EP 122 - HCIM - Ali Evans

Transcript

Roland Siebelink (00:01)
Welcome, everyone. So glad to have you back on the show where we have amazing founders coming on week after week to talk about all the tricks that they apply to break out of their shell to reach the potential of their startups and, of course, using a lot of AI to do so. This week, our guest is extra special. I met him more than a year ago for quick coffee that turned out, I think, a two-hour discussion up in the new San Francisco Bayview area. And the guest spent years writing checks and sitting on boards at Francisco Partners, Riverside Partners, two of the most respected PE firms in tech. He sold dozens of companies from the investor's seat. And then he did something most investors only theorize about, maybe because their wives won't let them.

He acquired a 25-year-old healthcare automation company and stepped into the CEO chair himself. Now navigating something really rare, running a company you also own at the fund level and proving that boring, compliant workflow automation software is exactly the kind of thing that AI cannot replace overnight. With that, everyone meet Ali Evans, the CEO of HCIM. Welcome to Scaling Without Breaking, Ali.

‍Ali Evans (01:21)
Thank you for having me, Roland.

‍Roland Siebelink (01:24)
Of course, Ali, it's been a long time coming, but I'm glad we finally made it. I really want to delve into that difference in perspective between being a PE investor and being a of a portfolio company of a startup. Let's start with that AI hook right away. Most PE investors I talk to, Ali, are terrified of AI replacing their portfolio companies. You went the opposite direction. You doubled down on a 25-year-old automation business. What are you seeing that all your colleagues are missing?

‍Ali Evans (01:58)
I don't know if they're missing anything. I think it really comes down to deciding what side of history do you want to be on? I think for us as technology investors and business builders really, we are motivated by the opportunity to leverage technology for good and good of humans and good of people. I think with HCIM, we saw a business that had really strong customer relationships, really deep expertise, and an earned reputation of trust. While the expertise certainly can be at least mimicked by AI and maybe even replaced by AI, we believe trust and we believe relationships are hard for artificial intelligence or other AI-enabled tools like agents to replace. And so we think we can leverage that asset, leverage relationships, leverage the trust to then infuse our solutions with AI, infuse our solutions with more technology, and then bring that to our clients in a way that they can leverage and benefit from. And of course, that means we're to be creative. We're going to be innovative with what we provide them. It may change the business model. It may change the nature of our relationships, but we think that 25 years of hard earned client relationship and trust is something that can be built upon.

‍Roland Siebelink (03:19)
Of course. Tell us a story a little bit more about HCIM. How were they funded? What happened in that history? How did you land on them and what made you decide to buy them?

‍Ali Evans (03:29)
Yeah, absolutely. HCIM, the business was founded in July of 2000. It was founded by an ex Blue Shield of California operating executive. He had built multi-decade experience working inside of a large insurance company. And he thought to himself, "Hey, I could create a company to help more insurance companies like this one, like Blue Shield." I think quickly he saw - he started off as a consultant. He was doing consulting for these organizations and he saw the need for automation. He saw their teams were doing a lot of manual work, a lot of data entry. And he thought, wow, it seems like software could do forward, that person, he was nearing retirement age. He wanted to transition out of the business, but really cared a lot about the company continuing and continuing to flourish. And he wanted to find the right buyer. He went on an approximately almost four-year journey to find the right buyer. To be honest, at first we did not come to an agreement on terms on a deal. We took some time to build a relationship, get to know each other. He considered a second buyer. That deal also fell apart. Eventually, I guess I was the third option. But we were able to strike a win-win deal.

And ultimately, as part of that deal, I would become CEO. And I think he liked the idea that he got to know me, he knew my values, and we had some alignment there. He could have trust that he knew who the person who's going to be leading his company that he'd worked for 25 years to build.

‍Roland Siebelink (05:11)
But what I really wanted to delve into with you a little bit, Ali, was the difference in perspective between how a founder looks at the business and how an investor, PE investor in particular, looks at the business. I think in our prep call, you said it sounds like they speak the same language, but the founder speaks Spanish while the investor speaks Portuguese. Can you expand on that?

‍Ali Evans (05:33)
Absolutely. I think one of the things for me, I was an operator before I became an investor. And so, I felt like my job is often to translate between the two languages. What I find Business owners and founders, they should be valued and applauded for what they do. They have an idea. They turn that idea into a solution to someone's problem. And they can build an organization of humans who can then go solve that problem. Nowadays, maybe they just use AI agents, but somehow they solve that problem and they're remunerated for it in some way that creates a business. That's incredible. And I think that very simple building blocks of understanding problems, understanding solutions, understanding business models that then can make a sustainable dynamic or solution of problem, those are common between founder and private equity investor.
‍
I think where the difference comes ofthen is often find with founders, they have so much passion for the problem that they solve, and they're so focused on solving that problem, the business is an afterthought. They say, okay, I just want to get the almost like the minimum amount of reimbursement I possibly can to afford my lifestyle, afford my team, allow us to keep growing the business so we can keep solving the problem for our clients in the market. I think as an investor, it's a different calculus, which is, okay, for every unit of risk I take, how much return can I generate?

Oftentimes, what I see is that the founder thinks about, okay, well, I just want to solve more problems. The investor thinks about, I want to maximize that return per unit of risk, and the two sides can talk past each other. And so, I think that in my experience, what I've tried to bring to the table with our companies is, let me talk like the founder. Let me talk about solving problems for customers and really focus on that. But then let me in the background, let me think about, well, how do I translate that into return and units of return? And so that's really where both as a board member and now as a CEO, constantly trying to bounce back and forth between those two ways of thinking.

‍Ali Evans (08:01)
Important for founders to know the trade-off. There's something to be said there are founders, one that comes to mind is Judy Faulkner, the founder of Epic, the big electronic health record company. She owns 96% of Epic. She has complete control, and no investor will ever dictate what she wants to do as long as she's in control of the business. Exactly. And that's by design. She wanted to be able to drive the company, not based on generating return for investors.

‍Roland Siebelink (08:23)
And alive, yes. Does that play in your head, Ali, when you're in the CEO seat at HCIM? Is it easy to sometimes let go of the investor perspective or do you constantly feel like I have to look at it from both sides?

‍Ali Evans (08:49)
It's been a learning curve. I think one of the things that investors often underestimate is even though we think like this, we think about units of risk per unit of return, our employees do not. When I first became a CEO, I'd stand up and explain our strategy or explain the decisions we were making in the context of risk and return or just how it would help our business grow. And what I realized is that that didn't really matter to them. They cared about three things: their purpose and their mission, their ability to have autonomy, and their ability to grow and develop as individuals.

And so I had to shift the way I communicated. I had to shift the way I thought about motivating the team. And I think that's been one of the biggest learning curves is recognizing that while I may be thinking in the background about risk and return, I have to communicate and motivate in a very different way to the team. And that's been a journey for me. I'm still learning, but I think I'm getting better at it.

‍Roland Siebelink (09:35)
That's fascinating. So when you're in those board meetings or you're reporting back to your fund, you have to switch hats again?

‍Ali Evans (09:42)
Yeah, exactly. And I think that's where having been an investor helps me because I know what questions are going to come up. I know what concerns are going to be raised. And I can proactively address those. But then when I'm with the team, I have to be very intentional about speaking their language and focusing on what motivates them, which is very different from what motivates an investor.

‍Roland Siebelink (10:06)
You also mentioned in our prep call that you did a lot of due diligence on yourself before you took this step. What did that look like?

‍Ali Evans (10:14)
Yeah, I think that's a really important point. I think a lot of people who are investors think about, okay, I want to go be an operator. I want to go run a company. But they don't really think through what that actually means. And so for me, I spent a lot of time thinking about, okay, what are the skills that I have? What are the skills that I don't have? What are the things that I'm going to need to learn? What are the things that are going to be hard for me?

And I think one of the biggest things I realized is that as an investor, you get to see a lot of different companies, a lot of different situations, and you get to pattern match. As an operator, you're in one company, and you have to go deep. And that requires a different skill set. It requires a different mindset. And so I had to really think about, am I willing to go that deep? Am I willing to commit to one company for an extended period of time? And I think that's something that a lot of investors struggle with because we're used to having optionality. We're used to being able to move from one thing to the next. And as an operator, you don't have that same level of optionality.

‍Roland Siebelink (11:18)
That's a great insight. And so what made you decide that HCIM was the right company for you to do that with?

‍Ali Evans (11:25)
I think there were a few things. One was the founder. I really respected him. I thought he had built a great company. I thought he cared deeply about the company and the people. And I think that was really important to me because I wanted to know that I was going to be inheriting something that was built on a solid foundation.

Two, I thought the business was in a really interesting spot. It was at an inflection point where it could either continue to grow and scale, or it could plateau. And I thought that was an interesting challenge. I thought it was something that I could add value to. And I thought it was something that would be intellectually stimulating for me.

And then three, I thought the market opportunity was really interesting. Healthcare is a massive market. Automation is a massive need within healthcare. And I thought that there was a real opportunity to build something significant there. And so when you put all those things together, it felt like the right fit for me.

‍Roland Siebelink (12:20)
That's great. And so now you're a few years into this. What have been some of the biggest surprises or challenges that you didn't anticipate?

‍Ali Evans (12:28)
I think one of the biggest surprises has been how much I've enjoyed it. I think going in, I was excited about it, but I didn't know if I would really love being an operator. And I have found that I really do love it. I love being close to customers. I love being able to make decisions quickly and see the impact of those decisions. I love building a team and seeing people grow and develop. And so that's been a really pleasant surprise.

I think the challenges have been around just the day-to-day grind of running a business. As an investor, you can step away from a company if things aren't going well. You can focus on the companies that are doing well. As an operator, you can't do that. You have to show up every day. You have to deal with whatever comes up. And that can be challenging. It can be exhausting. But I think it's also incredibly rewarding.

‍Roland Siebelink (13:18)
That's a great perspective. Let's talk a little bit about AI because that was the hook we started with. How are you thinking about incorporating AI into HCIM's products and services?

‍Ali Evans (13:29)
Yeah, I think AI is obviously a huge topic right now. And I think there's a lot of hype around it. But I also think there's a lot of real opportunity. For us at HCIM, we've been doing automation for 25 years. We've been doing robotic process automation, which is essentially taking manual tasks and automating them with software. And I think AI is really just the next evolution of that.

What AI allows us to do is automate more complex tasks. It allows us to make decisions that previously required a human. And I think that's incredibly powerful. But I also think it's important to recognize that AI is not going to replace humans entirely. I think it's going to augment humans. It's going to make them more productive. It's going to allow them to focus on higher value tasks. And I think that's really where the opportunity is for us.

We're thinking about how do we infuse AI into our existing solutions? How do we make our RPA more intelligent? How do we make it able to handle more complex scenarios? And then how do we bring that to our clients in a way that adds real value to them? And I think that's the key is we have to be very customer-focused in how we think about AI. We can't just do AI for the sake of doing AI. We have to do it because it solves a real problem for our customers.

‍Roland Siebelink (14:44)
That's a great way to think about it. And are you seeing any specific use cases where AI is making a big difference for your customers?

‍Ali Evans (14:52)
Yeah, I think one of the areas that we're really excited about is in claims processing. Healthcare payers process millions of claims every year. And a lot of that work is still very manual. There are people who are reading through claims, making decisions about whether to approve or deny them, and then processing them. And I think AI can really help with that.

We're building solutions that can read through a claim, understand what's being requested, compare it against policy guidelines, and then make a recommendation about whether it should be approved or denied. And then a human can review that recommendation and make the final decision. But what that does is it makes the human much more productive. They can process many more claims in a day. And it also improves the quality of the decisions because the AI is able to be much more consistent in how it applies the policy guidelines.

And I think that's just one example. I think there are many other areas within healthcare where AI can add real value. And that's what we're focused on is finding those areas and building solutions that address them.

‍Roland Siebelink (15:54)
That's fantastic. And so as you think about the competitive landscape, are there other companies that are doing similar things? How do you think about differentiation?

‍Ali Evans (16:03)
Yeah, I think there are definitely other companies that are working on automation in healthcare. I think what differentiates us is our relationships. I think it's the trust that we've built over 25 years. I think it's the deep expertise that we have in healthcare. And I think it's our willingness to be a partner to our clients rather than just a vendor.

A lot of companies come in and they say, "Here's our software. Here's how it works. Good luck." We come in and we say, "Let's understand your process. Let's understand your pain points. Let's build a solution that's tailored to your needs. And then let's work with you to implement it and make sure it's successful." And I think that partnership approach is really what differentiates us.And I think that's going to be even more important as AI becomes more prevalent because AI is not a plug-and-play solution. It requires a lot of customization. It requires a lot of tuning. And it requires a partner who understands your business and can help you get the most value out of it. And I think that's where we excel.

‍Roland Siebelink (17:05)
That makes a lot of sense. Let's talk a little bit about the future. Where do you see HCIM in five years? What's your vision for the company?

‍Ali Evans (17:13)
I think in five years, I see us as being a much larger company. I think we're going to continue to grow and scale. I think we're going to add more customers. I think we're going to add more services. And I think we're going to become a more significant player in the healthcare automation space.

But I also think that we're going to maintain our culture. I think we're going to maintain our focus on customers. And I think we're going to maintain our commitment to being a great place to work. And I think that's really important because as you grow, it's easy to lose sight of those things. It's easy to become just another big company. And I want to make sure that we don't do that. I want to make sure that we maintain what makes us special.

And I think the other thing that I'm really excited about is I think we're going to continue to innovate. I think we're going to continue to push the boundaries of what's possible with automation and AI. And I think we're going to be a leader in the industry. And that's really what drives me is that opportunity to build something significant and to make a real impact in healthcare.

‍Roland Siebelink (18:17)
That's a great vision. And so as you think about executing on that vision, what are the biggest challenges or obstacles that you're facing right now?

‍Ali Evans (18:26)
I think one of the biggest challenges is talent. I think finding and retaining great people is always hard. And I think it's especially hard in technology right now because there's so much competition for talent. And so we have to be very intentional about how we recruit, how we onboard, how we develop people, and how we retain them. And I think that's something that we're constantly working on.I think the other challenge is just the pace of change in the industry.

I think healthcare is changing rapidly. Technology is changing rapidly. And we have to be able to keep up with that. We have to be able to adapt quickly. And we have to be able to innovate continuously. And that's not easy. That requires a certain mindset. It requires a certain culture. And it requires a certain level of investment. And so we have to be very thoughtful about how we do that.

But I think those are the right challenges to have. I think if you're not facing challenges around talent and innovation, then you're probably not growing. And so I'm actually excited about those challenges because I think they're a sign that we're on the right track.

‍Roland Siebelink (19:30)
That's a great way to think about it. Let's shift gears a little bit and talk about agentic AI. I know that's a topic that a lot of people are talking about right now. How are you thinking about that at HCIM?

‍Ali Evans (19:42)
Yeah, I think agentic AI is really interesting. I think the idea of having AI agents that can take actions on behalf of users, that can interact with other systems, that can make decisions, I think that's incredibly powerful. But I also think we're still very early in that journey. I think there's a lot of hype around it right now. But I think the reality is that the technology is still maturing. And I think there are still a lot of challenges to overcome.

That being said, I think there are some really interesting use cases for agentic AI in healthcare. I think the idea of having an AI agent that can help coordinate care across different providers, that can help manage a patient's care plan, that can help ensure that they're getting the right care at the right time, I think that's incredibly valuable. And I think that's something that we're going to see more of in the future.

But I also think it's important to recognize that these agents are going to need to work in partnership with humans. They're not going to replace humans entirely. And I think that's where the real value is going to come from is in that human-AI collaboration.

‍Roland Siebelink (20:54)
Yeah. So what are you seeing in terms of real implementations? Not just the marketing buzz, but actual things that people haven't heard about. What is changing in the world because of this new mana that's been given to us?

‍Ali Evans (21:10)
I think there's a lot more marketing buzz than there is reality still. But I have seen some really interesting prototypes and proofs of concepts of companies building agentic workflows that go outside of just their one base application, SaaS tool that they have, and can interact with both other applications within an organization's environment, and candidly the outside world calling on whether it be Uber carriers or other type of human-in-the-loop type integrations of AI agent plus human, which is really exciting. I'll call it the last mile of AI value delivery. If you can mix agent plus human until we have humanoid robots that can also execute. That is really exciting and something that we are watching closely.

‍Roland Siebelink (21:48)
Oh, that's a great way of putting it. I love that.Last questions are a little bit more about the person behind the business. Ali, let's get to know you a little bit more.What would you say, when you were a kid or maybe a teenager, what were some of the things that could have predicted that you would become a successful CEO and a PE investor one day? Were there people inspiring you with certain values, certain habits that you picked up?

‍Ali Evans (22:35)
Well, I first must say, I'm very much still on the journey. I humbly say, everybody is just a person trying to become the best version of themselves they can every day. And I'm very much on that journey. I was very fortunate to have lots of role models in my life. My grandmother, she taught me a lot about what I know about finances. I used to count the offering at church with her in the evenings, wrapping coins back in the old days in a very manual, non-AI process, physical coins, if people can believe it.Foundations. My dad was a small business entrepreneur. He ran an IT managed service business; never really had more than 10 employees, but just an incredible leader of people. And I learned a lot from him in terms of how do you treat people and interact well.

‍Roland Siebelink (23:16)
Was there some early manager perhaps that saw the spark in you?

‍Ali Evans (23:31)
Great question. Yes, and he's actually an investor now. When I was in college, I was curious about financial services and investing because I maybe had done a little stock picking and heard that people do this for a living. But I emailed this person, his name is Jason, and I asked him if I could work for him for free as an internship just to learn about investing because he was a professional investor. And, he worked at a company called Wellington, which is a very established, serious investment firm.

He was willing to take a chance on me. And so, he invited me in; I was going to do a four-week internship with him and really just shadow him essentially. I remember coming in with my very cheap suit from probably clearance at Macy's and it's boxy and doesn't fit. And everyone there has very expensive suits and they're looking at me funny. But I just sat next to him in his office. I had my little laptop and he would tell me to research stocks.

It really first sparked the interest of how do you mix analysis of an industry or analysis of how some part of the world works, an analysis of a business that then operates within that industry, and an analysis of an investment and the price of which I should pay for owning a little piece of that business. And that combination of those three factors, industry, business, and investment analysis, I found fascinating. And I never would have learned how to do it had not been for his kindness of inviting me for that four-week internship several years ago.

‍Roland Siebelink (24:56)
That's amazing. That's amazing. And last question before we wrap up. But I think you made a link in our prep call between small town football and how you run a team today.

‍Ali Evans (25:22)
Yeah, absolutely. My firm is named Metamora. It's named after the camp we would go to for the first few days of football practice when I was a high school football player. And the reason being is it was the hardest experience I've ever had in my life to this day. We'd go away to this camp, we'd wake up at 4:30 in the morning, and then we would have practices, four or five practices a day, finishing at 9 p.m. at night, completely exhausted for a week.

But what was interesting about that experience is it bonded us so closely as a team. You go through these crucible moments, it's incredibly challenging. You feel like you're not going to make it, but at that time, there's 30 or 40 or 50 other people going through it with you. And so you support each other, bond together. Fast forward, we named the firm Metamora because when we invest in businesses, again, they're good companies, but they're not perfect. And so that means there are going to be challenges.

There are going to be new technologies that get introduced. There are going to be customers that go out of business. There's just going to be hard things that happen. And so for us, it's all about how we respond and do we bond together as a team and support each other. And so, we wanted that to be a core part of our firm and how we built the firm. And so, we, named it that. Like I said, we still have a long way to go, but we feel like we're on the right journey.

‍Roland Siebelink (26:44)
That's an amazing story. Well, thank you, Ali. I'm sure our listeners will love this whole episode. I love the specific stories that you added. If people want to be in touch, how can they reach you?

‍Ali Evans (26:56)
Yeah, absolutely. The best way to reach me is on LinkedIn. You can just search Ali Evans and I'm relatively active, so I will respond.

‍Roland Siebelink (27:04)
Excellent. Okay. And if somebody knows me and does not know Ali yet, I'm happy to provide an introduction as well, of course. Ali Evans, the CEO of HCIM and also the general partner of Metamora. Thank you so much for joining the Scaling Without Breaking podcast and sharing some of your breakthroughs from the bubble with us. The audience, of course, we will have another amazing founder, CEO, venture partner here next week. So please keep tuning in.

‍Ali Evans (27:19)
That's right.

‍Roland Siebelink (27:28)
Founder, CEO, venture partner here next week. So please keep tuning in.

‍

Why 20 People Can Beat Billion-Dollar AI Companies | EP 122

Show Notes

Transcript