How Elafris CEO Jake Diner grew to $240K revenue and 4 customers in 2018.

hello everyone my guest today is jake diner he's an innovation and technology expert with two decades of experience in product management currently his company is working on is elephras we'll talk about that in a second but first he graduated from msu with a degree in computer science and after working for over a decade in corporate leadership roles including positions at belkin and dell he decided to use his experience to build starbucks with a focus on those serving the insurance industry that's what led him to where he is today as ceo of elephras a san francisco-based company that has built artificial intelligence-powered chatbot technology designed to help insurers meet the engagement expectations of today's consumer jake are you ready to take us to the top yeah absolutely all right so tell us about the company and specifically is it kind of a pure play sas model or how do you make money [Music] well first of all uh our company allows us to solve the problem of engagement between the consumers and insurance company uh from my personal experience where i got pulled over and the cop asked a very simple question proof of insurance and i happened to have a smartphone app my insurance smartphone app on the phone and that app started update itself the first time i launched it so i'm sitting there in the car with the cops standing right next to me flashing the light in my eyes and we're both waiting for the app to update itself it took about five minutes poor connection the app updated itself then it asked for username and password and i had no idea what it is because i've never used my insurance app before so that's what kind of pushed us well there got to be a better way to engage with our insurance companies as consumers so that's how we started our company and essentially we merged into building virtual insurance agents so we are teaching ai to be capable of uh augmenting and perhaps in the future replacing uh insurance agents and who's buying the software consumers they pay for the app or insurance companies themselves no it's uh there's no app uh it's the ai platform sas platform which insurers buy and it sits between insurance systems which is a policy administration or agency management system and a channel that consumer is communicating with so so if you got pulled over somewhere you want to ask a quick question insurance company you can just text you send an sms to your insurance company and on the back end instead of agent you have ai answering or if you want to check with alexa the status of your claim where the check has been approved what else what else needs to be done you just talk to your insurance company using your preferred channel communication and our ai will understand it it will manage the dialogue manage that conversation and pull the required data from the insurance so let's go back to the example the police officer there so with your solution you would have opened your phone and where would you have gone text i would just send an sms to my insurance company and how would you know what that number is well that number is on my insurance id card which but didn't you have to log into the app to get the the the card good point so i do have to establish that contact right so i know who is my insurance company and i can pretty much just search in uh in a messenger channel so for example uh i can uh so before i can contact them i have to know who they are but jake just be clear i would imagine most of my myself listening right now if i asked you to tell me your insurance company's number right now none of them would be able to respond to that so it goes back to the same problem you had earlier they'd still have to have the app well you have to have a contact information not the app itself okay well let's say i just got pulled over i don't have contact information how would i get that without downloading the app uh you can search for this okay so i go on google i search for blue cross blue on our nation you know nationwide car insurance call-in number yes yeah you can you can search for literally so uh for example uh you can uh uh you can just type in google and you can say nationwide and the number that's come up that's the number you should be able to call it yeah so i'm going to text that number and it's going to say it's going to write back on my this is a landline that can't accept text that's the mistake that that line should be able to accept text as well okay and is that what you're providing correct okay got it all right um i think i think i understand now so what is the walk me through pricing what's the average insurance kind of company paying you per month for this well it's based on the size of the insurance company and we typically charge between five to ten thousand dollars a month for insurance companies okay and size based off what number of agents number of policies issued what well insurance industry is measured on the books so how much how many uh policies they sold essentially so based on the amount of policies okay got it and that's what you price based off of correct okay and let's again put this on a timeline for me when did you launch the company what year uh we launched it two years ago so called 2016 and seoul founder do you have a team oh there are two founders myself and michael shapiro he is my college classmate oh very cool do you guys split 50 50 or who has more i always split 55 oh very good fair interesting what happens when you both disagree uh well we actually um we also reserve some uh um uh voting rights for advisors so that's a good way to manage disagreement is to bring external voice got it what's the total team size today uh 14 people 14 and where's everybody based uh we have steam split in san francisco area in ohio from all places and uh key of ukraine yep good spots and what have you scaled to in terms of customers how many customers are you working with so we have today for customers who use our solution and in our pipeline we have about 10 more okay insurance business it's a very long sale cycle business because they're very risk averse and they want to make sure they get the best technology so we do we go through a lot of pilots a lot of uh rfps to uh to make a sale so for customers paying kind of a minimum of five grand per month it's fair to say you're doing about 20 grand a month right now in revenue yeah okay probably okay i mean is it lower or higher well no no it's about right just depends sometimes it's a little bit more sometimes a bit less so okay and talk to me about growth where were you a year ago the same time how much revenue well a year ago we didn't have anyone so we acquired all customers within one year okay so when did you launch the pricing when did you launch the pricing because you said the company was created in 2016. yeah it took us about a year just to build initial uh proof of concept got it uh because it's an ai platform on the back end so we don't use google to ibms we've tested them all out they don't sufficient what we're doing so we have very sophisticated natural language processing platform that understands the text and on top of that you have a very complex dialogue manager that essentially understands what to do with it so so for example um are you texting me a quote right i'm back and i'm analyzing all right so you probably want to start a quote i need to understand uh which type of quote you want to start like you have insurance that supports out of home and life so i'm gonna well which point would you like to get home or life or auto and you're gonna say that pat pet insurance right totally unexpected not answering the question i've asked you so i have to be able to do i have to be able to understand what am i doing next where am i taking you because you just asked something i don't have an answer for i understand it took a while to build it and have you bootstrapped it or did you raise oh we bootstrapped okay so you you and your co-founder just kind of sunk in the money for the first year to support the thing and pay yourselves or or not probably you probably didn't pay yourselves yeah how much did you guys put in uh what about half a million each okay wow okay and so i mean how long will that take you what do you hope to grow revenue to while you saw that money in the bank uh well we are right now so we about to run out of money now so we started to raise our seed round uh we're raising about one and a half million and uh right now we are in the process of uh um uh negotiating the jump ship the what the term sheet what do you have are you doing a convertible note or a priced equity round uh note a note okay so what do you think i mean if you raise 1.5 million on a note what what what kind of cap are you hoping to get what interest rate what terms are you hoping to get well it's all this is what we're what we're negotiating right now so i cannot speak about that well not what you again all i'm asking is what would you consider successful what are you aiming for what cap do you want to get oh um so if we can get uh five or six million that would be nice as a cap yeah yeah and then um are you i mostly other terms are pretty standard right a twenty percent discount right a six percent eight percent interest rate things like that well actually we're going with the safe so there's no interest there just the discount just the discount and the cap very good well look i hope that closes i hope it i hope then obviously use that capital and continue to drive growth how many months of runway will that 1.5 get you if you close it well the plan is to get it to 18 months 18 months got it and do you have any economics yet around like churn our lifetime value in cac or is it too early uh it's it's still too early to be uh you know to pound yourself in the chest but uh what we've noticed and this is what they like is the improvement in the quote conversion rates it's the improvement in amount of payments so one of the things that the chat bots or using the it's sometimes people call it chatbot so one of the things that chatbots can do they know how to re-engage people as opposed to the web forms on the website so because you close the browser and the conversation is gone but the chatbot because it lives on the channel which consumer has so it's sms channel facebook messenger uh or amazon alexa it's always can come back and re-engage you and ask follow-up questions and remind you about things yeah so we've seen we're seeing a greater uh payment collection so lifetime value for our customers is increasing so some of our customers on average had uh uh three or four payments that they were able to collect from people that bought insurance from them correct correct they will so it's called the amount of payments so we are we are aiming to increase the amount of payments by 25 that's good and that's one of your key value props correct very good help collect more payments very good all right let's wrap up here with the famous five jake number one what's your favorite business book art of the deal number two is there a ceo you're following or studying no number three what's your favorite online tool for building a business hot spot number four how many hours i sleep to get every night uh six if i'm lucky all right and which situation married single do you have kids uh married have a daughter one kid on how old are you ah four no no how old are you oh how old are you still four i'm 40. 40. all right last question what do you wish your 20 year old self knew [Music] that no matter how hard you prepare for life it's always going to get harder life will get harder that's just the way it works guys there you have it from jake again i had a lot of experience at dell other companies decide to take the leap in 2016 put in about 500 grand him and his co-founder of their own money to build um elaphrous which basically is again a chatbot for insurance agencies it helps them get more payments it helps them make more money from their customers they currently have four customers paying five grand a month so 20 grand a month and monthly recurring revenue their team of 14 based between san francisco ohio and kiev russia again they're raising about 1.5 million bucks right now hoping to get a five or six cap on that we wish you the best jake and thanks for taking us to the top thank you