Building a High Growth Vertical AI Company in Healthcare: Ganesh Padmanabhan, CEO of Autonomize AI (Part 7)

Sramana Mitra: Talk about your financing strategy.

Ganesh Padmanabhan: We didn’t raise any moneyfor the first year until we got about $200,000 in revenue. Once you take money from an outside investor, you’re bound to that. For me personally, I wanted to have so much conviction before we actually raised outside capital. That was one part of it.

Sramana Mitra: To validate it, right?

Ganesh Padmanabhan: Exactly. We would never know exactly what we’re going to build and what’s going to help you be a thing, but get enough framing to go plan out the next 12-18 months, right?

Once we got there and we raised a $4 million seed round.

Sramana Mitra: From who?

Ganesh Padmanabhan: It was led by Asset Management Ventures, which Bay area-based, Johnson’s original fund in Palo Alto and ATX Venture Partners, which is a local firm here in Austin. They used to be called ATX Seed Ventures. It also had some high net worth angels and industry leaders. Then we used that to actually go and build out the business. After that is when we actually, I wouldn’t call it a pivot, but we refocused our initial go to market.

Sramana Mitra: You found the product-market fit.

Ganesh Padmanabhan: Exactly. We haven’t raised any capital outside of that. We’re in the process of it. We will announce it when the timing is right.

Sramana Mitra: But given the structure of your business, I would venture to guess that you can do this without raising any further money, right? Because these are very large deals.

Ganesh Padmanabhan: It is. I think the short answer is yes, we can, but also think of the scale here, Sramana. We can organically grow this business to where we want to be. It might take a little longer to get there, but it’s good having a little bit of capital infusion, not a lot.

Sramana Mitra: I’m not arguing for not raising money. I’m just saying that you have the luxury of not being desperate to raise money, which is when the investors want to invest in you. You may have seen me say this in public that VCs love to come to the rescue of victory.

This is a situation where they can come to the rescue of victory. And they love that.

Ganesh Padmanabhan: They love that. No, I agree with you. I can talk more about our process in a bit, but we ran a very competitive process to go do another fundraise recently.

Sramana Mitra: I have a different question though, which is your competitive landscape. Who do you see in deals? Whom do you see in deals?

Ganesh Padmanabhan: We see everybody and then nobody. Health enterprises have two choices today to do what we do for them. One, go back to point solution vendors and change their existing mousetrap for a better mousetrap. I’ll get a better prior auth, a better care management, and better things.

In that regard, one of the credible competitors we run into is Cohere Health. It’s technically not a competitor because they don’t consider us a competitor, but we have won deals from them before because we’re not just a prior auth company.

Cohere Health is very well backed. They just raised $90 million Series C. I have a lot of respect for what they built. They built a clinical model engine that’ll allow them to do prior authorization, increase auto approval, auto denial rates, and so forth.

We’re not in that business. We’re not about auto approval or auto denial. We’re about reducing admin burden. So, if your goal is to outsource your utilization management or prior auth to a vendor, you have other vendors like Cohere to do it. However, if your goal is to not drive a lot of change management in your environment yet get the actual returns of investment of infusing AI into this, we’re the best one that you’ll ever find.

We also run into established companies like Avalon. We win over those conversations because we solve their exact problem on that particular workflow and then show them the foundation of how this can actually scale to other things.

The other kind of competitors we run into is classic system integrators (SIs) who build with the cloud computing mindset. If you’re dealing with the McKinsey’s and the Bains of the world, you get a lot of PowerPoints. If you deal with Cognizant, Infosys, and other classic SIs, you get a piles of decks and architectural diagrams, but they still don’t have the level of domain expertise you need and the productization expertise to take that and deliver that at scale.

So, we win on both accounts.

Sramana Mitra: One company I didn’t hear you mention is Machinify.

Ganesh Padmanabhan: So Machinify just sold their prior auth business, so we haven’t run into them. The other company that we always hear about from investors is Anterior backed by NEA and Sequoia. They raised a Series A last year. They have been focused more on third party administrators (TPAs) or the outsourcers market. They are in partnership with Accenture, but we don’t run into them.

The beauty of the age of GenAI, is that everybody thinks they can build a lot of these capabilities on their own because the bar to build just came down because you have better tooling and better language models. So, nobody wants to just buy and put something in. They all want to build or get a platform that can get them to where they really want to because they want to own the roadmap.

We’re the best capability out there today for healthcare to get them there in that journey faster than anybody else.

Sramana Mitra: Well, I think that the beauty of your approach is keeping the human in the loop of their choice. They already have human in the loop. You are augmenting that human in the loop. If I were looking at you as an investor, that’s what would draw me the most to this approach.

Very good. Well, excellent, Ganesh. Congratulations and good luck!

Building a High Growth Vertical AI Company in Healthcare: Ganesh Padmanabhan, CEO of Autonomize AI (Part 6)

Sramana Mitra: It sounds like in your go-to-market strategy, you’ve operated as a co-pilot to human in the loop. Is that a correct observation?

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Building a High Growth Vertical AI Company in Healthcare: Ganesh Padmanabhan, CEO of Autonomize AI (Part 5)

Sramana Mitra: However, the first health insurance company is the real turning point for you in terms of product-market fit. So tell me a bit about the technology infrastructure that you had to plug into. This is obviously not happening in vacuum, there are all these systems that you have to work on top of.

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Building a High Growth Vertical AI Company in Healthcare: Ganesh Padmanabhan, CEO of Autonomize AI (Part 4)

Sramana Mitra: Healthcare is big, but it’s cumbersome. It’s one of the biggest exit barrier systems, right? You’ve all these legacy systems that refuse to exit, that refuse to budge, and entrepreneurs have a really hard time getting their toehold – not even foothold – toehold into those homes.

Where did you find the entry point of something that you could sell?

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Building a High Growth Vertical AI Company in Healthcare: Ganesh Padmanabhan, CEO of Autonomize AI (Part 3)

Sramana Mitra: How long did you stay there?

Ganesh Padmanabhan: About two and a half years. During that time, we went from about $3 million to about $30 million ARR. It was very fast growth. It was early days of AI and we learned a lot.

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Building a High Growth Vertical AI Company in Healthcare: Ganesh Padmanabhan, CEO of Autonomize AI (Part 2)

Sramana Mitra: Okay. So, now I have a picture of your timeline to double click down on. So, tell me about the startup that you did – where you got acqui-hired. How long was that journey?

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Building a High Growth Vertical AI Company in Healthcare: Ganesh Padmanabhan, CEO of Autonomize AI (Part 1)

Ganesh has executed on a textbook case study of building a vertical AI company in Healthcare with a clear human-in-the-loop strategy that VCs are salivating over. Read on, much to learn.

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Bootstrapping a High Growth Cyber Security Venture with a Paycheck: Christian Geyer, CEO of ACTFORE (Part 6)

Sramana Mitra: So, what you’re describing is a very interesting scenario where you were able to incubate the company to a very large degree – $18.3 million revenue level within your parent company, and the board let you do that. It’s amazing that you were able to do this at this scale.

Now, how many people went with the spinoff – you and your co-founder and who else?

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