An Interview With David Gelbard, Founder & CEO of Parachute Health

David Gelbard is the Founder and CEO of Parachute Health, a New York City based healthcare technology company aiming to digitize the post-acute durable medical equipment (DME) space. They recently raised a fresh round of funding, led by Insight Venture Partners, and we sat down with David to talk about his efforts to drag healthcare kicking and screaming into the 21st Century.

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Tim: Like many founders in Healthcare, your entrepreneurial story begins with a personal one, so why don’t you tell us a little bit about why you started Parachute in the first place?

David: About 4 years ago, my dad, when he was 78, ended up going to the hospital for life-saving spinal surgery. The surgery was a success and it was a really wonderful day. Unfortunately, upon arriving home the walker that was supposed to arrive never got there. The hospital sent the order across via fax to the equipment supplier and it never actually got to the house. My father ended up falling; 4 years later he still goes to rehab because of the fall, still trying to fix what’s going on, but it’s just like… when you call back into the hospital and ask them why they screwed up, they just say, “well we faxed it.” For something like an oxygen tank, a walker, a wheelchair – things that you need for day-to-day living – it’s just insane to think we’re still using methods of communication like a fax machine in 2018.

At that moment I just felt that it was such an awful thing, an emotional rollercoaster for me and my family. I had a friend’s wedding that weekend that I didn’t go to – my sister had told me it may be the last weekend with our dad. And for him to get through surgery and then fall, it put a bad spin on such a wonderful thing that he had made it through.

So the company was created to make sure that this never happens again, to any family. The concept of a more efficient means of ordering DME – it’s just a no-brainer – it should happen. It’s a real problem that needs to get fixed.

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Tim: So as you dug a little bit deeper into this space, what surprised you the most?

David: Two things shocked me: One is that other critical services use the fax too! Home care, ambulance, nursing home, orthotic, wound care – you name it, the fax machine is involved. It’s not just our special corner of the universe. It’s all of the things that get ordered from facility to facility or outside the four walls of a hospital, and that was pretty mind-blowing.

The second thing is this idea of insurance documentation; that today, to get something covered by an insurance company, you have to memorize as a social worker or a nurse or physical therapist tens of thousands of products, for hundreds of insurance plans, for twenty thousand different ICD10 codes, for multiple zip codes. These unique 5-10-20 questions count as the criteria to get things covered and no one knows them! The whole idea that when you use your insurance card, that you feel incompetent – that you don’t even know if you’re covered or not – it’s just something that’s out the door. There’s such distrust, or lack of confidence in the insurance card. That to me was really something – just how global of a problem that is; the level of communication across healthcare – that’s obviously a few things, but… healthcare I think is in the early innings of where it needs to be, in terms of technology and building out an infrastructure. I really think we’re in the first inning of a major healthcare transformation. The things that you think should happen – like not having a fax machine, are still the modus operandi of healthcare.

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Tim: It is mind-boggling, if you think about it. No other industry that’s critical to the health and well-being of every person on the planet does stuff this archaically. It’s a little goofy.

David: To use one analogy: imagine going to a restaurant, giving someone your credit card, and then they fax the bank waiting for a response before they serve you. You’re ordering food there. In this case, you’re ordering an oxygen tank so you can breathe.

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Tim: The other thing too, is that this space you’re in is fragmented. There’s widely varying degrees of sophistication in the buyers of a platform like Parachute. So how do you get them to think differently about such ingrained ways of doing things?

David: At the end of the day, we have all different users that have all different levels of technology expertise. The key thing to always keep in mind is that these are people, and people are nervous about change. As long as you’re able to understand what their concerns are and bring them up the curve in a way that they want – in an easy way – then at the end of the day, our company, is going to be successful.

So how do we handle that fragmentation? First: One is how you comfort users through the change process. Healthcare rapidly changing is scary and hard.

The second bit is how you deal with the fragmentation in the types of buyers… it has to do with building a product that’s seamless, so that someone that has no sophistication, and someone that has a ton of sophistication can utilize it all the same. The Apple iPhone did that. Whether you’re someone who picks up an iPhone for the first time, or an avid tech user, you can use an iPhone. You just make things so simple, and have such good service, that people don’t even notice the change. They just say, ‘Wow, that was a much easier way of doing it than before.’ I think the problem that many people have is that they don’t know how to simplify the complexity. Healthcare for sure is complicated, but if you figure out a way to simplify things in a way that is understandable and digestible, then you handle the fragmentation by having a product that’s good enough that other people will tell everyone else about it. Then you don’t have to go from door-to-door when other people are sharing their positive experiences with others. I think getting to a place of durability only comes when a user has a really amazing experience.

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Tim: At this point you’ve raised a couple of rounds of funding. What are your biggest takeaways with respect to the funding environment, in Healthcare Tech specifically, and how investors’ expectations maybe have changed in the subsequent rounds that you’ve raised?

David: I think the funding environment right now is still pretty positive. I think it’s changed a bit where there’s been more of a migration towards sound business models, real traction, big markets, and more of the fundamentals of what makes a great business, as opposed to an idea that fits into a market that people want to go after. I think there has to be a little more demonstrable traction to be able to get investors today versus, say a couple of years ago, when you could have any idea, and whether you showed execution or not, there was so much capital chasing few ideas that you’d end up raising from somewhere. I do think that the market still has a lot of capital to deploy, but my perception is that investors are becoming a little more focused on business models that have a lot of viability and traction.

The second thing I’d say is that healthcare as a specific vertical is quite different than others. It moves at a somewhat slower pace, and people are a lot more risk-averse about trying new tech, right? Because at the end of the day, if the tech fails, it might mean a patient’s life. So the level of anxiety is just a lot higher than other markets.

I think that the upside is there, but what probably happened over the past few years is that people just didn’t see the traction they were expecting, because either there wasn’t a realization of the sales cycle, or they weren’t building something that was really a product. And most technology we’re finding in healthcare is adding time to someone’s day, and no one has time for another technology tool. The thing about Parachute is, we’re replacing someone’s fax machine. So what takes an hour right now using outdated legacy technology takes a minute or two on our platform. We’re actually giving someone back an hour a day. Very few technology platforms in healthcare are actually built for speed and for getting things done in a more efficient way, but we are. And I think that’s why we were able to see success through the fundraising process, because the business model is sound, the team surrounding it understands healthcare and is really strong. And you know, we’re solving a real pain-point.

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Tim: You just mentioned your team, which has been growing rapidly, with a lot of your funding going to building a great organization. Along the way, how do you think about company culture – what is yours, and how do you make sure that you consistently hire for it as you continue to grow?

David: The one thing out of the gate that we are steadfast on is a mission-oriented culture. People who care about others. At the end of the day, we’re helping people, and you want people who aren’t just looking for their next stop or a fast-growing startup. You want people who care. Every fax machine we get rid of, is people we’re helping. That’s something that most of the people we’ve been able to attract have felt in their core. And to me that’s the start – you want to build something bigger than yourself. You get one life, and you want to have a business that actually helps people. There’s an element of ‘it feels good, and you can make money.’ Those values matter, you know?

The second thing we look for, is people who are incredibly confident, and know how to work hard. What we’ve done really well at, is finding people who are scrappy enough to get things done, but are strategic enough and thoughtful enough to think through problems. So they’re not just patching things together to get it out the door, but they’re thinking of the long-term trajectory for the business, how to fit things in, and you wind up getting a lot of people internally who punch above their weight class and collaborate really well together.

The third thing, to me, is that someone has really impeccable communication skills. As the team scales, there has to be an element of information flow across the business, and we’ve found a lot of great success in people who are strong communicators, to our partners, to our investors, to internal teammates. And that’s been able to elevate us quickly. Great communication is a core value of the culture.

The last thing I’d say is that something we push internally is to constantly innovate and push new ideas. So there’s something you see across management teams is that they’re incredibly passionate about getting to the right answers. Digging up ideas, innovating, and not just devolving into group-think is always a big thing. Someone who speaks through problems and is logical in a coherent way. So people can beat up the line of traditional thinking and get to the right answer. And having an honest, open space – a protected space – so people can critique their ideas and not feel judged, but rather feel supported and challenged. I started thinking about our culture in team meetings – people who like working with us are people who like having an idea, aren’t stubborn enough to say that’s my idea and that’s why it’s right… but who say this is my idea, this is why, and get engaged enough to get to a thought-provoking answer. There’s not always a right answer – but many times there is. And I think we’ve fostered a culture that never just says ‘yeah that’s good thank you,’ right? If it’s the right answer, sure. But many times it requires teamwork. There’s no one person who creates Parachute, it’s a team. That’s one thing we harp on internally – it’s never about one person, it’s the team collaboratively.

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Tim: So what keeps you up at night?

David: The thing that keeps me up at night is the level of opportunity right now in Healthcare Tech. You can look across the market and see all these opportunities. Obviously that’s a positive. The negative is that that’s a distraction. You see all these opportunities, and the key thing to remember is that not staying focused is an Achilles heel of almost every early-stage company. Because there are only so many people on your team who are only capable of so much, even at 100% capacity or 120% capacity…. And anyone’s eyes looking at this market have got to be bigger than the capacity of their team, especially as an early-stage company. That’s the way I feel. So remaining focused while putting opportunities on the back-burner is one of the hardest challenges – and what keeps me up – because you see an opportunity and you want to attack it. However, often times it’ll wind up being the downfall if you push forward with it.

The other thing that keeps me up is continually attracting great people. We have such a phenomenal culture – we have smart, caring, thoughtful people internally. It’s just about being super-focused on that inner core of people. At the end of the day, yeah it’s a great business model and a great market, but if you don’t have those people internally to get together as a team and go attack it, it’ll never work. So, we have to have such a focus on people, and making sure everyone internally who comes in, they feel good, they get integrated well, and they continually grow inside the organization as well.

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Tim: Everyone is talking about value-based care. And to a certain degree every new healthcare organization is trying to figure out how to live in that world. So how do you see Parachute helping its partners achieve their value-based care goals?

David: Value-based care if you simplify it, just means getting closer and closer to a fixed-revenue target, and if an outcome doesn’t work out well, you have incremental costs. What’s happened is that healthcare more and more isn’t just ‘let me bring someone to my hospital or nursing home and do as much as I can for them and not keep costs in mind.’ So how is Parachute impacting that? Right now when someone leaves the hospital, there is next-to-no visibility when it comes to medical equipment. No one knows if they got their oxygen tank, no one knows if they got their wheelchair or walker. And it turns out, 15% of the time, wheelchairs, walkers or oxygen tanks either never get to the patient or get there later than anticipated. And it creates a 60% increase in readmissions, which is a staggering statistic. Until value-based care, Parachute never mattered. Once you discharged someone, it was ‘best of luck to you.’ But in today’s world, value-based care needs Parachute, and obviously vice versa. Because if you want to make sure that someone you’ve discharged has an oxygen tank to breathe, or has a walker to get to the bathroom or go to the kitchen, then at the end of the day we fit squarely into the new paradigm of healthcare, which is ‘we have to take care of the patient outside your four walls, and cost is a consideration.’ You choose how that impacts their care, or the supplier you’re choosing to work with. All that data, all that reporting that flows back in through Parachute is critical to making decisions on who should be in your network and who’s taking care of your patients in the most optimal way.

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Tim: What would you want to leave readers with, knowing that this is a pretty diverse cross-section of folks in our industry – investors, entrepreneurs, people within all functional levels of an organization, and even potential future Parachute employees?

David: If you’re looking to be part of a company where you have a ton of autonomy, working on real problems in Healthcare, and working with a team of people that are exceptional, and are truly mission-oriented and have a wonderful way about them – then I think Parachute is a great partner. Every day that we grow and are moving forward, real people’s lives are being impacted for the better. There are very few times you have that immediate gratification, but when you help educate someone in healthcare on technology, when you help someone’s mom or dad who’s a patient get what they need on time and it saves their life, there’s few things that can get you so excited when you wake up in the morning. And when you’re surrounded by great people, there’s nothing better. One of the things I’m most proud of is the people we bring to the table, and that we’re really solving things for people’s families. That was definitely one of the intents of the business when I first started, and I can definitely say that the core of that rings true today.