What's up, everybody? This is Cortland Allen from ndhackers.com, and you're listening
to the Indie Hackers Podcast. On this show, I talked to the founders behind profitable
internet businesses, and I tried to get a sense of how they got to where they are today,
how they make decisions both in their personal lives and at their companies, and how the
rest of us can learn from their examples to go on to build our own successful internet
businesses. Now, this show is just one part of Indie Hackers. There's also a website
that you can find at ndhackers.com, where there's an entire community of founders and
aspiring entrepreneurs helping each other get started and helping each other resolve
the sort of day-to-day practical challenges that you run into as a founder. In addition,
there are full transcripts of every podcast episode, including this one, at www.ndhackers.com
slash podcast. Today I'm talking to Caitlin Gleason, the founder and CEO of a company called
Eligible. I think Caitlin's proof that passion and grit and tenacity are really the key ingredients
to being a successful entrepreneur. Paul Graham, the creator of Y Combinator, has called Caitlin
his role model, and for good reason, I think. Caitlin has been successful at a great many
things, from acting to sales, and now as the founder of her company, which develops APIs
for medical eligibility, claims and payments. So I'm super excited to have you here, Caitlin.
Welcome to the show and thanks for joining.
Thank you.
I just spoke with Steli Efti, who was part of the same YC batch where I first met you
a couple years ago. I guess that was six years, excuse me, seven years ago now.
A long time ago now.
Yeah, tell me about it. But you know what? I never stopped hearing about you. I've continued
to hear good things about you and about Eligible since you started the company right after
YC.
I thought I'm quiet.
You know what it is? It's because we're Facebook friends. And so I see you're posting.
Oh, okay, I'm not quite on Facebook.
You definitely talk about what's going on there.
I use that for marketing and for recruitment. So yeah.
Well, I think everything that I've seen and everything that you've been doing is awesome.
Thank you.
But I have to admit, I know very little. We were going well out of my area of expertise.
I know nothing about the healthcare space. I know nothing about insurance. I barely even
go to the doctor. And so in this interview, you're going to have to do a lot of explaining.
So why don't we start with you explaining to the audience what Eligible is and how it
works?
Yeah, I always like to give a quick anecdote that a lot of people can relate to. So when
you go and get some lab work done or you say you never go to the doctor, so maybe you can't
relate to this. But essentially, most people, if they go and get a lab, they'll kind of
stop at the front desk after they're done with the lab and the front desk will collect
something like $20. And then two months later, that same person winds up with this mystery
bill for another 100 bucks. And they kind of go, wait, why?
And the reason that's happening more and more these days is because there's this saturation
going on in the health insurance market with more and more plans carrying not only a copay,
but also now a deductible and a co-insurance. So estimations for a patient's liability up
front are typically wrong, right? So most people are kind of being told, oh, here, let
me get your co-pay and never that they're going to get this random surprise bill. So
Eligible targets that problem and a multitude of other problems, but that's the biggest
problem. That's our area of focus today. We work with large healthcare institutions to
solve that. So our healthcare institutions tell their patients at scheduling how much
they're going to owe up front. They build our APIs into their software, like inside
of their call centers or inside of their iPhone apps for a patient to schedule. And then they
tell the patient, hey, you have a deductible that's going to be $150 or $120, right? And
then the patient actually pays that. They pay what they owe for the service right after
it's done, not months later. So yeah, they use APIs to do that. And that's our area of
focus. I hope that that brought some clarity to what we do.
That makes a lot of sense. And we're going to dig into some of the details here because
I think it will certainly be important to understand how you were able to start this
business.
Yeah, I love that actually.
I think most companies that are involved in sort of insurance and healthcare, I just assume
that they've been around forever. I'm like, okay, well, this company got in because they
were part of how this insurance industry got created, or they're part of how the healthcare
industry got created. But you created Eligible, when was it, 2012?
Yes, 2012. And actually, we incorporated in 2011, November 23, 2011. But 2012 is when
we got into why we see ourselves as eligible. So that's really when the company started
churning.
Yeah, so I got to ask you right off the bat, breaking into an industry like this is hard.
What do you think has been the hardest part of starting a company like Eligible?
My God, there's so many hard parts. Do you want me to pick one?
Yeah, just pick a random hard one.
Oh, my God, let me actually give you an intelligent answer because there are so many hard parts.
The biggest thing for us is the need from day one to have the infrastructure in place
to be in tip top shape from a compliance and privacy and security perspective. The mass
majority of our investment over the past five years has been in automating every certification
and compliance order that we can possibly get. Our systems, our teams, our customers,
everything top to bottom is ironclad when it comes to compliance, security and privacy.
And we truly have no other choice but to make that upfront investment. So the hardest part
is because of that, you just have to go slower than you would like to go. There really isn't
a move fast and break things here. You can't break things, right? It's healthcare.
So I was lucky enough to have come from Dr. Crono. So I think that that experience definitely
made it very clear to me that I had to start from scratch there. One of the very first
things that Eligible did was we, I personally at my kitchen table started digging into the
HIPAA compliance spec. It's a 5010 spec. And it's a data spec. It's electronic data interchange.
It's called X12 EDI. And that was one of the first things that I really learned. There's
an eligibility X12 EDI transaction. And it was the first thing I learned to really get
into this. So definitely the hardest part is you have this enormous amount of kind of
you got to pay this tax, this compliance, privacy and security tax, and you don't get
to move on and pass go. And so you sort of pay that tax. So that's definitely the hardest
part.
Yeah. And hopefully all of your competitors are paying the same tax that you have.
Oh, yeah. Oh, yeah. And there's a huge moat now because of it, right? So now we are definitely
because of the grit and the tenacity and the just sort of obsession on probably my end,
right? That this OCD that now we definitely benefit from that same tax. I would be silly
not to admit that, right? We definitely benefit from it.
Moats. I love it. We're going to talk about moats. We're going to talk about all sorts
of strategic stuff here. Before we get into it, let me just ask to provide some context
for listeners. How successful would you say eligible is? How big is it? How many employees
is it? How much revenue do you do?
Yeah, there's only certain sort of factors that we share publicly. So I can tell you
this. So the company is already processing on a monthly basis billions of dollars in
healthcare expenditures that cross hands between patients, providers and insurers. It's something
like close to 20 million transactions per month. So it's really high volume. That reaches
because some of our partners are large healthcare systems and other ones are large vendors that
service hundreds of large healthcare systems. I think the last time we checked, we touched
over 100,000 providers on a daily basis. The reach is really large at this point. Some
of our customers are huge vendors that have actually, you would probably consider them
incumbents that have been around for a very long time.
All right, so let's get into this. First, I want to know how you know all this stuff.
No one comes out of the womb like, all right, we're going to help reduce deductibles and
make build API's to help doctors and...
Are you saying my theater degree didn't make me qualified? What are you saying?
Well, let's start there. How do you go from being in theater to deciding that you want
to start a company and that you want to start a company in the healthcare space?
So I kind of came up very, I guess, lower middle class. I mean, don't say that's my
family because they'll get offended, right? But definitely middle class, you know, my
parents are incredible at love and affection and all that stuff. And I was really fortunate
that way. And they always have thought I could sort of take over the world. So really fortunate
that way. But I have a lot of grit in me built in since the time I'm 13.
I literally started working when I was 13. And I just have wild pragmatic optimism, right?
So I'm very practical, but I'm also wildly optimistic. And I guess the original question
was, how did you learn all this, right? Well, I fucking taught it to myself, you know? Literally,
I talked to everyone I classically talk to. I read everything I classically read. I tested,
I built, I, you know, I took this job with Dr. Cronar, right? I did everything I had
to do. The work, the grit, the real work, there's nothing you can fake here, right?
I did the real work to get here. So that's how I learned.
I like your, your description of your childhood because it's so similar to mine. So lower
middle class, very loving, supportive, like you can do anything you want parents. I think
what's funny about growing up that way, at least for me is like, kind of never realized
that not everybody's childhood was like that until I became an adult. And I was like, Oh,
some people had very unhappy or difficult or unsupported childhoods. And I'm pretty
lucky to have had what I had. And I think it certainly gives you this degree of confidence
that you can do things. And there's so many cliches about, okay, just believe you can
believe in yourself and you can do it. And they're really corny, but there's a lot of
truth there.
Yeah. My dad's like Walt Disney. I'm not kidding. Like he's just like, you know, make a wish.
And I think I just had to teach myself was yeah, you make that wish, but then you go
work your ass off for that wish. And I had some really key people in my life, even during
that age, all the way up until now that are still in my life that, you know, just friends
and colleagues and stuff that really made me realize, Oh, no, it's great to make that
wish. And it's important, but you've got to work for that wish too. Once those two things
click together, that's when it really happened for me.
So when was the first time that you decided that the work you wanted to do might involve
being an entrepreneur?
Interesting. Okay, so that's really goes far back. So I was around 17 or 18 years old.
And first of all, I started working at 13. I was somebody called a pastry girl at a restaurant.
And then I came up through that restaurant. And then I ended up sort of running the restaurant
by the time I was like 16 or 17, literally running it, whoa, working full time. And then
I actually got a job at retail. And I worked there for another two or three years. And
again, working full time. So I've been working full time, I think since I'm 17, right around
like 16, 17. And so 40 hours a week.
Can I ask why? Were you trying to support yourself? Or was it just ambition?
I wanted that shirt, I had to go buy that shirt and I wanted. You know what I mean?
Like, you want to go, you want to go do that you want a car, you want to drive it, you
want to put gas in it. I paid everything like insurance, the monthly bill, whatever. So
it was all about, you know, me wanting things basically. So yeah, that's how I and then
when I got into business, it was because I was kind of felt like I was working a lot
but I knew I could make more money. That was literally what it was. I was like, Okay, so
I started investigating like different paths. And my friend had a sales job. And she's like,
Oh, it's so great. I make this commission. And I was like, Wait, what's commission? And
she's like, Oh, you actually get paid like every sale you make. Oh my god, I will own
that. Where do I go? Where do I go? Where do I go? You know? And I'm dead serious. And
I was young, you know, so I'm going to school for acting, whatever was going on, Stony Brook
University. And I get the sales job. And I don't even think the company is still in existence.
It was like a business to business directory. Now this is 2003. So this is before LinkedIn,
but they could have been LinkedIn, like that's what they were actually building. And, you
know, looking back on like, that's pretty useful. It wasn't a great product, but it
connected people, it totally could have been something really great. And here I am, I just
start selling and I start engaging professionals and I start connecting them with other professionals
I know. And it was so natural. I did not have to all I had to do, you know, they taught
me a script and I'm already going to acting school. And I'm like, I know how to do a script.
I know how to do a pitch. And I know they would teach you objections and rebuttals.
And all of a sudden, you know, by 20, I'm running that I built a sales team for them.
And I'm running the sales team. And there's 40 of them. And I'm making them a lot of money.
And I'm going to school acting the whole time, you know, so there's just this whole, I don't
know, which is being really natural to me. The reason I left that that company was because
and this actually shaped the rest of my life was it pissed me off that they didn't care
about the product. I saw the opportunity like I saw what it was capable of. And they just
wouldn't fix the product. Like they wouldn't improve the product. They were totally fine
with it just sort of being what it was, you know, yeah, so for me, I wanted I didn't want
to just sell and not be proud of what I was selling. I knew I could sell.
I think there's something about being in sales to where you're constantly dealing with customers
as objections and their complaints, where you become acutely aware of the problems in
any product and it must be infuriating when they're not fixed because it makes your job
harder.
So much harder. Yes. And for me, I enormous I'm obsessed with empathy and I feel for people.
So I was just feeling for these people. I'm like, but it's broken. We need to fix it.
You know, that's the existential crisis. I was like, I'm never doing business again.
I don't care. Mom and dad were like, you're making more than daddy right now. I'm like,
I don't care. I don't care about me. I'm an actor. I'm going to go waitress. And I actually
did. I was like, I didn't care. I didn't want to be in that corporate world. I felt like
that was everything. Everyone was just the person who was going to sell and not build
something great.
So besides some of the negative things about not caring about their product, are there
any things that you learned, any skills that you picked up doing sales that have sort of
carried forward to this day?
Definitely. Yeah, I definitely know how to run sales. That's what I do.
It sounds like any business that you become a part of, you end up running it. Yeah. From
restaurant to sales to whatever.
Restaurant, retail, then sales, and then yeah, and then eligible. Yeah.
Why is that? How does that happen exactly?
I don't know. It's a very gregarious thing. It's not, it's a very love, like loving life
sort of thing. It's not a, you know, I'm just excited by challenges. I think I'm also fortunate.
I like to work. I actually prefer to work. If I go on vacation, I'm still working. It's
just probably in like a creative setting, right? I'm doing something creative. I don't
know whether it is. I would attribute it to hard work. I don't know. I don't know.
That's fascinating. That's a really tough one. I don't know.
Well maybe we'll figure it out in the course of this conversation. Okay, you tell me.
Or at the very least we can just make something up. Okay, you tell me.
All right, well let's talk about how you eventually got into the healthcare space. You've mentioned
Dr. Crono. I know what Dr. Crono is, but people listening probably never heard of Dr. Crono.
How did you get involved with Dr. Crono and what was it?
Okay, so where we left off was here. I am this artist. I'm like, I'm going to just work
at nighttime. I'm going to go to every library in New York City during the day and like try
and audition, right? Like this was my premise. And then all of a sudden I got really sick
of working in restaurants because they have a different lifestyle. I don't drink. I don't
do drugs. I don't smoke. I wake up at 5 a.m. and I start going at 5 a.m. Like it didn't
fit the restaurant sort of lifestyle. And it got me really actually really depressed.
And I was 22, 23, I can't remember something around there. And just going through that
like existential crisis of like, Oh my God, I got to get out of here. And I started reading
all really old, historic, what I call romantic. I find like Benjamin Franklin books like all
like old, you know, it's like sensual and romantic. I'm not even kidding. I love old
history.
Did you just call Benjamin Franklin romantic?
Yes.
I don't know if anyone's ever said that.
No, it's just very romantic to me. I don't know what to say. It just became very romantic
to me. And I read Ben Franklin and I just read about like Virginia Woolf. And I even
read Ayn Rand and I just read every, I don't know. I just read every book. I've just read
everything and I just became like a roracious reader. And I did that for a couple of years
and I kind of stuck with this. And then eventually I was looking for a sales job because I kind
of gave up. I'm like, okay, I'll go back to this because I need to make money. I got to
pay the rent, right? So I'll go back to the corporate world on one condition. I will sell
if I can somehow impact the product, right? If I can somehow be involved in the product.
So I went on Craigslist in New York city and found Dr. Crono and I went to the first interview
and I walked into a co-working space. Now I didn't even know startups existed. So I've
no idea what, I thought the whole floor was my dance from Dr. Crono. I was like, oh, cool.
This is great. And I didn't, you know, I left. I still thought that, right? I didn't know.
But they explained to me, you know, we're coming out with this new product. I thought
it was a new product line. You know, we're coming out with this new product. It was super
exciting and it was awesome. You know, it was like, oh my God, this is exactly what
I'm looking for. I'll help them with something they're not good at. They didn't like to sell.
And I will, they were kind of, they had invested a lot of their own money. They weren't able
to raise capitals 2010 in New York city. So it's a little different. Right. You know,
it just seemed really perfect to me. And when I tell you, I dropped everything and I just
became like their apprentice. I guess, is that the word? I just dropped everything.
I literally just focused 90 hour weeks with them. I did everything I could to get that
product live with them, to sell doctors for them. So much so that when Mike and Dan got
into YC, they brought me with them. So there I was in healthcare. And then all of a sudden
I was in engineering and startup land. You know, I've designed their iPad, their EMR
iPad with their designer. I was very much engaged in the product lifecycle. So all of
a sudden it just landed right from the romantic Ben Franklin.
I remember seeing you and the Dr. Crono founders and Y Combinator. I don't think it ever even
occurred to me that you weren't a co-founder.
I think everyone thought that. I think I'm the only employee ever to go through YC.
Yeah, you just did the whole thing with them. What did you get out of that process, if anything?
You know, PG and Jessica were amazing with me. And I guess maybe I don't know if I ruined
that or I don't know. They never did anything bad. I was in it myself the next year and
they love me. I swear. So no, but I don't know why that happened. It was the most life
tuning experience of my life. I'm going to cry.
You know, here I was in New York and obviously I'm searching, right? Obviously it's existential.
I'm searching. I want this world where people create their own reality. And I'm so willing
to do the work to be a part of it, right? But I wanted it really bad. And all of a sudden
there it is. Like it's so normal in YC, you know, Mountain View to build your own company.
It is so normal for me to live in a hallway basically with my computer and my, you know,
my laptop or whatever, and be coding, right? And learning how to code. That's normal there.
Yeah.
And this totally changed my life. It totally changed my life. Everything about it changed
my life. I remember the first time that PG was on office hours and we were on a... He
does walks and we were on a walk and it was me, Mike, Dan and PG. And, you know, I'm in
the back. You know, I stayed back because it's not my company. So I'm in the back. And
then he's all of a sudden he's sort of talking about revenue and I'm like, yeah, I'm growing
it 10% week over week. And he's like, who is this?
Come to the front.
What? No, no, no, no. He's like, you guys don't fit. What is this? I don't know. I'm
trying to help. But it was instant. Like I knew at that point I was like, oh, our brain's
like, okay, cool.
What made you decide to start your own company rather than continue with Dr. Chrono?
First of all, I will say Mike made the best decision. He's a CEO. And, you know, now I'm
running my own company. The day I told Mike I was leaving, he walked me home to my apartment.
We did actually all live together. We're super close. We're really good friends, all of us.
We're super close, great, great people. And he walked me home that night. And he said
to me, he was like, dude, he's like, wait till you have a child of your own. And I was
like, huh?
He's like, just wait. He's like, this is going to happen to you. Because, you know, of course,
as an employee of a startup, you know everything, right? You know how that CEO should be doing
their job. You know how that product should be run. You know everything. Of course, I
was CEO in Vermont. I was thinking I knew everything. I knew nothing. And he called
it. He's like, you have no idea how hard this is or how hard it's been. And he was right.
So why did I leave? Partially because I'm just insatiable. I couldn't ever be satisfied.
I didn't know that at the time. I thought I left because of them or like they weren't
giving me the opportunity, but it was all me. I was ready to move on. I was ready to
go start my own. So great for Mike for being like, no, go start your own. You know, you're
not going to run my company, go start your own. I really now respect tremendously and
have like the utmost respect for it.
So maybe that's the answer to why you end up running every business that you join. You're
insatiable and you need to do more and more and more. And if you can't run it, then you're
going to start your own.
And that's great. And that's why I can't give up at eligible ever. You know, there were
times in almost seven years, there've been really dark, dark, dark times over and over
and over again. And I just can't give up. Um, Daphne Cockroach. One other thing though,
they did have an annoying thing. They wouldn't make me the VP of sales because I didn't go
to Stanford or MIT.
Really?
And now I look back and I'm like, dude, was it because I was a girl? Like, you know, I
don't know. So anyway, so like there's, there's two sides to every story. So 90% of me is
like, you know what? Good for them. Like they did the right thing. And at the same time,
I'm like, dude, I worked really hard. I built all this out for you. Like all I wanted was
it sounds stupid now, but all I wanted was that recognition or that credibility of, Hey,
she's done this and kind of had that in my, my wheelhouse of saying, Hey, I did that.
So.
And in a lot of ways, that's the most important thing. I mean, once you've gotten your basic
needs taken care of, having more money is great, obviously. But if nobody acknowledges
you or recognizes you, then it feels pretty empty.
It's the only thing for me. I don't care about money. I didn't grow up with anything. So
to me, I'm like, whatever, I can live. Yeah, I don't care. Yeah.
So let's talk about ideas. A lot of people listening in are trying to start their first
company. And one of the biggest hurdles that you need to get over early on at least is
to decide what it is that you're going to work on to come up with an idea that at least
sounds good in theory. How did you decide what you wanted to work on once you left Dr.
Crono?
So I was just talking to my boyfriend about this. So it's really interesting. So I think
I was very much lucky to have been for right or whatever, right to, to not have any sort
of fallback. I had no fallback whatsoever. So I remember when I first left Dr. Crono,
I just told you the story. And you know, I was just gung ho on, okay, I'm going to start
something. And I definitely had a lot of different ideas. There's no question. Like I had a lot
of different ideas. And I almost wanted to shy away from health care, just because like
I just gotten out of it. And I'm like, God, do I really want to pay that tax? Do I really
want to go through all the privacy, compliance and security that I know I'm going to need
to do I have the wherewithal that the engineering that the expertise and then for whatever reason
I decided, okay, this is the right move. But I think timing was also part of it. I think
that there was an inflection point where I only had $5,000 in the bank when I left Dr.
Crono. And I only had like 25k credit card like a line that I could use before I would
have nothing, you know, so I only had that. And by the way, I paid it off with no interest
before the interest kicked in. Okay. Any from like I invest, I got investors by that time.
So you know, from my perspective, the time crunch, the the urgency is what made me, I
don't have a skill like you. I'm not an engineer by trade. Sure, I can build shit, but I can't
go and be hired as an engineer. So I had no fall back. So I think that urgency of I must
make something work right now. And I know that this is a huge market. And I know that
I can sell this. So there was that. I think that's why I ended up going that way.
What did the idea for eligible look like right at the beginning when you first created it?
And how did the things you learned at Dr. Crono and working in the healthcare industry
inform you that this would be a good idea to work on?
Yeah, so it was very clear to me two things. First thing, trend in the industry was very
clear to me. All of a sudden, this new saturation of deductible plans was coming up. That's
number one, it was happening. It was there was a shift. And what this means is that the
insurance company is paying less and the patient is paying more. Okay. But the second thing
I realized is that there is no technology for patients paying providers. No, even like
Dr. Crono, all these guys, they all focus on insurance paying providers. So this cat,
you know, this just shift in the industry, I knew was going to really mess things up
for people. And they were going to need technology to solve that problem. That was crystal clear
to me day one. Crystal clear.
Yeah. So you asked me kind of like, how did I see it? Right? So like, what did I learn
from Dr. Crono? How did I...
Yeah. How were you aware of these trends? Was it just through doing sales and getting
exposure to be able to talk directly to customers?
I think this is like my only real, if I were to say I have a skill, I definitely have an
ability to listen to users very closely and then factor out 10 years from now what they're
going to need. And if you think about it, it's seven years from now. Right? So I definitely,
and it's just from listening and empathy, I think I'm not sure. But I was hearing crystal
clear to me, everything is moving to the patient. And I was hearing crystal clear to me that
there was nothing to support it. Nothing. And if you talk to any provider, any billing
system, any backend system, none of them were actually saying this. Want to know why? Because
they didn't understand it. Right? They didn't know. It was just, it's one of those things
that it's kind of like Stockholm syndrome. It's so chaotic. There's so much going on
that people just kind of say, it's just got to, it's this hard. It's got to be this way.
But I was able to kind of like identify, no, there's a problem. We just need to fix it.
Right? We just need better technology on the patient billing side and that fix it. Right?
So that was clear to me. And originally, I think your question was, well, what did you
originally plan out to build? So in my perspective, the way that this kind of worked for me is
that I wanted to, I really want, I have had a passion to solve this for the consumer,
not in the way most people think. My passion is that my premise is that people forego having
medical treatment because they are worried about what they might owe. Right? So they
will, right. So they will not go and get that preventable care. They won't, they won't get
that lab that will tell them if they have cancer, they won't go get that colonoscopy
if that will tell them that they have cancer because they are worried that they're going
to get this random bill that they're not prepared for. And anybody, it doesn't matter if you
know, healthcare or not, that you state that to says, yep, I didn't go and get this, you
know, spot on my skin, you know, looked at, or I didn't go and get my diabetes pump. And
my dad actually was like, we're going getting his diabetes pump and getting skinnier and
skinnier and skinnier. It's like, what's the deal? He's like, well, what if it's going
to be really expensive? I'm like, get your freaking pump. It was like a $20 copay. But
it's just, this is like my premise. So I've always been very passionate about the advocacy
route of no, I want to be able to get these tests. I want to know how much it's going
to cost. I know everybody wants to know that, right? So that was clear to me. So when I
first started eligible, it was okay, maybe I'll just go completely consumer, maybe I
will kind of try and build this this system for the consumer to check their deductible,
check their co insurance, check their co page, right, and be able to just see that. And that's
kind of where I started. And I needed to work with providers and work with insurers to do
that. So immediately, I kind of went and found I literally went door to door, I found a provider
in Mountain View who was willing to work with me, which was super useful. I told him the
premise, I told him the story, you know, I went and built a partnership with kind of
like strike did in the very beginning, I built a small partnership with like an aggregator
who kind of already had insurance connections. And I was like, Okay, you know, I have insurance
connections, I have this provider to work with, I went and found one of my co founders
back then he's no longer with us, I gave him stock, but he's no longer with us. But I found
him on Stack Overflow. I was like asking everyone on Stack Overflow about EDI questions, insurance
EDI questions and API questions. He was answering them all. So I was like, Dude, we should do
this. We can do this, you know, I can get us into what I see, I think if we can just
build something, you know, I really, really think we can. So he joined me and we did do
that. So yeah, so eventually, so that first that all eventually that all came together,
and it ended up being an iPhone app. And when I got into YC, and with the provider's permission,
the provider is working with the Mountain View, when I got into YC, we were checking
with Harge, his benefits, and he had just gotten an MRI. And he had just gotten a huge
bill for it, right? High freakin deductible. This is 2012. No one knew what a deductible
was, right? So he has his bill and he's like, I just got a bill for this. We have this like
bad blue shield of California plan. And I just got a bill for this. This is right. And
I was like, I know. And he did it right there in real time, like on the iPhone, you know,
right in the middle of your interview in the middle of our yeah, the interview. No, it
actually wasn't the interview. It was like a precursor to the interview. It was like
a pretty interview. Yeah, exactly. The app told him exactly where he was at his deductible.
Okay, very cool. So I got to ask you all sorts of questions about like the super early phase,
because I think that's where a lot of businesses die. People don't get to the point where they've
got an app developed, or they're able to get somebody to invest, or they've got 100% of
my credit card. Yeah. So you're funding this all on your own on your credit card. How much
runway did you have? I yeah, so I estimate right and I hope I'm not completely wrong
here. But I left after Corona with 5k in the bank. And then it was about 25k and credit
card line that I had. And it was because I have perfect credit, right? And I've been
building it since I was a kid. So I could take out this credit and not pay any interest.
And I had something like 10 months to pay it off before interest would kick in. So that
was my runway. Yeah, I was my investment in myself. And it was bad, you know, really dark
times in a way because it was scary. I hope if I failed, I would have been so screwed.
Yeah, for sure. Did you ever stop and think, you know, maybe this is too risky for me and
I should just get a job and maybe build this business on the side. Yeah, I did that as
Dr. Prono. It didn't work out. No, I really didn't because I didn't do anything on the
side with Dr. Prono. I was completely focused on them. But it just doesn't work. You know,
for me, it was so extreme. So I had every family member, my fiancee at the time we were
together for literally 15 years. And he was like, you're insane. He's like, this is insane.
You are crazy. You're walking right from Dr. Prono. You just killed yourself for this company.
And they're doing well. And you're finally making a salary. Because mind you, when I
was at Dr. Prono, I was a contract sales rep. I only made money on commission, right? So
I finally had the salary and I'm leaving. And he's like, you're insane. So and here
I am in this Mountain View. I don't know if you've ever been to Red Rock in Mountain View.
No, I never went. I missed out on a lot of stuff back then. I was pretty much heads down
writing code the entire time. Trust me, I get that. But that's all I do. But every morning
I get my latte to code. Fuck that. Okay. But so here's the deal. My apartment was next
to Red Rock. And literally every morning I would wake up and go get my latte and like
walk back to the apartment or walk to the Mountain View library and like sit in the
grass with my latte and my computer and build shit. That was it. That's what I did. So people
really thought I was crazy. So it was crazy for sure. And that was my runway, my credit.
So I asked some people on the India Actors Forum to submit questions. And you got a lot
of them. So I'm not going to be able to read all of them, but I will read a few. Adith
Victor asks, Caitlin, as somebody who started off as a non-technical founder, how you're
able to communicate your vision and your requirements for the product to the early developers that
you worked with?
I now have the proper words to articulate how I did this. So I didn't in the past. So
what I didn't realize is that what I always focus on and which is actually really good
is I always focus on user requirements and the goals. So what are the product goals?
What is the, I refer to it, what's the X? Like what's the X, not the Y, not the implementation
approach, not how we're going to go about doing it. What's, what are we trying to do?
What, right? What's the X? So I would always in detail focus on the X and give user stories.
Now I didn't know at the time that they were called user stories or user requirements or
product goals. I had no idea, right? But that's what I would always focus on. And then if
there were a question on the approach that we would take, and this came, I mean, when
I tell you, I know how this entire system works from, you know, our S3 logging to Revit
MQ. No, there's nothing in our infrastructure that I don't have some sort of understanding
about.
In the very beginning, I worked with my engineering teams to literally set up our VPN. So there's
nothing, I don't know. But it always began with the goal of the product. It always began
with the goal of the user. And with that, building out very small delivery plans off
of really clear implementation decisions that we've made, that's intuitively what we ended
up doing. I just didn't know that that's what those things were called.
That's awesome. I talked to a lot of people who have a background in marketing. A lot
of people, obviously, who are developers and started companies, but I think coming from
a background, a sales background, and also combining that with being a genuinely empathetic
person is such an advantage because then you automatically do the things that you need
to do.
That's one of the major stories. You care about making sure that you're actually solving
a problem for them and the implementation is secondary to that.
Yeah. Yeah, a lot of my... You either love it or hate it. And a lot of my engineers have
really just adored that about us because they say it's very different than most companies
where it's a big Y discussion, usually. It's a big implementation discussion. And the X
and the what and the user can sometimes really get lost.
So let's talk about your first customer. How did you convince the provider to sign up?
And what did you have at that point in time? And I realize I'm asking you to remember ancient
history here.
No, it is a really long time ago. So one of the first ways that we really started getting
customers and they were paying us a few thousand dollars a month because we had already built
something useful. Building this iPhone app with this aggregator made us realize to get
rid of the aggregator. So we retired the iPhone app. So we retired that product. We retired
the aggregator. We're like, we're building our own connections, right? No, no, no, right?
So that's when we really started to be able to bring in customers, right?
I think another thing that always shocks people is we got so many customers just from posting
on Hacker News. I guess because we're an API. So it was an integration. We had really simplified
building this iPhone app with this aggregator made us realize, through this old format,
we can build an API on top of it. And I know it's going to sound so lame, but I remember
when I had the idea, because I was at the computer history museum in Mountain View.
And there is a walkway over, I have no idea where I remember this, but I walked everywhere
at that time. And I was walking home from it. And I just remember having this idea.
The concept became really clear to me that, hey, we don't have to buy this old infrastructure
to parse this old format. An API can do this. Look at Twilio. They're doing this. What is
it like OFX? We can do this. We can just have them send us parameters and we can give them
back JSON, right? And at that time, I didn't even know what JSON was. I was like, we'll
give them back a string of variables. What? And I'm like, on Stack Overflow, is this a
good idea? And everyone's like, why don't you use JSON? I was like, JSON. JSON. I know
everyone's going to be like, she's so lame. But it's actually what happened. It is what
it is. Seven years ago, I don't have to be embarrassed. But yeah, so for us, putting
that together and putting the JSON together, that actually created super... That created
value. I mean, that's an invention in the healthcare industry that I never get credit
for, by the way. But that's an invention in the healthcare industry. So much that I've
had incumbents that run IT teams for huge billion dollar companies say, you know what?
Your YouTube videos from 2012 saved us $10 million last year. I'm like, what? Like, oh,
yeah, we did our whole infrastructure around the idea of having an API instead of this
sterling commerce EDI parser. You should be charging for these YouTube videos.
No! I'm like, oh, okay. Yeah. So that in itself was enough of an innovation and it created
enough value to generate cash flow. I mean, we weren't profitable yet at that time. But
it was enough to have early customers who were willing to pay us. It cut down their
integration time instantly. So it was enough. And by that time, we had a solid small team
and we worked really well for us. So you figured out a lot of things right in
the early days. And I think that probably contributed to how fast and how quickly you're
able to grow. This question comes from a member on the forum, Louie Nichols asks, what are
some of the biggest mistakes that you made in the first few months of your company? And
to that I'll add, if you could go back and sort of redo this early history, what would
you change? I don't know if I would change anything from
the early history, because when you're early, it's only you that you're hurting. I would
change stuff from later history when I had a bunch of employees and I wasn't fast enough
to catch up to everything I had to learn. And because of that, I hurt people. And that's
actually what I like hurts me the most. I'm like, because I was trying to figure out now
how to run this sort of larger corporation. We're a global corporation. We have people
everywhere. I have designers in Europe. I have people in Canada. I have people in India.
I have people in California. I have people everywhere. So it was really hard for me to
keep up with that as fast. And I think the way that I dealt with it was sometimes by
just being super excited and coming off really aggressive and scaring people.
So that's actually my... If someone ever asked me, where did you screw up? Or what do you
feel bad about? I feel really... I just wish I would have done all of this more gracefully.
Let's talk about those changes because your company, I assume like every other company
has changed and evolved and grown a lot as you've hired, brought on new people. And I'm
sure the ways that you've had to hire have changed. And the ways that you've had to find
customers have changed. What are some of the biggest milestones between you first getting
into YC and you actually having dozens of employees and then servicing dozens of customers?
Yeah. The biggest thing for me, as I said, we're in a business where we are creating
a category and this category has never existed. And very few employees and investors have
the patience and the wherewithal it takes to create a new category. It's a lot of uncertainty
and there are a lot of unknowns. And when we walk into an institution and we have a
potential ACV, which is at your annual contract value of a couple of million dollars at that
time, the sales cycle becomes a bit of really deconstructing their departments and their
inner workings. And are we working with their IT team? Is that who's going to be buying
us? Or is it their finance team? It's really unknown because you're creating a category.
And while I was doing that, I had to also be creating my own corporation. That's the
biggest milestone. It all came together about two years ago in 2016 because we had grown
the company 8.4X. We had brought it to profitability and we were profitable for a whole year and
then we raised significant capital. So doing that, all of a sudden, the stakes are so much
higher. All of a sudden, you're now not the underdog you need to perform at this high
growth density and you hire all these people at the same time, incredibly intelligent people.
And then you're fighting to keep up with that. And ultimately, what happened for us in the
first year, we had spent so much time on compliance and everything. We very much felt that we
landed in the chasm. We very much felt for the year that there was some stagnation. We
had grown so much and we were profitable. And that year when you first hire everyone,
oh my God. Is everything all right? What am I doing wrong?
So that was the biggest inflection point. And what I would definitely change there is
I just would have handled it more gracefully. I got us out of it and now we're right back.
But I did it like a warrior, right? Where it's like, chill out, chill out. I got us
out of it, but it was very aggressive.
Give me an example of some of this aggression.
Okay. And it's only because... Okay, so here's my philosophy and I've now since changed it.
My big thing is if I understand concepts, they don't need to know the words. So if you've
ever heard Richard Feynman, he talks about this a lot. Who cares what that bird is called?
I can tell you everything about that bird. If you know the name of the bird and you know
nothing else, you know nothing about the bird.
Whereas a lot of times people who are sort of bullshitting are the exact opposite. They
don't know the concept, but they'll just say the word and then pretend like that means
they understand.
It was really... Because I know it on such a deep level. User requirements and these
vision protocols and it really screwed me up. Because I felt like I was surrounded by
people who just knew the names. And somehow that made them maybe smarter than me. Maybe
it's like an insecurity or something. I really struggled there. And the only way I can get
through that is to kind of just write through it. What is it? And then finally it came to
me like, oh, I just have to... I got to know how to communicate with my team. And ultimately
that's my fault.
And something I wish I would have learned faster is this nomenclature that you guys
all learn when you go to engineering school. I just knew it by learning it intuitively,
instinctually, by doing it. And I didn't have the vocab. And that was actually when I fixed
that, that's when everything was fine. But to find the fixing, I kind of was just like,
I'm freaking out. I just say it. Maybe it's a girl thing. I don't know.
No, that's fascinating. It's cool. It's really interesting because you said at one point,
you're trying to figure out how to make your business work and how to explain to customers
what you're doing and solve the problems in the industry. But at the same time, your company
is growing. And so you have these dual challenges that you're trying to juggle. And is it really
possible to do both of those things perfectly? It's challenging to even do one.
I just wish I could have done it more gracefully.
I want to talk more about this category creation thing because I think it's a fascinating topic.
Because I think a lot of people don't really, especially first time founders, don't talk
about it. They don't understand the difference between creating a category and entering
an existing category. What is the difference? And how does that lead to sort of a different
experience as an entrepreneur?
Yeah. So when you enter an existing category, your price is already set. So you really can't
go in there and start really taking a price and making it your own. Because it's already
been set. There's a great A16Z podcast where they're like, the price of Kleenex is the
price of Kleenex. You can't set that price, that category. But when you walk in and you're
actually sort of building out essentially almost a new department at the institutions
that you work with, and we work with very large institutions, now all of a sudden, you're
capturing so much value for them, you're de-risking so much of their revenue, or you're making
them so much revenue that you can charge an order of magnitude more than your commodity
counterparts.
So this sort of category creation and what we've been going through, there's one example
of an account we just went into pilot with for the next three months. And they formerly
were paying us like maybe a few hundred dollars a month. And this pilot is priced at something
like $26k a month. So just that one example, I just pulled a random, pluck a random example
out. And it's not that their volume is changing, it's just that we have expanded our value
proc. So we've built more and more products and services to make what we do to them more
and more valuable. So we increase their revenue, we decrease their cost. Now they can go from
15 full-time employees to two.
And it's hard to overstate how important that is because I don't know if you're familiar
with patio 11, but him and also Marc and Dreesen always shout out to us from the rooftop that
one of the best ways to make more money in your company is to raise your prices. And
if you create a category and you're able to basically set the price, because you're not
really limited by competitors, you're not limited by the status quo, then you can raise
your prices through the roof and at the same time increase the value of your company by
five or 10 or 20x without having to find that many more customers.
How much of this were you aware of before you started eligible? And how much of this
was stuff that you learned on the job as you were building your company?
So here's the thing. I always knew I was determined to create a category. And you're investors,
it's a very lonely road because everyone will push you to sell to an existing market. Why?
Because it's simple. It's known. You know who you're selling to. They'll push you into
a commodity business, a rat race, right? So it's a very lonely road. So again, it's one
of these instinctual things that my work was leading us here. It was leading us to building
our own category. Again, I didn't have the freaking words. It didn't have the words.
So I'd like to say I knew exactly what I was freaking doing, but because I didn't have
the words, it was a little awkward. And that's why actually I'm becoming such a proactive
person in talking about it, because I want other founders to not feel so lonely and to
know that, no, the goal at the end of this horrific path is worth it. The value you create,
I mean, this is how revolutions get created, right? This is how you change the world. This
is how, you know, so in my opinion, by creating this new thing that didn't exist before, but
it has been very difficult in the sense that I wasn't able to name exactly that, you know,
okay, we're entering this market. We know it's huge. We're literally going to be able
to take, you know, this pot of gold and move it to that pot of gold by building this new
category. And this is exactly how we're going to do it. I would, I kind of wish I was able
to lay that out day one.
There's so much on that that I want to respond to you. And we only have another five or so
minutes here. But one of the difficulties, I think, with creating your own category,
and one of the reasons why people direct you away from doing it is just that it's hard
to explain to people what you're even selling and why it's valuable if they've never had
anything like that before. How have you tackled this challenge and explained eligible to your
customers?
I love it because in the A16 podcast, the A16Z podcast, they call it calling the baby
ugly. Who wants to call? You don't want to call someone's baby ugly, right? I mean, that's
literally what we have to do. We're walking into the institution and telling them that
the status quo that they're used to, it cannot be anymore, right? So there's, you really
have to reset the playing field. You need to understand what they're doing in their
current state and then essentially debug it with them so that they fully understand this
new world and the new capacity that which they can do this. So one really tangible example.
So we use a lot of data science and we build a lot of machine learning models off of historic
data for these folks. And previously, what they were doing before us is they were keeping
algorithms and spreadsheets. And they were completely human driven, right? But now we're
actually algorithmically driving those through data models, right? Which constantly get updated
for them trying to sit there in a spreadsheet and look through there, whatever. We're ML
models, right? So that's a great example. But you got to understand the people, the
100 people at this institution that currently right now sort through a spreadsheet are important
in these people, right? So the institutions find these people very important. So to say,
no, you don't need people doing this in spreadsheets anymore. We're going to put this in data science
models, right? We're going to do this automatically. It's a really hard thing to do.
Let's talk about moats for a second. Since you brought this up earlier in our conversation,
I think when you're creating your own category and doing something new, you don't necessarily
have that many similar competitors at first. How long does that stay the case? Have competitors
to eligible popped up? And if so, how do you think about keeping your value proposition
unique and differentiating yourself from others?
I think that the level of depth there is to our offering now. So as I was saying earlier,
this expansion of a value prop, the level of depth is also another moat. So I think
that folks would have to get through the initial moat and then they could say, oh, we do that.
But then anyone who sat down with them would know they don't, right? Because if they sat
down with us and sat down with them, they'd know they don't. So they have to get through
the first moat. Now, the second what we've built over the last two years is this like
business intelligence moat, which would be another few years for them to get through.
So I'm sure they'll come up, but we just have a nice runway without them right now, the
new ones, incumbents who pretend that so they just like slap on, you know, some like website
and it's like, you know, I'm an incumbent, I already own the account, I'm the account
bummer, right? I've been with these people for 10 years, we go to dinner every month,
whatever. Yeah, we're gonna do what eligible does. They've been saying that for five years,
but they can't even do what they do. These incumbents, we start to look at what they
do. And we're like, they're not even doing their own job. They're saying they're gonna
end up doing ours. Like, no, right?
Do customers believe them? I think they believe them in the first three years. But by year
four, it's like, we're still leading this, you said you're gonna it's on the roadmap,
right? You're telling your roadmap, right? Yeah, it's on a roadmap q4. No. Yeah. So where's
all this going? Or is eligible in 10 years? Where did you want to be?
That's $100 billion company, bro. So it's gonna be huge. And you're gonna be there forever.
And ever. Why? Why not? It's a worthy cause. I really think that because it has such high
impact. I was dead serious about that story about my dad. He really didn't get the it
was a life threatening product that he needed this diabetes pump. He was literally skinny.
I kid with him. Your next step is the grave. Like you are bones right now. You need this
pump. He gets the pump, he gained 20 pounds. Right. Also, and he was not doing that, because
he literally didn't know what it was going to cost him every month. And that to me is
a worthy cause. That's awesome. Well, Caitlin, I've enjoyed having you on the podcast. This
has been great. I wish we had more time to talk. Maybe I can rope you into coming on
the show next year. I'll talk about what's new with eligible. In the meantime, can you
tell listeners where they can go to find out more about what you're up to?
Sure. I'm on Twitter. It's Kat Gleason, and on LinkedIn.
All right. Thanks so much for coming on the show, Caitlin.
Thank you.
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