The following interview is a conversation we had with Itzik Cohen, CEO of PayZen, on our podcast Category Visionaries. You can view the full episode here: $240 Million Raised to Build the Future of Affordable Health Care

Itzik Cohen
Good to be with you. Thanks, Brett. 

Brett
I’m super excited for this conversation. I’d love to kick off with maybe just a quick summary of who you are and a bit more about your background. 

Itzik Cohen
Great. So I’m a native of Israel. I living in San Francisco now for 26 years. So I’ve been here for quite a while. Been in tech most of my life. Later, kind of later careers, more in fintech started starting in 2012, kind of fintech 1.0. And here we are doing more fintechy things to better people’s lives. But one interesting tidbit about me is I’m 68 and I played professional basketball in Europe. Kind of like euro league is kind of the NBA of Europe, I guess. So I have that going for me as well. 

Brett
I did an interview a while back with Eric Stillman, the CEO and Co-Founder of Rapid, and he was talking about that was his dream, is to buy what’s the basketball team there, the famous basketball team Makafe Tel Aviv. Okay. Yeah. So you’re a player there. 

Itzik Cohen
Looks like that was my team. Yep. I played there for six years as a pro. It was good times and also allowed me to focus on my tech career or tech studies because it gives you a lot of free time when you’re playing basketball. And yes, that was a good combo. 

Brett
Wow. Now what was it like? Take us back to 97 or was. Yeah, it looks like it was 97 that you first came to the US and started working in the US. What was Silicon Valley like back then? 

Itzik Cohen
So the reason I came here to begin with know, unlike today, where you can really make it anywhere, people are more know back then, if you really wanted to be the heart of the revolution or the Internet revolution as we called it back then, it was called, you really had to be here. The energy in Silicon Valley the network, if you had ideas, you wanted to get funded. Everything really happened here. A lot of israeli founders could not have done it like the way they do it today, which is basically getting funding in Israel. There weren’t a lot of feces in Israel at the time. And so I came here really to just experience what it’s like to be in Silicon Valley. 

Itzik Cohen
I was very fortunate to get started here with an israeli company first, but then even more fortunate to be one of the early guys in webex communications. Again, that gave me an amazing opportunity to be in management, getting a front row view and actually responsibility in a company that was growing fast, doing some pretty innovative things, and ended up going public and then growing and being public for seven years and get acquired by Cisco and seeing all of these things, witnessing these things at the time, all the challenges, I think I could not have done what I’m doing today, or I would never be as good of a CEO or a leader if I didn’t have that type of experience and understand what it takes to really run a company, to deal with all the challenges. It’s not all glamour. 

Itzik Cohen
I’m sure you heard from other founders, and the world is a little bit to pace and I could. There are some really interesting stories about what we had to kind of go through. Even though we have a lot more experience these days, it never ends. I mean, you start a company, you start a business, it’s never a straight line. You have to deal with a lot of unexpected things. The world is not always the most hospitable to founders and early stage startups. Like in Peyton’s case, you sell to hospitals and health systems, and six months after you start a company, there’s a COVID pandemic. Try and sell to a hospital during a pandemic when you’re ready to go with your product. Not easy, right? So we have to navigate a lot of different things in order to get to the stage we’re in. 

Itzik Cohen
But that’s what makes it fun and challenging. 

Brett
And can you tell us more about Payzen at a high level? What problem are you solving? 

Itzik Cohen
So the problem we’re solving is basically health care affordability. And just to simplify what healthcare affordability is, essentially the way healthcare plans are structured today. More and more people have high deductible plans, which means you have more out of pocket expense as a family. Average is around $4,000 a year per family in the United States. Even if you have insurance, most people cannot afford that deductible. If you change the lens to the healthcare provider, more and more of their revenue is now coming from the patients. There’s a consumerization trend in healthcare where the patient has become the payer. Essentially the problem for the healthcare system is that they’re not collecting enough because patients cannot afford it, which hits their cash flow and their APIs as well. 

Itzik Cohen
So essentially it’s a problem for both patients who have less access to healthcare and more medical debt, which is a huge problem in the US, and healthcare providers who provide service and they’re not getting paid what they owe, essentially because patients cannot pay them in full. And the idea was this is a financial problem, why not try a fintechy approach to solve the problem using technology? And here we are today, four years later. Exactly. And we’re doing pretty good. About five x a year growth and continuing to grow at that pace in the next, at least two years. That’s what we’re expecting. So yeah, we had a thesis, and by the way, that’s another important information here. 

Itzik Cohen
The thesis was most people are pretty decent people and they want to pay their obligations if you give them a way to pay their bills in a way that will not overburden them financially. And that was one of the most pivotal moments in our company’s history. Kind of the first time people ask me about how would it feel to get your first customer. Well, my first customer was basically a healthcare system. But what we really needed to understand is the thesis holding water? Are people really going to pay more? Are more people going to participate in paying their bills because you make it easier for them? The answer is unequivocally yes. The thesis checks out completely, which means that it gave us a lot more motivation and tailwind to move forward with our products. And of course, our products are much more robust. 

Itzik Cohen
And we have second products now coming to the market that we introduced a couple of weeks ago, but we can talk about it later on. But that was really important for us to understand. Okay, you have a thesis as a problem. Is your thesis checking out? The answer is yes. That was huge because we really didn’t know. Nobody has done it exactly the way we did. 

Brett
And what was the source of inspiration to develop thesis in the first place? How did you uncover this problem? And then what was it about this problem that made you say, yes, that’s it, let’s go build a company around this? 

Itzik Cohen
It started, first of all, everything was data driven. So I would say that myself and my co-founders, we looked at data that kind of led us in this direction. But my personal story actually goes a little bit to the past. I had a health scare in around 2001, I think this was 2002, and I was fine. I was really well taken care of, and I had a great insurance. And that was really my first experience with the United States healthcare system, somebody who was not grown up here. And at the end of the day, I still received a $50,000 bill. It was a pretty long process of healing and a lot of procedures that I needed to get through, but it worked out. Everything was great, but I still got a bill for $50,000 to pay. 

Itzik Cohen
And the first thought that come to mind is like, well, I can afford it. I’m very fortunate, but what do people can’t? What do they do? And I did nothing with this thinking for years. Right? I mean, obviously, a lot of time has passed since then. But in my previous company that I started before pays, and a company called Beyond Finance. Beyond finance is one of the largest debt settlement companies in the United States, helping consumers get out of credit card debt, personal loans, in a way that will allow them to negotiate their debt with their creditors. And one of the data points I’ve seen is that the fastest growing type of debt that were enrolling into our platform was medical debt was growing faster than credit cards, personal loans, or any other type of debt that is out there. 

Itzik Cohen
And I was wondering, what do we do with this debt? And there was no really good solution at the time. After I left, the company, got back to San Francisco, kind of pulled the band back together, and know there’s a problem here. It’s growing. We started doing some more research, and what we thought was a big problem turned out to be a massive problem. And I’ll just maybe give you some numbers. So, every year in the United States, hospitals are billing patients after insurance. About $430,000,000,000. This is the size of the actual billings that are going to patients after insurance. Every year in the United States is growing at 15% a year. Only 20% of it, well, it depends. 20% to 25% of it is being paid in full. So call it 80 billion. 

Itzik Cohen
So now you ask, what happens to the rest of the 360,000,000,000? Well, these people are of many categories. Some of them need help, spread those payments over time. Some other people need financial assistance. There’s a lot of different categories here, and Payton is essentially addressing that market. 

Brett
Super fascinating and also pretty depressing numbers and pretty startling numbers there. I know you touched on that with your first customer there being that health system. Can you tell us a bit more about some of those other early customers and what you really did to build trust and credibility with them, because that’s something that all B, two B founders really struggle with in the early days. 

Itzik Cohen
So because we didn’t know if it’s going to work, I chose the most honest, transparent way to approach that first customer. Essentially, we looked at it as we don’t know if it’s going to work. We’d like to innovate with you and do you mind doing a test or a pilot? And the other thing that I realized, and that was actually by design, is every revenue we will make is going to be success based. Meaning if we’re not going to add any value or we’re not adding more patients who are paying you their bills, then it’s not going to cost you anything. To essentially make it so easy to work with you in such a compelling way. Reduce more and more of the challenges that we heard about in the healthcare. 

Itzik Cohen
Essentially, if you think about healthcare and the challenges to self health systems, for example, is it issues. It takes a lot of time. It’s very complex to integrate with the PMR, the electronic medical records, so make it very easy to do that. And we invested a ton of effort to make our technology easy to integrate. The other thing is make it free. If you’re not adding any value, make sure that the provider will not have to spend a dime to make it work. And only then if you’re successful, you will get paid. So kind of put your money where your mouth is in a way. So really remove any friction between you and a. Yes, right. But the first customer required because we didn’t have any data. 

Itzik Cohen
Now it’s a lot easier for us because we have a lot of reference customers and great reviews, and we have KPIs and case studies that show exactly the value we add to each provider. So you can actually monetize, you can really understand what it means to you in terms of dollars and cents as a medical provider. But we didn’t have it at first, so we had to make it a pilot. Let’s innovate together and help us make this a better product. And quite frankly, the first couple of customers had a lot of influence over what the product looks like today because essentially they innovated with us. And look, I’ll be totally honest, I mean, I was not a healthcare person. I’m still not a healthcare person. I’m more of a fintech technology guy. We had to learn a lot. 

Itzik Cohen
And who better to teach you healthcare than healthcare providers? So that partnership, that honest partnership of trying to be innovative and learn without over promising anything, being very humble was, I think, the key to, first of all, get trust. And people are used to people promising them everything and never deliver. I didn’t promise anything. I basically came with questions and a potential solution that turned out to work. But that’s why it was so exciting that our thesis worked for us and for the healthcare provider, because we actually didn’t know until we actually started working with them. 

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’ve 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. When I was on your website a couple of days ago preparing for this interview, what I noticed was that the messaging is very clear. I would say a big chunk of the time where I’m preparing for these interviews. I go on the Founder’s website and I have no clue what the hell the company does. 

Brett
I just walk away scratching my head wondering what on earth the company does. Your messaging is very clear. It’s very crisp. What did it take to get your messaging to this point? 

Itzik Cohen
Being obsessive about iterating your message. So discipline is going to be, and focus is going to be a key theme of why we’re successful as a team, not only in our business, but also in fundraising, for example, because we did not have a lot of the issues a lot of other founders have today with town rounds and spending too quickly and all of those things. So discipline, that means that after every meeting with every customer or every investor is a post mortem. What worked, what doesn’t work, what needs to be improved, what resonated? And where is the friction still, what do we need to really explain that we can’t bring home and it’s just a bunch of trial and error, but really focusing on simplifying what we do, I’ll be honest with you, Brett. What we do is very complex. It’s extremely complex. 

Itzik Cohen
I mean, healthcare as an industry, and especially payments and revcycle management in hospitals, it’s extremely complex for them and for the patients. Trying to simplify it in the background. Using technology is not easy. So there are so many things that we can explain in a very complex way. We choose to simplify everything we do in ways that will make it very clear to people what we do for hospitals, what we do for patients. And of course, you can always double click and we can explain it better. But we think that you need to know what we’re doing. As soon as you come to our website or as soon as you see one of our presentations, it should be clear to you what our place is and what our position in the world. 

Brett
Is when it comes to the positioning against other categories. How do you think about the category that you’re in on the website? I see operating system for healthcare affordability. Is that the category? Is it patient financing? Is it medical lifecycle billing? I think that’s a category I’ve heard of. What is that? Market category. 

Itzik Cohen
So healthcare affordability is something we started, but we didn’t really know what we’re starting because the idea we had earlier was we can solve all healthcare affordability problems with a financial product, essentially a payment plan product without interest or fees. Underwrite patients to the right payment plan and you can actually finance those assets to the provider. But that is not correct. The more we dove into the data with providers, the more we spoke to our customers, we realized that there’s a lot more to this wallet share that we’re not addressing with our two products, which is basically a post care payment plan and a pre care access card, which kind of the same thing, but designed for different use cases. 

Itzik Cohen
For example, there’s this whole charity care essentially, a lot of hospitals are trying to provide financial assistance to patients if they are of a certain financial class. And they know that if they can underwrite them for charity and match them with their charity program, they can get paid by the government a lot of the face value of the bill. The problem is that there is no real automated way to do that. And we found out, and we actually figured together with some of our providers, that our integration with EMR we already have, can actually help us automate that problem as well. So now we’re shifting from addressing just the class of patients who needs to pay their bills over time to patients who can get their bills canceled or get a big discount because of financial assistance. 

Itzik Cohen
But automate the whole process for the patient and for the provider. And actually, the analogy, Brett, is when you think about what we are used to as consumers now in know, when you go to check out from Amazon or using Shopify for checking out and paying for something you purchase, you have certain expectations from your experience I mean, everything is transparent, everything is embedded, everything is pretty easy to use. Whether you pay with a credit card, PayPal, or if you use financing, it’s all there. In healthcare, everything was broken. Essentially, if you needed patient financing, you need to call somebody. Then they would refer you to a third party they’re working with. Then you have to apply for patient financing. If you got accepted or approved, and then you would pay the provider. It’s a very broken process. 

Itzik Cohen
What we did is we started to embed all of our technology within the checkout process the provider already has. So essentially, if we think you’re someone who will enjoy or will benefit paying your bill over time, you will see an offer to pay your bill over time embedded in your epic my chart experience right away. If you’re somebody who has the potential of being justified as a financial assistance case, you will have that experience. That is different, but it gets embedded into the system. So we’re trying to bring healthcare payments or healthcare billing and affordability to the 21st century because it’s not there yet. Yeah. 

Brett
A while back, I was watching an interview of Bill Ackman, and he mentioned a book called the Outsiders that I read that I really loved. And I think it was seven or eight ceos who didn’t come from the industry. They came in and they dominated the space. It sounds like you’re an outsider here. From a healthcare perspective. Obviously, you have deep expertise in fintech. 

Itzik Cohen
Do you think it would have been. 

Brett
Possible for you to try to solve this problem if you were a healthcare guy? Or did it really take an outsider to come in and have this fresh look and this fresh view? 

Itzik Cohen
I’m not a big fan of tech people thinking they can get into anything complex and just solve everything without having any understanding of what they’re getting themselves into. So I have a little bit more humility, and I think that especially in this case, it’s true healthcare revcycle management and the daunting tasks that people at the healthcare systems need to deal with when it comes to regulations, when it comes to dealing with payers, denial management, coding, dealing now with a lot more, with financial friction with the patient. It’s such a mess. There’s so much they need to do that somebody needs to come. And really, I mean, yes, being an outsider gives you a fresh perspective. So I can absolutely agree with that. But I think that we need to respect a lot of the experience of things and mistakes that people already tried. 

Itzik Cohen
So I’m trying to combine and have more of a balanced approach here. What I’m saying here is, I’m learning a lot, and we are learning a lot as a company because we engage with healthcare professionals who have been doing it for years, who really want to innovate. But the current systems that they’re in, the current environment they’re working in, will not allow them to really have that kind of out of the box thinking, moving fast and innovating because they have a lot to do. So I think it’s more of a balance of, yes, being an outsider gives you an advantage, but I would not overlook the motivation that a lot of systems have. And I think this is a part of our success. 

Itzik Cohen
By the way, a lot of systems really want to innovate with us, and we find that very exciting because it helps us learn more, expand our products. Our products are better because of this engagement with our healthcare providers, our customers. 

Brett
That makes a lot of sense. And I’m guessing that you can kind of bucket outsiders into two different buckets, right? Bucket one would be they come in and say, wow, everyone in this industry is a moron. They’re all idiots. They’ve completely missed this. I’m going to come fix it. And the other bucket would be coming in with extreme curiosity, wanting to engage and collaborate and learn and then building solutions from there. It definitely sounds like you’re in bucket two as opposed to bucket one. 

Itzik Cohen
Yes, absolutely. And I think that a lot of attempts to do it tried a bucket one that did not succeed in this space. So I’ve seen a lot of stories, and quite frankly, there’s a lot of scars in healthcare and healthcare professionals that heard, when I mentioned earlier that they heard so many promises and nobody really delivered. It’s because people think it’s a simple technology problem only, and it’s not. There’s a lot more to it when. 

Brett
It comes to that established category. It sounded like that established category, then is patient financing. Do you view it as the healthcare affordability? Operating system is eventually going to replace this category of patient financing, or are they going to coexist together? 

Itzik Cohen
No. Patient financing is a portion of what we do because the reason we call it operating system is because you cannot solve healthcare affordability with just financing. It’s just not going to work. Essentially, what you will address is a very small portion of the $360,000,000,000 that remain after the 20% that paid in full. Maybe you’ll add another 5% or 10% to that bucket. But if you really want to solve more and more of that wallet share and bring it to a healthy state, you will need to find different solutions and offer different products to patients at the right time, using data. And the reason it’s an operating system is because we have many solutions. Some of them are charity automation, some of them are Medicaid eligibility, automation and enrollment. Again, a lot of people are eligible for Medicaid, they’re just not enrolled. 

Itzik Cohen
Well, a lot of them don’t know how to fill up the forms and some of them don’t speak English. And guess what? Until they will be enrolled, the provider will not get paid. So providers are going to extreme length to enroll these people into Medicaid. But we can automate a lot of these processes a lot more vastly. So again, that’s a different solution in the operating system. So what I’m trying to say is, yes, patient finance has its place and we are doing it very well. We are the best in the market. We have multiple products that address many different situations in a great way, in an automated, embedded way. But our vision is to expand our operating system to address more and more use cases as part of the affordability problem. 

Brett
What do you think your superpower is? Or maybe another way to ask that? What would your colleagues, co-founders, investors, what would they describe your superpower as? 

Itzik Cohen
I don’t know. It’s hard to really think about myself that way. But I hope that my ability to look at daunting problems and not freak out and think very logically about those things, not being afraid of those problems and pushing through no matter what, is a pretty important power to have or ability to have. I would say one more thing that I’m pretty proud of, especially in the Payzen case, is look, our discipline as a team, co founding team, and everybody who comes to work for Payzen, first of all, you have to really buy into our mission. We need to solve healthcare affordability. So we’re doing some amazing things here. And the best part of my day is to read our patient feedback. We’re doing some really awesome things. 

Itzik Cohen
But I think that being very disciplined and focused on execution rather than a lot of buzz and creating news when you shouldn’t, and maybe getting crazy valuations when you shouldn’t, I mean, we existed in 2000 and 22,021. We were not ready to raise, so we didn’t raise. One would say, well, you missed out on a ton of valuation. But you know what, I also saved myself from a download because you can’t really get over your skis when it’s not milestone based. So we think that keeping our heads down, executing, growing as a company, focusing on first principles and growing the business is what brings us to a point where next year we’re going to be cash flow positive already. So that’s an amazing place to be in this world, right, where we don’t have to raise more money. 

Itzik Cohen
I mean, we can turn profitable with what we have in the bank right now, which is amazing. And we’re growing four x a year. So I don’t think a lot of companies, tech companies, fintech companies, can say those things. 

Brett
Now, based on the entire journey that you’ve had so far building this company, let’s imagine that you were starting again today from scratch. What would be the number one piece of advice that you’d give to yourself? 

Itzik Cohen
Oh, wow. I was asked that question a week ago by one of my board members. I think this is actually a good advice for any Founder. Don’t hire your chief sales or chief revenue officer too early. You think you’re ready for scale, so you want to get your sales team kind of growing and you need somebody who comes and scale the business. You’re probably not ready. You’re going to be the number one sales guy for the company for quite a while. And any professional you’re going to bring who is potentially an amazing sales guy or a sales operator will not have the gut feel and will not have the iterative kind of discipline you have about what works, what doesn’t work, what needs to be improved. How is that flowing into your sales material? 

Itzik Cohen
How are we articulating the value of the company in the right way and explaining the value to stakeholders? Is that don’t do it too early. Only now we’re thinking about it, we still don’t have one. And I think that was one of the things that I could have avoided, which was costly, but still was too early, too soon. 

Brett
Final question for you. Let’s zoom out three to five years into the future. What’s the big picture vision that you’re building here? 

Itzik Cohen
I like Payton to be the trusted brand for patients and providers that when it comes to paying for their healthcare, if they would interact with us, they will always get what they’re entitled to, meaning either a payment plan, if they’re entitled to some financial assistance, they will automate the whole process. We have a big market to go after. So I want us to expand our solution sets touch more and solve more and more use cases. I see us as a public company in three years and keeping our innovative approach. I think one of the things that I’m trying to avoid in any company I build I don’t know if you read the great degeneration book by Ferguson, but companies and institutions get to be bureaucratic and lose their innovative spirit. 

Itzik Cohen
And I’m trying to use everything that, the lessons from the book and the lessons asked from my previous companies to avoid that. I want ASA to always remain a company that’s innovating, that makes very streamlined decisions, streamlined management without a lot of bureaucracy. So trying to make it keep it that way, it’s going to be a challenge as we grow. But again, that’s my five year vision, I guess. 

Brett
Amazing. I love the vision and I’ve really loved this conversation. I know the audience is going to really enjoy it as well. We are up on time, so we’ll have to wrap here. Before we do, if there’s any founders that are listening in and they just want to follow along with your company building journey, where should they go? 

Itzik Cohen
payzen.com is a great start and they can find me on LinkedIn and they want to connect and get any advice or just talk, they’re more than welcome. 

Brett
Amazing. It’s a thank you so much for taking the time. I really appreciate it. 

Itzik Cohen
It was my pleasure. Thank you, brother. I enjoyed it. 

Brett
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. 

Itzik Cohen
On the next episode.