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Building a Healthcare Disruptor: Why PathologyWatch Chose to Be a Tech-Enabled Service Instead of Pure SaaS

Healthcare startups often face a crucial decision: pursue a pure software play or become a full-stack solution provider. In a recent Category Visionaries episode, PathologyWatch CEO Daniel Lambert revealed why choosing the latter path – despite lower potential multiples – proved crucial for disrupting the $20 billion pathology market.

The Initial Customer Discovery That Changed Everything

Before writing a single line of code, Lambert’s team conducted extensive interviews with potential customers. “We interviewed about ten or twelve dermatologists and said, hey, what do you need?” What they heard repeatedly transformed their entire approach: “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.”

This feedback led to a critical strategic decision. As Daniel explains, “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 means you’re sacrificing some upside on the multiples, but it also means that you can actually handle the patient case directly.”

The Value Stack Approach to Early Sales

Instead of betting everything on a single value proposition, PathologyWatch developed multiple angles to appeal to different customer segments. Daniel notes they had “a stack of ideas” including improved patient care, time savings, and additional billing opportunities. “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.”

This experimental approach paid off. The company has grown to serve 180 clinics and three hospital partnerships in just two and a half years of active selling. But before reaching this point, they had to solve a fundamental challenge in healthcare sales.

Navigating the Healthcare Sales Maze

Unlike traditional B2B software sales, healthcare companies must clear regulatory hurdles before they can even begin selling. “Since we work in healthcare, we actually had to get the insurance contracts first,” Daniel explains. This meant establishing relationships with insurance providers before approaching potential customers.

The regulatory complexity doesn’t end there. When asked what advice he’d give to founders starting healthcare companies today, Daniel emphasizes the importance of thorough regulatory research: “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.”

Why Running Their Own Labs Proved Essential

Perhaps the most counterintuitive aspect of PathologyWatch’s strategy was their decision to operate their own laboratories. Daniel explains why this hands-on approach was crucial: “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.”

This decision enabled them to build better AI systems by encountering real-world challenges: “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.”

For founders considering entering regulated markets, Daniel’s experience offers a crucial lesson: sometimes the path to disruption requires embracing, rather than avoiding, the complexity of your industry. By building a full-stack solution, PathologyWatch positioned itself to not just serve the market, but to help define how digital pathology will be done in the future.