Capital Efficient Entrepreneurship: Neil Vaswani, CEO of Corestream (Part 2)

Sramana Mitra: What year did you start Corestream?

Neil Vaswani: In 2005, I realized that there was this inefficiency in the market. Then in 2005, I sought capital. In 2006, we closed capital. In 2008, we went to market.

Sramana Mitra: Talk to me a little bit about what was the idea. What prompted Corestream?

Neil Vaswani: I remember getting angry with myself every day when I was 24 or 25. I was getting frustrated with myself that I hadn’t started a company yet. It was this burning desire. I knew I would be miserable for the rest of my life if I didn’t start a company. It was the kind of thing where I wanted to create value.

I tried my hand at Merrill Lynch and other banking types of positions. I just never felt I was creating value and something unique in terms of the value that I can create. I was working on two business models at that time. I was thinking about starting a digital signage company called Mobile Media Net. The concept was to put monitors or flat-screen mini-TVs at the back of Grey Hound seats. I felt that it was an untapped opportunity. I figured you could advertise to people while serving entertainment.

I was working on that while I identified an inefficiency in the market, which ultimately led to Corestream. One was voluntary benefit plans. There were brokers that were earning all the commissions from these voluntary benefit plans. When you offer these voluntary benefits to employees, employees participate, and then the commission is paid to the broker for offering those plans to those employees. All the administrative burden to support these programs was managed by the employer and the insurance carrier. It’s really clunky for both sides of the equation. The broker is making all the commission, but the employer and the carriers are doing all the work.

I figured, “This looks like an inefficiency. Can I take these commissions and use them to fund the technology platform to solve the administrative burden and market these programs at scale?” Increased adoption and reduced friction was the goal.

Sramana Mitra: Why that problem? What was your background that drew you to that problem?

Neil Vaswani: I managed Citi Group. Citi Group was a client. I worked on product solutions for them. They had come to me and said, “We want to offer health club memberships” Specifically Equinox. They had an executive high up in the food chain that worked out at Equinox.

He was paying a higher rate than his buddy who worked at JP Morgan. He got annoyed at that – that his buddy at JP Morgan was paying better rates. That message came down to the HR team who called me and said, “Is there any way you can partner with Equinox and offer our employees the same discount that the JP Morgan Chase employees get?” One of the things we worked on for Citi Group at that time was creating that marketplace.

I reached out to Equinox. Equinox said, “We’re happy to do it for Citi Group, but we require payroll deduction as the methodology for billing. When an employee signs up, we’ll get them a discount, but it has to come out of the employee’s paycheck.” Equinox felt that participation would be better through payroll deduction. They were concerned about brand degradation issues. They didn’t want to be perceived as a discounter. They wanted to be perceived as an employee benefit provider.

I went back to Citi Group and said, “They’re happy to do it. You just have to set up payroll deduction with them.” Citi Group said, “We can’t just offer one health club because we’re 150,000 employees.” The health club industry is pretty fragmented. Health clubs are focused on a specific income bracket and region.

Citi Group said, “If we just offered Equinox, it would just cater to the high-income folks at New York City. What about the rest of our employees?” They said, “Can you go out and partner up with others?” As I started to do that, we collected all that and came back to Citi. Payroll said, “There’s no way we’re setting up six different integrations and payroll slots for all these vendors to bill through. Our HR system doesn’t solve for this at scale. Pick one health club.” The HR came back, “We can’t offer all these. We’re not going to offer any of them.”

Sramana Mitra: I see. You had a big window into a problem. You took out that problem and solved it as a company.

Neil Vaswani: Exactly.

This segment is part 2 in the series : Capital Efficient Entrepreneurship: Neil Vaswani, CEO of Corestream
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