Our world is changing one day at a time. Between my last post covering Ritual two weeks ago and today, Ritual has laid off more than half of their staff due to the impact of COVID-19 on the restaurant industry. The start-up world has turned upside down as both revenue and funding has dried up almost overnight. These are unprecedented times. At the end of this, only businesses with very strong foundations will be left standing. Which makes it all the more important for job seekers to analyze and understand a business before committing to it. With that, let’s jump into understanding Opencare’s business today. As I write this, Opencare has laid off ~25% of their workforce.
Origin Story
Founded by Nikolai Bratkovski and Cameron Howieson in 2012, Opencare’s vision is to change the way patients and health providers interact. In the beginning they went wide and experimented with compiling data from private non-OHIP service providers such as dentists and therapists in the Greater Toronto Area. Their goal was to liberate patients from the frustrating inefficiency of health care appointment scheduling and create a marketplace where patients can book appointments with therapists and dentists alike. However, for the last 2+ years they have focused on dental practices only. Their website states:
We are currently laser focused on creating an amazing experience for patients to find the right health provider, and to bring them together using a streamlined appointment booking platform. We see this as a gateway to simplifying all interactions between patients and providers; ultimately making health care more personable, approachable and accessible.
According to crunchbase, they have raised a total of $24.6M. I believe they are now in the process of raising a series B round which most likely be impacted by covid-19.
So, what is the business?
The business at its core is pretty simple. Opencare sends a patient to a dentist and get paid by the dentist to help him/her find this new patient.
For example, let’s say you are someone who is looking for a dentist. You search for dentists in your area on Google and it shows you an Opencare advert claiming to help you find top rated dentists in your city. You go to Opencare’s website, search for a dentist and book an appointment. When you visit the dental practice, you may or may not like the service that you get but because Opencare has sent a patient to the dental practice, they receive a fixed fee from the practice. If you decide to revisit the dental practice - you have become a source of recurring revenue for the dental practice. Therefore the dental practice has acquired a new patient by paying a fixed pre-determined fee to Opencare. This is a win-win-win situation for everyone. You win because you have found a good dentist. The dental practice is winning because they now have a committed patient. Opencare wins because the platform has facilitated this discovery thereby creating value for everyone.
How does Opencare find patients?
It is through a combination of marketing and patient incentives. If you are in a city that Opencare serves and are even lightly active on the social media, you may have seen an Opencare advertisement similar to below:
Opencare is directly spending money on two things:
Facebook or Google Ad to help patients discover their platform
Incentives ($75-$100 gift card or Apple Airpods as above) to influence patients to go to the dentist
Remember, that Opencare makes money only when a patient goes to the dentist. So, they have to balance their expenditure on the above two and likely keep that overall expense lower than the fee that they are charging the dentists to make any money.
Let’s now add some numbers to understand this better:
CASE 1:
Say, in order to attract one patient, Opencare spends $20 on facebook ads and gives a $75 gift card to the patient after their visit to the dentist. In this case Opencare’s acquisition cost/patient is $20+$75 = $95.
Say, the dental practice pays a pre-determined fee of $100 for each patient that Opencare sends. This means that Opencare’s revenue for this patient = $100.
This means that Opencare just made $5 ($100-$95) through this one patient. As long as Opencare can keep all its other expenses such as salaries for their marketing team, sales teams, other staff, office space etc. below $5/patient, they would make a profit.
Let’s also look at the numbers for the dental practice. Say, the first time the patient visit the dentist, they get a general examination and pay $350. They then decide to go a 2nd and a 3rd time. Each time they pay $200 to the practice for cleaning. In this transaction, the dental practice has a total revenue of $750 ($350+$200+$200). The practice spent $100 in acquiring this patient as fee to Opencare. So, they made a total of $650 ($750-$100). As long as the practice is able to keep their costs to serve this patient below $650, they have made profits on this patient.
The patient has found a good dentist and also received a $75 gift card.
Everyone is happy.
CASE 2:
Let’s say that in this case Opencare’s acquisition cost/patient is the same i.e. $20+$75 = $95. But, now the dental practice is only paying a pre-determined fee of $80 for each patient that Opencare sends. This means that Opencare’s revenue for this patient = $80.
Now, Opencare just lost $15 ($80-$95) in this transaction.
If everything else remains the same for the dental practice, they made a total of $670 ($750-$80). As long as the practice is able to keep their costs to serve this patient below $670, they have made profits on this patient.
The patient has found a good dentist and also received a $75 gift card.
In this case the patient and the dental practice are happy. Opencare - not so much.
CASE 3:
Similar to Case 2, let’s say that in this case also Opencare’s acquisition cost/patient is the same i.e. $20+$75 = $95. Dental practice is only paying a pre-determined fee of $80 for each patient that Opencare sends. So, Opencare is losing $15 ($80-$95) in this transaction.
Now, what if the patient pays $350 for the general examination in the first visit but never goes back to the dentist after the first visit. In this case, the dental practice made a total of $270 ($350-$80). As long as the practice is able to keep their costs to serve this patient below $270, they have made profits on this patient.
In this case nobody is likely very happy. Opencare is losing money. Dental practice had a low quality patient show up through Opencare. Patient either didn’t like the practice or went to the practice only because of the $75 gift card promised by Opencare. The likelihood of this happening is higher when Opencare promises free Apple Airpods. Patients will be more likely to use their insurance to pay for the dentist, get the Airpods and never book a 2nd appointment.
What’s really happening in the business?
Only Opencare has the data to answer that. I believe that there will be all three cases present in their data. The likelihood of case 3 being the highest. This is because:
Customer acquisition costs are high. How many people do you think are actually looking for dentists? Also, how many times have you seen an Opencare ad on facebook or instagram?
Dental practices are traditional establishments and wouldn’t usually pay a high fee for a new patient. Negotiating a fee requires a strong sales team that is able to sell the value proposition to the dental practices and then prove that value by sending high quality patients.
Opencare’s incentives aren’t aligned with that of the dental practices. While Opencare makes money only for the patient’s first visit, the dental practices want to acquire patients that become long term patients i.e. recurring sources of revenue. This misalignment leads to patient-centric offers such as “FREE Airpods” that would get patients excited to book ONE appointment even when they aren’t really in the market for a dentist.
What’s exciting about Opencare?
Strong Team and Culture - Opencare has truly done a good job of assembling a very strong team with years of experience across businesses. In addition to finding great people, they have also done a fabulous job of building a strong collaborative culture. You don’t have to go much farther than Glassdoor reviews and LinkedIn posts to see this in action. This is a team that is getting positive reviews even post layoffs and is actually taking steps to help impacted individuals. I am excited about Opencare’s prospects mostly because they have built a great team and I believe that a strong team is the foundation that any business needs to succeed.
Healthcare as a market - Opencare is attempting to bring efficiency in healthcare appointments, starting with dental practices. It really is a huge market and if they are able to execute well and are actually able to bring down their costs, this could become bigger than what it is right now.
Opportunity to be more than a customer acquisition channel - Currently, the dental practices use Opencare as a marketing and customer acquisition channel. However, what if this relationship develops into something more? What if Opencare figures out a way to get recurring revenue from these dental practices? Building relationships take time and Opencare has invested multiple years in doing so. I hope that they can take advantage of this investment and serve more needs that the dental practices have, in turn, creating more value and taking a slightly larger cut of the revenues of 100s of practices across north america.
What makes me nervous about Opencare’s future?
Current business model - As I mentioned above, if you aren’t living under a rock in one of Opencare’s markets, you would have seen their ads and offers to book a dental appointment. These costs become very large very quick. They are literally buying demand in their marketplace by paying through gift cards. Opencare’s website states that “Patients love Opencare, giving us a net promoter score higher than their iPhone and Netflix”. Netflix doesn’t give $100 giftcards to its viewers to watch its content. Apple retails Airpods at $219 in Canada. No free Airpods. Unless Opencare is able to charge dentists more than what they are spending on finding patients, they are making losses. While I don’t know their numbers, these costs are just too high and don’t reflect a solid business. It isn’t really new in the world of startups to spend $2 for a revenue of $1. However, when startups spend that kind of money, it is with the expectation that once a user is acquired, they would continue to use the platform and over a period of their life on the platform, they would become profitable. Let’s say a ridesharing service gives you a $10 promo to try their platform for the first time. They are hoping that in all likelihood, you will enjoy the service and will use their platform again in the future. The company has lost the first $10 but will likely make $20 in your 2nd, 3rd, 4th and 5th ride with them. The problem with Opencare’s business is that they don’t make any money when the patient goes to the dentist a 2nd time. Essentially their customer life time value is the same as the fees that they collect from the dentist for sending a patient the first time. If this fees is lower than the money they have spent on ads and offers, they have made a loss and will never make any money on this customer again. This isn’t a great business model.
The next section is only for those of you who may consider interviewing at Opencare in the future.
Interview Guide
This section is only for those of you who may consider interviewing at Opencare in the future. I hope that Opencare continues to thrive beyond covid-19 and expands the team in the future.
Although, I will not be sharing the exact questions that I was asked in my interviews at Opencare because of the NDA, below is a list of questions that I scraped off Glassdoor and other sources to save you some time. Generally, the organization is big on culture and values. So, prepare well for behavioral questions.
Tell me about yourself.
Why Opencare? Why this role?
Which one of our core values (found on the website) do you identify with most? What about the least?
Tell me about a time where you used data to make an important decision in your personal life.
Tell me about a time you had to bend the rules to get something done.
What is something your current manager would say you need to improve on and something they like?
Tell us about a process that you have developed in your previous work?
How would your current manager rate your performance?
Describe a time when you didn’t agree with your manager? How did you handle the situation?
Someone is not giving you a clear “yes” or “no” response to one of your requests. What do you do?
What do you do when a colleague challenges one of your ideas?
Please describe a time where you failed to meet expectations. What steps did you take in order to meet what was expected of you? What were the results?
Describe an instance when one of your mistakes impacted the work of someone else on your team?
Give an example of an inter-personal conflict at work that you had to deal with. How did you resolve it?
What motivates you at work? What does success mean to you?
What do you do for fun?
What does diversity and inclusion mean to you?
What kind of people do you not work well with?
What do you usually hate doing in your role, but you find it usually mandatory?
Why would you NOT take this role? What’s the real reason that you might turn down this role if it was offered to you right now, on the spot?
That’s all for now :)
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You were asked to sign an NDA as a part of your interview process?