SaaS Interviews with CEOs, Startups, Founders
How we pivoted our way to a near hundred million dollar exit
10 Oct 2022
Chapter 1: What insights did Nathan share about the Founder 500 event?
Hey folks, hope your Q3 and Q4 is off to a good start. We just wrapped up Founder 500 in Austin, Texas. Hundreds of bootstrap founders showed up. It was an amazing time. I loved meeting so many of you.
This interview today is a recording from that session, which you're gonna love because now we have visuals, we have the founder teaching, and I made every single speaker include their revenue graphs and real artifacts in their presentations. Without further ado, let's jump in.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all these podcast interviews. check it out right now at getlatka.com please welcome jason andrew to the stage
Chapter 2: How did Jason Andrew start Limelight Health and what was the initial product?
All right. Uh, good afternoon. Good to see everybody. Hopefully you got some lunch, some good food there. Um, and I did want to start by just, uh, thanking Nathan for the invite and cool event, uh, having some really good conversations and also congrats on the $145 million raise. It was awesome. Um, so my name is Jason Andrew. I was in Silicon Valley for about 20 years. I'm in Eugene, Oregon now.
And, uh, I started limelight health with the three co-founders in 2014. Uh, we were, uh, uh,
Started out as a multi-carrier quoting system for insurance brokers in life and health space I'd been 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 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 million exit. I'm really enjoying the bootstrap mindset here. So full disclosure, we raised about $44 million 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 was a meaningful exit for our founders and employees and investors.
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Chapter 3: What challenges did Limelight Health face in finding product-market fit?
And so we're really thankful for that as well. So over the next 20 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 figured out 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 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 about almost 12 million in 2021 and our way to about 19 million. Um, and so, you know, we, we were having some growth, but, uh, we had about 50% of that was services revenue. The other 50% was a 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 the, um, services.
So, um, I know it's kind of cliche, but I'm gonna 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, uh, through that 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 $1,000 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 believed we would deliver to them. And it was on the relationships and the trust. And we did a lot of work 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.
And then another relationship that Michael introduced 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. 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 20 clients on the insurance brokerage side of now going enterprise. And we had 13 people in the company at the time.
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Chapter 4: What pivotal decisions led to Limelight Health's growth and eventual exit?
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 brokerage side of the business alive and spent a lot of time with those customers who were very, very, very patient with us. Um, so 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, one of my co-founders, Garrett Viggers, he's a musician.
Chapter 5: How did relationships impact the success of Limelight Health?
And so we got into it. In the 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 like burning the candle at both ends. I could buy pizza and he could play songs.
And we just walk around the office and like try and encourage the guys like, Hey, keep going, man. We're going to 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 Garrett 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 going to 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 serenading customers. So we had like a huge executive team come from Ireland and they came to our office. They'd visit 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 go on site. We'd be on site with customers. We'd like sing to like all their employees and, 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 in 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 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.
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Chapter 6: What strategies did Jason Andrew use to pivot the business model?
but it was authentic and it was real. And to this day, the acquiring company adopted that they've done eight concerts globally. And, uh, we ended up becoming the, the music sponsor for the largest insure 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 would 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 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 growing, but I started getting overly concerned about how we were going to be able to scale and how we were gonna really grow the business.
And so I had brought on, as I said in 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 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 gonna 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 gonna be able to grow into.
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Chapter 7: How did the company culture contribute to Limelight Health's success?
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 million 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 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 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 or what we were doing in terms of building the company. Pete 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 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 a hundred 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 is going to take us a ton more money, a ton more time and the market seemed to be getting more and more competitive. Uh, 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. 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.
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Chapter 8: What lessons can entrepreneurs learn from Limelight Health's journey?
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 the 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. Um, 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. Um, it can be cliche, but I think relationships 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 ended 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 realize 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 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 thank you. That's it.
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