Capital Efficient Entrepreneurship: Neil Vaswani, CEO of Corestream (Part 5)

Sramana Mitra: The point at which it makes sense to take a lot more money is if you know that if you put in $10, you’re going to make $100. There are certain companies that figure out the product-market fit and the customer acquisition strategy. If it’s something that will yield a deterministic return on that investment, then it makes sense to raise more money. If you don’t have that equation figured out, tinkering with a lot of money is a very bad idea.

Neil Vaswani: There’re two sides to that coin. It depends on your goals and how much you can bootstrap. Do you want to go for boom or bust, or are you trying to build a real business. I agree with you. That’s the path I took. Having to constantly raise capital is a bit of a distraction.

Sramana Mitra: It’s not fun.

Neil Vaswani: It can be time-consuming. You just want to focus on growing the business. It worked out for me, so I can’t argue with the results and everything you’re validating. I agree with you there. We took that capital down and made a business plan pivot at that point. We pivoted to a channel distribution model. It took us about a year or two to really understand how to work with consultants and brokers.

You’re talking about an element of disruption. You’re still negotiating revenue share agreements as opposed to charging some sort of fee. There’s still some friction to deal with there. It took us a year to really get some momentum. Then we got some great momentum. From 2012 to 2017, we went from 75,000 users to 785,000 users. We grew the company about 10x.

Sramana Mitra: How many customers did that represent?

Neil Vaswani: Somewhere around 75. At the end of 2017, CBS with 220,000 lives became our largest client. Our average client size was about 17,000 users.

Sramana Mitra: This was all coming through your channel partners? How many channel partners did you have?

Neil Vaswani: We had about 20. 10 were active and five to seven were strategic.

Sramana Mitra: What happens next?

Neil Vaswani: In that channel partnership process, we had also partnered up with an insurance carrier. That did not work. The insurance carrier was not used to selling technology and complex solutions. Distributing to their sales force was too much of a departure. We learned a lot of lessons about partnering up with large corporations. The biggest lesson for me was, we needed to be the incubator. Large corporations are not good at incubating. That’s why they acquire as opposed to creating. If you want to partner with them and you want to incubate a concept with them, it requires a lot of heavy lifting from the outside. You have to figure out how you’re going to assimilate yourself within that organization so that you can really incubate on all levels. We brought all those lessons to our new channel partners.

In late 2016, we made the decision that we wanted to partner with somebody that had more control over their sales force than the consultants did. The problem with benefit brokers is that it’s difficult to be strategic with them in terms of a go-to market offensive strategy. They tend to look at things defensively and per transaction.

Another issue we faced with them was the corporate mothership of these consulting shops did not control the individual producers. It could not mandate what each producer would have to use. They couldn’t make a requirement there. These large consulting shops are typically consolidators of mom and pop agencies. They gobble up and consume hundreds and thousands of mom and pop brokerage shops. Those mom and pop brokerage shops still continue to operate as independent entrepreneurs.

To mandate and get them to do anything at scale is almost impossible. Even though we’re partnered up with some of these large consulting shops, we still had to socialize the concept with every one of these brokers. It was difficult to scale. We partnered up with a technology enterprise or SaaS player to integrate our solution and leverage their sales force, which they control. We embarked on that vision.

We partnered with ADP in 2016. It was our first technology partnership. They had a need for the exact solution that we have. We went to market with them in 2017. We landed our first pilot in 2017. We landed about eight clients. This year, we’ll be approaching about 40 clients with them.

This segment is part 5 in the series : Capital Efficient Entrepreneurship: Neil Vaswani, CEO of Corestream
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