Limelighthealthrevenue, acquisition & funding

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