Ignoring Assumptions – How Cedar Closed a $102M Series C During the Height of COVID-19
Florian Otto, Co-Founder & CEO of Cedar, recently shared his journey from wanting to become a maxillofacial surgeon to founding a successful patient payment and engagement platform for hospitals and health systems in New York. In part two of this Coffee Session, Florian talks to Christian Busch, Program CEO of German Accelerator New York, about Cedar’s successful Series-C led by Andreessen Horowitz despite COVID-19, how to nourish investor relationships, the mentors alongside him, and his guiding principles as a leader.
Florian Otto, Co-Founder & CEO and Arel Lidow, Co-Founder & President of Cedar (©️Cedar)
You just closed a $102M Series C led by Andreessen Horowitz – Congratulations! Can you tell us if and how the current situation around COVID-19 has impacted this funding round?
Contrary to what most people might think, we didn’t start planning this round before COVID-19 hit, and the coronavirus actually didn’t have that much of an impact on this investment. Sure, we couldn’t meet in person, but that didn’t stop us from moving forward. I think that smart and thoughtful investors are still investing despite the pandemic. A firm like Andreessen Horowitz doesn’t just look at the next 3 months but tries to foresee where a company will be in 5 years. So while COVID-19 might slow things down in the short run, I feel it is accelerating technology, especially in the healthcare sector.
You also have a very prominent investor from Los Angeles – Ashton Kutcher. How did Ashton Kutcher end up investing in a company like Cedar?
Ashton [Kutcher] is very passionate about healthcare and building products. In an interview with us (Cedar), he shared that his investment philosophy is to “bet on people and products that are in it for the greater good.” He has invested in multiple healthcare companies, such as Pager, Forward, and Medinas. When we first talked to him, I think he just had his first baby, so the issues we’re trying to solve resonated with him. He realized that it makes no sense that one can buy Starbucks with one press of a button, but we need to write a physical check to pay your healthcare provider.
You have a mix of investors from Europe and the U.S. How do you convince European investors to invest in a purely U.S.-focused company?
Our two European investors, Lakestar and Kinnevik, were both already active in the U.S. Lakestar was through a personal relationship as I knew their team previously. While their portfolio is not focused on healthcare companies, I think they invested more in the team than the industry. They also didn’t price the round but co-invested in it.
Kinnevik led our $36M Series B round. They have a vision and are passionate about healthcare and technology in the U.S. They wanted to get into that space and have previously. One of their first big investments was Livongo, which is now valued at over $6 billion – a huge healthcare success story. One of our board members also sits on the board at Kinnevik. Usually, it would be difficult to explain to a Swedish investor what we are doing, but as Kinnevik has a strong focus on the U.S. and digital health already, they understand the U.S. healthcare system and are excited about what we are building.
Many founders assume they can just come to the U.S. and quickly raise money within the first few months. How important is it to have an introduction or establish a connection with an investor?
It’s not that easy. You want to have investors that can somehow help you along your journey because money isn’t the only thing. I encourage every entrepreneur in the U.S., whether they are German or not, to have an influential U.S. investor involved in your company. European investors don’t have the perspective or won’t be able to help with a lot of things regarding the U.S. market, as their relationships, the talent they can introduce you to, and their expertise are focused on Europe. While some European investors, such as Kinnevik, will have deep connections in the U.S., it is still different from our other investors, Thrive Capital or Founders Fund, who are New York-based.
You have very good relationships with your investors. What are your top tips to nourish and maintain a healthy investor relationship?
We obviously get access to our investors’ networks and resources, but that’s kind of their duty. Andreessen Horowitz, for example, has more than 100 people that can help with recruiting, finance, marketing, PR, etc., which is something I was very excited about.
More importantly, they help me as a CEO. For that to work, you must understand and accept that a good investor relationship is a two-way street. For your investor to be able to help you, you need to be transparent and let them know what’s going on. My tip is to share as much as possible because mentors and business partners can only support as much as they know. Sure, you don’t want them to be too involved because it’s your business to run in the end, but you should be open to informing them as much as possible. That’s the only way they can help and provide guidance.
I’m super excited that we have such a strong investor. Scott Kupor, Managing Partner at Andreessen Horowitz, will be joining our board. He has a lot of operational experience, so I look forward to exchanging ideas and working very closely together.
You’ve had a wide variety of experiences. Do you have one or two people that you consider mentors? People that still really help you advance and progress?
100% – My mentors have changed a lot along my career path, and I think having mentors from different backgrounds and with diverse expertise is imperative. It’s not necessary to have a mentor that is better at everything than you but someone who has different perspectives and knowledge.
For example, I consider Bethany [Hale], our Head of Marketing at Cedar, a mentor when it comes to communications. She’s just so much better than I am at marketing, and I can learn so much from her. Then there are other people I seek out regarding general business questions. For this kind of guidance, Nat Turner, from one of our investors Flatiron Health, is someone I go to often. And then there are people I ask for advice on technology or people management. Having a strong network and group of people you know you can reach out to when you’re struggling with something is crucial.
That’s wonderful! Being a leader yourself, what are your guiding principles?
There are a few things that are extremely important to me, and this is also being reflected in our company. To me, a company’s values are a reflection or an extension of a founder’s principles.
First and foremost, you need to focus on your vision. There are many exciting things to work on and do, but if it doesn’t solve the problem and doesn’t focus on why Cedar exists, it may be something we want to do outside work. We have to push forward relentlessly and work towards our mission.
Secondly, you don’t want to be mediocre. If I (or we as a team) start being ordinary, we cannot develop exceptional products. We need people that have the drive to strive for excellence. Being mediocre isn’t going to get you anywhere.
Next, and also extremely important, is to be positive and open to feedback. As an entrepreneur, you will make mistakes, and there will be setbacks. I firmly believe that it’s essential to learn from them and move on. Trust me; it’s worth it. If you make a mistake and can learn from it, it’s a great achievement. And be open to feedback. Don’t take feedback as something negative or see it as someone pointing out your weaknesses. Look at feedback as something that can help you grow.
Further, I want people to use their best judgment. We want to give our employees a lot of freedom because I think that freedom nurtures creativity. I’m not the type who likes to micromanage – I don’t think that helps people excel.
Also, in a growing company, there are little to no rules. Everyone is trying to figure out what might work best and what doesn’t. That said, I encourage people to use their best judgment when facing an uncertain or complex situation.
And last but not least is transparency. Everyone at Cedar is an extension of the family and deserves to know what’s happening. We share a lot of information with the entire team, and I trust that it’s not being carried out externally. When we have a board meeting, everyone is in the loop and sees the board presentation. Everyone also knew about the financing round. How else would the team understand why I’m acting strange because I’m a little stressed out? Everyone needs to know what’s going on.
With COVID-19, companies had to adjust. In times of a crisis, some companies will lose, some will get by, while others will come out stronger than before. Where do you see Cedar in this?
I think we will come out of this strong in the long run. In the beginning, when the pandemic first hit, there were some hiccups. But overall, we are in a highly stable market, and our product delivers so much value that I am confident we will be fine. COVID-19 is terrible for humanitarian and economic reasons. At the same time, it might have given the health system the wake-up call it needs to start changing. If everything is fine and one doesn’t get challenged or forced to change, you don’t even know what you’re capable of. Healthcare systems realized it doesn’t take five years to switch to telemedicine. Instead, it only took two weeks to adapt. We would have never known had we not gotten forced to adjust. The coronavirus uncovered some hidden powers we didn’t think we had, and we realized we could change. And you know what, even if something is not a hundred percent finished, we can work with that and figure things out along the way. That’s something very positive we can take from this situation, not just for Cedar but for many other companies as well.
You mentioned that when COVID-19 first hit, there were some struggles. What were those, and how did you overcome these challenges?
Internally, we needed to switch to a complete remote model, which was new. It took a few weeks to get the communication and infrastructure right. Now, we are set up for remote work and will continue to get better. I can see us returning to the office once things return to “normal,” but I’m sure we will continue to have people working from home because we’ve seen that it works.
Conducting new business with hospitals or health systems was also difficult for obvious reasons. When the pandemic hit, hospitals were busy dealing with this imminent threat, trying to get ventilators and ICU beds, so nobody thought of adopting a new technology, which is understandable. Additionally, the procedure volume was down in the entire U.S, and non-life-threatening treatments and surgeries were pushed off to limit the spread of the disease and focus on COVID-19 ICU units. In the long run, I’m optimistic this won’t have any negative effects on us, and we see this as an opportunity to make changes on our end.
And last but not least, what do you think makes an entrepreneur?
To be an entrepreneur, you first have to desire to be an entrepreneur. Don’t become an entrepreneur for monetary reasons or because everyone expects you to be a self-starter. To me, an entrepreneur has this internal drive to create something of their own and solve a problem. A true entrepreneur is someone extremely passionate about finding a solution. That drive is what pushes entrepreneurs through setbacks and helps them overcome obstacles.
Did you miss part one of our Coffee Session with Florian Otto? Read about his journey from wanting to become a maxillofacial surgeon in Freiburg, Germany, to founding a successful patient payment and engagement platform for hospitals and health systems in New York City here.
About Florian Otto:
An accomplished entrepreneur and former physician, Florian now drives growth and sets overall direction across all facets of Cedar’s operations as CEO. Prior to founding Cedar, Florian was VP of Sales at Zocdoc, where he drove the commercial adoption of the platform. Florian also founded a daily deal company in Brazil (ClubeUrbano) that was eventually acquired by Groupon. After the acquisition, he became Chief Executive Officer of Groupon Brazil, growing the company to one of Groupon’s top three international markets. Florian began his business career as a strategy consultant at McKinsey & Company within their healthcare practice. Florian originally is from Bremen and holds an M.D., D.D.S., and Ph.D. from the University of Freiburg, Germany.
