How Limelighthealth CEO Jason Andrew grew to $5M revenue and 300 customers in 2018.

please welcome Jason Andrew to the stage all right uh good afternoon good to see everybody hope you got some lunch some good food there and I did want to start by just uh thanking Nathan for the invite and cool event having some really good conversations and also congrats on the 145 million dollar raise I think it's awesome um so my name is Jason Andrew I was in Silicon Valley for about 20 years I'm in Eugene Oregon now and I started Limelight Health with three co-founders in 2014. uh we were uh started out as a multi-carrier quoting system for insurance brokers in the life and health space I'd been in the insurance industry for now about 22 years and so when we started the company we were you know grew it for about six and a half years and we were acquired in August of 2020 and then I was at Phineas for the last two years on an earn out and just left two months ago and so now I'm trying to figure out what I'm gonna do when I grow up if you have any ideas I'm open to conversations um so just trying to figure that out okay so um so today I'm going to talk about how we pivoted multiple times to about a 93 million dollar exit um I'm really enjoying the bootstrap mindset here so full disclosure we raised about 44 million dollars over four rounds of funding so all the pitfalls and challenges that have been discussed all day around taking Venture we went through a lot of those but it wasn't a meaningful exit for our Founders and employees and investors and so we're really thankful for that as well um so over the next 20 minutes we're going to talk about um what we did to get our first million and and kind of some of the ways we went about that how we found uh product Market fit which actually took us about probably six years almost till we sold the company actually forgot product Market fit um and then why an exit for us made sense and where we were at in the marketplace uh what things were keeping me up at night and and why that seemed for sure um the the best path so thankfully uh you know we grew revenues from uh the first year all the way through our exit um and when we when we started the company uh we did some things that you know worked on a prototype but we were then you know acquired we were doing almost 12 million in 2021 and our way to about 19 million um and so you know we were having some growth but uh we had about 50 of that was Services Revenue the other 50 was uh recurring error and really because we were doing big Enterprise deployments at that point in time uh you know it was probably a three-year recurring revenue on the on the services side of it so um that explains some of the multiple that we got which is kind of a blend between SAS and and the services so um I know it's kind of cliche but I'm going to talk about really for me a lot of it as a CEO was about relationships and intuitively trying to figure out where the business needed to go and having really great people that helped us along the way and just learning how to go from a Founder to a CEO through the whole path and so we we did a prototype for the first um really for the first um year and it was built in one programming language and when we finished that we also my co-founder Michael had a lot of connections in the industry and we had about 20 to 30 clients that paid us about thousand dollars total in advance that's where our first year revenue and they really did it based on the fact that we had a prototype that they believed we would deliver to them and it was on the relationships and the trust and we did a lot of work to to deliver on that but if we hadn't had Michael and didn't have the relationships in the industry and what we were doing we would not have gotten those first customers signed up without a doubt um and then another relationship that Michael didn't used to was an angel investor who actually ended up investing in the company becoming an advisor to me and then ultimately we hired him later on he was instrumental in a lot of areas of the company but one of the first things that he did was make an introduction to an insurance carrier was one of the largest insurance carriers in the in the world and they said yeah we'd love your your product which was really a prototype at the time we want to work with you and so we had a huge decision to make after a year of selling to Insurance Brokers having about 20 clients on the insurance brokered side of now going Enterprise and we had 13 people in the company at the time and we really decided if we do this we're gonna have to take our baby which we just built put it out on the doorstep in the rain ignore it and go all in on this insurance carrier which is going to pay us about a million dollars in revenue for the next year of work and become a customer so we made a bet we went after the million dollars and we then worked really diligently to try and take care of the customers we had there but we largely did not have capacity to do both well and it took about two years to rebuild the product for the insurance carrier space while we kept the brokered side of the business alive and spent a lot of time with those customers who were very very very patient with us um so it we we didn't at that time turn off the other business and so we kept growing that and so now we had two businesses one selling to Insurance Brokers the other one selling to insurance carriers we had one insurance carrier and that was for about almost two and a half years that we had worked with um so in terms of culture and authenticity um this is my co-found one of my co-founders Garrett viggers uh he's a musician and so we got into it in the early days neither one of us were technical co-founders so uh we couldn't code so we were mostly remote we had some engineers in the office so when they were up late at night because in the early days we were like you know burning the count on both ends I could buy pizza and he could play songs and we were just walking around the office and like trying to encourage the guys like hey keep going man we're gonna get through this you know and um but what we started doing then on our All Hands was playing music uh just as a way you know to kind of encourage people and get like music and that was the thing when we sold the company we had 140 employees and I swear probably 80 were really really good musicians of some variety or another and all through the life cycle of the company we started doing all hands where an employee would say hey I'm gonna do a song an original or a cover or something like that we had everything from Opera to rock songs to you name it but then we started actually in uh serenading customers so we had like a huge uh executive team come from Ireland and they came to our office they visited a bunch of companies in Silicon Valley and so we like serenaded these guys and they came to our office and they were blown away they're like we've never had anybody in a sales meeting serenade us with a song and we're friends with them to this day and we've gotten then then we started doing that to uh go on site we'd outside with customers we'd like sing to like all their employees and so what it did was we knew we were looking for ways to stand out because we were still building our product and we had competitors that had a lot more money and a lot more skilled engineering teams and it it was huge in in settings apart and it was authentic because we all liked music we ended up doing concerts when covet hit and we invited customers we invited Partners we invited family we started to talk about mental health you know and so you say we probably spent as much time thinking about culture and doing quirky stuff like that as we did building the company and it may have been in some folks Minds a complete waste of time but it was authentic and it was real and to this day the acquiring company adopted that they've done eight concerts globally and we ended up becoming the the music sponsor for the largest and sure Tech um event globally uh for this third year running now and so it's it's been something that the company became known for we got a lot of business a lot of customers out of that and uh our sales team could call in and people would start talking about music and it just dropped uh the guards that people had so anyway so um you gotta figure out your own thing whatever it is in terms of your culture so um as we continue building the company uh in in the the kind of the first pivot we we had to again uh make the decision to move away from the broker Channel we went into the the carrier market so um all right let's go to section two so in terms of relationships and and the importance of relationships um after we had uh pivoted and shifted um it was 2016 we were heading into 2017 and we were we were growing um but our I started getting overly concerned about how we were going to be able to scale and how we were going to really grow the business and so I had brought on uh that said said another slide a gentleman around kind of late 2018 as an advisor who had sold a company that was in the space that we had started with and so I had asked him if you were my seat what would you do how would you grow this business you know how would you go about it and he basically wrote me a report and said look you're going to slog away for probably 10 years and maybe if you're successful you might get to 10 million in Revenue but it's highly unlikely that's about the space that you're going to be able to grow into obviously I was super concerned after that and I was looking at where the market was so I had then looked at our carrier Market space where we had this one customer and looked at companies that were in an adjacent space to us and I started cold calling some of the executives that had retired after they had gone public one of them responded to me a guy named Pete Espinoza who had been the head of sales at guidewire which is now about a 9 billion dollar company and I said Do you ever advise and help people and he said sure if I like them I do it and so Pete I said will you come out I'll fly you out I'd like you just to meet with our executive team and tell us all the problems you had how you got through it and what you did to build it so Pete said sure I'll come out and I spent a whole day with our team and really told us all the challenges they had all the difficulties he ended up then coming on as an advisor helped me hire his entire previous Enterprise sales team and then made an introduction to an executive at Ernst young who was instrumental in US raising a future round as well as being able to build out the model we shifted to and so again it was really some of these relationships that gave the Insight in terms of making these huge shifts every time that I felt like I didn't know where to go what we were doing in terms of building the company um Pete then made an introduction to a third person who was uh probably the fifth employee at guidewire she ended up joining our board and was instrumental in how we got to the point where we had to make a product change later on as we went there so um fast forward then to about 2017 we we raised our series B and at that point in time we were trying to figure out how to really penetrate this market and I started getting concerned because now as I looked at our competitors they had all on average been in the market for about 27 years and had raised on average about 100 million dollars compared to at that time we had raised about 10 and so I went to the board and we started looking at it and saying look we're going to if we're going to be able to scale this it's going to take us a ton more money a ton more time and the market seemed to be getting more and more competitive and I started getting concerned that we weren't going to be able to execute on that we had a fairly immature product we had now had five carrier customers and we had a really good brand in terms of the work so we raised a series C so now we raised 30 million dollars this is towards the end of 18. and I hired an executive team one of which was a really seasoned product leader who had said look we've got products in three different categories right now and we have to really focus if we're going to cross the chasm and make it as a company so we shifted over the next 12 months this is about six years in it's from waterfall to Agile we had 405 customers 400 in the broker Channel and five in the carrier so we cut off completely the broker Channel which was really scary and got rid of 400 customers we were left with five and towards the end of that year we then got uh interest about four inbound folks that we had built relationships over the last several years on the Strategic side and I had went to the board and said look I think that we've got again a pretty immature product we're gonna have to raise a ton more money and this is going to take us a long time and the Market's getting more and more competitive and so we made the decision um it's a longer conversation so I'm going to now but made the decision and the board agreed and then we were acquired in about eight months later about eight month process of going through that so this was kind of the cross in the chasm when we raise the money um again we were we had probably four different businesses because of the way that we had built the product we were in the broker Market we were in the peo market we were in the carrier market and we had a data business so we cut off three or four of those and focused exclusively on just the carrier Market um and it was a really really scary time so um over last minutes uh 20 minutes talked about making bets and pivoting early on just following uh where the market is leading we didn't know at the time what our product Market fit was and we had to shift that several times to me kind of culture and authenticity is super important and so whatever that is for you we spent a lot of time on building culture and I think it's super important um it can be cliche but I think relationships are are critical um in in terms of for us it was a relationship at every stage that either helped us get a customer help us to get funding helped us to be able to figure out how to build our product um and then we've got folks that had been on the path we had gone to so we went to companies that we wanted to imitate and brought them on either to our board and as advisors end up often hiring advisors as employees that were super helpful and had the roadmap and how to grow um and then I started doing a ton of market research assessing the risk and realized again that we had a very immature product and looking at the competition that just the life cycle for us to be able to scale to the next level and get where we thought we were going to be wasn't uh the path that was going to work and so we tapped out and it was a really good tap out I'm thankful for it but um thank you that's it [Music]

hello everyone my guest today is jason andrew he is recognized the early trend for insurtech back in 2013 he co-founded limelight health to deliver better data integration and sales efficiency for insurance carriers peos brokers and others in the employee benefits ecosystem limelight's award-winning technology quote pad aims to transform the way health insurance and employee benefits are quoted sold and renewed jason are you ready to take us to the top absolutely thank you you bet all right what's the business model on this thing is it pure play sas it's both we've got uh some services and some sas revenue so if you think of guidewire software or ipline in the insurance industry we do both um but it's it's a sas model over the last 12 months what percentage revenue was sas first professional service we're at 60 40 right now so 60 uh 60 percent of service and 40 rev uh recurring that's increasing you know every month so you're trying to drive more sas yeah i think the way that if we look at kind of some of our um you know companies that we look to aspire to be like uh down the road they're probably the reverse they're probably uh 60 sas and 40 uh services and that's the way this industry really works for bigger companies and we we're trending in that direction yeah all right tell us about the company uh what do you guys do and um and then we'll dive into your customer base so in the employee benefits industry you think about 96 of all businesses in the country have less than 50 employees that's probably the most fragmented business and typically about 80 of that business is driven by a broker selling to an employer and it's extremely fragmented you have a lot of legacy systems um it's all done in excel email so limelight build a platform that helps an underwriter at a carrier work with a sales executive who's working with a broker to get to you as the employer uh health dental vision life disability insurance coverage yep okay and and in terms of the this just the sas side of this business model what would you say the average customer is paying you per month so we have two different verticals and so it uh it depends if in our in our broker channel uh they're paying about eighteen hundred dollars per month uh roughly uh if it's just one license it's about 100 a month but typically we've got multiple users there uh in our enterprise deployments uh it's closer between 80 to 100 000 a month okay got it and those enterprise deployments how are they different than just like when would a sole broker sign up versus the whole enterprise so we started actually selling directly to uh kind of independent regional brokers and so forth and that's a part of a business that we still have folks that are using they sign up uh we've got a smaller team that is working with them so we have them sign up on a pretty much ongoing basis kind of off the shelf but most of our focus on our enterprise business and those are longer sales cycles and uh you know somewhere between 12 and 16 months in terms of sales cycle help me understand how you're doing this so team kind of makeup today what size of the team and how many focused on inside sales uh only two are on inside sales and everybody else focus on the enterprise so we're and and we're scaling that team will be building more so we've kind of got partners that help out whether that's someone like a sales force or sales integrators uh folks that are like uh deloitte ernst young and so forth uh so we've got a whole bunch of partners that work with us but uh our enterprise sales team is is where we're building that out yeah and what's total team size look like 10 people on the sales team two on inside sales the rest are all on the enterprise sorry like the total team including engineering everything oh we've got about 100 people today okay 100 folks call it 10 to 12 on sales inside sale something like that and put all this on a timeline for me when did you launch company yeah we started in february of 2014 so we're four years into it boots dropped or have you raised we've done three rounds of funding and we're getting ready to raise another round so we uh we did a series b about 7 million last last year towards the beginning of 2017. and how much in the company to date so far uh just shy of 11 million 11. is that all equity or was their debt built in uh we did about one and a half in in uh in a debt round i'm sorry two two million in a debt round in 2015. the rest is equity okay and walk me through why you're raising today what are you gonna use the money for uh growth and expansion so we think we've got a lead in the market we think that that the folks that have been uh buying and signing on uh you know getting a lot of traction and so we think we can really be the dominant player for what we're doing in the industry so will that go towards like engineering though or more sales people a lot of it's going to go towards uh continuing to develop other products to make it more easily integratable and extendable for our partners to grow in an ideal world how much do you raise in this round you think what are you targeting about 30 million 30. and when you look at kind of valuations in the marketplace what would just give me give me a like above the rainbow scenario evaluation that you would be thrilled to get oh look i mean somewhere between the low end 50 and the high 100 million so you know if you talk about rainbow 100 yeah so so would you if someone gave me an offer for 30 million out of 50 pre i mean you're basically selling you know 35 of the company you would you would consider that if it's the right partner uh again that'd be on the low end yeah yeah so interesting um as you jump kind of into the market and start kind of getting you know demand for the for this round how are you doing that do you start with your inside folks that have already invested and at what point you start inviting outside folks in yeah look let me just really make a comment on your question there right so uh i mean i do think valuations are important but i think you you and i both know that many companies have focused so much on the valuations no by the way just to be clear i don't i just i don't want you to put words in my mouth i don't think evaluation is just one data point i've seen people get killed on valuation because the terms are that's right yeah so uh yeah so somewhere between that range in that sense so uh sorry so the question there in terms of the sales team and the growth say it again yeah so no i was just curious as you think about raising this round you start with people who've already put money up see if they have interest you know what does the process look like for you you're going to san fran you line up meetings over a week like what's it look like yeah i know we're we've we you know one of the things that we've seen you know building relations has been important so we've we've had a number of folks that have been following the business for the last couple of years we've stayed in touch and said hey when you get to xyz milestones we'd be very interested so our first thing was to go to those folks uh you know less than a dozen that we already have relations with said look when you get to this stage we're very interested so that's where we start yep and how many customers have you scaled to today so right now in our broker channel we've got about 300 different independent and regional national brokerage firms six of the top ten in the u.s are using my light and then on the enterprise side we've got five big uh really well-known customers okay so can i i mean so if i take 300 brokers just the broker side of the business times 1800 bucks that puts you about 540 grand per month in revenue is that generally accurate are you way bigger than that yeah we're way bigger than that okay where are you generally right now in terms of ar run rate uh right now with all of our bookings for arr sorry with mri we're doing about 420 000 okay and just be clear that's just the 40 that is pure sas uh that's correct okay got it very cool how do you no layer on the professional services side where do you layer that on what do you mean in terms of wavy later on so is it an onboarding fee right that's that's you know fifty percent of the first year acv and that you use that to drive you know stickiness and retention yeah well you know look the the insurance industry is is got all kinds of legacy systems and all kinds of points where you need to connect to so in every implementation we're either connecting to uh or via api or we're connecting into an existing system or we're doing a a configuration to a sales force or an existing uh player so we've done a lot of those type of connections so that's some of it is the setup and the configuration of our product okay and if you're at back to the sas side if you're at 420 grand today per month give me a general sense of growth of just the south side because i think it's growing faster than the services side where were your year ago on that on that model so uh january of 2017 we're at 50 000 january of this year 200 000 as of july we were 400 000. okay that's great so really healthy growth and has that just been from cross selling to your kind of other accounts that used to be just professional services all new customer acquisition growth all new customers okay so where are you spending money to acquire these new customers um we've done very little in marketing so far i think that the company's done a good job the team's done a good job in branding and getting us out there we just won the red herring you know top 100 companies in north america we've done a bunch of stuff like that we've put very little in the actual marketing span it's all been in staff and field marketing so we do a lot of events we spend a lot of time um it's it's a pretty small industry so we spend a lot of time uh focusing on where going where our customers are do you back in newark do you back in the cac what are you willing to spend to acquire one of these customers yeah we're looking at that right now i mean in terms of kind of what that is it's uh we're drilling down those numbers but i wouldn't be able to tell you today like we know exactly you know what those are so yeah what about payback period again if you sign one of these guys up paying you 1400 bucks per month how quickly do you like to get paid back like under 12 months 24 months six months yeah with the with the the regionals the independence is definitely within 12 months 12 months do you require upfront payment or no on sale or customers it depends upon on on the enterprise deals yes on the smaller ones we uh have some that prepay uh two years most of our contracts overall are three year contracts in the enterprise side and on just the the broker regional side they're 12 or 24 months and some of those prepay for a couple of years churn's critical in this business what's your turn and how do you think about it really low it's pretty sticky we build uh on both sides so it's you know probably around less than three percent on the brokerage side we have some turn there but i'm really smaller deals on the enterprise side we've had zero turn today and again you know we've been in production for about two and a half years so we'll see how that trends but uh it's a pretty uh it's a pretty sticky business jason that's less than three percent of what is that gross you know revenue or gross logo yeah of of a logo and again so if you think about like you know 300 brokers or whatnot um we might lose you know 15 in a year but we're gonna gain a whole bunch more sure again and those are um so in terms of actual you know bigger customer logos we haven't lost any in terms of kind of the the regional independent brokers we have some that that come and go in that sense but it's a really small portion of our revenue yep so just be clear it's three percent gross logo churn per month or per year per year per year i mean yeah okay that's i mean basically nothing there so it's great makes me think you're not charging enough well that's possibilities so we're looking at everything right yeah very good and the team of 100 where's everybody based we're actually a very dispersed team i know uh you know we've looked at companies like zapier we love their model and how they've done it so we're not we haven't gone all in to kind of say hey we're gonna pay you to move out of san francisco but we've got an office in redding california one in des moines iowa and here in san francisco but out of that uh 60 people are all over the globe so we're a pretty dispersed team very remote a last question before we wrap up you mentioned 50 million would be kind of the lower end evaluation to be looking at if someone came in today and offered you exactly that 50 million to buy the whole company would you sell are you making the offer no i'm curious though um look i mean someone came in it was the right person uh we we'd probably take a look at uh everything right never hurts to have a conversation yeah there you have it jason let's wrap up with the famous five number one what's your favorite business book favorite business book i just read shoe dog by phil knight my wife recommended it and that was just recently i loved how transparent he was about the struggles of scaling the business it was amazing so i think that's probably my one of my top books right now number two is there a ceo your fog are studying currently i see you i'm following or studying currently uh always fascinated by just because i'm here by proximity uh just kind of the the pros and cons of everything that's going on with elon musk and all that he can do very fast number three what's your favorite online tool for building your business favorite online tool for building our business uh probably it has to be slack i mean that's uh we live and breathe there so when they're down we're part of the noise right yep how many hours of sleep to eat every night i get about six on average okay and what's your situation married single kids been married for 20 years i have three kids wow and how are you jason how old am i i'm like only 22. and we started young i'm 45 45 45. last question what do you wish your 20 year old self knew i wish my 20 year old self uh knew how to think about contracts and relationships a lot more than my 45 year old self does guys there you have it focus on relationships they do pay off in the long run founded limelight back a couple years ago call it 2014 now has over 300 customers paying on average 1400 bucks per month so say 420 grand per month in pure sas revenue that's 5 million per year that's about 40 of their total revenue they raised 11 million bucks to drive that growth uh really incredible growth year over year so far super sticky less than three percent gross low good return per year payback periods less than 12 months with our team of 100 people based off all kinds of remote locations all around the place again trying to make insurance uh and sure tech specifically much easier so that these benefits can be quoted sold and renewed more officially jason thank you so much for taking us to the top nathan thank you appreciate it