation pivoted somewhere I certainly didn't expect. But I thought we were having less sex than ever.

    13. FT

      Yeah, but more STDs.

    14. HS

      Wow.

    15. FT

      Yeah.

    16. HS

      That's worrying.

    17. FT

      Yeah. It is. And, and, well, it's a while since I looked at the statistics because I've not been doing this for-

    18. HS

      [laughs]

    19. FT

      ... a while now. Um, but when I was, like, last in this, yeah, the statistics were just kind of a, a, like, steady increase and then an increase in resistance and just getting to the point where certain STDs are, like, harder and harder to treat, and some of them might eventually become untreatable or, like, you have to be hospitalized to get a certain really powerful antibiotic to treat it, which is crazy. Um, and so antibiotic stewardship was the whole thing, and so we did that with STDs. And then [laughs]

    20. HS

      [laughs] I so love this conversation. Keep going.

    21. FT

      And then, and then we found, uh, a fascinating market in sepsis. Um, and so sepsis is a disease that kills hundreds of thousands of people a year. It's basically where you get bacteria in your bloodstream, and what kills you is not actually the bacteria, it's your own immune system. So you're not supposed to have bacteria in your blood, right? Your blood is supposed to be sterile, and when bacteria get in there, your immune system kind of freaks out and it triggers this whole downstream cascade where your blood vessels start to leak and all of your organs start failing, and it's basically really bad. And that's what kills you, is your own, uh, immune reaction to the bacteria rather than the bacteria.

    22. HS

      Huh.

    23. FT

      And so this is, you know, one of the leading causes of death in the US. Often if you're dying from something else, like if, you know, you have serious cancer, it'll be sepsis that ultimately ends up being what kills you, um, 'cause you get more susceptible to it, uh, with other diseases. And so it's leading cause of death, like increasing mortality. It's incredibly expensive. Outcomes are terrible. Um, and so we were working on basically a better testing technology where from the earliest date, uh, you could detect these bacteria and what antibiotic they are gonna be susceptible to and treat people faster. Because with sepsis, basically every hour that you don't treat somebody is about a 12% increase in mortality, so you wanna get the treatment as soon as possible.

    24. HS

      Every hour you don't treat someone is a 12% increase in mortality. Wow.

    25. FT

      Yeah.

    26. HS

      Okay. And so we start this sepsis testing.

    27. FT

      So started the sepsis testing, and so this-

    28. HS

      Does it instantly go well?

    29. FT

      No. So this company died at the end of 2019.

    30. HS

      Oh, I'm sorry.

  6. 14:43 – 18:44

    Founding Curative on a sepsis thesis, before Covid changed everything

    1. FT

      I think, you know, you, you got something out of it. [laughs]

    2. HS

      Okay. And so this company is, like, winding down.

    3. FT

      Yep.

    4. HS

      Need to find something else. What happens now?

    5. FT

      Yeah. So originally, the pitch behind Curative, uh, was we were gonna also solve sepsis, but in a completely different way.

    6. HS

      [laughs] You're really focused on sepsis, huh? Yeah.

    7. FT

      A lot of pivots. A really... Yeah.

    8. HS

      Okay.

    9. FT

      Um, yeah. So when we were going through all of this work with the sepsis diagnostics, one of the things that kept jumping out in the data was when you look at other companies that had tried to do sepsis diagnostics, 'cause we were not the first. A bunch of big pharma companies, like Roche spent a couple hundred million. Uh, Siemens spent 100 million. A bunch of companies spent a lot of money trying to make better sepsis diagnostics. So it's kind of this, like, graveyard of dead sepsis companies. And when you dig into the data, you find this really interesting thing, that in academic medical centers, when you try out these new sepsis tests, they work great. And you see much better outcomes, and you see, you know, people live longer, and it's saving lives. And then you try to replicate that in bigger studies, and they fail. And when you dig in and look why, it's when you expand that aperture of who's in the trial out of the academic medical center and into community hospitals. What's happening in a community hospital is they're so understaffed, they're so overwhelmed with the volume, particularly in the emergency room, they don't suspect sepsis fast enough. And as I said earlier, it's every hour is 12% increase in mortality. And the intervention that they have to do is actually pretty severe. They basically put a big IV line usually in your femoral artery. They're pumping you full of fluids. They're pumping you full of nasty antibiotics that have bad side effects. So it's a pretty aggressive treatment. But if they don't suspect sepsis early enough and jump to that treatment, by the time they get there, it's already too late. And so if you're in a community hospital and it's 2:00 AM on a Saturday, is there someone on staff that actually suspects sepsis early enough, or does it wait until Monday morning? And so it doesn't matter if you have a better test if no one ever runs it. And so the original pitch behind Curative is let's take the learnings from an academic medical center and go out to community hospitals and basically build mini hospital in a hospital, uh, that just manages their sepsis patients. So whenever they get somebody, you know, we will diagnose them as having sepsis out of the emergency room. We will then take on that patient. They would pay us a fixed fee, so no matter what happens, we're on the hook. If we can drive a better outcome by applying, mostly just getting doctors to follow the instructions, but at scale, then you could drive better outcomes, um, by getting those academic medical center type, um, like, clinical results, but h- helping a community hospital to actually do that.

    10. HS

      So what happens then? We, we start that business.

    11. FT

      That, start that business. We raised, uh, a million dollars of seed money. Uh, Justin was the first investor. You mentioned at the beginning-

    12. HS

      Mm

    13. FT

      ... Justin Mateen. Uh, he came in, uh, right as I was shutting down Shield. He was a, an investor in Shield. Um, and he wanted to put more money into sh- to Shield. And I said, "No, I, I don't think you should do that. I think that company is, is, you know, is, is not gonna make it, unfortunately, but I'm thinking of starting this new thing." And he was like, "Yes, I'm in." And he didn't even know what it was. [laughs]

    14. HS

      How much did he put in?

    15. FT

      He put in, I think, $125,000, uh, at a $3 million valuation.

    16. HS

      Wow.

    17. FT

      So he was the first-

    18. HS

      Okay

    19. FT

      ... first money in.

    20. HS

      First money in. Love it.

    21. FT

      Um, and, and so we had a pilot set up with a first hospital in Wisconsin. This was a clinician that we'd worked with before, who was really enthusiastic. And then we got a call from his assistant saying, "This is all on hold, and I can't speak to you for at least three months." And we were like, "That's really out of character that he wouldn't at least call us or text us, or that he's having his assistant..." And when we dug in, they were getting ready for this thing called COVID-19, that they were expecting to see the first patient in their hospital. And so that was the first inkling for me of like, "Oh, crap, this is gonna be a big thing. This is gonna be bigger than people think it is." And so they were shutting down the entire hospital.

  7. 18:44 – 27:03

    Covid hits: pivoting overnight into mass testing

    1. FT

      And so it started off for us as like, "Okay, well, we can't run our clinical studies. We can't actually launch this product because all the hospitals are in lockdown. Maybe we can go help out with this testing thing for a couple of weeks until all of this blows over, um, and then we'll go back to sepsis."

    2. HS

      And so at that point we're like, we move into COVID-19 testing.

    3. FT

      Yes. Yes. And so it all happened quite quickly from, like, a lot of me saying, "No, no, no, this is not gonna be a thing. Like, don't worry about it. Like, just it's-"

    4. HS

      What was the moment where you realized? Like, where, where were you like, "This is substantially going to be a real thing"?

    5. FT

      So I was, like, in my apartment in San Francisco looking at some data that I think was on Twitter. Um, and, and I was like, "Oh, crap, if that, if this continues at this rate, like, this is gonna be way more substantial than people realize." And so this was probably mid-February. Um, and so then I started to reach out about sort of setting up testing capacity, uh, to... Well, first of all, we had the problem of finding a lab license.

    6. HS

      Yeah.

    7. FT

      'Cause I just sold the lab license.

    8. HS

      [gasps] This was the 150 grand you just sold.

    9. FT

      I just sold the lab license, and so we didn't have a lab anymore that was capable of running these kind of tests. We had a test. Um, so our chief scientific officer at, at Curative had, in his spare time, developed a COVID test, and one of the things they'd done at a previous company is they developed one of these flu tests and just offered it to employees to make them feel better. And so he said, "Hey, can I develop a COVID test? I don't think it'll be very useful, but it might make our employees feel good, and it's, like, a good training exercise for the team." And so they had worked on, through January and the early part of February, a COVID test that they'd been developing, uh, basically in their, like, spare time, in evenings and on weekends. And so then when everything started to really take off, we actually already had the test. What we didn't have was a lab to deploy them.

    10. HS

      And so at that point you then go back to the old one and buy it for 27 million?

    11. FT

      No, so I bought a different lab license.

    12. HS

      You bought a different lab license.

    13. FT

      So we reached out, I reached out to a bunch of people I knew in the Bay Area that had facilities with this kind of license. Nobody wanted anything COVID related on site. Nobody wanted, you know, anything to do with it. And so we, um, I, like, put it out, I just put out an email to, like, everybody I know. Um, and there's actually a guy who, uh, was in the same YC batch as me, um, who had become a VC, and he, uh, connected me to a group in LA, and they had this license, and they were using it for, like, uh, sports doping testing. And they were in what I thought was LA. I remember telling Justin, "Oh, Justin, I'm going to, to LA. I'll be in San Dimas." And he was like, "Where the hell is San Dimas?"

    14. HS

      [laughs]

    15. FT

      It's, like, basically very far east of actual LA. It's still in LA County. It's a little city, uh, best known for, uh, Bill & Ted. You know, it, it's a little town of, like, 30,000 people.

    16. HS

      And that's where the lab testing was.

    17. FT

      And that's where the lab was. And so I flew out there to look at that lab, uh, this was from, uh, from San Francisco, and to look at one other lab license that was, I think, affiliated with, um, with one of the universities. And, you know, they had a good space, they had this license, and they were doing pretty minimal testing. So they- just kind of like a blank slate. And so it started off as a 50/50 JV between Curative and this company that had the lab license, and we would bring the test, we would bring the expertise, they would bring the license. And it became pretty clear quite quickly that they didn't have the expertise to scale it up. Like, they were actively getting in the way of scaling it up. Um, and so we-

    18. HS

      What did you do?

    19. FT

      We bought them out.

    20. HS

      And that was the 27 million.

    21. FT

      So that was the 27 million.

    22. HS

      Where'd you get 27 million from?

    23. FT

      Uh, forward revenue from customers. So we were getting paid. We had our first testing contract. We were doing the, uh, police and the fire department.

    24. HS

      And so, so how do you do that?

    25. FT

      [laughs]

    26. HS

      You have the chief science officer who's created this brilliant test kit.

    27. FT

      Yep.

    28. HS

      And you go to, like, San Francisco State or government council-

    29. FT

      So this was mostly, yeah, and so actually our very first customer was the sheriff department in San Dimas. Well, we did some, like, private testing for individuals that were paying for the tests, but our first, you know, government customer was the sheriff's department in San Dimas, and that came about because they got wind that we were setting up a COVID lab because people were freaking out about it in the town. And so one of their sheriffs reached out to me on LinkedIn and was like, "Hey, what are you guys doing?" Um, and so I connected with him and I explained what we're doing and how it was very safe and how we had this way of deactivating the COVID as soon as it went into the sample, and so there was no live virus on site and we were not presenting a risk to the community, and actually this was gonna be a good thing, and we're gonna be hiring a lot of people, and kind of got him on board that, you know, we're doing, we knew what we were doing and we're doing this in a safe way. And then he was like, "Well, well, we really need testing." And then the fire department wanted testing, and then our first really big contract was the city of LA, and that came about from a tweet. Um, so we had, uh, Laura Deming.

    30. HS

      Yeah.

  8. 27:03 – 30:44

    Building an "orthogonal supply chain" to scale testing 10x

    1. FT

      we can do that. We'll make that work." Um, and we delivered it, you know-

    2. HS

      What did you see that others didn't?

    3. FT

      That you have to kinda scale, like, something like that up from scratch, that the existing labs, like, the lab industry in general is a very low margin industry, and it's built on efficiency. You look at the big labs, the Quest and Lab Corps, and they are ultra-efficient machines. Like, they're, some of what they do with automation is incredible. But if you're asking them to 10X capacity, that's literally the opposite of what they're built for. They are built for, we will get 1% extra margin by optimizing this bit of the process over here so that it is perfectly efficient. And they are really good at that. But if you ask them to 10X that, it really doesn't work, and the mindset isn't there. The people don't know how to scale those kind of things up. All of the supply chain broke down. And so we basically said, "Okay, start from scratch. Throw all of that away. Imagine that you're gonna have to scale this up to hundreds of thousands of tests a day. Where do you start?" And so we built what we called, uh, an orthogonal supply chain, which is just basically a fancy way of saying, we don't use the things other people use.

    4. HS

      [laughs] You sound like a McKinsey consultant-

    5. FT

      [laughs]

    6. HS

      ... specializing in innovation.

    7. FT

      Exactly.

    8. HS

      An orthogonal supply chain. Yeah, great.

    9. FT

      Well, I found that was, like, a good fancy word that, like, you know-

    10. HS

      Oh, yeah, yeah

    11. FT

      ... was helpful from a sales standpoint.

    12. HS

      Rubber stamp tech. Yeah.

    13. FT

      Right.

    14. HS

      Okay.

    15. FT

      What it basically means is everybody was chasing the same, uh, consumables, the same supplies. Everybody was trying to use the same stuff. And if, if, you know, you can make 1X of that, maybe they can increase to make 1.2X. If everybody's trying to buy that, us also trying to buy that doesn't help. That doesn't net increase the number of tests being done, right? It just makes us all squabble over it.

    16. HS

      Hmm.

    17. FT

      So that's pointless. So you gotta find other ways of doing the testing using supplies that maybe wouldn't traditionally be used for this kind of testing. Um, so we were sourcing swabs, you know, from other types of vendors that were being used for, you know, electronic testing and then sterilizing them. We were sourcing, there's this kind of extraction material that you usually use, and magnetic beads is kind of the default standard. But there's this other way of doing it with filter plates, which is more scalable 'cause it's basically just glass and plastic, and you can scale that up faster than you can scale up magnetic beads, where they all come from basically two factories in China. And so we're like, "Okay, well, we should never use magnetic beads because that's not gonna scale as a technology. We need to go find vendors who can scale up the plastic and glass manufacturing and partner with them to basically 10X it."

    18. HS

      Hmm.

    19. FT

      And so you kind of approach every single bit of the supply chain that way. You end up with this massive scale. Now, outside of a pandemic, that doesn't work because people don't want 10X more testing than they wanted yesterday. But within a pandemic, you gotta approach it differently. And so we peaked, I think our peak day was 206,000 people tested in a single day.

    20. HS

      206,000 people tested in a single day?

    21. FT

      And that was December of 2020, so that was within eight months from zero, zero to 206,000. So and the company went from about seven to 7,000 employees in, in those first nine months.

    22. HS

      7,000 employees in nine months?

    23. FT

      Yeah. [laughs] Yeah, it was, uh, it was a little crazy.

    24. HS

      Do you sleep at all?

    25. FT

      [laughs]

    26. HS

      I mean, I'm, I'm-

    27. FT

      I don't sleep very much, no.

    28. HS

      But, like, in that time, what was the craziest thing that you did?

    29. FT

      Um, I mean, some of the hiring, you know, you have to get licensed people for certain roles, but other, like, more administrative roles, you don't need licensed people. And so we would literally... I- A lot of people wanted to work on the pandemic, which was very helpful. We'd have people, like, line up in the parking lot, um, socially distanced, like, down the street, and then give them five-minute interview slots and just have somebody sit there with a clipboard, and it's like five minutes and next, just to get the volume of people, um, in the door.

  9. 30:44 – 35:32

    $5B in revenue, brutal margins, and losing money on vaccines

    1. HS

      How much money did you make from COVID testing?

    2. FT

      I think the total revenue ended up being about $5 billion over a three-year period.

    3. HS

      $5 billion. Is that the largest private provider?

    4. FT

      We were, yeah, we were the largest, like, non-lab corp from Quest testing company.

    5. HS

      That is extraordinary. What is the margin profile on a COVID test?

    6. FT

      So really good during surges, and then really bad not during surges. [laughs] Um, so what we found was when, when there was a peak, right, so we get a new variant or, uh, you know, it's usually winter was the biggest peak, but then we started having these summer peaks, which was kind of weird. Um, everybody would run to get tested. Um, and these were all public testing sites. So these were in parking lots. These were the drive-through tests. That was what we were doing. So if you went to a drive-through testing site, like, the biggest one w- was the, uh, Dodger Stadium site in LA. It was seven lanes of traffic, 7:00 AM to 7:00 PM, seven days a week. So they were testing at the peak about 10,000 people a day coming through their cars, getting tested, and coming back to the lab. So when you're at peak capacity and you're filling all of the lab's volume, it's very profitable. Then those, uh, basically surges subside, right, and you end up back at testing, you know, using 20 or 30% of your capacity.

    7. HS

      Mm.

    8. FT

      All your fixed cost is same. You're still paying 7,000 to people. Now, you don't have to buy as many consumables, but all of that infrastructure has to be maintained for the surge. And so this is again where it's like the opposite of the traditional lab industry, where they have a very flat volume. Every year, people do roughly the same amount of blood work as they did last year, or maybe they do, like, predictably slightly more, but it's, it's within a couple of percentage points. Here, you're kind of building it for that peak capacity, and then during the lulls, like, maintaining that capacity is incredibly expensive. And so it was kind of necessary, and this was part of the way it was set up, but they increased the price, the reimbursement price, uh, that they were paying for these tests because they needed to incentivize the capacity to be built. Because if you don't build that peak capacity, then when you have a surge, it all goes horribly wrong and no one can get a test. But that means you basically have to pay to overbuild it because during the dips, you have to have that capacity. You can't just shut it down, right?

    9. HS

      And you can't build up 7,000 in 24 hours and-

    10. FT

      And so you need to maintain that, and so we would lose a lot of money in every one of the dips, basically.

    11. HS

      Wow, you'd actually lose money?

    12. FT

      Yeah. Yeah, yeah. We'd lose money on every test during the dips.

    13. HS

      Oh, wow.

    14. FT

      Yeah.

    15. HS

      So of the 5 billion, how much is profit?

    16. FT

      So after all was said and done, the money that we basically put forward into the, uh, insurance business, the health insurance company, was about 500 million that we invested into the health insurance business.

    17. HS

      It's absolutely astonishing.

    18. FT

      Yeah.

    19. HS

      Can I ask you, when we saw the vaccines roll out, did you know they were ineffective in the way that they've kind of turned out to be?

    20. FT

      It was not clear at the beginning, and I think also it's, it's sort of changed, like, the... When nobody's had any exposure to COVID, being vaccinated probably provides a lot more benefit. Once everybody sort of had COVID a few times, then the vaccine's benefit is much less because you've already had it. Also, the variants got weaker and weaker. Uh, when we were first rolling them out, I mean, I, I think in, you know, December of, of 2020, there was benefit for a lot of people getting the vaccine.

    21. HS

      Did you get vaccinations?

    22. FT

      Yes. We did the, we did two and a half million vaccinations. That was another service we did. We also lost a ton of money on that. That was a terrible business.

    23. HS

      Why?

    24. FT

      Um, because the government wasn't paying enough. We lost money on every single dose.

    25. HS

      Wow.

    26. FT

      It cost more to administer them than we were getting paid, so-

    27. HS

      Why did you do it?

    28. FT

      Uh, uh, giving back. A lot of our partners wanted it. So a lot of the partners on the government side we were working with for testing also wanted us to administer vaccinations.

    29. HS

      Was it-- This sounds awful. Was it a hard... Like, your business with COVID obviously being eased-

    30. FT

      Yeah

  10. 35:32 – 41:39

    The pivot to health insurance after Covid winds down

    1. FT

      So we started looking at kinda what comes next middle of 2020, like, really early. Um, yeah.

    2. HS

      How did that search for what comes next change? Uh, you just started looking at middle of 2020. It's not until end of '22, start of '23 when that actual search is activated into real-time plan, correct?

    3. FT

      Yeah. I think we started, uh, probably, like, late '21 is when we got really serious about health insurance. It just took a while to actually get the license.

    4. HS

      Yeah.

    5. FT

      So-

    6. HS

      Why health insurance?

    7. FT

      Well, it wasn't the first idea. We looked at a bunch of other stuff. We looked at other stuff in the lab testing industry. Unfortunately, it's just not that big an industry, and so even, like, we had this interesting technology that could theoretically let you do a lot of lab tests that are individual tests today, like, as just one single test, which w- Be scientifically quite cool. But even if you say, okay, I'm gonna displace all of LabCorp and Quest, that's about 30 billion of market cap. So that's, like, the largest company you could possibly build is about 30 billion, which that is a big company, but coming out of what we did with COVID, I wanted to build a much bigger company than that. And so there's just not a big enough market in lab testing. Um, so the lab testing was, was out. And then we briefly looked at trying to buy a hospital, um, or multiple hospitals. We looked at one in Florida and we looked at one in Texas, and the idea was, well, if the hospital's kind of like the, or the health system becoming the center of where care is delivered, they buy a- have bought up a lot of the primary care offices, um, if you can transform that with technology, can you drive much better outcomes? What we ultimately decided is it doesn't work that well because the payer mix is too broken up. And so as a hospital, your customer is, like, 50% the government and then a whole bunch of, like, split up smaller insurance plans, and they all want different things, and they change their mind every five minutes about what they actually want. And you're trying to, like, keep them all happy. So your ability to really change things from the hospital side is quite limited, is what we ended up deciding. Um, and when you come back to it, like, we looked at a, a bunch of preventative care things. We looked at a primary care chain. Everything sort of ends up coming back to the payer. Like, the payer is the one that drives behavior in the US healthcare system. If you are providing the dollars, people will go where the dollars are. If you say, "I'm gonna pay for this service," people will go do that service. If you say, "I'm not gonna pay for this," people will stop doing that. And so the payer is the one that's kind of driving things.

    8. HS

      If you could do one thing to change the structure of the US healthcare system today, magic wand, what would you do?

    9. FT

      Um, I think you have to break up the negotiating into smaller units. Like, it's gotten to this point where I think it, it's, it's quite an efficient system as a market when the counterparties are small. When everything gets very consolidated, it becomes incredibly inefficient. So when we look at, for example, health systems, right? So we pay for, for care at health systems. Some of that care you can get in other places. If we look at how much we pay a primary care doctor who's independent compared to a primary care doctor affiliated with a system, affiliated with a system they get paid on average double. Same service, you know, same credentials, it's just that this one is part of a hospital system, and that hospital system will use the fact that they have a ton of beds, that they have this ultra special surgery center that you need, like, we need to have that capacity in our network because some people need to be hospitalized. Some people need those services. That if you wanna get access to that, you gotta pay me double for my primary care doctors. And so when all of the players are small, when you have smaller payers and smaller hospitals, you end up kind of getting to reasonable negotiations. What's happened is you have these massive payers, like the market is ultra consolidated. You basically have, like, four large players that control the entire market on the payer side, and then you get these ultra consolidated hospital systems because that's the only way for them to survive. If they wanna, you know, fight with Blue Cross, the only way to survive is to get really big so they have the negotiating power. And then they just reach these loggerheads where nothing gets done, and everybody's overpaying for everything, and everything's inefficient. And when you have more competition in the market, more smaller payers entering, more, you know, smaller health systems, you start to get, like, an actual efficient market. When you're just negotiating for, like, "Hey, I have a third of healthcare in the state, and I have a third of all of the employees in the state," you, it's not an efficient market anymore because there's no alternative. You h- you must reach a deal.

    10. HS

      If I am sick, is the best place to be treated in the US?

    11. FT

      Yes, definitely.

    12. HS

      Seriously?

    13. FT

      Yeah. Yeah, we have-- Uh, the US has the access to, by far, the most cutting-edge techniques and facilities and drugs than the rest of the world, and they're willing to spend a lot more.

    14. HS

      What do you know now, sorry, that you wish you'd known when you made the pivot into insurance?

    15. FT

      I think I wish that I knew AI was coming because I think, like, the way we designed the business in 2022 when we first started, we had no idea that this wave of AI and LLMs was coming. Like, we were building a health insurance business because we thought it was a good business to build, and we thought it needed to be built. We needed better alternatives in the market for health insurance. And then in the last, like, 18 months, how we do pretty much everything is now a completely different workflow, and we-- there's so much of... I mean, all health insurance does is, like, moving bits around, right? Like, we don't have a physical product. We give you a little plastic card, but apart from that, our product is that we move bits around in a database that means care is paid for.

    16. HS

      Oh.

    17. FT

      That's it, right? And we do a lot of managing, uh, kind of managing a marketplace. We work with the providers to negotiate prices. We work with employers to negotiate how much they pay, and then we try to work with employees to keep them healthy. If we can get people to stay healthy, we can avoid the long-term downstream

  11. 41:39 – 45:48

    How AI agents replaced entire back-office departments

    1. FT

      cost of care. But essentially, it's marketplace business. Um, and that has been fundamentally, like, shifted by AI. But when we first started building-

    2. HS

      How has it been shifted by AI?

    3. FT

      ... we didn't know that was coming. So, so much of that back office work Right, is being completely changed by AI. There's, we now have entire departments that used to be people, like, rubber-stamping things. Um, the first one that went to zero people was our credentialing department, um, where, you know, this is a process that's incredibly labor-intensive, where you have to check all doctors that join our network have a valid medical license and aren't being sued for malpractice. And this is, you know, a person going to the medical board website, checking that the license record is there, checking transcripts from their school, checking, like, a database of, of who's been sued by who, um, and then, like, rubber-stamping. And that used to take us two to three months on average and cost about $50. We have now built in-house an agent that runs on, on Claude that does this end to end, and it goes to the website, it verifies the license, it goes and reads the transcript, it puts it all together, it stamps it for approval. Um, and we're now averaging about 12 hours turnaround time for credentialing somebody, and it costs us about 20 cents. And so this is, like, a mind-numbing process that payers have to do, which is important. We wanna know that doctors in our network, right, are, are validly licensed to practice medicine. Um, but it's like, h- historically has always been kind of terrible, and payers have been bad at it, right? If you're a doctor and you join a network and it takes three months before you can see any patients, that's just bureaucracy, right? Like, they don't... Doctors hate that, and it's not actually adding the value that it should be adding. It's just creating paperwork.

    4. HS

      How many people did you have in credentialing?

    5. FT

      That one wasn't that large. I think there was, like, five or six people. We had a few other departments that have shrunk more than that with the-

    6. HS

      What other departments?

    7. FT

      We've seen a lot on the claims side. Claims processing, right, is, used to be a very manual process where claims comes in and people are, like, manually tweaking and editing it. Um, and also on the underwriting side. Underwriting, you know, the process used to be, uh, a broker comes to us with a group, an employer that they're looking to insure, and they ask for competitive bids from multiple different insurance companies. And what that means is basically sending us an email with a bunch of PDFs and spreadsheets attached of who are the employees, what current claims do they have, what's the current insurance look like? And you'd think that over time they would develop, like, a standardized-ish format for how that should run. But no, every single one is, like, a different spreadsheet format, different PDF. And we tried to sort of solve that problem with software and build, like, universal importers and universal intake, and it, like, it kinda worked. But what we found works amazingly is literally to give the files to an agent, tell it to write Python to get these files into a standardized format, because they're not very good at parsing files, but they're incredibly good at code gen. And so you can tell it to write a Python script to convert any random file into this known format and then test it and loop and iterate on your script until it's working, and then you throw away that script. And so it's single-use code that never gets used again. You just generate that code one time and then throw it away. Um, and that works so well. And so now brokers, providers, employers, when people are sending us files, we always used to, like, insist, "Oh, you have to use our standard format for this," and they'd hate it and they'd get mad 'cause somebody's sitting there in a provider office, like, manually reformatting these files into our spreadsheet. Now, send us whatever you've got, whatever format. It could be scribbles on a napkin, it doesn't matter. The model will figure it out. The model will convert it into our standard format, and it will do it in about 15 minutes. And so you build these data ingestion pipelines that used to be hundreds of people sitting, moving spreadsheets around, and it's now a model writing Python code to do that same thing, and then every single time you throw that Python away and start from scratch.

    8. HS

      Dude, I have so many questions to ask on the back of this. The first one is you mentioned there kind of the internal agent build-out that you've done for the company and for your specific processes.

    9. FT

      Yeah.

    10. HS

      Do you buy the SaaS is dead theory, that we will-

  12. 45:48 – 1:13:06

    Is SaaS dead? Cutting Salesforce and 80% of SaaS spend

    1. FT

      Yes.

    2. HS

      Why?

    3. FT

      [laughs] Because I see the number of contracts we're canceling. Like, we, we just recently canceled our Salesforce contract because we have an internal CRM that was built, you know, was Vibe coded that is working better, that is managing our process better, um, is more integrated into what we're doing. We run our agents inside of it, and no- no one was using Salesforce anymore. $600,000 a year.

    4. HS

      Wow.

    5. FT

      Gone to zero.

    6. HS

      How long did it take?

    7. FT

      Two months.

    8. HS

      Is it worth... Because it, argument back, I always like to see both sides. I'm, I'm never-

    9. FT

      Yeah. Yeah, yeah.

    10. HS

      I- is it worth the engineering hours to Vibe code that and then to maintain it?

    11. FT

      The maintenance is, is definitely one of the most challenging pieces. Um, I agree with that. I think for most businesses of, of any reasonable scale, yes, it is worth it. Now, whether they will have the tech resources to do that soon, I think that's, like, the bigger question. It's kind of when will this happen? But when you build those things custom to your workflow, they work better. Like, most of these big, you know, systems, you're paying an administrator. Like, we had a full-time Salesforce administrator, right? You're paying people whose sole job is to manage this, like, archaic software platform. Not that Salesforce is archaic, but you know, we have a few other, like, internal apps that we were paying for, like industry software that is taking multiple FTEs to maintain it. You can transition that into one great engineer, and then whenever you want a custom feature, you just go build it.

    12. HS

      Absolutely fucking wild.

    13. FT

      [laughs]

    14. HS

      $600,000 a year on Salesforce.

    15. FT

      Yeah.

    16. HS

      Wow.

    17. FT

      And so we're seeing, you know, there's pockets of software that I think persist because they are more infrastructure based.

    18. HS

      Okay, which persist?

    19. FT

      So we're seeing a lot of back-end stuff like, uh, like Sentry, like stuff like that, right, where it's, like, kind of become part of your infrastructure. Um, Slack has been, like, notoriously hard internally for us to... Like, too many, so many people have built integrations and, like, workflows that are now working in Slack. Uh, I think that while they keep putting the prices up, if they put the prices up too much, then eventually it'll make sense to replace that. But, um-

    20. HS

      What else is on the chopping block?

    21. FT

      We- we're cutting about 80% of our SaaS spend this year. So we ha- like, in, in, uh, one of our internal meetings, we have a slide of, like, when, when are SaaS contracts due, and whose job is it to tell them that we're not renewing this year?

    22. HS

      Well, you can do it in one fell swoop.

    23. FT

      Yeah. [laughs]

    24. HS

      What, what, what, what-

    25. FT

      Well, they have renewals. We have to pay them through the renewal.

    26. HS

      Ah. Is it all, like, legacy software like Salesforce, though?

    27. FT

      Some of it's like that. Some of it's, like, very insurance-specific software. Um, so, like, our claim system, for example, right, is this, like, massive off-the-shelf platform that we just migrated to a few years ago. This is again why, like-

    28. HS

      Hmm

    29. FT

      ... if I'd known AI was coming, we would've probably approached things differently. Um, and it's just, it's very hard to use. Like, it's hard... Their API barely works. It's hard to get the data out of their database. Uh, they won't let us manage it. It's, it [sighs] ... But that's how insurance companies are running things, and so we've built our own claim system completely from scratch in-house that's now, uh, we've migrated most of the workflows off. We'll be fully off in July.

    30. HS

      I am a health insurer. You know other health insurers.

  13. 1:13:06 – 1:29:24

    Subcritical: building a fundamentally safer nuclear reactor

    1. FT

      Curative?

    2. HS

      Yeah.

    3. FT

      Yeah, I invest primarily in companies of people that I know, and I do very little investing if I don't know the founders.

    4. HS

      Does that work well?

    5. FT

      It's had mixed results, but some of them are too early to tell. Some of them are-

    6. HS

      Best in- best investment?

    7. FT

      Um, they're all, they're all a bit too early to, to tell. [laughs]

    8. HS

      Do you have any energy investments?

    9. FT

      Uh, yes. So there is a company that, um, I co-founded with my wife, Subcritical, that is, um, in the nuclear fission space. So this was based on an, an idea that I had a few years ago that, um, we need more power and that nuclear is a really good way to do this. Uh, and it started off actually as looking for an investment. This was, like, one of my fir- first times where I was like, "We should find a company that's doing nuclear power and try and invest in it and see if we can make it go faster." Um, because I kind of thought, I'm pretty good at making things go faster in really regulated spaces. Like, that's kind of what I'm, what I'm good at.

    10. HS

      That's your thing.

    11. FT

      Yeah.

    12. HS

      Yeah.

    13. FT

      That's my thing. Yeah. Everybody's gotta have a thing. [laughs]

    14. HS

      Yeah.

    15. FT

      And so-

    16. HS

      Was that your hook on the first date? [laughs] Regulated industries-

    17. FT

      That-

    18. HS

      I make it go faster.

    19. FT

      Well, our hook on our first date, so after our first date, we both shared our genome files with each other, our VCF.

    20. HS

      Wow.

    21. FT

      Um, and so she said she'd done this before and, uh, the guy thought it was really strange. And we both were like, "Oh, we should share our genomes," and then, you know, compared and checked that we were compatible so it was worth having a second date.

    22. HS

      [laughs]

    23. FT

      And we were both totally into that. So we-

    24. HS

      Were you compatible by genome?

    25. FT

      We knew it was meant to be. We were compatible by genome. We have two beautiful kids. So we, uh, we knew it was meant to be. [laughs]

    26. HS

      I'm sorry. If you're incompatible by genome, you have, like, a, a-

    27. FT

      If you both have, like, the same-

    28. HS

      Like, you have a ginger child? [laughs]

    29. FT

      [laughs] Well, that was a, a concern. My brother is ginger.

    30. HS

      I'm sorry.

Episode duration: 1:29:35

Install uListen for AI-powered chat & search across the full episode — Get Full Transcript

Transcript of episode GHRuerXkHlI

Get more out of YouTube videos.

High quality summaries for YouTube videos. Accurate transcripts to search & find moments. Powered by ChatGPT & Claude AI.

iOSAndroidClaudeChrome