The following interview is a conversation we had with Daniel Lambert, CEO of PathologyWatch, on our podcast Category Visionaries. You can view the full episode here: Over $50M Raised to Build the Future of Digital Pathology

Daniel Lambert
Thanks for having me. 

Brett
So, to kick things off, could we just start with a quick summary of who you are and a bit more about your background? 

Daniel Lambert
Yeah, so my name is Dan Lambert. I’ve been in healthcare now for a about a decade. I’m a computer engineer by training and was at Harvard Business School class 2011. I’ve been a serial entrepreneur ever since. This is my third venture backed startup and hopefully the one that goes the furthest, and that’s me. 

Brett
What were some of the other startups that you’ve started that our audience may have heard of? Yeah, so my first one was a. 

Daniel Lambert
Company called Push Pins, which was mobile couponing inside of a grocery store. And this was 15 years ago, before digital coupons really existed, but we built a lot of the infrastructure that enables digital couponing today. And then my second company was a company called Board Vitals, which specialized in up to date medical education, board exams and continuing medical education, or CME, and grew that business and sold it to Blackstelled rollup, which then went on to exit as an IPO. And then I worked outside of startups. I worked for a couple of years at IBM as well, working on some of their earlier AI projects. 

Brett
What was that like, going from startup land to IBM? 

Daniel Lambert
Yeah, it’s a very different environment and just really, I think it depends on what you want out of your career, if it’s going to be a good fit or not. Startups are obviously a lot more on the front lines, but typically lower salaries and longer hours and a lot of kind of headache of having to be your own HR and legal and all other departments that exist inside of a startup. So some people love that and some people don’t. 

Brett
And a few other questions we’d like to ask. And the goal here is really just to better understand what makes you tick. First one, what Founder or CEO do you admire the most. And what do you admire about them?

Daniel Lambert
Yeah, and I think this is a pretty common answer, but I really like Elon Musk just because of the scope of the challenges that he takes on. And for us, as a cancer research company, you need someone that motivates you to tackle an extremely large challenge that feels impossible at the beginning. And the kinds of companies that he creates, when they’re started, they feel like these impossible challenges and then finding a way to navigate through those super important and many other entrepreneurs that have kind of just figured out how to navigate complex environments and complex markets that you wouldn’t think that there’s a way through. 

Brett
Yeah, it blows my mind that anyone bets against Elon Musk these days. Seems like there’s just a lot of chatter and a lot of people who dislike him, and that just seems like a very dangerous bet to. 

Daniel Lambert
Yeah, yeah, absolutely. Especially when there’s someone that almost acts like they have nothing to lose and is willing to bet everything on every time they’re going out there. That’s kind of what an entrepreneur has to do. Right? Against all ods. You’re going to make the full bet. 

Brett
What about books? Are there any specific books that have had a major impact on you? And we like to call this a quick book. So a quickbook is a book that just rocks you to your core. It really changes how you view the. 

Daniel Lambert
World and think about the world. 

Brett
Do any quick books come to mind? 

Daniel Lambert
Yeah, especially for entrepreneurship. The hard thing about hard things by Ben Horowitz. And there are a lot of entrepreneurial books that talk about how to run a good company when it’s larger or when times are good. And the book is all about how to be a wartime CEO or how to tackle difficult things when you don’t have a lot of options, you don’t have a lot of funding. How do you manage down to every last detail when you’re in the middle of a pivot or when the market is really against you? And that resonated a lot with me. Just because of the difficulty of bringing new technology. Bringing new technology to bear is not an easy journey. 

Daniel Lambert
And having someone talk about what that was actually really like and the mistakes that they made and the things they got right made it a really compelling read. 

Brett
Yeah, I love the premise of that book. When he was in the thick of it, going through his own personal hell with his journey, he was looking for books and couldn’t find any books that actually gave tactical advice on how to navigate that environment. So him writing that book, I think, is very cool. I think it’s very rare to have a book like that written by someone who’s really experienced these challenges firsthand. Yeah. 

Daniel Lambert
And who’s willing to talk about the things they got right. Wrong, too. 

Brett
Yeah, absolutely. Now, let’s switch gears here, and let’s dive a bit deeper into the company. So can you just give us maybe, like, the elevator pitch, like, the high level overview of what the company does? 

Daniel Lambert
Yeah, absolutely. So if you ever go into a doctor to get a biopsy, what’s typically done is that tissue is sent out to a lab, like quest or labcore or one of the really big labs, and there they do some tissue. A pathologist looks at it under a microscope, makes a best guess as to what that cancer is, and then they typically fax the report back to the clinic or the hospital or wherever it needs to go. And to me, when I looked at that felt like a process that was 25 or 30 years in the past. And so we came in with the perspective of software eats Pathology, or software replaces all of these very old processes. And so what the company does is we convince clinics and hospitals to send us volume. We process those inside of our labs. 

Daniel Lambert
We digitize the image. We then have both a pathologist look at it and then an AI look at it retrospectively to make the diagnosis, and then we push the results into the electronic medical record system of the clinic or the hospital. And so it’s a much more seamless, integrated play, and we built a lot of software to do that. But at the same time, we’re developing algorithms that can assist with the diagnosis and also algorithms that in the future, will be able to predict the course of the disease. It turns out that the digital image that we capture has a lot of information about how the cancer is growing, how similar that cancer is to previous cancers. 

Daniel Lambert
And so we work on a lot of what’s called prognostics, or trying to give the patient an estimate of likelihood of recurrence, how the patient should be treated, et cetera. And that’s the beauty of digital Pathology and AI, and that’s kind of what it’s unlocking right now. 

Brett
And take me back to February 2019, when you were just launching the company with your Co-Founder. What were those early conversations like? How did you really uncover this problem? And what was it about this problem to say, yes, that’s it. Let’s go all in, and then let’s solve it. Yeah. 

Daniel Lambert
So I think, as an entrepreneur, I always start with a big enough market that you can make an impact and in the US, Pathology is roughly a $20 billion market a year, so a good size chunk to go after. And we also saw that digital Pathology was just barely starting to be introduced. Like some labs were starting to buy scanners and exploring what those could do, but nobody really had use cases yet for what the potential of that digital imagery unlocks. And that’s super important to recognize, is that we knew that there was going to be these very rich and large databases of patient images that could be indexed on millions of patients, but no one was making that information useful yet. 

Daniel Lambert
And then at the same time were also seeing that Google’s image AI was recognizing cats with 99.5% sensitivity, very high numbers in image recognition. And so the technology had reached a certain maturity point, but absolutely no adoption in the market. And so there were a confluence of things that were coming together all at the same time. And it turns out that was actually like a really correct bet. The regulatory and legal and everything when we started was kind of very against digital Pathology and AI. But if you look at it now, there are now CPT and reimbursement codes, there are letters approving digital Pathology for primary reads and a whole lot of legal opinions. So sometimes you kind of have to start the company before you know how everything is going to play out. 

Daniel Lambert
And we definitely embrace that as were starting the company, very important. We interviewed about ten or twelve dermatologists and said, hey, what do you need? And they were all very consistent. They said, look, don’t bring us just a point of the solution or like a piece of it. We get pitched all the time on just a single device or a single thing. What we want is for you to pick up our biopsies, handle everything end to end, show us the digital image, integrate with our electronic medical record system. And we heard that so consistently, ten times over and that they were just completely underserved because nobody was doing that. And the light bulb went off after having all those customer interactions of, this is what needs to happen in this industry, like, let the customer guide you. 

Daniel Lambert
That also meant we had to build a solution end to end. And that’s what went ahead and did. 

Brett
And talk to me about landing your first paying customers. That’s obviously something that every startup struggles with. How did you land those first few paying customers? 

Daniel Lambert
Yeah, well, since we work in healthcare, we actually had to get the insurance contracts first. So there was a sequence of setting up shop, getting on the insurance plans, and then going to the first dermatologist and then telling them the benefits of what we bring, and we quickly realized that there are three benefits to what we do. The first one is that it’s simply better patient care if the dermatologist can see the image and they can see the notes from the physician, at the same time, they can actually show the patient the case. Less room for error, more ability to talk, to show the patient, this is why we’re doing this surgery, or this is why we need to go back in and treat this case further. And patients really like that, along with the safety benefits. 

Daniel Lambert
The second benefit that we brought up was like, hey, just look, this is going to save a lot of time in your office. Don’t you want to just at least try that? And we now know, like, our average clinic saves 25 hours a month, but at the time, we kind of just did some guesswork and said, we think that we’re going to save you ten or 15 hours a month of just clerical work because we’re nicely integrated with your system. And that message resonated with our first clients. And then number three is the potential for additional billing if wanted. So this enabled the dermatologist to potentially read their own cases. It also increased the complexity of the visit if they actually look at the image as a secondary read. 

Daniel Lambert
And so we had kind of just a stack of ideas of, these are compelling things, but they were just hypotheses. And we presented the dermatologist with those hypotheses, and then each of our first four or five customers, I think they all latched onto a different value proposition. So it was a little bit of spray and prey on these value propositions until we found one that landed and was willing to commit volume to us. And they didn’t commit the whole volume up front. They wanted to test us, and we delivered on those early cases, and then they ended up sending more volume over time. 

Brett
This show is brought to you by Front Lines Media, a podcast production studio that helps B2B founders launch, manage, and grow their own podcast. Now, if you’re a Founder, you may be thinking, I don’t have time to host a podcast. I’ve got a company to build. Well, that’s exactly what we built our service to do. You show up and host, and we handle literally everything else. To set up a call to discuss launching your own podcast, visit frontlines.io podcast. Now back today’s episode. And how long did it take for you to find product market fit? Did you get product market fit right away, or what was that journey like? 

Daniel Lambert
So, definitely not. I would say that because we had to build out the infrastructure first and get the insurance contracts. It was delayed before we could get somebody to commit to that. So we had initially tried to develop an AI and then think about licensing it to different parties, but the industry was not really ready for that. And so we said, okay, how are we going to actually introduce this technology in a way that where it feels comfortable to the dermatologists, that feels comfortable to our clients, it feels comfortable to the insurance companies, and we settled on that. 

Daniel Lambert
The best way to break in, and this is true, especially in healthcare, is to start as a tech enabled service company, more so than just trying to be the SaaS technology provider, which it means you’re sacrificing some upside on the multiples, but it also means that you can actually handle the patient case directly. And we learned a lot from doing that. And in some ways, I’m glad that the market kind of pushed us that direction, because everybody has a plan until you get punched in the face. We really needed to run the labs. We really needed to run these algorithms on our own and develop these algorithms in our own lab so that we can learn from all of those things. And in healthcare, you’re dealing with biology, and it’s a lot of unknown things when you start a company like this. 

Daniel Lambert
We had to actually sell the process of this, actively working to catch smudges and bad stains and artifacts that come out of the lab. And that if you’re really going to be an AI developer in this space, you have to think about the realities and not just build an AI on a very clean data set or license a small data set and build your AI. You really have to be in the thick of it to develop a true Pathology AI. And that’s the same with radiology and other fields. You kind of have to handle the messiness. And so we got pretty good at handling some of those issues. 

Brett
And obviously, there’s a lot of buz around AI right now. A lot of people are talking about AI. What do you do to make sure that your customers really understand just how powerful that your AI is? 

Daniel Lambert
Yeah, so we have several published studies that shows exactly what the AI got right and what the AI got wrong. In the study, it’s several thousand patient cases. So you can get a pretty clear idea, or it’s a statistically significant picture of what the results are. And what we find in the research is that the AI is extremely good at picking up those very small melanomas and early melanomas that are easy to miss because it’s picking up patterns of a melanoma that might not even be fully formed yet, but that has attributes of a melanoma, because the AI is looking at thousands of inner variables more than the human eye is even seeing, and then pattern matching, that it means that it’s going to pick up some things that the human eye might just not catch. 

Daniel Lambert
And that technology is also really important as we get into prognostics, is that we can now take a patient case and we can say, oh, this is very similar to 1000 patient cohorts, or 1000 patients in a different cohort, or sometimes even a much smaller number like this case is very similar to these other patients where the tumor was either severe or didn’t metastasize. And you can start to extract patterns or learn what the AI is seeing that determines that a case is quite aggressive. And so I think that there’s some really important nuance there. And also an understanding that we’re at the very beginning of this exploration of the AI’s ability to pattern bash across huge patient populations means the dawn of a lot of personalized medicine and prognostics that just simply didn’t exist before the tests that were used before us. 

Daniel Lambert
It’s a lot of molecular testing or genetic paneling that kind of gets you directionally correct, but isn’t nearly as accurate as the image analysis. That gives you a lot of really important information. And so if you want to learn more, you can just look up Pathology Watch five skin types, and there are several articles written about it. And we also published all of our flaws, too. Yeah, I think that’s a really important part, especially in healthcare, so that others can learn both through our methodology and where the AI falls a little bit short, which is the reality of the state of AI, is that it’s not perfect, but you need to know where those blind spots are. And that’s what we’re working on right now. 

Brett
Can you give us an idea of the growth and traction that you’re seeing today? Our audience loves metrics and numbers, so any numbers that you can share would be awesome. 

Daniel Lambert
Yeah, absolutely. So we started selling this product in earnest about two and a half years ago, and we already have 180 clinics sending volume. We have three hospital partnerships that are sending volume. We also now have really large private equity rolled up accounts that are starting to send us volume as well. So we’re trying to tip the industry as this is the way that it’s done. And using digital Pathology is the way of the future. And I think we’re making a pretty strong financial case that we’re there companies doing north of 10 million in revenue and we’ve raised over 50 million. I think that a lot of investors are very excited. I mean, this is one of those kind of asymmetric risk plays in that. Yeah, it’s a risky technology. It’s brand new. 

Daniel Lambert
Of course the company may not make it, but on the flip side, it’s like this company could easily be 100 x. Or if this methodology and this approach ends up taking over all of Pathology, it can have a huge market impact and displace some existing players. And so I think that there’s a lot of excitement about a foundational technology that will definitely be used. It’s not a question of whether or not digital Pathology and AI will come. It definitely will. It’s just a matter of who and when. And if you pull. Most pathologists, about 80% of them believe that digital Pathology and AI will be replacing the current microscope and fax machine model. And that’s obviously why we built the company, is we share that thesis as well. 

Brett
And if you were just starting a healthcare company again today from scratch, what would be the number one piece of advice you’d give to yourself? 

Daniel Lambert
I think understanding that you have to be patient. Like, I would just tell myself, like, hey, sometimes you can’t move at lightning speed. We face a wall of regulations, some things that were made for other parts of healthcare that end up impacting Pathology. So really reading up on how the FDA thinks about AI and stark laws and sunshine act and anti kickback laws and Medicare billing laws, getting a very good understanding of how many legal opinions were going to be needed to grow a company like this and understanding the boundaries better from the get go. It’s worth several months of just understanding the full regulatory environment and anything that you go into. And also in our, you know, a lot of laboratory regulation as well. Laboratories are regulated by an organization called CLIA. 

Daniel Lambert
Understanding what they’re looking for too, and how they’re thinking about digital pathology, I think that would have been helpful. 

Brett
What do you think is the most important skill for a B2B Founder to have to survive and thrive today? 

Daniel Lambert
I think it’s 100% sales. You have to get out there early and learn from the customer from day one, rather than building a product and then letting it fail, or you think the entire product is just coming from your head. Because especially in healthcare, the clinicians are used to certain ways of doing things and they’re also very experienced and so letting them guide you. And in fact, myself and the engineers that I work with, we require them to sit down with the pathologists and with the lab staff and learn the process rather than just trying to build something around it. So, yeah, I think selling early so that you get that picture is important. And then, of course, also a CEO has to sell shares of the company if you’re going to be a venture backed startup. 

Daniel Lambert
And it really just feels like whether I’m selling a dermatologist or I’m selling an investor, it’s actually a very similar process of trying to highlight the value propositions. I also think having some awareness of the technology is really important, too. And a final question.

Brett
Let’s zoom out three to five years into the future. What does the company look like three to five years from today?

Daniel Lambert
Yeah, I think that we’re publishing standards of how digital Pathology is done. I think that the company is doing north of 100 million in revenue. And I think that we move up market. A lot of our clients are smaller independent clinics or regional hospitals. We’re taking our software and then making sure that becomes the standard for major hospitals, major regional labs, and then the really large global footprint. Labs that have a lot of upside for adopting a software process like what we’re doing. Amazing. 

Brett
Daniel. We are up on time, so we’re going to have to wrap before we do. If people want to follow along with your journey as you build and execute on this vision, where should they go? Yeah. 

Daniel Lambert
To connect with me directly, I’m at Pathology Dan on Twitter. Or you can go directly to pathologywatch.com or follow us on any other social media. 

Brett
Amazing. Dan, thanks so much for taking the time. I really enjoyed this. I know the audience is going to as well. Really appreciate it. Thank you, Bret. All right, keep in touch. This episode of Category visionaries is brought to you by Front Lines Media, Silicon Valley’s leading podcast production studio. If you’re a B2B Founder looking for help launching and growing your own podcast, visit frontlines.io podcast. And for the latest episode, search for Category visionaries on your podcast platform of choice. Thanks for listening, and we’ll catch you on the next episode.