William Leonard
Hey everyone! Welcome back to the Atlanta Startup Podcast. My name is William Leonard, your co-host for today. And I’m so excited to be sitting down with the CEO and Founder of Codoxo, Musheer Ahmed and I can say with absolute conviction that this is a conversation you don’t want to miss. As we’ll talk about his cybersecurity experience after graduating from Georgia Tech, and how that helped shape his thesis for building Codoxo, his thoughts on the future of AI applications and healthcare. And we’re sure we’ll also talk about the metrics that investors want to see at the series B stage as he recently led the company to close a fresh new round of capital. Musheer, thanks for joining me today man.
Musheer Ahmed
I appreciate you having me here today.
William Leonard
Awesome! I’m excited for you to share more about the story here and more about what you’re working on at Codoxo. I would love for you to give our audience a quick 30-second rundown of what Codoxo is doing?
Musheer Ahmed
Absolutely. America spends more on health care than any other nation in the world today. Unfortunately, not all of that money is going to real patient care. A significant amount is lost to fraud, waste, and abuse in the healthcare system. Despite these losses being an order of magnitude higher than other industries, we’ve seen very, very little innovation happening in this space compared to those industry reports saying that only a small fraction of fraud and waste abuse is identified and recovered by existing solutions. These are some of the issues that Codoxo has found to help address at health plans and government agencies. Our goal is to put our limited healthcare dollars back to real patient care and help make our system more affordable and effective.
William Leonard
I love the historical context that you give about the industry, the problems, and the financial issues that we’re seeing. I think that’s going to make for a unique conversation a bit later on here. But we’d love for you to give us the picture. Give us the timeline of your background, and what led you to build Codoxo and be here in Atlanta.
Musheer Ahmed
Now, that’s a great question, William. I have spent a lot of my time at Georgia Tech. I did my undergraduate degree in Computer Science at Georgia Tech. I joined the Ph.D. program in the Cyber Security Department straight out of my undergraduate degree. When I started my Ph.D., the government was enforcing the adoption of electronic medical records. Prior to that, if you walked into a clinic or healthcare facility, you’d have paper charts, and providers and doctors will take notes on paper. The government, for many reasons that we don’t have time to get into, said that “Okay, we need to move over from these paper records into electronic medical records.” There was expected to be a lot of savings to be achieved. Once this happened, there were tests that were being repeated by every provider, especially older patients with multiple chronic conditions are seeing multiple specialists, and they can they tend to repeat the same test over and there was an idea that, okay, we will bring about a lot of savings once this data gets electronic and it starts getting shared. When I started my Ph.D., I looked at that, and I said, “Okay, I’m going to dedicate my entire Ph.D. to the healthcare space. And in the healthcare space, I’m going to focus on trying to predict what are the challenges we will see in the healthcare industry once this data gets electronic? And what can we do to overcome and address these challenges?” The first part of my research was okay, once this data does go electronic, how do we protect this information in a much more secure manner, especially on mobile devices, and more and more people will access it on their phones, iPads, and other devices, as well. I did a ton of work there in that space, then the next part of my dissertation went into, once we secure the data, how do we share this information across healthcare organizations so we can achieve some of the goals that the government has put forward? And then the final part of my research was okay, once this data is shared, eventually, the data will get breached. We know at some point, data will get leaked, data will get breached, and bad actors will start monetizing the data. I went down a path to understand okay, what can bad actors do to monetize healthcare data? One of the things was that they would engage in health care fraud, and waste abuse. So that’s what introduced me to this path into the world of fraud, waste, and abuse. A lot of times people ask me, how do you go from a cyber security degree to healthcare fraud, waste, and abuse? That was the trajectory my research took me down. As a part of my dissertation, I had the opportunity to attend several industry conferences, speak to health plans and government agencies, understand what are the solutions in place, and identify the gaps that exist in the industry. I have dedicated the final part of my dissertation to understanding what are the gaps? How can we, as academics, come in and develop sophisticated technologies to fill those gaps? That journey led me to develop some technology that we ended up patenting. Through Codoxo, what I’ve done is bring that patent into the industry and allowed multiple organizations to benefit from that and achieve a lot of savings. That’s the background, the story, and what led me to found this company. Initially, I did not think at the start of my Ph.D. that I would be going down this entrepreneurial path, but it definitely came through together towards the end.
William Leonard
That’s what I was gonna ask, right? This is interesting because you were getting your Ph.D. at Georgia Tech, you took a step back and looked at the macro state of healthcare, as you were anticipating a greater adoption of electronic health data. Did you have any entrepreneurial experience previously or was this just internally such a burning idea that you knew you could build and you just said, “I have no entrepreneurial experience, I’m just gonna go out there and build.” What was that situation like for you to decide to actually build something?
Musheer Ahmed
I did not have any entrepreneurial experience prior to this but I was fortunate enough that I knew people who have gone down this journey. I had them as mentors and guides as well. My academic advisor had actually launched a company based on academic research prior to this which became very successful. He also mentored me a lot. He is the co-founder of the company as well. I think I had access to people who’ve been on that journey which was incredibly helpful and instrumental and allowed me to go down that path as well. But I did not have the experience to do this.
William Leonard
That’s fascinating. But let’s talk more about the business here. You’re helping healthcare payers and agencies in a sense, what is the practical value you’re bringing to their day-to-day operations as the business Codoxo?
Musheer Ahmed
I think our initial claim to fame was our detection capability. The healthcare industry has been slow to adopt new innovative technologies out there. I think if you look at the cybersecurity space, the finance space, all these other spaces, what we’ve seen is they’ve been a little bit more proactive in adopting new AI-based solutions. In the healthcare space, when we started off, what was happening was just like any other fraud landscape. Fraud, waste, and abuse schemes are constantly evolving over time. The major schemes of 2022 are very different from the major schemes of 2021 and 2020. We don’t know what we may see in 2023. It’s an evolving landscape. There are new schemes that come out all the time, and people that do want to engage in fraud, waste, and abuse are creative enough to come up with new ways to do it all the time. They will identify new ways and mechanisms to do that. But the industry had largely adopted a static rule-based detection approach that was predominantly the most common detection capability and what comes across very clear from the cybersecurity space, the background from which I come from is that rule-based systems don’t win in the long term. Because if you don’t have a sophisticated detection technology that’s able to identify new schemes proactively, we are going to lose tens of dollars. It’s going to be a significant financial impact. That’s what would happen, where what I would see is that a health plan if a new fraud, waste abuse came and merged, it could take them several months, in some cases, it has taken them years to identify. In that process, they’re losing millions or tens of millions of dollars, adding on to the hundreds of billions in annual losses to the healthcare space in the US alone. The goal for us was how do we build a proactive AI-based detection technology that’s able to identify this on complex healthcare data? Healthcare is very complex. The data is very complex and has a lot of unique characteristics that we don’t find in other industries that we have to work with. We did a multi-year research effort and we developed our own sophisticated AI capabilities that are very proactive, very accurate, and efficient in identifying these capabilities. When we launched the company, what I ended up doing was reaching out to health plans, talking to them, and engaging in a head-to-head comparison with their existing solutions and capabilities. We’re able to show in every single case we’re finding millions or tens of millions of dollars in suspicious activity just by analyzing a small part of the data that existing solutions are not able to identify and quickly started spreading. We may be pioneers and bringing AI technology. When I started off, I had to walk into every health plan and educate them on what is AI, why do you need it, and why should you work with Codoxo? I think today, I’m really proud that the industry has increased their baseline and now they asked for health plans, will ask if you have AI or not, and if you don’t, we’re not going to work with you. Our goal as an organization is to continue to stay innovative and continue to lead the way for these organizations to adopt new technology to do things differently. Our goal is not to be another vendor that does the same thing in this problem but to do things very differently. What we’ve done, what we are doing now, is moving. We’ve been very successful in educating the market and bringing very impactful AI into the industry where we’re able to find things that nobody else can find very quickly as it emerges. Now we are moving towards a unified cost containment model where we’re bringing multiple departments and teams onto a single platform to bring about a lot more efficiencies, how the organization operates, and also identifying things a lot sooner. We go from postpaid detection which the industry has largely been focused on how we find fraud, waste, and abuse after the claims have been paid to prepaid detection, which a lot of people now are also doing. How do we identify this before claims are paid out? Now we’re doing something that nobody in the industry is doing, pre-claim submission analysis was how do we impact a claim and influence a claim even before it is submitted to the payer? We’re doing some really cutting-edge things that a lot of health plans know that they can get only through us and through no one else. Hopefully, that kind of gave a very detailed overview.
William Leonard
That is incredibly comprehensive. I love it because it ties together your experience and perspective from your cybersecurity days and how you really intertwined it with healthcare now. You mentioned there are different schemes from 2020 to 2021 to 2022. I’m curious, can you tell us some of the examples of some of the schemes that you’re seeing and maybe some things you saw in 2021 that are just mind-boggling to you that these are happening in the modern era of healthcare?
Musheer Ahmed
No, absolutely. The scenes continue to evolve. There are always interesting things that are out there. Let me take COVID as a great example there. When COVID hit in 2020, what we saw is that there was a relaxing of a lot of regulations and requirements. There are certain things like prior authorization requirements that were relaxed at that time, provider enrollment rules were relaxed, and a lot of things were loose. The whole idea was how do we allow the healthcare system to function as we’re going through this radical change in this global pandemic at that time. Then we didn’t know how we should treat patients that actually contract COVID, there were frequent changing treatment protocols, a lot of things that were very new, and at that point, that created an opportunity for people with bad intentions to actually come in and take advantage of that situation. We saw a surge of COVID 19-related scans that have emerged since the pandemic had started. A lot of lectures to give you a few examples. We’ve seen scams around lab testing, people conduct all these tests, they created something called a COVID panel, there’s no such thing as that and do a whole bunch of tests and charge insurance companies a bunch of money, something we identified very, very quickly. When the pandemic started, where our clients were able to see this insight through the platform and take immediate action before it cost them tens of millions of dollars there. That’s just one example on the lab testing side with COVID. We’ve also seen a lot of activity happening around telemedicine claim that is inappropriate. There are a lot of things you can do virtually with a patient but there are certain things you just cannot do unless you’re physically present with the patient. When we see those kinds of things being built for through our clients, we’re able to quickly flag and show them that this is completely inappropriate, something our AI is able to find very quickly, whereas traditional rule-based systems and expertise to sit in and identify those things and code them. That’s the unique advantage of working with us, where our AI, even if we’ve never seen it before, nobody’s ever imagined that it will highlight and surface bubble that to the top and tell you, here’s where you need to start paying some attention at.
William Leonard
That is incredibly fascinating. Criminals are so innovative. They should be working for some of these companies and startups that they’re trying to scam, honestly, but that’s a whole different topic. But that’s really fascinating that you all are able to proactively predict those schemes and help these insurance companies save millions of dollars, and also just bring greater good, because oftentimes you mess with somebody’s livelihood, with their health insurance data. I’m sure that’s another big value add and talking point that you all express internally, as the business.
Musheer Ahmed
Absolutely, William, and if I may add, what we do is our mission and goal of the company is to make healthcare affordable and effective. That’s something at Codoxo. All our employees are really excited about we’re doing something that contains social good. The most egregious example, the greatest, most egregious, of course, not all fraud, waste, and abuse of payment integrity deals with these kinds of things. There are certain things where there’s overuse, abuse, and errors as well that we’re able to identify for our clients and show them. But in the most egregious cases, we’ve seen, for example, in colleges, the cancer doctors say that the patients that have come to them, all of them have cancer and actually performed chemotherapy on them and forced them to go through chemotherapy, knowing very well that they did not have cancer. These are providers, unfortunately, that only look at financial incentives and don’t look if they cause patient harm. We’re able to identify people, we’ve seen cases where cardiologists force patients to go through stent surgeries and scare them by saying, “Hey, you need to go through this surgery within the next day or two, otherwise, you’re going to go through a massive heart attack. You will not make it.” The provider clearly knows that’s not the case. It’s unfortunate. The majority of providers are good people. It’s the few black sheep that have impacted the healthcare system in a negative manner intentionally. We are out there protecting our health care dollars, identifying them, and making sure patients are not harmed. But of course, there are also other providers who we give the benefit of the doubt. They were not aware. We do have more educational activities and programs catered towards them educating providers on coding issues and compliance issues, allowing them to follow policies in a better way as well. We operate across the entire spectrum. But on the worst side of the spectrum, I think we’re doing something really good helping patients and helping Americans get the kind of care they need while weeding out some of the bad actors there.
William Leonard
You all certainly are doing great work over at Codoxo. Certainly want to transition the conversation here a bit to Codoxo, you just announced a Series B round of funding back in February. Congrats to you and the team, that is a tremendous feat. I would love to have you share some insight and maybe tips for our founders who are listening on what it takes to raise a Series B, from investors here in the region or even not in the region, but just overall what does it take? What are the metrics? What are some of the things that investors are looking at, as they are scouring over whether to invest in your business?
Musheer Ahmed
That’s a great question, William. Of course, at every stage of the company, there are different things that matter the most. Every investor is a little bit different. What I would always encourage is as you engage with investors always try to understand what is the criteria of investment that they have because usually there’s not a hard and fast rule there. There may be different revenue numbers you need to hit. There may be different milestones sometimes that do come about but if I were to generalize and give a general idea of what does a series B investor typically look for, at the Series A stage, what they’re looking for is you have substantial revenue and you have repeatability where you’re able to go in and sell a product, you’ve identified an issue. You’ve developed some solutions, a product out there people are willing to pay and enough people are willing to pay, you’re able to repeat that process and gain some kind of substantial revenue from that. In series B, what they’re trying to evaluate is, are you ready to scale this into a massive organization? Have you validated it? There is a very large significant market opportunity out there where you can, with additional capital, you’re able to significantly scale revenue, scale your organization, and have a massive impact to capture a large portion of that market opportunity ahead of you. I think, in general, that’s what they would be looking for. But of course, every investor would have something that may have different custom criteria based on the fund that they do have and that they’re operating out of.
William Leonard
I think that’s incredibly helpful to paint the picture of what they’re looking at in a Series A and Series B. I’m curious, obviously, you’ve raised earlier stage capital in the Series B, what was the most difficult successive round to raise from your vantage point? How, as a founder, can you prepare yourself to get to that next round of capital as efficiently as possible? Because the name of the game in venture is capital efficiency, not everybody can achieve it but it’s certain that that North Star for a lot of startups.
Musheer Ahmed
I would say the most important thing and the most difficult thing almost changes with every stage you’re at. It’s that’s one thing that I’ve learned. But what I would say is that being capital efficient, as you said, is the most important thing that anybody should be focused on, especially during earlier stages of the company. What naturally happens is entrepreneurs typically tend to be optimistic, you have to be ready, and entrepreneurs are going out and saying, “I can change the world, if I had, I can take an idea.” With the right team, the right capital allocation, and light conditions, I can make a really large business out there. They tend to be risk-takers and they tend to have an optimistic view of the world out there. A lot of times things do take longer than an entrepreneur may think. I think being grounded in that reality is going to be really important to always plan for things to take longer. The best way you can plan is to be efficient with the capital you’ve raised, especially during the early stages of the company. What I would say is don’t burn a lot of capital until you’ve established product-market fit, your view established, you have customers who are heavily delighted, and you’ve been able to show some form of repeatability. I think the biggest mistake I see a lot of entrepreneurs making is you can get capital easily if you go out for it, but taking a lot of capital early is sometimes going to damage your prospects of success because you want to take just enough and spending just enough to show product-market fit. Once you’re able to show you can repeat that, then of course scale, grow, and bring in more capital. But that’s where I see a lot of people making the earliest mistake, spending a lot of money in growing really large teams and then not able to generate the kind of revenue you thought so always be careful over there. I do know at Codoxo when we raised our Series A round, we were only maybe 13 to 15 employees back then. We had some very large health plan customers, we reached a pretty significant milestone for our company with a very small number of employees, and then now of course today we’re at 60 employees. We’ve grown tremendously over the last year and even two years since then but that’s after we reached a critical point in our growth, where we’ve been able to show a lot of success. My biggest advice is always going to be in fundraising is to be careful, be capital efficient, don’t spend too much, and try to get to your next milestone by spending as little as you can.
William Leonard
That’s all excellent advice, Musheer. I have a pretty interesting question for you. You know, oftentimes, at the early stage, founders have to balance generating revenue versus getting customers to use the product and not charging them. That is often a balance that investors have to juggle and muddle over as we’re evaluating investments. How do you think founders in the world of healthcare should maybe come across that balance of not charging but getting customers on the platform or charging and also getting customers on the platform? Is there a healthy medium to doing that?
Musheer Ahmed
No, that’s a great question. In the healthcare space, I think there’s traditionally been more hesitancy with adopting new technology solutions, especially that come out of startups. I think that hesitancy has always been there. You’ll always have a challenge in trying to get new technologies and get some large paying customers right off the bat. How we were able to overcome that initial stage was by offering pilots to some of our early customers, we would go in, and we’d offer them a limited scope pilot for a very short duration and give them results, partial results, not to reveal everything we can do for them. Once we were able to hit those numbers, show them an ROI, then tell them okay, now we’ve shown you the ROI. Now it’s really become very compelling for them to sign on as a full client. I think we started off by engaging in pilots and getting our early adopters on board but once we had a good critical mass of early adopters, some really big names in the industry that started working with us, then we just stopped doing pilots. You can talk to our references, to our existing customers that did pilots, and now our fully implemented, fully live customers. That helped us grow. I think every industry is a little bit different but the initial pilot process definitely helped us get our feet out there and got us our early traction to succeed.
William Leonard
That’s a strong anecdote. You almost kind of tease your prospective customer a bit and say, “Hey, this is what we can do. This is the scope of what we’re doing now. Let us know if you want to get the full scope of results and actually start paying for it.” I like that approach there and as we’re rounding out the conversation here, Musheer, you’re a Georgia Tech alum. Is it fair to assume that you grew up here in metro Atlanta as well?
Musheer Ahmed
I have been here but I did not grow up here. But I’ve been here for I think, maybe, almost 20 years or so. I need to count but close to that.
William Leonard
We’ll just tell everybody you’re from Atlanta. It’s our secret.
Musheer Ahmed
This is home for me.
William Leonard
Certainly. Thinking about the city here, and you’ve seen the evolution of tech companies truly coming up out of the ground, what has been your take on the city’s growth? Are you bullish on Atlanta becoming a tech epicenter, not only in the country but maybe in the world?
Musheer Ahmed
No, I am completely bullish on that. Actually, I will say from my own personal experience, that we started our company years back, we did our seed round which was co-led by a fund in the Silicon Valley in San Francisco. I got the round done and I didn’t even make a flight into San Francisco like literally. I was in Atlanta. They came in and met with me in person and ended up raising a seed round from them. I think back then also, I saw that change happening. I think if you looked at it ten years ago, you would have to make a trip out to find capital in San Francisco, some companies moved to the Bay Area. But I think since I have started the company, I’ve just seen the startup ecosystem just grow and the amount of support out there is great. We’ve had some really large successful companies come out of Atlanta, some really large unicorns and those founders want to get back to the community. You’ll see that a lot of successful founders, that’s their top priority. How do we help our next generation of entrepreneurs to be successful? I have, as a part of my journey, leveraged several organizations in Atlanta from the Georgia Research Alliance to Atlanta Startup Battle that we won. The first one. We were part of ATDC. We’ve leveraged so many players in the Atlanta ecosystem that have helped us get as successful as we’ve become and that ecosystem has only grown stronger. I think even on the investor side, we have so many funds in Atlanta now that you don’t even need to consider a Silicon Valley fund. I think there’s just so much capital in Atlanta as well. I did see some reports out there recently that we’re going to have a lot more successful technology companies and startups come out of Atlanta in the future. We’re moving in that direction. I think another advantage what we’ve seen is, I mean Atlanta’s a great city, cost of living is great, much better than maybe in the Bay Area and some other places people are now trying to move from there here. I think it’s become a great spot for people to move in and have a great life here. We also have great talent. I think all the universities here in Atlanta are bringing out strong talent. Having that kind of talent is very important for a startup to attract people and not only startups, I think we’ve seen all the big technology companies open offices here or make announcements about building new offices. I do believe strongly that Atlanta will not only become a major technology hub, an icon for startups but not only in the US but also globally. I think it’s it’s definitely on the map now.
William Leonard
I agree. I think the intersection of the diverse talent here, the capital that is pouring into the city and the region, you think about the established enterprises here, and then also some of the later stage startups and newer IPOs that are moving here and establishing headquarters here along with the cost of living. I think those are all factors that are going to underpin tremendous growth for this startup ecosystem here. I’m glad you’re here and you’re creating jobs in this region and in this amazing city. Really excited about Codoxo and the vision that you have for the business. You’ve expressed the vision of how you started it years ago and where the business is now acting in a very proactive fashion for your customers. We’re excited that you’re here and we’re excited to continue to see you grow. Musheer, it was certainly a fantastic conversation, and looking forward to seeing you around the city sometime.
Musheer Ahmed
Absolutely. William, thank you so much for having me here today. I really enjoyed this conversation.
William Leonard
Awesome, take care.
Musheer Ahmed
You take care, too. Thank you.
Lisa
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