Armando (0:00 – 0:41)
Hi, I’m Armand Roman, host of the Founder’s Guidepost. You’ve built your business over decades, and now it’s time to think about that once-in-a-lifetime exit. You’ve come to the right place.
Here, you will hear business exit professionals talk about what you should know before exit. Besides hosting the Founder’s Guidepost, I’m CEO and founder of Axiom Founder’s Family Office, working with founders to help preserve their American success story. And it all begins with a founder stress test.
We also host the Scottsdale Founders Forum for the founder considering exiting in the next 36 months. Here’s to your hard work and to your American success story. Enjoy.
Hi, Heidi. How are you?
Heidi (0:42 – 0:51)
I’m well, Armando. Thank you so much for having me on to do this with you. I’m really excited to share a little bit about my story and hopefully help some folks out there.
Armando (0:52 – 1:38)
That’ll be great. I’ll just do a quick, for the audience here. The audience here are typically Arizona founders who’ve built a really nice business.
They think they can scale it with the right help, with the right team, the right people, and the financing, et cetera. And people have, of course, seen what you’ve done with WebPT as the co-founder of WebPT. You started not that long ago, and you’ve really grown and just become a shining star for our beautiful state of Arizona.
So I’ll just introduce you quickly here, Heidi Judenga, co-founder of WebPT. And if you could speak, Heidi, just a little bit about what was the genesis of the company and where are you? Where did you start?
If we can start at their place.
Heidi (1:40 – 5:17)
Yeah. I am a physical therapist by trade. I have my doctorate in physical therapy.
I practiced in sports medicine and outpatient orthopedics for a little over 10 years before the idea of WebPT started. I had risen to the level of a clinic director, which you have P&L responsibilities over one of the largest practices actually in Arizona for sports medicine. And you have to take yourself back.
This is back in 2005, 2006. And anybody who’s been around healthcare recognizes that one of our biggest sort of obstacles is every year just seeing our reimbursements declining because of either insurance payment cuts, Medicare cuts, things like that. So, you know, when you’re running a business and your top line revenue is either staying stagnant or starting to decline, you have to look at your expense line.
One of our biggest expenses was transcription and dictation at the time. Physical therapists see patients often more than just, you know, once a year, like many physicians do, or upwards of 10 visits on average per patient. And so that generates a lot of documentation that we have to keep our referring physicians updated on patients.
And so we were doing all of that by pen and paper back in the day. And so around this time, the HITECH Act had been passed in which basically was a mandate for providers to move to more of a digital electronic medical record process of doing their patient documentation. And so we decided, well, let’s go out and do some research.
I happen to be dating a software engineer, an entrepreneur at the time, and we did a little bit of research and we found things that were very clunky to use. They were server-based, meaning that I would have to spend a lot of capital expense to just get up and running with this platform and was not something that was feasible for even the practice size of my own, the one that I was running. And so we put our heads together to essentially solve a problem that I was just having in my practice to reduce these expenses on this documentation process.
It took us about, I don’t know, 14 months to build version one, which was just, again, being used within my practice. We got the feedback from my therapist, provide iterative process through building things a little bit better. And about in that time, we built a platform or a piece of software that actually was being used by our therapist, giving us positive feedback.
So the next step was really like, hey, some of my colleagues started asking me, hey, what are you guys doing over there? And before we knew it, in the next sort of six to eight months, we had about 12 other practices up and running, giving us positive feedback, continuing to iterate on the process. But most importantly, we didn’t pay for that software in which they found value in what we had built.
And so that’s when the light bulb really went off. And this was in 2008. We did a little bit of market research and we found that 80% of physical therapists across the U.S. were basically in the same problem and having the same dilemma. And so they were spending a lot of money in documenting it. Decided to launch the company in February of 2008. And that’s where the whole story sort of really starts.
Armando (5:17 – 5:39)
So this is a problem that you as a physical therapist were having in your clinic. And to solve that problem for you and you as the clinician, the practicing physical therapist, you knew what the problem was and you knew what you want, what would make it easier, better for you. And with that software designed specifically with you and your patients and your practice in mind, that’s where this started.
Heidi (5:40 – 6:41)
Yes. And that subject matter expertise, I think, is very key. There are a couple of things that, you know, as we reflect back, I mean, you said it wasn’t so long ago.
It seems like a long time, 16 years ago, we started this. Right. So especially as an entrepreneur in those early years, it feels like one year is like a dog year, time seven.
Right. So it has been a fast process, but have learned a ton. But in some of the things we’ve learned and given a lot of credit for in those early days was the niche market of our subject matter expertise and how vigilantly we fought to stay narrowly focused in that niche, which niche when we started wasn’t the niche of today.
Right. Everybody now talks about niches and it’s kind of the way to go. But we sort of were ahead of that curve a little bit and really stayed true to our subject matter expertise, which helped us in the long run.
Armando (6:41 – 6:54)
And so that was where you began as you think about where you are today for market share, for number of clinics, number of people you’re serving, employees. Give us a quick view of what that looks like today, please.
Heidi (6:55 – 7:41)
Wow. Well, yeah, it’s drastically changed from where we started, as you can imagine, with just a few people at the back of a coffee shop back in 2008 to today being a global company. We have close to 800 employees that are dispersed all across the U.S. as well as we have teams in India as well as in South America. And so as far as market share goes over this time, we are just shy of 50 percent market share in the outpatient sector. So, you know, just about 50 percent of practices that are in the outpatient world are using the WebPT platform.
Armando (7:42 – 7:43)
How does that make you feel to say that?
Heidi (7:45 – 8:47)
It has been an incredible journey. You know, the words technology and hygiene back in the day weren’t often used synonymously in the same sentence. So I have to say, like, you know, it was a big risk for me and my sort of where my education lay and what my sort of own professional goals were for myself to take this leap of faith into technology.
Obviously, I wouldn’t change anything. But what drove me in those days of decision making, of leaving clinical practice to really drive into this technology world was all about impact. And the reason I became a physical therapist was because I love to help people.
And once that sort of light bulb goes off to understand that I was going to be able to help even more patients, even more of my and help my colleagues in this new venture. That’s when I just said, we’re all in. Let’s go.
Armando (8:47 – 8:58)
Wow. Fantastic. Fantastic.
Right. As a as a physical therapist practicing, you can impact one patient at a time. But where you are today, the impact is just incredible.
[Speaker 3] (8:59 – 8:59)
Yes.
Armando (8:59 – 9:33)
Excellent. Yeah. Good.
So I’ve got a couple of questions I’d like to ask you. So when you began, you know, obviously began, like you said, here locally in Arizona, and I’ve got about 50 percent, 50 percent of the market share all over. And to grow, often companies will seek venture capital loans, private equity.
All those are ways that people access more money so they can hire more people and have an even greater impact. When you began to think about that yourself, how was that? You had not done that before, right?
Heidi (9:34 – 13:08)
Correct. Yeah. So just to kind of set the timeline, we launched the company in 2008.
We grew the company from a bootstrapped position to a million dollars in run rate revenue. And at that point, we sort of were riding about to ride this crust of this wave of adoption of electronic medical records. Physical therapists were not part of the incentivization by the U.S. government for this adoption and move towards digitization of records and adoption of EMR. We were being pulled because of physicians being mandated and incentivized to do that. And we wanted to stay in alignment with that. And so in the industry, timing was everything for us in terms of being right there at the right time with a platform that resonated with the industry. And so we were in this fast growing sort of wave of adoption.
And that’s when we sort of decided in 2011, hey, we can keep growing at this slower pace because we were profitable. We were at a million dollar run rate. We had done that in three years.
But we had this opportunity in front of us to capture this moment in time and ride this crust. And so we pitched here locally to Canal Partners, which was led by Jim Armstrong, which is a very well-known entity today in the Arizona technology space. He was the founder of JDA Software who had grown his company to a multi-billion dollar market cap, had taken the public and then private and started it all out of a garage in Canada.
And so when he decided that we were going to be a company that he wanted to invest in, we obviously were thrilled and took his investment in in 2011. He invested a million dollars into the business. And we’re happy to say we were one of his success stories in which we turned that million and grew the company to 20 million by 2016.
And so at that point, we picked our heads up again. Again, this was a story of never needing money, but truly knowing what we could do if we had invested capital. And so in 2016, we decided to take a venture capital round in.
We did a big process, which we can talk about more because that was a lot of distraction and time and energy, but came out with a good ending with partnering with Battery Ventures out of Silicon Valley, who became our venture partner in 2016, in which they took a slight majority stake in the business. And we can also talk about that. And invested in the company in which we took that company from just over 20 million to in 2019, 100 million business, in which at that point, again, picked our head up, decided that we wanted to continue to grow and truly, really continue to build the business even larger.
And that’s when we sold to private equity in 2019 to Warbird Pincus.
Armando (13:09 – 14:14)
Wow. Amazing. So you’ve taken a few hurdles here where, as you said, a leap of faith, but you saw the potential, you saw what was there.
And I remember back at that time with Electronic Medical Records, the doctor’s offices were all fretting over, how do we do this? And it was all brand new territory that they had to do. And that wave, as you described, was an opportunity that you saw, you recognized it, and you needed capital to really make it work for you.
So when you took on that first million dollars, sounds like it was a great partnership between the JDG software founder and yourself. How did you know what to do? How did you know what your company was worth?
How did you know what to give up in exchange for that million dollars? How did you know this was all new territory for you? How did you navigate that?
And what kind of help did you seek to help you understand and make good decisions as you went through that?
Heidi (14:15 – 17:42)
Yeah, we had a lot of help. I mean, I will just say that the technology community and the startup community was not what it was today. And I’m just so happy for founders today who have you know, resources like yourself and others that are now available.
So my co-founder, Brad, had been in companies previously that had gone through similar processes. So he’d been a part of a company as a CTO that had gone through processes like this. So he’d experienced it as more of an employee or an executive.
And then we actually looked at a few different resources locally. Arizona State University had started their sort of journey into this now, which is just a huge part of their university, of their entrepreneurship program. They called it startup prep, I think it was called.
And essentially, it was the beginning stages of learning how to build a deck, tell your story and know how to pitch, learn how to pitch. And so we went through that process of learning and that’s where we actually put our pitch deck together to pitch at the Arizona Investors Forum, in which that’s where we met Jim Armstrong. And so that was one of the resources we used.
And then, of course, with Jim’s background and also, you know, he opened doors to other entrepreneurs, to other people that he knew and his sort of network of folks that helped us along the way. And I will say the one big decision that was instrumental that not many founders would be willing to do, and I will just say it was a tough decision for us. But when we decided to go with Canal Partners, we also took on a CEO into the business.
And he was a seasoned CEO who had grown other companies from startup to $20 million. So he was right in the right wheelhouse. He had the experience of exactly where we wanted to go in that time frame.
He had actually never been a CEO before. He’d only been a COO. And so that operational expertise was something that complemented the two of us with Brad being very competent on the technology side, and then me coming in with my subject matter expertise and operational background as well, and people skills.
The three of us were known as the trifecta. But that was a big, and you talk about these leaps of faith that you risk taking that you have to do alongside to grow it. And, you know, bringing on a third-party CEO, I mean, he had been sort of hanging out with us for about, and giving us, like, he was a resource to us, mentor, if you will, as we went through this process of pitching and, you know, refining our processes a little and giving us sort of tidbits of information and tidbits of things that we should think about, which a lot of things we liked and implemented. And so it made us much more comfortable to go and make that decision of, hey, we’ll be the trio here that leads this company to sort of the next leg of the journey.
Armando (17:42 – 17:47)
Yeah. And so the CEO came on board along, or at the same time as that $1 million investment?
Heidi (17:48 – 17:59)
That’s right. Yeah. His name was Paul Winandy.
And like I said, he had been a COO previously and had a lot of experience in growing companies.
Armando (17:59 – 18:01)
Yeah. About how many employees at that time did you have? Do you recall?
Heidi (18:02 – 18:08)
Yeah. We had probably, I think at the time of the investment, we had about anywhere from 12 to 14 employees.
Armando (18:08 – 18:09)
Very small company still.
Heidi (18:10 – 18:11)
Yeah. Very small.
[Speaker 3] (18:12 – 18:12)
Wow.
Heidi (18:13 – 18:57)
That is one of also things that we get credit for a lot is our capital efficiency. You know, being a bootstrap company, like that was part of our ethos is just, you know, being capital efficient. And that really sort of set us on a trajectory as we’ve gone along to have that sort of mindset, which allowed us to be, you know, somewhat profitable at even that first investment phase where we didn’t need money.
We could have kept going and growing at a pace that was comfortable, but not at the pace where we felt like we wanted and needed. And also the demand in from the market. That’s always what investors want to see, right?
That the demand is higher than what you’re able to actually fulfill.
Armando (18:57 – 19:14)
Right. Right. So you could have not taken that money, not taken on the CEO, continued growing at a different pace, but rather than do that, you took that leap of faith, accepted the funds, brought the CEO on board, and that helped you get, like you said, from one to 20 million in revenues.
[Speaker 3] (19:14 – 19:16)
Is that right? Yes. That’s right.
Armando (19:16 – 19:30)
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If so, go to axiomcorp.com.
Heidi (19:30 – 20:29)
And then at the 20 million revenue, that was when, you know, there were, we were growing at a great pace, but there was opportunities in the market for acquisitions that would allow us to then even leapfrog and speed up our growth even more with pieces of technology that, at that point, we had to decide, it’s the big decision, buy versus build. And you’d spend a bunch of money to build something, and it might take two years, or you could spend a bunch of money and buy something, integrate that into your platform, and have that in a much shorter period of time. And so, you know, we did our diligence on a few potential acquisitions, and that’s really was part of the story with Battery Ventures coming in to use that funding to help us grow even faster with a few acquisitions that we made.
And we made quite a few during the time that Battery was our partner in the business.
Armando (20:29 – 20:38)
And Heidi, those acquisitions, they were acquisitions of companies that had developed complementary software to yours?
Heidi (20:38 – 20:39)
Yes.
Armando (20:39 – 20:41)
Okay. Yeah.
Heidi (20:41 – 22:05)
So, for example, we had in the, built a scheduler, we had built other sort of ancillary products that were complementary to our electronic medical record. But initially, we never, we partnered with companies to do our billing, for example, our revenue cycle management and our medical billing. And as, you know, the industry was maturing and understanding technology, they didn’t want to have two partners in the business side, they wanted to have one platform that did it all.
And so that was really our biggest acquisitions during that period of time was to grow the billing side of the business, which included a software, but also an acquisition of a company called BMS, which did revenue cycle management, which did two things. It allowed us to jump into this revenue cycle management, which was very lucrative and accretive to the company, but it also helped us to gain customers. So it helped us with our market share because they had targeted a midsize market, which we had started in the SMB segment, which allowed us to then sort of creep in and add to our market share in this mid middle market, which we had just started to penetrate in.
So again, acceleration of this in terms of how fast we could grow.
Armando (22:06 – 22:31)
Yep. So the acquisitions, how you acquired those companies, you bought them and brought them into your fold. Was the CEO, was he the one who was running those acquisitions?
Did you bring in an outside investment banking firm to do that? How did you get the expertise to know how much you should pay for those companies to acquire them properly the way it would make sense for the company?
Heidi (22:31 – 25:04)
Yeah. So we used to actually an investment banker to go through the battery process. That was like, going from a pseudo A plus round to, or angel round to a true series A with a major top 10 tiered a firm was a big leap.
And so we did the full investment banking process, meaning we partnered with an investment banker to help run our process to pitch to companies all over the country. I think we probably made 50 trips across all these different areas to meet and with different potential suitors who wanted to invest in WebPT. And man, was that a learning process, not only as a newer entrepreneur, but also as a female founder in technology.
There’s not many of us out there and there’s not many on the other side of the table either, women on the other side of the table. And so that was an interesting process that probably is for another day, but needless to say, we got through that process and made the right choice with Battery Ventures. Their expertise, so why do you end up choosing Battery?
Why do we think that was so positive? Well, A, they brought industry knowledge to the table. They had already been in healthcare.
They knew they had other companies that were SaaS companies that were similar to ours, but just in a different segment. Two, they brought expertise in having done major acquisitions with other companies. They introduced us again to other portfolio businesses who had experts within their organization of, hey, here’s how we ran this process.
It’s all about sharing, right? Because they want everybody to be successful. And so in that process of having their resources, we didn’t really need to go out and pay another investment banker to help us along the way.
We did our own sort of research. At this point also, we had brought in another CEO, right? So again, following this path of expertise, there are people who are experts from zero to 20.
And so now we were moving from 20 to a hundred, that takes a bit of a different expertise.
[Speaker 3] (25:06 – 25:06)
Exactly.
Heidi (25:08 – 25:28)
Who had done major acquisitions in her past, things like that. Nancy Hamm was our CEO during this period of from Battery through to 2019. And she had been with larger firms and helped to grow businesses even bigger than a hundred million, but definitely this was her wheelhouse.
Armando (25:28 – 26:18)
Yeah. And Heidi, let me just take a moment here to talk to the audience quickly, because you’ve mentioned a couple of things that I think are just so important. You talked about different specialists along the way.
On day one, you needed something on after that first million or at that first million, you needed something different. At the 20 million mark, you needed something different. So you went out and you brought different expertise on board because your company was then different at a different stage where it was.
So the people you bring on board as your company is growing will be different than those you might’ve had on day one. So I just want to make that point. So the audience hears that and understands that.
And as you continue growing, I’m sure that you will continue looking for the right expertise at that time for your company with the needs that you have out there.
Heidi (26:19 – 28:58)
Yeah. So I’ll say Armando, the secret to our success in being able to bring in leaders who were outside in, not a founder, continuing to lead the business throughout this entire process, was in the very beginning, being very deliberate with our development of our core values and the culture of the business. That has been, again, something we get complimented on as true, solid foundation on how decisions are made, the type of people that you’re trying to get into the business.
We use those same core values to evaluate and understand those CEOs that we’re bringing into the business, that they had to be aligned with those values and understand how that is going to help the company moving forward. I will say, as a founder in continuing to be a part of the business throughout this entire journey, although not being the decision maker, I’ve always been on the board. I have held a high executive level position in which I was part of the decision-making process and always looked at as an ally to the CEO, as far as subject matter expertise and relationship building credibility within the industry, sort of face of the business still, although not holding that CEO position.
That’s unique. I don’t know that there’s, A, a lot of founders that could do that because it is hard not being the decision maker on a day-to-day basis, but also to, again, stages of the journey. There are many founders that say, you know what, I love the chaos of the first stage.
When it starts to get structured and we’ve got to have hierarchy in the business, I don’t want to have anything to do with that. Or even this next phase, where now we’re in, it’s not only about just growth. Now you have to start thinking about margin and EBITDA.
How do you be more efficient and operationally efficient with your business? And so, personally, I am a lifelong learner. I have loved every stage of the business because I continuously learn and have had positive experiences with each one of the leaders we’ve had along the way and continue to see the impact that we have had throughout the years.
And so that’s what’s really kept me in the business for this long, but it’s definitely not for everybody.
Armando (28:59 – 29:16)
Yeah. I did want to touch on that because as you said, it is unusual that the you are still part of the business. You’ve gone from zero to, as you said, 50% market share, which is a tremendous growth in the company.
And you are still part of the company you founded, as you said, about 16 years ago.
[Speaker 3] (29:17 – 29:17)
Right.
Heidi (29:18 – 30:09)
Yeah. It’s an incredible journey. Again, there are days where I’m like, well, why am I still here?
Because it gets frustrating sometimes, just like in any business. I’m sure I thought that when I was making this leap of faith, and I know I did leap of faith in those early years from going from a very stable, like all of my education had led me to the top of my game as a physical therapist. I was seeing professional athletes.
I had checked all the boxes for the goals that I wanted to accomplish in my professional career and then took this leap of faith into technology, which I knew nothing about, had to start all the way back at the bottom. But again, that connection of my why and what I want, the impact that I want to have with my my life really drew me into understanding, wow, this could be even bigger than I ever dreamed before.
Armando (30:10 – 31:06)
Yeah, I do want to go back, Heidi, you talked about the million dollars that you took on the CEO at the same time, and you only had about 12 employees at that time. Yeah. That is a big decision point, obviously, that you made.
And I’d like you to touch on a little bit the factors as to why you didn’t become the CEO or the co-founder became the CEO. Instead, you brought in the outside person. That was a big decision.
And I’d say that founders probably with 12 employees would not do that. You did. And it sounds like it’s been a good decision for you and the company and the market share that you’ve acquired since then.
Could you go back to that moment and talk about the reasons why you did that? And for the audience’s benefit who might be in that same place themselves wondering, should they, should they not? Maybe talk about that a bit, please.
Heidi (31:07 – 32:55)
Sure. First and foremost, it was getting to know Paul and having clear expectations of how we would be running the business together. When I say Trifecta, it was truly a trio.
And I think that having three, having an odd number was good because just two, sometimes it’s just going back and forth. And one person is the decision maker and the other person has to just go along with it or vice versa. So when you have three, you can have consensus to where one of you also has to go along, but I think you can all get there because you have three very diverse sort of points of view from the business.
And I think that was really important to us as we are making the right decisions for the business. And all three of us brought very different expertise together. And so all of our combined knowledge and expertise together, we all complimented each other and we all respected what we brought to the table.
And that is super unique. I would say that is super unique and always hard to do. And I will say once we got to, even Canal Partners sometimes was a little leery of whether or not that was going to be sustainable because ultimately everybody always wants, hey, you just need one decision maker, right?
But it worked for us. And I’ll just say it started with just that respect and domain expertise that we recognized in each other that we needed to truly make the best decisions for the business moving forward. And so I have to give a lot of credit to Paul, to our CEO, because working with a husband and wife team also, by the way, that boyfriend became my husband.
Armando (32:56 – 33:09)
He was stepping into a different kind of partner relationship there. He might have asked himself, is this really a good idea?
Heidi (33:10 – 34:48)
I’m sure he probably did. But to all of our credit, we tried as hard as we could to leave business at the, or business was at the office and private, you didn’t walk in the door as husband and wife, you came in the door as business partner. Well, it’s easier said than done for sure.
But it worked for us and didn’t necessarily work out for the marriage. So that’s again, a whole other story. But we have a beautiful daughter, Ava, who was born through this process as part of the deciding factors in 2011, when we decided to go for this funding.
I was actually pregnant at the time going through this thing. So many stories reflect on as this journey has taken many turns, but just like many entrepreneurs, there’s going to be ups and downs. There’s going to be trials and tribulations and days that you just want to throw your hands up and say, I can’t freaking do this anymore.
It really does help to have a partner in the business, somebody who gets it and can pick you up or take the slack one day when you just need a day to go cry on your pillow. That really helps. So that formative team that you have in the beginning is so critical in terms of trust, expertise, but also more importantly, passion for the vision that you as a founder have created to get you through.
And those are really important things to think about as you’re starting your team is so critical in that beginning stages.
Armando (34:49 – 35:20)
Good advice. I’m so glad you brought that up because the audience is, a lot of times the founders feel all by themselves out there. They begin to second guess themselves.
They may be close people close to them, verbally verbalize that second guessing. Are you sure you should be doing this? Why don’t you go get a job instead?
And so it’s not all, it’s sure enough fantastic for you, but along the way, there are peaks and valleys that can be pretty low valleys emotionally as you go through building a business as you have.
Heidi (35:20 – 35:49)
Absolutely. Absolutely. And you, I mean, a lot gets talked about in terms of mental health through entrepreneurship now.
And I think it’s good to recognize those things and to have more resources now. And especially now that we have a bigger startup community that people can share stories and understand that you are not alone, that this is fairly normal to go through these peaks and valleys and support each other through it.
Armando (35:49 – 36:17)
Yeah. That camaraderie can be very, very beneficial for everyone. So another question for you going back to when you had about 12 employees and now you had the trifecta, you took in a million dollars, as you said, how did you know in terms, how did you determine what, what that million was worth in terms of you gave up some equity, most likely, or, or something?
How did you know that, that the exchange, that it was good, that you were actually changing yourself with what you were doing?
Heidi (36:18 – 39:14)
Sure. Well, you know, you have to establish a valuation of the business. And when you, you establish that in, I mean, in 2008, the, the multiples were not what they are today.
We were a very different time in the market. So really understanding, I think this is one of the harder things that, that entrepreneurs do. They always want to value their, they think their business is way about more valuable than maybe it really is.
So really understanding what the market will bear and coming to a fair value, fair valuation when you’re working with an investor, of course, the investor is always going to want that valuation to be smaller. And so you got to find this common ground to where there truly is sort of a market knowledge of what is the multiple going for? What is the opportunity that you have?
And that’s the biggest thing. Like your valuation is one thing, but it’s really the investor is going to evaluate on multiple things, the team, the opportunity, like what is the growth potential in the business? And then you know, execution wise, how are you able to, does it seem like you’re able to get there?
And then vice versa, right? This is one thing that I also, we tell, I always, always tell newer entrepreneurs that this is, it’s like a marriage when you go into have an investor come into your business. This has got to be a two-way street where you should be asking a lot of questions as well as what is their sort of culture.
Talk to other portfolio companies, if you can, to say, Hey, things are always nice when, when things are going well, but when shit hits the fan, how do they react then? Are they micromanagers? Are they really operators, but they say they’re not operators.
Do they want to be like, what do board meetings feel like? And what are the expectations of board meetings? Like a lot of these questions should be asked by the entrepreneurs before you get into any relationship with an investor.
And I’ll just also say like, we’re here. I’m also a huge proponent of bootstrapping, right? I think too many entrepreneurs want to just take outside money in too early when there’s only an idea.
And that’s when you’re going to give up too much of your company because you truly don’t know what your company is worth, right? We had a million dollars in sales and we knew that we were on this trajectory and it was very clear that with an investment in, into our business, we didn’t spend very much on marketing. So we could amp up marketing.
We had only a couple of people in our sales team, so we could add a few more salespeople. The market would bear it. We could spend that money on, obviously as we would grow, we needed to support them.
So we needed to build out a support team. Like it was very clear where that million dollars was going to be used. If we continue to execute on the path that we were going, that hockey stick was going to form.
Armando (39:15 – 39:38)
Wow. Wow. And so that valuation at that time you talked about, you know, with the million dollar mark, how did you engage, how did you, did you engage an investment banker to come up with a valuation and appraisal firm?
Or how was it more, you were brand new. There’s nobody else really in the industry at that time doing what you were doing, right? Or no?
Heidi (39:39 – 41:38)
Well, there are other SaaS companies, right? So we were a new SaaS company in the PT space, but there were other SaaS businesses that had, you know, been given valuations, other companies that you, when you go out and you just, I mean, there’s, you can pay for, you know, portfolio information and things like that, that you can understand what, you know, this is a lot of these are public too, that you can, you can find out what companies were sold for.
Investment company, investment banking companies put out these reports quite often when they’re soliciting your business, because, you know, they think they’re getting bigger valuations that you might, you might come to them for business. So you can kind of get a general idea of what valuations should be at. And it’s usually 4X, 5X, 6X, 10X, right?
Whether it’s based on your top line revenue or based on your EBITDA margins. And in early stage growth, it’s, it’s usually, I mean, it’s always about growth potential. It’s always about top line revenue.
And so, yeah, that’s how we came up with our valuation and also about market size, right? What is the potential for you in the future? Like how big is this market and how much opportunity is there?
For us, it was a greenfield opportunity. And at the time, I think we only estimated it at a, like a $2 billion market. Today with the growth and all the opportunity now with technology, I mean, we estimate this market to be above $6 billion as far as market size, which again is small.
It’s still a small niche market. Even when I say 6 billion, everyone’s like, yeah, that’s big. Well, when you think about, and we are B2B, so business to business, we only sell to businesses.
We don’t sell to consumers. So when you get into the B2C market, that’s where it becomes, you know, exponentially bigger, but ultimately much harder, much more expensive to penetrate into those types of markets.
Armando (41:39 – 41:55)
So I do want to touch the valuation one more time about how you had not done this before. Did you seek outside help to understand the valuation or between your trifecta, the three of you, you, you, you did the research yourselves. How did you, how did you get there?
Heidi (41:56 – 42:41)
Yeah, we did our research ourselves. We had, you know, participated with ASU, like I mentioned, who had some expertise there that they gave to us to help us with that valuation. Paul, the soon to be CEO also was in this, like he was actually the leader of ATIF back then, which is today the Arizona Investors Forum.
So he was dealing with valuations of companies all the time. Like he knew what the market was at that point in time. So he was very helpful as we thought about, you know, our pitch and, and, and negotiating with Canal Partners.
And, and eventually we came to an agreement where they took a small piece of the company and, you know, we were on our way.
Armando (42:41 – 42:59)
Okay, good. I guess it gets, it gets back to what you said about getting the right specialists on board and your CEO brought some of that expertise making your trifecta, which helped you in determining what was the value of the company and what would you exchange in equity for that million dollars of investment?
[Speaker 3] (43:00 – 43:00)
Yep.
Armando (43:01 – 43:26)
Okay. So with what we’ve talked about so far, as you think about those other entrepreneurs out there, other founders out there who have a company, who are, who are seeing your success and seeing, you know, where you are in your, in your marketplace, market share, and they would like to get some of that same success themselves. Words of wisdom you’d like to reflect on to share with them as you’ve gone through your journey?
Heidi (43:28 – 45:34)
I guess it would start with first and foremost, staying laser focused. I think in a world where there is a lot of opportunity to have resources to give you advice and, you know, people to seek out, that also leads to sometimes distractions. Having a very clear vision of where you want to go, what the market opportunity is, what does your platform, what is the problem that you’re solving with your technology or services that your, your company is offering is so important to be able to define that in the early stages and stick to it if that is really working for you.
The second is to validate that by getting customers early. So people who are willing to see the value in the idea brought to life, people have to be able or want to pay for that, for it to be a meaningful business. And so getting customers early on to, to buy into the vision and actually pay for your services or your software is extremely important.
Because without that, you don’t really have a business, you have an idea. And that’s where we get into the unfortunate part of not knowing the value of the business. Because if it’s just an idea, no one’s willing to pay for it, then what is the value?
What is really the value of the business, right? So that’s the hard part of the beginning of establishing that valuation. And then the other piece of it is to, you know, we talked a little bit about people, surrounding yourself with people that, either those first advisors to the business or first employees of the business that are additive to your expertise.
So they’re not clones of you, but they’re, it’s self-reflection and knowing what is the expertise, you know, that you need in the business that may not be your strong suit.
Armando (45:37 – 45:43)
So bringing complementary people, complementary skillsets and experience, complementing you to build out the team.
Heidi (45:44 – 46:41)
Yes. Yes. But they have to sort of match in values and culture to yours, right?
As you, as a founder, are sort of early establishing that culture of the business and the values that are driving the types of people you want in the business, the type of company you want to run and how you want to run it. That is really key in the beginning to start to establish the culture within the organization. And then you slowly grow over time because usually every business that has a true founder, like the culture in WAPT started from us as founders.
What has been great for us over time is that that solidified so strongly into the foundation that still lives on today, 16 years later in the same values that we came up with in 2010, that we wrote down in 2010, still exist today as the core values of the business in 2024.
Armando (46:42 – 47:31)
Wow. Wow. So I do want to ask, you touched on this once or twice about being a woman, being a female founder.
And it sounds like you were in the minority as you were seeking money and building out this company. And that must be a whole different set of reflections you might be able to share as well, because there are many more women founders today than, of course, 20, 30 years ago. It’s not as uncommon, but certainly what would you share with them that you’ve learned along the way and advice to the female founders out there as you were back in the day, 16 years ago, what might you share with them who are listening today that they might learn from you and take that themselves and go forward?
Heidi (47:34 – 49:10)
Well, I mean, I will say that it was a learning experience. Like I endured the imposter syndrome a lot when you get sort of looked over or not seen as an important part of the business. If we were in a room with the three of us, everyone would talk to the two guys in the room and maybe I would chime in with something and they would almost like give me a pat on the head and then go back to the other men in the room.
So I guess it’s really just, it’s unfortunate, but you do have to have a strong grasp of the business, know your numbers, know your metrics, be able to articulate that vision in a very clear and comprehensive manner in which you will command respect in the room. I will just say that over time, I found my voice that was much stronger that I sort of let that imposter syndrome sort of get lost in that I knew that this business would not be the same without me. As a co-founder, as a subject matter expert, no one in that room knew the industry better than I did.
And I had to be able to articulate that in a way that I learned to speak their language, whether it was through metrics or the right things that would capture their attention of what they were looking for and what they wanted to hear, right? In the language they wanted to hear, not what they wanted to hear, but in the language that they spoke.
Armando (49:10 – 49:46)
So you learned what would catch their ear and you began using that terminology, speaking in those terms, and you were no question, you were the subject matter expert, you are the physical therapist and you are the need that you were solving. And yet it sounds until you were able to communicate that way that maybe that was a way that did make them listen and did give you more attention to understand the value that you clearly brought to the creation of your company.
Heidi (49:46 – 50:13)
Yeah. And of course, even with my co-founder and our CEO at the time, having their respect and support through the process, right? And deferring to me on things and things like that also helped in understanding like, hey, we’re a package deal here and we are really all three important to the business.
So it was also their support in that process as well.
Armando (50:14 – 50:20)
Yeah. Well, I have a 21-year-old daughter. I want to make sure she listens to this podcast and hears Heidi and Janine talk about this.
Heidi (50:22 – 51:45)
Yeah. It definitely takes a hit to your ego at times, but, you know, fortitude, resilience, all of the things that grit that kind of got us here as an entrepreneur to have a successful business also played out to be important as you learn a different language. And I’ll just say, like, that was something I found interesting as I, you know, as you go into the medical field, you learn a whole different language and how to communicate, right?
A set of terminology. As I moved into technology, that was one of the barriers at first. I didn’t understand what they were talking about because there were all these words and terms that were unfamiliar to me.
So I took it upon myself to go become a product, went and got educated on becoming a certified product manager. So I really understood the sort of a lot of the technology side of the house. I couldn’t program, but I definitely knew how to plan and how to make sure that, you know, the voice of the subject matter expert was put into and how to prepare the programmers to build the right set of software.
And then the same thing with now going out into this whole new financial sector and investment world, right? There’s a whole different language there as well. It’s like becoming a Drupal lingual.
Armando (51:47 – 52:51)
But every industry, as you say, every industry has its own language. And when you’re able to communicate in that language, then the people who are already there, it makes it easier to communicate with them clearly, more articulately. That’s good.
Great. So let me just look at my questions here. Heidi, I want to make sure that we covered everything and that we didn’t miss anything.
Does anything come to mind for you that we didn’t talk about along this journey for you? From, you know, from day one to where you are today, from the growth, the expertise, bringing the specialists, acquiring the capital that you needed, but you also made a good point. I’ll get back to that.
You made a good point about when you brought in the capital, you also were bringing in expertise and bringing in team members who came along with that. And you mentioned that the investment, I think it’s that the investment banking firm, they brought to the table a certain skillset and experience that you could see that was helpful to you as you were seeking additional, additional, what you needed to grow the company, right?
Heidi (52:51 – 55:06)
Yeah. Every step of the way in terms of partnership, we always come back to alignment on first and foremost skillset needed, but second and expertise in the area, right? So I wouldn’t go out and get an investment banker that, although they might’ve known SaaS, they didn’t have any expertise in healthcare because this is such a unique niche area that is so complex that if you have no idea what you’re, you don’t know the language, then it’s going to be really hard to build alliances and potential, you know, M&A opportunities if you don’t even know what you’re targeting and why you would target it, right? So obviously those boxes have to be checked, but then it’s, it’s no different than when we hired a CEO or hired another employee, like alignment of values and alignment on, and sort of culture and how you want to do business. Also really important, important setting those expectations out communication style, like things that you want to align on early before you’re signing any contracts to, to have that partnership go as well as you can.
Goes for the M&A, goes for all of it. Like that’s just been sort of part of our secret sauce that we’ve never like hire for culture first, but also align your business opportunities, hopefully with that same sort of culture first mentality. Obviously after checking the boxes of need and, and why it would be accretive to the business, right?
I mean, it’s a right target, but then also, cause we know that, especially with M&A, for example, like research has shown over and over again, that they don’t fail because of financial viability. They fought, they fail because of, of, of the lack of culture alignment when they’re trying to integrate into a business. And so having learned that early and, and having culture be such a strong part of the foundation of the business, that was critical for us, whether it was hiring or M&A, or even who is going to be our investment banker, who’s going to be our next investment partner, financial investment partner.
It all came back to alignment on, on culture values.
Armando (55:06 – 55:32)
Yeah. And I’ll touch on that as well. You also mentioned you’ve mentioned culture and values quite a bit that from day one, you set those, you wrote those down.
Those have remained consistent. And I do wonder, I’m curious when you, when you were then growing and taking on more investment, how involved was the management team in, in that decision-making process or on bringing on the right partner at that time?
Heidi (55:35 – 57:08)
Well, it was definitely in the management team making those decisions. You know, again, going back to who are your investment partners? You know, they stayed true to not being operators.
They were financial partners and they expected us as a management team to do the diligence, do the work. I mean, they were going to help us, right? We, they would ask anything we would ask them to help us with.
They would provide resources or definitely do some of it themselves. And so that was also really important to have them feel like they are part of the business, although not operators, we put them to work a lot. Hey, go find a research study on this or go, Hey, we’re interested in this sort of niche of the market.
Can you find out or run this survey about finding out this research, this information about this segment of the market that we don’t know much about? And so they would gladly go do that because they know we would then come back with that information and be able to synthesize and, and help our, help our strategy along to make the right decisions. But yeah, management seems so critical in making any decisions.
It’s gotta be alignment with the management team, but getting the right diligence to hopefully make the right decisions. Have we made right decisions every time? Absolutely not.
I mean, I don’t want to make this seem like every decision we’ve made has been positive. There’ve been plenty of decisions that didn’t quite go the way that we had planned, but you learn from those and you move on and hopefully make a better decision the next time. Yeah.
Armando (57:08 – 58:21)
Fantastic. Fantastic. So good.
Well, Heidi, again, thank you so much for this conversation. Many Arizona founders out there, of course, are looking at the sex that the success that WebPT has had that you as the co-founder have had in creating that business. And now 16 years later, having, as you said, 50% of the market share and it’s a $6 billion market.
That’s just amazing. Just amazing. So it’s very exciting to have this conversation with you and, you know, for those founders who were listening, you talked about getting the right specialists on board, having a good core values and good culture, hiring for culture and values primary, and make sure that as you add people on board, that they have complementary skills and expertise to help build out that team.
And you’ve also mentioned, said that with your investment banking firms and investors, they’ve brought more than just money. They’re bringing other things along with them that have been helpful to you and your team as you continue building this company out. So the whole team framework that you described, you very consistently have talked about that team framework, how that team has been critical to the ongoing success of this business.
Heidi (58:22 – 58:55)
Yeah, we call it stakeholders, right? You have many stakeholders in the business, including your customers, including your partners. We also consider our employees as stakeholders.
Any of these M&A acquisition targets and community members are also potential stakeholders in the business. And so it’s the stakeholder integration model that we really adhere to as part of an overall framework. It’s called conscious capitalism that we’ve strongly adhered to from early in the business.
Armando (58:56 – 59:17)
Good. So as you sit here 16 years later, Heidi, and you think about where you are, as you said, you are the co-founder still with this company, and it is unusual as you described. And the company still has a lot of growth.
It can continue on. Are you still doing any hands-on physical therapy treatment?
Heidi (59:19 – 1:00:09)
Only to friends and family. I still do keep up my license. I have a big passion project that we’re in our fourth year now with a nonprofit called Rising Tide, which is a scholarship and educational enrichment program for DPT students.
So students going on to get their DPT from underrepresented backgrounds. And so we have approximately 45 scholars that have gone through our program now. We’ve deployed just over a million dollars in scholarship funds.
And just, it’s been amazing to be able to give back to the next generation of physical therapists and just so proud that in getting to know this next generation, knowing that the future in physical therapy is extremely bright.
Armando (1:00:10 – 1:00:46)
Oh, fantastic. That’s excellent to hear. Well, thank you so much, Heidi, for the conversation.
Really appreciate this. And I hope that this founder out there or many who are listening, who are getting inspired and have actually learned from some of the conversation that we’ve had that you’ve shared with your experience, because there are many, many people who do want to emulate the success you’ve had, built great companies. And if they get the right specialists, do things with thought, if they get good core values, good culture and continue, they’ll get through those valleys and those peaks will become valleys for them as they continue.
So thank you so much for this conversation. Really, truly appreciate this.
Heidi (1:00:47 – 1:00:48)
Thank you, Armando. Appreciate the opportunity.
Armando (1:00:49 – 1:01:11)
Hope you enjoyed this episode of the Founder’s Guidepost. Whether exit is on your immediate horizon or maybe 10 years down the road, there’s something here for you. Wondering if you’ve missed anything in your planning?
Schedule your 30-minute founder’s strategy call at axiomcorp.com. And congratulations on your business success. You are the American success story.
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