Capital Efficient Entrepreneurship: Neil Vaswani, CEO of Corestream (Part 4)

Sramana Mitra: How many enterprise clients got you to 75,000 end users?

Neil Vaswani: Maybe 10.

Sramana Mitra: What kind of average deal sizes were you closing?

Neil Vaswani: We had some big ones that were 20,000 to 30,000 employees. On average, it was something like 6,000 to 7,000 employees. We had 75,000 end users that were payroll-deducted. We also had more that were not payroll-deducted. We probably had 150,000 that were not payroll-deducted. The important metric for us is, how many payroll slots did we have access to.

If we offer payroll deduction as a billing mechanism, the engagement, participation, and adoption is a lot higher than when offered through credit cards or direct bill. We had employee groups and associations that leveraged our product. The engagement was low. I never really counted them as an important metric. I don’t know the exact number of that. It was probably somewhere around 150,000. The more important metric is the 75,000 payroll-deductions. That’s when the employer has actually invested in integrating with us. They convert at a much higher rate.

Sramana Mitra: You were not quite hitting the kind of engagement metrics you wanted. What did you do to get there and what were some strategic moves that you made to turn that around?

Neil Vaswani: The first thing was, we took capital, but we didn’t take too much capital. We had patient money in the business. If we took a lot of money at a very high valuation, I’m almost certain we wouldn’t be around right now. The pressure would be boom or bust at that point.

Sramana Mitra: Yes.

Neil Vaswani: We see that all the time. In my world, we had patient money, which was good. They stuck with us. In 2011, we landed our first channel partner client. A consulting shop approached us and introduced us to Pfizer. We ended up winning the bid.

Pfizer said, “I want you to work with my consultant. I just want you guys to figure out a revenue share together. I want to pair up cutting-edge technology with cutting-edge consulting.” We partnered up with a broker. That was our first channel deal. We had an insurance carrier that was a channel as well. We started to build this channel strategy. An insurance partner of ours said, “We really want to work with you. Can we distribute your product?”

We started to realize that there was probably something here from a channel distribution model. We went out and raised another round in 2012 through Abundance Capital. It was not a huge round. They were the original investors to Kickstarter. We’re pretty excited to have an audience with them and to work with them. We closed a round there.

Sramana Mitra: How much?

Neil Vaswani: About $1.1 million.

Sramana Mitra: You’re doing this capital efficiently.

Neil Vaswani: It was pretty much bootstrapping at this point. It felt like bootstrapping. I always say to myself that I should have taken more money at that time, because it was available.

Sramana Mitra: But did you know what you would do with more money?

Neil Vaswani: Not really.

Sramana Mitra: Then it’s not a good idea to take more money.

Neil Vaswani: I agree. I was just thinking that there’s money being thrown at me, why not take it? In hindsight, it was a great decision, because I needed that patient money to figure it out. That was important for our journey. Rudy Carson, who’s the founder of Connexia, is a friend and mentor of mine. He validated that approach. It’s always good to have the cash pressure.

This segment is part 4 in the series : Capital Efficient Entrepreneurship: Neil Vaswani, CEO of Corestream
1 2 3 4 5 6 7