Capital Efficient Entrepreneurship: Neil Vaswani, CEO of Corestream (Part 6)

Sramana Mitra: These are large enterprises?

Neil Vaswani: All sizes. ADP typically plays in the middle market. The business unit that we’re partnered with has a sweet spot of 1,000 to 10,000, but really, 3,000 to 7,000 is where most of the groups come in. Thus began the next part of our journey – third party integration with that technology provider, which already has scale and controls its sales force. 

We developed this concept called an API adaptor. There are a lot of platforms out there, but none of them went very deep into our world of voluntary benefits. When we started the business, we were ahead of our time. Voluntary benefits was the side show. It wasn’t an integral part of a large company’s benefits and compensation strategy. In our world, it’s like the Wild, Wild West. There’s not much standardization from insurance carrier to insurance carrier. It’s a completely different set of rules, file formats, protocols. You need a very flexible framework.

Sramana Mitra: It’s the ideal kind of workflow that needs to be streamlined and you can build a company around. It’s perfect actually.

Neil Vaswani: We just plug into systems. To give you a size of how well that’s working, we went from 785,000 users at the end of 2017 to 1.3 million today. We almost doubled. There’s a chance we’ll get to 1.4 million by the end of the year. We’re scaling that whole opportunity by partnering up with all the folks in that space. They want to get there quickly. They can’t do it on their own. They could but it would take them a few years.

Technology is not static. One day, you’re the iPhone. The next day, you’re Blackberry. You need to feed the beast and you need to consistently innovate. Companies like ADP said, “We’re not as nimble as Corestream. It’s going to take a while for us to get there. In order to get there, God knows where Corestream is. Let’s just partner.” They can just reach through Corestream’s API and pull whatever they want – content, administrative capabilities, all the decision support tools.

Enterprise and SaaS companies are really good at selling to employers. We are also good at that but we are showing them how to actually monetize employees. At the end of the day, it’s a win-win scenario where the employer gets to offer more benefits, the employee gets to take advantage of more benefits, and all the benefits that we offer are priced better than what they can get on their own. They win. We win. The clients win. The third-party technology platform gets a piece of the revenue and has these capabilities that they can market.

Sramana Mitra: What is your current business model?

Neil Vaswani: That is the current business model.

Sramana Mitra: So it’s SaaS?

Neil Vaswani: It’s a little different than SaaS. The big difference between us and SaaS is that we don’t charge a licensing fee.

Sramana Mitra: In SaaS, the fee structure is monthly subscription.

Neil Vaswani: That typical subscription licensing.

Sramana Mitra: Licensing is a different thing than subscription software. In SaaS, the business model is monthly or annual subscription.

Neil Vaswani: We don’t charge that. In our world, it’s structured as a per employee per month. That’s how SaaS companies will bill in our space. We don’t charge that. We have our revenue predicated on transactional revenue. These are commissions from employees actually participating. There’s commission and technology to support the integration that the carriers and vendors that plug into our platform pay us. The downside is, our floor is zero. On the upside, we’re not capped. If you take our revenue and translate it to that PEPM model, it does translate. It can look like a SaaS model, but it’s different because it’s transaction model.

This segment is part 6 in the series : Capital Efficient Entrepreneurship: Neil Vaswani, CEO of Corestream
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