How Limelight Health Pivoted to a $93M Acquisition at $12M Revenue (Talk by CEO Jason Andrew)

Introduction and Background

Jason Andrew

00:00Please welcome Jason Andrew to the stage. Alright. Good afternoon. Good to see everybody. Hope you got some lunch, some good food there. And I did wanna start by just thanking Nathan for the invite and cool event, having some really good conversations. And also congrats on the $145,000,000 raise. It was awesome. So my name is Jason Andrew. I was in Silicon Valley for about twenty years. I'm in Eugene, Oregon now. And I started Limelight Health with three

00:26co founders in 2014. We 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 twenty two years. And so when we started the company, we grew it for about six and a half years, and we were acquired in August 2020. And then I was at FINEOS for the last two years on an earn out and just left two months ago. And

Overview: Pivoting to a $93M Exit

Jason Andrew

00:52so now I'm trying to figure out what I'm going to do when I grow up. If you have any ideas, I'm open to conversations. So just trying to figure that out. Okay. So today, I'm going to talk about how we pivoted multiple times to about a $93,000,000 exit. I'm really enjoying the bootstrap mindset here. So full disclosure, we raised about $44,000,000 over four rounds of funding. So all the pitfalls and challenges that have been discussed all day

01:16around taking venture, we went through a lot of those. But it was a meaningful exit for our founders and employees and investors, and so we're really thankful for that as well.

01:26So over the next twenty minutes, we're going to talk about what we did to get our first million and kind of some of the ways we went about that, How we found product market fit, which actually took us about probably six years almost till we sold the company, actually found product market fit. And then why an exit for us made sense and where we were at in the marketplace, what things were keeping me up at night

Revenue and Business Mix at Acquisition

Jason Andrew

01:47and why that seemed for sure the best path. So thankfully, we grew revenues from the first year all the way through our exit. And when we started the company, we did some things that worked on a prototype, but we were then acquired, we were doing about almost 12,000,000 in 2021 and on our way to about 19,000,000. And so we were having some growth, but we had about 50% of that was services revenue. The other 50 was recurring

02:20ARR. And really because we were doing big enterprise deployments at that point in time, it was probably a three year recurring revenue on the services side of it. So that explains some of the multiple that we got, which is kind of a blend between SaaS and the services. So 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

First Customers and Early Revenue

Jason Andrew

02:46figure 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 that whole path. And so we did a prototype for the first,

03:01really for the first 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 dollars total in advance. That's for our first year revenue. And they really did it based on the fact that we had a prototype that they believe we would deliver to them. And it was on

03:23the relationships and the trust. And we did a lot of work to deliver on that. But if we hadn't had Michael 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. And then another relationship that Michael introduced me 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.

03:45He 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. It was one of the largest insurance carriers in the world. And they said, yeah, we'd love 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

The Pivot to the Carrier Market

Jason Andrew

04:0420 clients on the insurance brokerage enterprise. And we had 13 people in the company at the time. And we really decided if we do this, we're going to 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

04:28made 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 brokerage side of the business alive, and spent a lot of time with those customers who were very, very, very patient with us.

Culture, Music, and Authenticity

Jason Andrew

04:52So 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, 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. So in terms of culture and authenticity, one of my co founders, Garrett Viggers, he's a musician. And so we got into it. In

05:16the early days, neither one of us were technical co founders. So 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 burning the candle on both ends, I could buy pizza and he could play songs. And we just walk around the office and try and encourage the guys like, hey, keep going, man, we're going get through this.

05:36What we started doing then on our all hands was playing music just as a way to kind of encourage people and Garrett like music and that was the thing. When we sold the company, we had 140 employees and I'd say probably 80 were really, really good musicians of some variety or another. 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

Serenading Customers as a Sales Strategy

Jason Andrew

05:58original or a cover or something like that. We had everything from opera to rock songs to you name it. But then we started actually serenading customers. So we had a huge executive team come from Ireland, and they came to our office. They visited a bunch of companies in Silicon Valley. And so we 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

06:21us with a song. And we're friends with them to this day and we've gotten then we started doing that to go on-site. We'd be on-site 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 was huge

COVID Concerts and Brand Building

Jason Andrew

06:43in setting us apart. And it was authentic because we all liked music. We ended up doing concerts when COVID hit and we invited customers, we invited partners, we invited family, we started talking about mental health. And so I'd 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

07:08and it was real. And to this day, the acquiring company adopted that. They've done eight concerts globally, and we ended up becoming the music sponsor for the largest InsureTech event globally for this third year running now. And so it's been something that the company became known for. We had a lot of business, a lot of customers out of that. And our sales team would call in and people would start talking about music and it just dropped

07:32the guards that people had. Anyway,

07:38you got to figure out your own thing, whatever it is in terms of your culture. So as we continue building the company in the kind of the first pivot, we had to, again, make the decision to move away from the broker channel. We went into the carrier market. So,

07:55all right, let's go to section two. So in terms of relationships and the importance of relationships.

08:02After we had pivoted and shifted,

08:07it was 2016, we were heading into 2017, and we were growing. But 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, as I said on another slide, a gentleman around kind of late twenty eighteen as an advisor who had sold a company that was in the space that we had started with. And so I'd asked

08:35him, if you were in my seat, what would you do? How would you grow this business? How would you go about it? And he basically wrote me a report and said, look, you're going to slog away for probably ten years. And maybe if you're successful, you might get to 10,000,000 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

08:56was looking at where the market was. So I 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 Espinosa, who had been the head of sales at Guidewire, which is now about a $9,000,000,000 company. And I

09:16said, 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 to meet with our executive team and tell us all the problems that you had, how you got through it and what you did to build it. So Pete said, Sure, I'll come out. And he spent a whole day with our team and really

09:32told 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 and Young who was instrumental in us raising our 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

09:56these huge shifts every time that I felt like I didn't know where to go or what we were doing in terms of building the company.

Raising Series B and Assessing Competition

Jason Andrew

10:06Pete then made an introduction to a third person who was 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 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

10:33started getting concerned because now, as I looked at our competitors, they had all on average been in the market for about twenty seven years and had raised on average about $100,000,000 compared to us, who at that time had raised about 10. And so I went to the board and we started looking at it and saying, look, 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

Series C and the Decision to Focus

Jason Andrew

10:55the 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 $30,000,000. This is towards the end of 2018. And I hired an executive team, one of which was a

Cutting 400 Customers to Focus on 5

Jason Andrew

11:17really 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 twelve months. This is about six years in. 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

Inbound Acquisition Interest

Jason Andrew

11:43really scary, and got rid of 400 customers. We were left with five. And towards the end of that year, we then got interest from 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 going to have to raise a ton more money. And this is going to take us

12:06a long time, and the market's getting more and more competitive. And so we made the decision. It's a longer conversation, so I won't go into now, but made the decision and the board agreed. And then we were acquired in about eight months later, it's about an eight month process of going through that. So

12:24this was kind of the crossing the chasm when we raised the money. Again, 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. And it was a really, really scary time. So

Lessons: Relationships, Culture, and Pivoting

Jason Andrew

12:47over the last twenty minutes, we've talked about making bets and pivoting early on, just following 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 spend a lot of time on building culture, and I think it's super important. It can be cliche, but I

13:12think relationships are critical In terms of for us, it was a relationship at every stage that either helped us get a customer, helped us to get funding, helped us to be able to figure out how to build our product. 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, ended up often

13:33hiring advisors as employees that were super helpful and had the roadmap on how to grow.

13:39And 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 gonna be wasn't the path that was gonna work. So we tapped out and it was a really good tap out. I'm thankful for it. But

13:59thank you. That's it.