🎧🍌 Inside the $2 Trillion Employee Benefits Market
Why the internet never displaced insurance brokers, AI opportunities in insurance, and lessons from kickstarting a marketplace
Threeflow builds software for employee benefits brokers and insurance carriers.
Both Threeflow and the insurance industry are relatively under discussed. And our conversation is a deep dive into the nearly $2 trillion dollar employee benefits market, including structural issues that actually give the smallest companies the most leverage.
We also talk insurance industry more broadly, AI opportunities in insurance, lessons from kickstarting a marketplace doing nearly $3B in volume, and when his wife got cancer two months after closing Threeflow's seed round, and how his co-founders rallied to support him.
Thanks to Bolt for supporting this episode + to Joseph Floyd and Rick Zullo for introducing me to Ryan and helping brainstorming topics!
Support this Episode’s Sponsors
Regular listeners of The Peel are likely familiar with Bolt. They went zero to $40m ARR in five months - one of the fastest ever!
Starting May 30th, they’re hosting the world’s largest hackathon, with over $1 million in prizes.
30,000+ people have already signed up to build apps with AI. No coding required. A virtual event with 50+ IRL meetups worldwide.
Whether you’re a founder, creator, student, or anyone sitting on an idea, this is the moment to try it (and win over $1 million in prizes).
It’s free to join and win prizes like best one-shot prompt, top build-in-public journey, and most likely to get funded.
Sign-up here!
To inquire about sponsoring future episodes, click here.
Timestamps to jump in:
3:57 Threeflow: B2B benefits marketplace
5:50 How the benefits industry works
9:20 The importance of brokers in insurance
12:32 Benefits broker software stack
15:36 How to make money in employee benefits
21:11 Ways to compete in insurance
26:34 How AI is changing insurance
31:01 What its like to be an insurance broker
35:37 Starting ThreeFlow in 2016 pre-LLMs
40:13 The 128 day walk through Europe before Threeflow
44:47 When his wife was diagnosed with breast cancer
50:23 Advice for founders on surviving large personal events
52:46 Threeflow’s unorthodox Seed round
59:46 How to vet your investors
1:04:14 Why insurance brokers exist
1:05:08 How to build a marketplace on top of Vertical SaaS
1:10:53 Choosing a marketplace entry point
1:15:05 $2.5B in premium volume on Threeflow workflows
1:26:39 Importance of supply side volume in a marketplace
1:31:21 Fundraising without a formal process
1:33:03 Hiring for “just get stuff done”
1:36:22 AI opportunities in insurance
1:41:05 Building software in insurance
1:44:56 Tactics for running a distributed team
1:49:04 Creating your own playbooks
Referenced:
Find Ryan on LinkedIn.
👉 Stream on YouTube, Spotify, and Apple
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Ryan, welcome to the show.
Ryan Sachtjen:
Thanks for having me.
Turner Novak:
Thanks for coming on. I know feel like this is the furthest out episode I've ever scheduled. We were like two or three months out. We're like, let's do it.
Ryan Sachtjen:
We did it.
Turner Novak:
May... What is today? May 9th or whatever. So I think this will probably come out in a month or two roughly, but really quick for people who are not familiar, which is actually probably a lot of people probably that are regular listeners of the show, what is Threeflow for people who don't know?
Ryan Sachtjen:
Yeah, Threeflow, it's a B2B marketplace in the employee benefit insurance business. And so where we sit is in between employee benefit brokers who represent employer clients and employee benefit insurance carriers. So if you think about people today that work at a job and receive benefits from their company and what those benefits are, medical, dental, disability, life insurance, all of those things, there is a lot that goes into that decision-making process of what are the benefits that are offered and then ultimately how does that show up for me as the employee?
If you think about the decision pathway for that to be true, it goes into leadership within that employer. So HR team, finance team, and typically those individuals and teams work with an employee benefit broker who is their advisor to help make decisions around what should we offer, which is fundamentally an easy question, very simple question. It's actually quite difficult to answer comprehensively because it differs by employer. And so they work with this network of brokers to help in that advisory step. Then the advisor works with a collection of insurance companies. So where Threeflow sits is in between those two key stakeholders of employee benefit broker and employee benefit carrier. And we help facilitate a way in which these two parties work together in a more collaborative and comprehensive way. So we've built this marketplace that allows for brokers and carriers to work together more effectively.
Turner Novak:
So how does that play out? What exactly happens when you're sitting in the middle there?
Ryan Sachtjen:
So if we think about what happened before sort of Threeflow entered, historically, the way that these two parties worked together was very analog in nature.
Turner Novak:
It is just like email.
Ryan Sachtjen:
Mostly emails and documents. And so if I am the employee benefit broker, I'm going to email a bunch of insurance carriers and ask for them to basically provide me a quote.
Turner Novak:
This is on per employer basis.
Ryan Sachtjen:
That's right. And so typically there is a listing of employees that need to be insured and then there is specifications around what is the product, whether it's medical, dental, life, disability, I want to tell you what I want you to quote and then I want quote it across this population of employees. And so these insurance companies would receive that via email. They would then go into their own workstreams and process. Spoiler alert, it's a bunch of people that are just hand keying information into these various systems to develop what is the price for that insurance? And then that insurance company would respond back to the broker email and PDF documents to say, here is my proposal. And so now an employee benefit broker is going to read a proposal document and then they're going to go through all of the items in there and then wait for it, hand key everything into a spreadsheet so that they can go back to their employer client and say, "Hey, we went to 10 insurance companies. This is the market response. Do you want to keep your current coverage, current carrier or do you want to move?"
So the entire thing is wildly inefficient and it actually just doesn't lead to the best outcome for that employer to make the best decisions for their employees because a lot of times it's just kind of doing the work to get through what do you have today versus what's a possible option for tomorrow. And that was the opportunity that we saw. It was our experience on the wholesale side for the insurance carrier is the opportunity to offer these two parties to work together on one shared platform with one shared data set of information. They could actually drive forward a lot better outcomes. They could just collaborate more deeply and allowing for, there would be more focus on time of the 201, 301 level advising and thinking that needs to be done.
Turner Novak:
So just slightly deeper, more advisory maybe versus just like here's some quotes.
Ryan Sachtjen:
That's right. That's right. If you are spending all of your time and bandwidth as an insurance company or as a broker in just the manufacturing of it, you've got very little time to then be more advisory and consultative, which is fundamentally why an employer works with a broker and advisor is they want them to be that they want to be an advisory layer, but it doesn't happen enough. And so that was the area that we saw a real opportunity of if we could interface between these two and have one system with different workflows and views but shared information, then you really unlock a lot of possibility.
Turner Novak:
What was the most surprising thing when you first got in the industry? I think you said you worked in the industry on the wholesale side. So that's selling. Is that selling for the carrier?
Ryan Sachtjen:
Selling for the carrier into the broker and then trying to acquire the brokers underlying employer clients.
Turner Novak:
Okay. It's kind of interesting. Yeah, so you're really going after the employer clients, but is it that they're just kind of so small that just working with the brokers makes things more efficient for you as a carrier?
Ryan Sachtjen:
That and the overwhelming majority of employers today utilize a broker and they do so because a broker is... It performs that advisory function. And so it's very typical that we get the question a lot of the role and utility of the broker function.
Turner Novak:
Yeah, you in theory, you might think there's a middleman, you should remove the middleman. That's generally a good thesis for building a company.
Ryan Sachtjen:
And this is the classic question that we will get from someone on the investing side of, okay, so your play is to disrupt the broker, let's rip and replace. And what we knew from our experience was the enablement model was actually more interesting because it drives more value to the end user. And if you think about the utility of the employee benefit broker, they are the extension of the finance and HR team for these companies. Give you an example, paid family leave is a regulatory stipulation in now I think they're up to 13 or 14 states that mandate you have to provide this paid insurance coverage if you're on a paid family leave. If you're an employer and you've got an operations in 10 states, you need a place to go to understand, hey, I've got some folks that are in Colorado. What's my exposure on this?
And this is the ongoing functions, an example of the ongoing functions that they do in addition to budget creation, budget advisement, human capital strategy as a broader term. And so for us, we like the enablement play both from an opportunity for us to grow the business faster because if we acquire one broker, that means we access all of their underlying clients. So I like that part of it. But also in terms of just being most helpful, we do think that the enablement of allowing the brokers to be more efficient, to more effective and work better is the way that we can drive value to that broker and then inherently more value to even the carrier as well.
Turner Novak:
Because it sounds like there's just different layers of complexity with the different states. You mentioned all these different regulations and rules, but also different carriers might have different products. Am I right on that? So someone might do just medical, some people might do property and director's insurance or whatever. So I guess it's like it makes it even harder to just kind of skip and go direct to the company when they need different products, they need different expertise and different places depending on what they need.
Ryan Sachtjen:
There's an expertise element to it, and there's just a simplicity of how do we make it easier in we give you a method to be able to work... We one operating system that allows for you to work with a bunch of the supply side carriers as a broker. And I think what we observed was there was an interest for, if you think about the employee benefit broker today, it's a professional services company, typically a relatively small organization and they want and need a technology stack that works for them. But historically that has not been the case. They've used older legacy software systems that haven't been of high value. And so what they've typically done is built their own workstreams that are largely based in Microsoft products and workflow documents and things like that.
Turner Novak:
What are the software tools? Is there some kind of a database thing that was made in the eighties or the nineties that they use? Is that the stack?
Ryan Sachtjen:
Yeah. It is. There's a agency management system stack, which are pretty old legacy systems that they will typically use as their back office for organizations of clients, policies, and then compensation for their producers and also just some basic information about their customers. But it is limited on its functionality for sure. And so there has been this thirst for how do I find something that allows for me to operate my business better and more efficient and effective. But there hasn't been a huge tech stack that has been available for this segment of the industry, especially one that is as large as it is in terms of just dollars transacted.
Turner Novak:
Yeah. What's like the, I don't know, market size TAM if I'm using the VC lingo on this?
Ryan Sachtjen:
Yeah, I mean, the rough estimate each year is in the healthcare spend space, it's well over 2 trillion a year. And if you break that down further into when you pull out Medicaid, Medicare and you just include the employer sponsored, you're still at well over 1.5 to $1.8 trillion that is transacted across all of the premium across all of the employers across the country. And so it's massive, right? And it's controlled through this distribution network that's actually fairly small if you think about the number of individuals that are employee benefit brokers, employee benefit carriers, and was always a bit of the joke when I was on the wholesale side in talking to friends that were in other areas of trading finance, explaining this is how this transaction works where I'm emailing things back and forth 25 times and it's a multimillion dollar opportunity from a premium standpoint and this is the way that it comes together. And it usually would make people snicker of that can't possibly be the way that it works. And it's very true. It's very true.
Turner Novak:
Yeah. Well, you think of Facebook or Google Ads, you can spend a dollar on Facebook and it's the most automated machine learned possible thing on earth. They put so much data science and research into this and it's like you spent a dollar to show someone an ad. And then this on the other side, it's like Walmart or a Fortune 5 company buys an insurance policy that they pay $50 million for. And it's just some emails back and forth.
Ryan Sachtjen:
Just some emails. And that's the thing where I think our point of view in understanding the business was helpful because there is a lot that goes into that and there's a lot of nuance that needs to be true that you have to be able to deliver in order to help that problem. It's very easy, I think to say unilaterally, this is obviously something that we can improve and make more digital, but then when you actually double click into it, there's a lot there.
Turner Novak:
What's sort of the take rate then on different levels of it? When a broker sells a policy to a employer, and then what does the carrier get, and I don't know, profit or cut, take rate throughout like the value chain? How does it work?
Ryan Sachtjen:
Yeah, I mean, if you think about from a carrier perspective, when they think about a dollar of premium, they then break that down into what is the claim cost of that. And so there are certain products that are high incident, low severity, meaning you're going to use it a lot. Medical is actually one of those where you're using a fully insured medical product. And so there's a bunch of claims that are happening every single day. And then there are some products that are high severity, but low incidence, meaning it doesn't happen that often, but when it does, it's big.
Turner Novak:
Would be like hurricane or fire damage.
Ryan Sachtjen:
Or even at life insurance, you've got a company and it's 200 employees. The frequency to which that will be a life insurance claim, it's like one or two per thousand is sort of like the number. And so the way that they think about it's they cut down that dollar of premium to, what's the claim cost and then what is the expense layer of that? And for a lot of the insurance companies, the majority is claim cost. And then when they think about the acquisition cost for their team, for someone to sell a product into a broker, then ultimately into a employer, probably eight to 10% of premium is in that, their distribution cost. And then the remainder is sort of running the operations of their business and the distribution cost of paying a broker as well.
And so historically brokers get compensated as a percentage of premium, but you have seen a bit of an evolution on that where some brokers are using more of a fee-based structure. And so it's a little split. I would say generally larger employers, if you're a broker that works with larger employers, you've got more of a fee-based structure. And if it's smaller, you typically have more of a percentage of premium. But that's typically the composition of where does the cuts of the dollars go when $1 of premium is sold. And the goal for the insurance companies are, of course, grow the top line as much as you can, sell as much premium as you can, retain it at the highest level possible.
Turner Novak:
Like the lowest payouts, the lowest claims.
Ryan Sachtjen:
And the lowest... And do it at the least claim cost bit. And that's where you obviously see friction and rub like that as a fundamental element of the economics of the business and then how that intersects with the human element of the business where people obviously have a point of view on what should go into claim decisions, whether it's fully intramedical or others, but economically, that's the big driver of, I want to grow, I want to persist and I want to do so at a loss ratio that is as low as possible. And those are the three tenants that all insurance companies operate by.
Turner Novak:
Are there any regulations around or laws around they need to have certain ratios from a security of the industry or safety of the... Making sure that you can't profit more than this or aren't there caps or something? Am I-
Ryan Sachtjen:
Yeah.
Turner Novak:
Okay.
Ryan Sachtjen:
In some segments. So part of the Affordable Care Act introduced this idea of a minimum loss ratio, which was for the medical insurance product. And so basically what it says is if you run at a certain loss ratio or better as an employer, you get a dividend back. So you get money back into... You can either roll into next year's premium or you get that dollar back. So that minimum loss ratio threshold was pretty new to the industry, and it right now persists really in that fully insured medical segment as the area where there is a regulatory element and constraints to how can you run this in a way where it's profitable but not too profitable, and it gets to the point where then you share that back with the customer.
Turner Novak:
Interesting. Yeah. And how new ish is that? Is this a five-year, ten-year thing?
Ryan Sachtjen:
Yeah, I mean, we're within the first decade of this coming through, and so I think depending on the product, it is a very competitive marketplace. When you think about medical insurance products or the non-medical in particular, the ancillary market, life insurance, dental insurance, vision insurance, these carriers are running, a lot of times they're baking in a two to 3% profit assumption on their book. It's just their volume is so high, they've got a $3 billion book, a $4 billion book. So they spin off a nice EBITDA profit off of that. But the dynamics of it being a very, very competitive marketplace definitely compress the ability to earn a ton of profit because if you do too much, you'll get exposed and then you'll have a retention problem. And if you go to-
Turner Novak:
What does that mean, a retention problem?
Ryan Sachtjen:
Meaning you'll lose business to other carriers.
Turner Novak:
Because you should have been charging a lower premium.
Ryan Sachtjen:
And so that nets itself out. So there is this marketplace element that we observe on Threeflow and from a platform standpoint of where are carriers doing well in terms of renewing and persisting business and where are carriers not doing well? And obviously there's a lot of dynamics that go into that input, but one of it is are you priced competitively? And so it naturally has this dynamic effect in the marketplace that drives that price point down.
Turner Novak:
So if I was a carrier, how do I compete at the end of the day? It sounds like based on everything you just said, the way that I compete is I charge a lower price and lower premium. What else can you do?
Ryan Sachtjen:
I mean, I think it's a classic blend of price and service and product offerings that they have. So if you were an insurance company and let's say you and I are starting an insurance company tomorrow, and we say we're going to be the low cost option, meaning I'm going to provide the most stringent contract, meaning I've got the most qualifiers for a claim to get paid, and I've got the most bare bones in terms of my service structure. So it's all call center, it's all automated. It's a way where I'm trying to scale down all of my expense assumptions to be as tight as possible. The outcome of that is that you'll do well in certain markets, but not in others because the customer type will want a different profile of a carrier where they're actually willing to pay 10% more because they want all of the other service offerings.
Turner Novak:
Like you're in the ER, you need to call and you want to talk to the CEO and negotiate what you're getting paid or something like that by the extreme end, the highest end.
Ryan Sachtjen:
That's the extreme. That's your 10 star experience. And so then it's a classic example of where do you want to sit? How do you want to brand yourself as an insurance company? In the employee benefit market, you think about the decision-makers ultimately a lot of times the CFO or the CHRO at a company, and so they're looking at this of what's best for my employees too. They're trying to make that decision.
Turner Novak:
This is basically an employee retention product for them, right?
Ryan Sachtjen:
That's right, that's right. And a big part of the benefits package was this is all part of post-World War II in how do we attract and retain talent. And so a big part of it's your benefits package. And so there's this dynamic at play where it is different based off of the carrier and the profile and what you do, and you would have some success if you just said where is the lowest cost carrier every single time. But there's a balance to that in terms of who's buying what and what they're ultimately trying to purchase.
Turner Novak:
Didn't the whole benefit space, I think they make a law after World War II, you couldn't charge above a certain salary or something and people had to compete for talent, so they started giving benefits. Isn't that how it all came about?
Ryan Sachtjen:
That was a big part of the impetus. Yeah.
Turner Novak:
Interesting.
Ryan Sachtjen:
Okay. And so it then got memorialized in different things, regulation wise of what you must offer, Affordable Care Act, but even back to Orissa Law in 1874. So there's moments where it just sort of formalized the way in which the benefits programs are structured and how taxation correlates to the employer. But there's these moments where it helps drive forward this idea that in the US, your compensation package is both cash and benefits. And for a lot of these employers, the benefit package is about 25 cents per dollar spent. And so it's a really significant amount. So you want it to go well. You want it to use it effectively. And so these companies, and we talk about it a lot at Threeflow, what's the composition of that to try to help attract and retain the type of folks that we want to have on the team?
Turner Novak:
Yeah, it's interesting then if you're at a startup, some of those use equity as a compensation-
Ryan Sachtjen:
That's right.
Turner Novak:
... as a differentiator as well.
Ryan Sachtjen:
That's right.
Turner Novak:
It's kind of interesting that hasn't really bled out to the broader industry, but I guess the pitch with joining a startup is that the equity will increase in value. It'll either not be worth anything or it'll increase value pretty quickly. So I guess you kind within a year or three years, maybe you probably know relatively soon, is this going to make me a millionaire or do I join another one and try again basically?
Ryan Sachtjen:
Yeah, I think that's right. And I think what's interesting too is a little bit depending on what's happening from a macro environment standpoint, you almost witness people as they're evaluating an offer that would be salary equity plus benefits, where are they most placing their emphasis in review when there is this big upswing on company valuations and startup valuations are going really high. The equity gets a little bit more of that focus. When the opposite is true, there's almost a, Well, I'm going to think of that more as that's just the gravy bit. And I'm looking at the other two because those are known elements and entities. And I think the benefit part, certainly as we think about our team, making sure that we feel that we've made the right choices to take care of our crew, knowing about how people go from being younger and single and presumably go down the track of maybe have a partner or maybe have a family and making sure that you're doing right by them.
Even if they're not thinking about it top of mind, which generally isn't what people that are in their younger part of their career are thinking about. And so I think there's an opportunity to make that just be something they don't have to worry about.
Turner Novak:
Well, and speaking about opportunities too, just generally speaking in insurance, we just talked about how it's so... The technology hasn't evolved as well as it could have. So what do you think is kind of happening right now with insurance and automation, AI, all that kind of stuff?
Ryan Sachtjen:
I think what's super exciting about the introduction of AI into the industry is that it is making meaningful advancement opportunities to feel attainable by-
Turner Novak:
What does that mean?
Ryan Sachtjen:
Meaning historically, when we talk to an insurance company or a big broker and we're talking about maybe an integration project, "Hey, I want to build... I, Threeflow, want to build an integration into you carrier, and here's all of the reasons and the systems that we want to do." There could be alignment around that outcome. We really want to try to drive that forward. But the proposition would be that is a multi-quarter significant investment because we, as an insurance company, we don't have an API. We're going to build one that's going to be really brittle and we have to think about where are we going to pull those resources from to do that project. And so it felt like I want to do that.
But what we observed in real time was a challenge in how do they really action on that in a way that feels attainable that I can get this done because I want to get it done. Now with the advent of AI and things like agentic workflows, you can create moments of information exchange and data exchange, which is really the end outcome that you want and do so in a way that doesn't require a multi-quarter investment. It doesn't require them to say, I've got to go get a $2 million budget approval to get this project green lit. You can do so quick. And what then happens is there's elements where you see proof points of what information exchange looks like and what does that unlock for their business.
And then that helps the momentum of really thinking about what does this look like for me as an insurance company, as a brokerage firm, or any other sort of element in the ecosystem. So that's been a big part of what we've seen that has been working really well. The other element is how do we think about a way to really solve this comprehensive problem of structuring unstructured document sets and data and information, all of the exchange that was email and document driven. A lot of those documents still exist. And part of what we've had to solve from an AI standpoint is how do I not just process that information but do so in a way that actually drives the outcomes that's the good outcomes for our customer.
And so, part of that is big large language models are really good at things like synthesizing information and extracting segments or sections of a document. What they are not as performant on is how do I translate that in a way where an end user could compare an apples-to-apples outcome, because one carrier would call it an apple and the other carrier would call it a banana but that's actually the same thing. It's actually an apples-to-apples comparison.
Turner Novak:
How does that happen?
Ryan Sachtjen:
And so, we then use our own internal data set to then normalize that information because we know that that carrier calls that thing a banana but it's really normalized to be an apple. And so, part of how we do it, and that's part of the vertical stack that we've built, is how do you then process information and then normalize it in a way that you could understand it quickly if you didn't have any interest in knowing the how of that information came onto your screen.
And for us, really that element on the AI front has been huge unlock for us in terms of how do we think more natively about product development. What does that look like? How do we move things faster? What are the problems that we can solve now that are much more expanded as a result?
Turner Novak:
So, what you just mentioned there, if there's a term like a specific insurance term that defines something, you're saying that some of the carriers define certain types of coverage or types of triggers or policy, things like those are all defined differently by different carriers?
Ryan Sachtjen:
Yup.
Turner Novak:
So, they're not really normalized?
Ryan Sachtjen:
If you were to look at the plain language that would in a insurance policy or an insurance proposal for one carrier and then compare it to another carrier, the words would be different. And so, what you need to do if you're trying to understand, well, which is better is you need to be able to normalize that in a way where you can compare the two across.
Turner Novak:
Yup. And this is a broker-
Ryan Sachtjen:
This is a broker function that's doing it.
Turner Novak:
... that's currently probably just they have maybe multiple monitors and they have PDFs open of all the policies and they have a spreadsheet that they're going through and probably typing it into a spreadsheet most likely as they read through all these?
Ryan Sachtjen:
That's right.
Turner Novak:
Interesting. Okay.
Ryan Sachtjen:
And so, it's important because if you are helping advise an employer to make a decision around what am I going to buy and offer my employees, these are meaningful things. And so, it was for us, something very nuanced about the insurance business and benefits in particular was how do we approach this problem in a way that helps them?
Actually, just giving you the raw information that's in the document in its current form is actually not that helpful because I'm giving one version of the language and another version of the language. And so, if I'm looking at both of these pieces, I can't compare it in the same way that I would want, right?
Turner Novak:
Yeah. You maybe saved them a control laugh or something of they found it quicker but then they still have to do things with it. Yeah.
Ryan Sachtjen:
That's right. And so, what you really need really to drive the value is to help move that into a way where they can compare it. And across then the other 45 data attributes of that product, you've got a lot to get through and then you times that by maybe 10 insurance companies, the amount of information that you're trying to do as part of the analysis is pretty significant. And you've got five-and-a-half products per employer on average that's offered by employer two. And so, you just run the math and doing that at scale is really, really hard.
Turner Novak:
So, if I want to basically send a proposal or send a package to a employer, just one, to your point, how many hours maybe typically goes into that current manual process currently without using ThreeFlow?
Ryan Sachtjen:
Yeah. I mean, you're easily in the 50-plus-hour per project.
Turner Novak:
So, it's basically a week to just give a client some quotes on what they-
Ryan Sachtjen:
Yup. And so, if you think about a regional brokerage firm, relatively normal size, you're not part of a huge multibillion-dollar public company conglomerate, you probably have 150 to 350 employer clients that you're managing. So, you think about, okay, so I'm doing that project which is one week. I'm doing that across, let's say it's 300 clients that you have. And then-
Turner Novak:
Yeah, I do it once a year per client usually.
Ryan Sachtjen:
... you have to do it once a year per client. And you're also then doing a bunch of the ongoing work as far as just advising them on upcoming legislation and just doing the ongoing consulting work. And then the other bit which makes it even more challenging for the brokerage community and carriers is that the majority of the insurance policies renew on a January 1 cycle, which means that the time when this all happens is compressed.
Turner Novak:
Oh yeah. Like Q4 probably, right?
Ryan Sachtjen:
It's Q4. And so, it's much like tax season for accountants where as you get closer to April 15th, everybody is freaking out because you've got to get taxes filed. It's much the same where 75%, 80% of the policies were new January 1. And so, all of that work gets compressed.
And so, if you were to pick up the phone and call someone who works in a brokerage firm in October, you would hear a lot of deep sighs when you ask them how they're doing. It's a-
Turner Novak:
Because it's starting to ramp up?
Ryan Sachtjen:
It's starting to ramp up. And they would just say, "I'm just trying to keep my head above water." And so, the problem when you think about this on a macro level is if all of the focus and work is doing that, you're doing this huge project just to review these baseline details, do you have the bandwidth to think about, "Well, maybe there's a different structure, a different plan design, a different product that this employer should consider?"
Turner Novak:
Like self-insured, [inaudible 00:34:57].
Ryan Sachtjen:
You self-insured. There's a bunch of work that goes into all these elements that is the actual advisory that sometimes doesn't get as much attention as everyone would like to have. And they do their best and a lot of them do a really nice job. But if you can unlock that, you think about how much of a better outcome that you could drive as a firm, if you're not spending and burning all your time doing these manufacturing elements which are super important, they're mission critical to the deliverable. But if that just was done for you in a way that didn't limit your ability to go consult on it, it didn't limit your ability to work with your supply-side partners, it would be meaningful.
Turner Novak:
And you started the company not recently. This is not something where the LLMs were out, they were good and it all started working out. What was the original product back when you started?
Ryan Sachtjen:
When we first started-
Turner Novak:
Because was it 2016? Am I remembering right?
Ryan Sachtjen:
Yeah. And we really got things going into market in 2017, 2018. When we started the business, I started it with co-founder Rich Perrott, then we got connected to our CTO and co-founder Shaheeb Roshan. And we had no product and we were two guys that didn't have a tech background. We knew the business deeply. And so, we went and just met with everybody for a while and just made them write things out on whiteboards of like, "How do you do it? No, no, really tell me this part and this."
And the first version of what we built was very much a point solution and it was very much a broker-side solution only. So, it didn't have any collaboration with carrier partners. You just can't build everything to start. And so, we were like, "Well, let's just get something out and just get it started. We had to call friends in the business and just say, 'Hey, I just need you to do me a favor and try this thing and let us know.'"
It's going to be probably pretty terrible to start, but you understand the premise and you know that this can be better and we're on that hunt. And that helped to inform the first versions. And then, this was before we had the ability to leverage things like LLMs to process documents. And so, you had to really drive it forward through a lot of brute force in the first couple of years of getting a collection of brokers to start using it.
And then, one of the elements that was a big unlock for us was understanding how we can then start to use that volume of transaction in a way that we can engage with the supply side and the carrier side. And so, for us, that was a big part that we did. Actually, right when we pursued our seed round of financing in 2019, that was, okay, we can now turn on the carrier side. We can get them to enable. We can drive enough value. And then we can actually have them participate in the economics as well.
Turner Novak:
So, is there some sort of the broker sends a link or the ThreeFlow input form that the carrier then fills out in some way instead of just dumping their data over their raw policy PDF they might send?
Ryan Sachtjen:
Yeah, kind of. The first version was we were helping them build out the composition of what they're delivering. And they were actually still emailing it and then they were introducing the document back into our system in the very first version before the carrier.
And so then, we realized, well, if we allow for the delivery of the information to carriers to be organized in the right way, carriers use phrases like "in good order," like, "Did you get it in good order," inbound, so we can deliver-
Turner Novak:
So, the data's all been processed in the right format and stuff.
Ryan Sachtjen:
You have the basic components to underwrite that risk. You have the census file, you have the claims file, you have the policy documentation. And so, that was part of how do we pull the carrier in and then how do we build a workflow where they can have control over what is being delivered to the broker.
So, a big part of it was visibility and control initially for the carrier to say, "Hey, today, you send over a document and you have no idea what the broker is going to then pull and put onto their deliverable to the employer. You now can control what they're seeing on screen as part of your offer to that employer."
Turner Novak:
Why is that a big deal? I don't know anything about the industry.
Ryan Sachtjen:
There's a big deal of this element of nuance between carrier, whether it's a service offering or it's a contractual offering, is a big part of how do you differentiate if you're one of 15 insurance companies trying to sell them to a broker. You've got things that you believe really matter a lot. And so, by giving that individual control, you have the opportunity to position that differently in the way that you want it to be positioned for the broker. And then you use that as an opportunity to then go and inform and educate that broker of why that matters and why your employer matters.
So, it's a big part of the sales cycle of why that can control has an impact for you wanting to do that versus it doesn't really matter, it's going to be the same either way.
Turner Novak:
Okay. That makes sense. And one thing I know, before you actually started, you took a pretty big vacation sort of with your co-founder and your wives. What did you do before you officially started the company? And was this in between all the research, you took a break, and then you officially started?
Ryan Sachtjen:
We did the research after. So, Rich and I both worked for insurance company and I had been in that role for I think 13 years and Rich, I think 10 or 11. And so, this was independent decisions. We both independently made decisions to get married. So, we got married the same year and then we wanted to take a break and have a beat and take a breath because this was the first job out of school.
And so, we ended up doing 128 days walkabout style through, started in Scotland, ended in Turkey. And we were able to have fun moments of connecting up with Rich and his wife Julie to meet up for a week in Italy and hang out in Italy, and then separate out again and then meet back up in Istanbul and do all sorts of fun stuff like that.
And it was one of those moments where there's a lot of reasons that you don't do that trip because you want to jump right into the thing. But I got to say it's one of those where you reflect back on it and the value that it has for you just as a person and a human and certainly something to share and celebrate with your wife is pretty great. And we reflect quite fondly about and we wrote a terrible blog while we were and ...
Turner Novak:
Like a travel blog you wrote?
Ryan Sachtjen:
Yeah. And we had I think four readers, mostly aunts were the readers.
Turner Novak:
Okay, nice.
Ryan Sachtjen:
And there was one ... My family is German and the heritage goes back to a small little farming town in Northwest Germany. And I wrote a blog of us finding the family because we had an address and that was it. And we just showed up to the farm and met my basically sixth cousins once-removed and spoke no English whatsoever. I speak no German, ignorant-
Turner Novak:
How did you tell them like, "Hey, I'm your sixth cousin once-removed?"
Ryan Sachtjen:
So, we had gone to Bremerhaven and Bremerhaven has this amazing immigration museum. And so, we are actually able to find and track back when our family left. And so, there was a family where two of the brothers left and the rest of the family stayed. And so, that's where the family tree.
So, we basically printed that off. And so, I'm standing there and I assumed that they would speak English. And so, I was just like, "Hello?"
Turner Novak:
Who's just random on our farm?
Ryan Sachtjen:
And they're looking at me. They're looking at me and I'm just standing there doing nothing helpful. And my wife Jamie, she takes the moment, so she puts her hands on my shoulders and she's like, "Sachtjen?" And everyone nods and then she puts her hands on my shoulders and she's like, "Sachtjen." Then everyone's like, "Oh."
And I had my driver's license and I took my driver's license out and then she smartly ran back to the car and grabbed the family tree that we had printed out and we had shared. So, we sort of figured it, we tripped our way into figuring it out.
Turner Novak:
Interesting.
Ryan Sachtjen:
But we wrote about that day and it was pretty amazing.
Turner Novak:
That's a pretty cool story. What I hear a lot with those like, "We went to Europe to find our original family and we just showed up to the farm or the village unannounced and it was just a great time because they were so excited to see us."
Ryan Sachtjen:
They are. It was so great. We were just sharing cake and just looking at pictures of our dog and nodding. And then when we got back to the hotel, we were able to get a connection with one of our younger cousins and then use a translate function at that point to chat of like, "I'm so sorry, that was so awkward." She's like, "No, it was great."
Turner Novak:
So, it was on the phone like a translate app or ...
Ryan Sachtjen:
Yeah.
Turner Novak:
Okay. And they're pretty good now today in 2025. You can literally talk into it and it instantly translates to whatever language.
Ryan Sachtjen:
That would have been helpful. That would've been a helpful. Yeah, that would have been a helpful feature.
Turner Novak:
Your wife sounds awesome.
Ryan Sachtjen:
Yeah, she's awesome.
Turner Novak:
That was a good move. So, you started the company, things started to get going. I know it was pretty challenging when it started. How was the first couple months of the company?
Ryan Sachtjen:
We closed our seed financing in May of 2019. And then on July 10th of 2019, my wife was diagnosed with triple-negative breast cancer which is a very aggressive form of breast cancer that has unfortunately very low-survival rate and it's not a good outcome.
And so, we sort of had that moment where this happened, when we think about the context of the business, at the worst time possible. And we had at that point two kids. Our son Crosby was not even a year-old at that point. And so all of these things were culminating together in this moment of trying to get a business rolling-
Turner Novak:
Get your family off the ground. Yeah.
Ryan Sachtjen:
... have two young kids and have a wife who's a superhero going through this. And one of the things that I always reflect on in these moments is when people say resiliency is real but it can be a forcing function based on what's happening in your life. It's true. You put your head down and you just grind through it together with those that you trust and have that relationship developed and built.
And I think that was the thing that was, it both clarifies what's important in life, but also it makes it very clear about where are the real relationships that you have and those that really got your back. It's very easy to say that when things are going great and it's really easy to talk about how you support someone when everything's rolling. It's when the shit hits the fan, that's when stuff gets real. And it was a really, really hard year. She had basically a north of I think it was 16 rounds of chemo.
Turner Novak:
Wow. Yeah, that's brutal.
Ryan Sachtjen:
She had three surgeries. She had 25 sessions of radiation. It was terrible for a full year. And then the anxiety of not knowing how things were going to end up and then also trying to figure out a way that you separate that in your brain to get a job done when we were trying to recruit and hire teams. It was crazy. But I think it was one of those things where for anyone that's going through a similar journey of people are all have their own version of what is that moment of challenge in their life.
And for me, what was the thing that I am so deeply appreciative now in looking back is just the support structure that you build with the relationships you have and the way that that matters so deeply and how your tribe is your energy as you get through it. And we had an amazing support system and our investors and my co-founders were just couldn't have been better humans in that moment. And it's like you actually separate the business out for a moment to just be like, "What do you need in that?"
And those are the people that I will forever be appreciative of it. And I think when people talk about relationships over 40 years and 50 years, it's that kind of stuff that persists through in a way that is real. And now, my wife had a really good response to treatment. She just hit her five-year cancer-free moment which is a really, really big moment in terms of-
Turner Novak:
That's amazing. Yeah.
Ryan Sachtjen:
... where she's at in terms of her journey. But yeah, it was very hard doing all of those things all at the same time and just figuring out how do you get through it. But something that I try to be mindful of in ways in which people can be open about the stuff that they're dealing with and not have it somehow limit their ability to perform in a job or a function, you can be open about all that stuff and still do those other things as well.
Turner Novak:
And it's just a big mental, I don't know if load is the right word, but mental, and I don't know if distraction's the right word either because it's not a distraction. You should be focused on those things, but it's an entirely new thing that, it's a whole another job. It probably should be a full-time job of caring for your wife that has cancer.
Ryan Sachtjen:
Totally. I mean, it is. I think it's okay to say that it's, for a minute in that moment, is a distraction and not in the way that it's dismissive of that's the more important bit. But it is really hard to figure out how do you navigate through both, how do you be present for your family and then also acknowledge that there is a real-life element where we have to keep moving this business forward.
And that does take real toll on you and you're just oftentimes physically exhausted from it of, "I can't go any harder on this." But it is, it's real. It's something that you had to be really intentional about to try to figure out how do I separate these bits and just give myself a minute to focus.
And I think that's part of how the support comes into play, too, of when I was off on focusing on family stuff, everyone knew that that was the focus and having that separation was really important.
Turner Novak:
So, how do you do that? If I'm a group of co-founders, we're going through a similar situation where one founder needs to really focus on something outside of the business, they're still committed but it's something like this, like a family member, wife partner has cancer, was there a certain process that you guys went through or a structure of doing it? Conversations? How do you even bring that up to everyone?
Ryan Sachtjen:
As we reflect on how we focused on it, I think one part was being really clear about areas of focus was helpful. And so, I knew that, okay, this is the thing that when I can, I can really be intentional about focusing on. And the second was we were pretty open about the communications on a very fast cadence. And they knew what was happening and ... Because it would change week over week as far as how much I could focus on this versus that.
Turner Novak:
Because she might go through a period where she's feeling really good and maybe you're working from home in the kitchen with her or whatever, or she's on the couch and you're on a table beside working or whatever and you can be a little fluid with it.
Ryan Sachtjen:
That's right. And so, I don't think there's a magic in it. I don't think there's a beautiful process that you do. I think making sure that you're really open and honest about what are the needs in that moment. And I think being really clear about the areas of focus, those are the two bits that are critical.
And if you can do that well, then I think there's an area where if you're in this moment and you're trying to support a co-founder that's going through it, helping be intentional to tell them, "I got this bit," and remove that mental load from them and just have them focus on maybe an area that they're really, really good at intentionally and just say, "All this other shit, we got it. We'll take care of it. I know that previously, you were doing these things, but we'll take that but we need you to do this bit." Maybe it's a technical co-founder and, "I just need you to be focused on these things when you can." That's helpful too in terms of the clarity.
Turner Novak:
So, limit the scope of what you're doing.
Ryan Sachtjen:
Limit the scope.
Turner Novak:
Just focus the thing that when you make your co-founding team, you're like, "We are all good at these things. Just the things that you know you're good at, just do those." One thing or two things-
Ryan Sachtjen:
Which you should probably do anyway. But I think being even more critical and even more disciplined about what's the most narrow thing that I can have this person focused on in that moment I think is really helpful.
Turner Novak:
And then you mentioned, so the fundraise, so Rick Zullo who introduced us, I think he was your first investor, first-
Ryan Sachtjen:
He was.
Turner Novak:
... big led the seed round.
Ryan Sachtjen:
Yup.
Turner Novak:
How did the fundraise go? Meeting him, convincing him to invest or him convincing you to let him invest? What was that whole process? I know it was a non-traditional situation that went down there.
Ryan Sachtjen:
Totally. I mean, I think first off, I didn't know what I was doing at all.
Turner Novak:
Did you know you wanted to fundraise or?
Ryan Sachtjen:
We knew that we needed to raise some money. We had previously done a friends and family round. And so, it was the classic pass the hats. And we felt good about all of those that contributed and the friends and family were all insurance people, so brokers and carriers that felt this problem. So, we liked that bit. But there's-
Turner Novak:
Was this after you'd done some of your customer discovery conversations.
Ryan Sachtjen:
Yeah, that's right.
Turner Novak:
Okay. So, people were like, "Oh, these guys seem like they-
Ryan Sachtjen:
They know what they're doing.
Turner Novak:
... get what we want and maybe they'll make it."
Ryan Sachtjen:
I mean, a lot of them, we had personal relationships with. So like, "Look, if I'm going to make a bet on a team, I'm going to make a bet on Rich and Ryan and I'm going to give you guys 25 grand," or whatever the number was.
And so, we got to a point where we knew that we needed to put a little bit more gas in the tank. We needed to-
Turner Novak:
It was just to hire some people to help?
Ryan Sachtjen:
... hire some teams. And we had been working with classic contractors and just being scrappy. We didn't have anyone actually on staff. And so, I got introduced to Rick through another friend in Chicago. And at that time when we first met, we were not actively fundraising. We were starting to think about it, but not in an intentional like, "I'm going to run a process." I didn't even know what that freight ... I didn't know that that was the thing of like, "Here's how it goes and here's the process you run."
And so, Rick and I had an opportunity to meet each other and ended up setting up time together on a monthly cadence where we would riff on marketplace dynamics. And something I've always found to be fascinating, whether it's insurance or other industries of just how do marketplaces work, what are the dynamics of it, what are the levers and motivators? And so, we found ourselves talking about that and then applying it to the big thing that we were thinking about, which was introducing the carrier side into our product and then incorporating that into the economics of the business.
Turner Novak:
So, the product that was the pure broker product was there-
Ryan Sachtjen:
It was there. It was there.
Turner Novak:
... when you started fundraising. Okay.
Ryan Sachtjen:
At that time, our revenue was exclusively from the broker side, so they were-
Turner Novak:
Just like paying a SaaS fee?
Ryan Sachtjen:
... paying a SaaS fee. Yeah. And so, it was relatively uninteresting and we knew that we wanted to flip this to be supply-side funded eventually, but we had not done that. So, a lot of the discussion that we had was about how do we want to do that? What does that look like? What are the levers that we need? How could we do that across a handful of carriers and be successful there?
And I think what that allowed for Rick and I to do is, one, establish a relationship and level of trust pretty early. And then, what I actually didn't really know at the time was all of the work that he was doing to get equal spun-up and get the fund in place and raised.
Turner Novak:
So, you just thought he was some VC billionaire guy who was just going to give you some money and you'd be off to the races? Is that-
Ryan Sachtjen:
Well, I knew that they were starting a fund. I didn't know the exact composition of what was happening about them closing on that fund at the time. And then, I learned that later sort of in the process where they ... at the same time that we were doing our fundraise. So now at this point, we're actively talking to venture investors, Equal and others.
And then, that's when he had shared they were actively working to get their fund closed. And so, there was this moment where we were both very dependent on each other in terms of, "I'm looking to you to obviously help fund the business." And he, as part of getting the fund closed of course, is talking about their ability to go find deal flow and all of that stuff.
We did get to the point where we had three other term sheets that we were looking at other than Rick and Equal. And at that point, it was a pretty easy decision of who we wanted to partner with even though there were others that had slightly different deal terms and things like that.
And so, I think what that allowed for us to do is, A, have trust that there are these other options and we're choosing intentionally to be partners together. And I think it established this openness and honesty that we've had ever since of just, "Hey, here's what's up over here. Here's what I'm dealing with. I know that you've got your stuff that you're chasing down. I think we can go farther together." And I think that was sort of one of the foundational pieces of it.
And he then introduced us into Joe Floyd who's at Emergence Capital. They ended up leading RA. And so, it helped then us establish the relationship with Joe and team and part of the... We never really ran a super formal process. All the way through is it just helped drive business forward and establishing the capital partners that could help support the growth of the business.
Turner Novak:
And I think Rick mentioned that you were helping him. You talked to his LPs and they were using you to diligence Rick.
Ryan Sachtjen:
Yeah.
Turner Novak:
And you were probably like, "Let's go guys. Give Rick the money. I want some money. Give it to him so I can..."
Ryan Sachtjen:
Yeah, there was a fun dynamic, but part of the deal when it's kind of like... It's a deep partnership when you're thinking about a venture investor. It's a proposition that has a long tail on it in terms of timeline. And I don't know, maybe it's a reflection on stuff that happened with me personally and things like that, but that just matters so much to me. And I know with Shaheeb and Rich and the co-foounders, it matters so much to them as well. And being intentional about that and how you would choose, especially at the seed stage, someone who you want. You know that you're going to be working with for a long time. Just reflect on that because it really matters. And there are some firms that I don't think approach it in a similar kind of way and it's a little bit more transactional, and that's okay. It's okay, but just know what you're getting into in terms of that decision. And for us, the right call was making sure that we had someone that we could develop that relationship with and build on over time.
Turner Novak:
If I'm listening to you and you say that, and that really popped for me. I was like, "Oh yeah, I should think about this as a long-term relationship." Are there any red flags or green flags that someone should keep top of mind when they're meeting investors and thinking about, do I think this person might be a good longer term person? I'm not really sure what's the best way to tee up, but hope you get what I'm saying here, but what are some things that I should maybe be thinking about?
Ryan Sachtjen:
So I think for us, one of the things that I found was alignment in the investor to you individually but also the business that you're building. And so for us, we're in the employee benefit insurance industry. It's an area that most people don't know much about.
Turner Novak:
Yeah, I don't think I've read any VC blog posts about it except from Rick.
Ryan Sachtjen:
Yeah, that's right.
Turner Novak:
So there you go.
Ryan Sachtjen:
That's right. And so one of the things that I observed really quickly for me, which was personally a bit of a yellow flag, red flag for us, was it meant that more generalist investors were less of a good fit. And so I think that green flag and red flag is not my green flag is going to be someone else's green flag, red flag. It's establishing what is that for you? And for us, being intentional about those that had more of a vertical focus. So then whether it was then Emergence Capital, then Excel, they were very specific in they had exposure to either the business that we were building, so a vertical business in terms of Emergence's use case, or a thesis driven, like Rick's was in insurance.
For us, that allowed for me to move faster, because it didn't mean that every time I talk to you, I have to spend the first 30 minutes catching you up.
Turner Novak:
Like we just did when you explained to me how the industry works.
Ryan Sachtjen:
And now talk about it like a decision that we have to make. And if you just think about what do you try to optimize for? It's tempo. I'm all about tempo. That's a big part for us that was really important. And there's a bunch of amazing investors out there, but for Threeflow and for me, someone that was more of a generalist model didn't fit as well. There's others that actually would really appreciate that because maybe they do like the pattern matching in more of a horizontal, generalist kind of model, and so I think that's a big part of it.
The other part to me and to us was just about the authenticity of that person, and just our quotient on that's really high just matters to us. And I think especially when you get into those challenging, whether it's a challenging board meeting or a challenging quarter or a challenging year or whatever it is, it's going to happen. And knowing that you can actually work with that person and not have to dance around it in a way where you can't just be open about what's up so you can dig into it and try to help solve the problem is really important.
And I was with some other founders this week for this insurance summit event. We were reflecting on, it's a lot of times, we observe it, and probably myself too, of first time founders, especially if you're a little bit younger. The dynamic between you and your venture investor, it has a, "You're my boss," kind of dynamic to it, and it breeds this moment, like I've got to spin everything to you to make you feel like everything's great. And that is actually the worst thing that you can do, because then they have a perception that things are all great, even though you go away and now you feel shitty. You've got this mental load of like, "Ugh." And so then now you're in this pathway that doesn't drive forward what has to happen, which is we've got to figure out this thing and we got to try to move it forward.
And I think one of the things that I've reflected on as I've matured in trying to figure out how to do this well and try to operate and run a business is the more that you can just be open about that stuff, because everyone's invested in the success of the business, literally invested in the success of the business, and doing that in a way that is collaborative is really important. And making sure that you feel like that fit is something you see in that seed investor and that a round investor is really important, because it's going to happen and you want to be able to work through those things. And the personality type that maybe I would resonate with might be different than you, and that's okay. It's like whatever you think fits for you, making sure that's true is important.
You've got this marketplace model and you have a scenario where you've got a multi-billion dollar Fortune 200, Fortune 250 insurance company, and then you have generally speaking a relatively small maybe 20 to 50 million revenue business as a professional services company. And so you would assume that the leverage and dynamics wildly favors the insurance carrier.
Turner Novak:
Yeah, that's what I would think.
Ryan Sachtjen:
And it is not the case. It is not the case. And so part of it is why is that true? And it is largely because the way that... These insurance companies are sales companies that just happen to also do insurance. They're distribution companies, and when all of the distribution is controlled through this relatively small broker organization to access all of these employers, there is this choke point that they have, and brokers have done a very good job of using effectively. It's also very competitive in that there's, pick a product, there's 10 to 15 competitors that are good solid competitors as an insurance carrier that you're competing against. And so this market is unique in that the smaller entity actually has more leverage and power.
Turner Novak:
It's very rare.
Ryan Sachtjen:
It's very rare. And so then it breeds these weird idiosyncrasies of the dynamics that were important for us to understand that we knew because we had experience in the business, but when we're trying to catch folks up on, "Hey, this is how it works," it's always a, "Huh, that doesn't make any sense." Why wouldn't they just lever this layer in channel in a way to make it work better for them?
Turner Novak:
Yeah, just go to the carriers, cut some costs, make a bunch of money, become the new middleman or whatever, the whole vertical SaaS marketplace playbook.
Ryan Sachtjen:
Yeah.
Turner Novak:
So you mentioned something earlier though about you had a big conversation with Rick about how do you build a marketplace? How do you get them off the ground, kick things off? You mentioned earlier you had this broker vertical SaaS product initially built and you're like, "Okay, we got to figure out how do we get the carriers on board, have the supply side, start to monetize that." So how did you just approach that? And I just want to talk a little bit more about how did you get that going?
Ryan Sachtjen:
Yeah. So how we approached it was one bit, we had the domain knowledge to know that there were examples where there had previously been intermediaries that had participated in the transaction paid for by the supply side. So intermediaries are a general agency, which is like a broker's broker.
Turner Novak:
It's a broker for brokers?
Ryan Sachtjen:
It's a broker for brokers.
Turner Novak:
Okay.
Ryan Sachtjen:
And so there is a... It's like a little cottage industry, but the reason that it matters is that it illustrated that there is an opportunity for you to build value. In this case, the broker's broker is more about aggregating broker demand. If you imagine there's a bunch of smaller ones, and I as an insurance company don't want to spend money in salespeople being on the ground and going to-
Turner Novak:
Like Midwest, middle of Iowa where you have-
Ryan Sachtjen:
Pick the state. And so we saw that firsthand from being on the insurance carrier side, so I knew that that was a possible lane. The thing that we also knew is that what needed to be true for us to cut commercial... Anything that is a commercial contract with an insurance company, we needed to have usage and volume on the demand side. You can't just go with no volume, anything to insurance company and say, "Hey, I'm thinking about this idea." They're going to ask me the natural question which is who are you? Who do you work with? I will say, "Nobody," and they will say, "Come back later."
Turner Novak:
Give me a billion in premium and maybe we can-
Ryan Sachtjen:
Maybe we can talk about it.
Turner Novak:
I'll return your email, maybe.
Ryan Sachtjen:
Yeah. The other thing that we knew from our experience was while these insurance companies are large in aggregate across the country, the way that they organize themselves, it's very regionally based, which means that if you think about... At that time we were in Chicago, and if you think about the Chicago or Midwest market and you think about the motivations of the insurance company, in particular the distribution leadership, you don't need a ton of brokers on the demand side to feel like you can have impact with that distribution leader.
Turner Novak:
So, how so?
Ryan Sachtjen:
Meaning if I go get four or five brokers in the Chicago area and you are the sales leader for an insurance company in Chicago, you need those five brokers in order to hit your sales goal, and you know that you need them. So what I can do, what we're able to do is use them to become the champions internally within the insurance carrier to say, "Hey, we need to figure out a way to work with this new company that's starting, and the reason why is because they're working with some of my major trading partners in that market."
And for us, we were able to use that as a really important beachhead or wedge into how do we create a both commercial and operating contract with an insurance carrier so that we could then start in having them use the thing, which is really important, so we had the operational component, and then how do we put together commercial terms that allow for us to monetize on the supply side? And so we had to understand the depth of how these markets play in a very micro market basis, and then use that as a way to expand across the country for the insurance company, and then by extension, you can expand it across the country on the demand side.
Turner Novak:
So you basically went to... So this is actually what you did. You went to Chicago, you got enough broker volume to where a carrier would say, "All right, this is just worth the time to work with these guys, because we know that the ROI is going to be there. We're going to do whatever dollar amount in premium and then revenue, profitability, whatever." Make them so they hit their targets, maybe they hit their quota, they get a bonus or whatever, and you use that to force them basically, or make it worth their time to do it.
Ryan Sachtjen:
Yeah, make it worth their time. And I think then using... For us, the key when you're approaching a market as big as the insurance market is you have to be really intentional about the entry points and you have to make sure that's helpful for all the key stakeholders, and then you have to be able to extrapolate off of that from there. And the other bit that we noticed when we started the business too was historically, people would ask the question around what insurance products are we starting with first?
Turner Novak:
Yeah, and you started with some pretty small products. The way you just described that, you got to get big enough to... I would've thought just pick the biggest one and just bring that to them, but you didn't do that.
Ryan Sachtjen:
We didn't do that. We actually started on the non-medical side in what's referred to as the ancillary business.
Turner Novak:
So what is that?
Ryan Sachtjen:
Life insurance, long-term disability insurance, short-term disability insurance, things that are in more of the protection products versus the medical insurance products. So again, life and disability are the two components that are generally offered probably 80, 90% of the time by employers, so they're very commonly offered. And this actually goes back to the discovery conversations that we had with brokers in understanding where did they have the biggest frustration that didn't correlate to the biggest revenue value to their business?
And so these products, even though their premiums are smaller, which meant that as a broker, you make less money on these products, it actually was requiring a lot of time, and so it was disproportionate to the amount of money that they made. And so they kept on saying, "My ancillary process is so terrible."
Turner Novak:
But you needed to have them.
Ryan Sachtjen:
And you need it.
Turner Novak:
Because most customers who had-
Ryan Sachtjen:
Right, because it's expected and it's part of the core deliverable. So we knew that in our belly and then we confirmed it when we were going through the discovery motion before we built anything, so those were the products we started with. We then used that to drive the volume because we knew we could go to enough brokers and say, "Hey, I know that you hate doing this process for this cohort of products, so we'll solve that for you," to be able to drive volume such that I can then go, what we were talking about, in market, try to establish the carrier side and then expand that across the country. And then for us, that was the way in which you can build the market across that particular product. And then for us, it was how do we then add additional insurance products to the portfolio on platform, and then how do we map that to the carriers that we have? And so things that we launched after the life and disability were things like dental and vision.
Turner Novak:
Are those pretty common too?
Ryan Sachtjen:
Pretty common as well. And so the other bit was that mapped to the insurance companies that we already had relationships with. Many of those are the same companies that also offer dental vision.
Turner Novak:
So then on the business side, that just makes each customer becomes a bigger contract value.
Ryan Sachtjen:
That's right.
Turner Novak:
Margins improve. You're just getting more revenue from the existing customers.
Ryan Sachtjen:
That's right. And so for us, that was a big part of now... Because you have this natural cold start problem whenever you're building a marketplace, and the fundamental question is, well, how do you solve for that?
And for us, it was finding that lane of solving a really core problem for the demand side in such a way that you can then use that to be a fundamental entry point for starting to build demand side, and then introduce supply side. And ultimately, what we observe is we have a marketplace where it's a opposite side network effect, meaning if you are a broker, you do not care if another broker is on our platform. You care if n plus one carrier is, because that's just one more carrier that you can work with. If you're a carrier, you actually don't want more carriers on platform. You actually prefer it to be less. But what you want is you want n plus one broker, because you want more brokers to sell into.
And so our opportunity once you get this going is how do we add more on both sides in a way that still drives value to both stakeholders? And that's been a key part of how we've grown the business in terms of new broker customers, new carrier customers, and then new products that we're supporting as we've been growing.
Turner Novak:
So then when you mentioned growing, getting pretty big, what's the current state of the business? I don't know what you're open to publicly saying, but I know you've raised a series B from Excel. I'm assuming that there's probably something good that's going on. If you've gotten to that point in the business, what are you sharing publicly?
Ryan Sachtjen:
Yeah. I think one of the key top level metrics that we talk a lot about is premium under management on platform and how we think about that, and we're well into the middle of the $2 billion range now. We'll be 3 billion by the end of the year, and we think about that over the context of both the number of broker clients that we have. We're north of 330 broker locations across the country, we've got north of 70 carrier relationships on the carrier side. And so for us, the premium transacted on platform is a really key element to what are the success metrics of the business? Our team is just under 140, and so we've got a good crew that's distributed across the country.
Turner Novak:
And then when you talk about building a marketplace, I think the big thing or the big risk is off platform, people transacting off platform. In theory, if everyone is already emailing each other manual stuff, is there any chance that your carrier just emails the broker? How do you make sure that everything's happening on the Threeflow platform and you're able to actually monetize it?
Ryan Sachtjen:
Yeah, it definitely happens, right?
Turner Novak:
Oh, really? Okay.
Ryan Sachtjen:
Some of it can be unintended where it's just I am a carrier and I'm just emailing... Renewal is a good example where these policies have defined contract terms, and then there is a renewal that's going to come up that is here's your next price, whether it's 12 months or 24 months. If you're maybe you work in the home office of a particular carrier and you know this is the underlying broker, you might just email that renewal to the broker that's operating on Threeflow. And so that would be an example of just an unintentional off-platform transaction. What should happen is we want that to all obviously happen on platform.
Turner Novak:
You could probably do an alert of something, like, "The renewals coming up."
Ryan Sachtjen:
That's right. And so a bunch of it is building workflows to be able to support what happens today. So an example for the renewal is there are times that the carrier wants to release it, so we need to build work streams that allow for that to be really easy for the carrier. Sometimes, there are times where the broker wants to request it, so how do we allow for them to configure that on platform so it automatically requests to the carrier and they can get it based on their own time horizon?
The other bit that has been really exciting about the advancement on the AI front is its performance in doing things like email ingestion and document ingestion. So we can then share with our customers, look, if it starts off platform, because of that example, carrier just emails it. No problem. Here's an easy way that you pull it onto platform, by introducing it through a very simple email box distribution.
On the backend, we've got the technical problem is solvable. How do you do that? How do you make sure that you're processing those emails? You're pulling out the document, then you're processing the document, you're extracting the information within the document, and then you're normalizing in the way that we talked about before. So we definitely think a lot about it because we want to make sure that there is just a wild value differential for both carriers and brokers.
Turner Novak:
Wild value to use Threeflow.
Ryan Sachtjen:
It's better, right? It's just like they get a better outcome for a whole host of reasons if things are happening on platform versus not. But it's an analog industry, that is how it's operated for a long time, and so sometimes if we enter a new market where we historically didn't have a ton of penetration, there's an education change curve that you've got to take that market through to show, "Hey, this is actually how it's better." And you're going to have the natural motions of a change curve that are going to take place even in that market that we have to make sure that we're mindful of.
Turner Novak:
So it sounds like the benefit for brokers is the 50-hour a week process that we talked about for renewal, automate it all. And maybe I'm exaggerating this a little bit, but press a button, you get all the quotes. It's something you can present to your client instantly or within a couple of minutes, or maybe it's a couple of days later because you have to wait for replies, but cut 50 hours down to we'll say five minutes? What's the cut on time saved?
Ryan Sachtjen:
It probably goes from 50 down to you're doing the five hours, but it's the analysis hours, right?
Turner Novak:
Okay. So you're just looking at all the quotes and looking at what the coverage could look like and maybe any recommendations to your client, stuff like that.
Ryan Sachtjen:
That's right.
Turner Novak:
Okay.
Ryan Sachtjen:
That's right. You're developing your recommendations, effectively.
Turner Novak:
And then the benefit to the carriers, is this more broker discovery? There's more brokers you can distribute through if you come on?
Ryan Sachtjen:
I think there is an element to that. So there's a carrot of new growth. I think there's also an opportunity for the industry, especially on the carrier side, has had a connectivity and a workflow problem. And so if we think about we've got a relationship with a big insurance company where the delivery of our inbound, so broker requests this carrier to quote, we drop it programmatically into their underwriting system, and then that carrier doesn't have to spend a bunch of time in receiving an email from broker and then going through a bunch of manual motions to enter that data into their underwriting system so that they can develop a price for it, and then respond back.
So a big part of what we do is we built the connectivity so that I can deliver that inbound into your recording and rating system. You then can run that motion and then now programmatically deliver this back to the broker through our platform. And so there's a distribution element to it, there's also this operational element to it, and then there's a big part of an error removal that is really important as well. Because when you've got humans re-keying and doing all these things-
Turner Novak:
Someone might fat finger-
Ryan Sachtjen:
It happens all the time.
Turner Novak:
... that messes up the coverage in a bad way for you as a carrier.
Ryan Sachtjen:
It happens all the time. And typically as the carrier, and I knew this from my own experience, it is on you to figure out how to clean it up. And those are the out of contract claim approvals that happen that every carrier knows is a thing that takes place. And what we believe is by building the pipes into the carriers and then ultimately piping that back into the brokers, we can help remove that element and also allow for them to just focus on the bits that matter more, which is as a carrier, your job is to sell into the broker and explain to them why these products or these plan designs fit this employer better, and so go do that better. Go be more efficient on that. Improve your close ratios, spend less time on just the manufacturing in a similar way.
The other bit for both sides that's exciting is historically, when you've got an analog process, there is no data or information or analytics that shares what's happening in real time. So a big part of what we do is we organize all that information and data, and then we have two shared dashboards that carriers consume and brokers consume that talk about what's happening in the market, whether it's for me as the broker or it's for me as the carrier.
Turner Novak:
Interesting.
Ryan Sachtjen:
And organizing that data and putting it into the hands of those stakeholders is really critical because they've never had it either at that moment in time or they've never had that full picture of resolution for what's happening in market. And if you're a carrier, you've historically known opportunities that you've received. You know how many you've sold of those opportunities and some outcomes there, but what you don't have is the denominator in that. You don't have, "Well, what didn't I see and why didn't I see it? Or when I'm losing business, why am I losing business? Am I losing business for a rate differential of X or Y?" So things that we can organize for the carrier and also allow for them to manage their relationships on the broker side, and then the same in a different kind of flavor for the broker.
So that how we pull this information together, because once you automate the workstreams and bring them onto a platform system, you get that as a big unlock. And that's been exciting to see how we've continued to iterate on what that looks like in market, because if we think about what's the opportunity? It's not only looking at what has happened. It's starting to use this to build out sort the intelligence layer of our business to help brokers be more predictive in, "Well, which insurance company should I consider?" Helping carriers be more thoughtful around, "Where am I winning disproportionately in markets?" And be able to do that in faster turns. And it really opens up a new what's possible opportunity with carriers on product development, what that looks like and how they manage that over time.
Turner Novak:
So for a carrier, the insights might be that, hey, a lot of companies are now starting to buy childcare benefits or coverage. I'm not sure what the product might look like, but they might have them because they don't have anything there.
Ryan Sachtjen:
That's right.
Turner Novak:
So they don't even know it exists, and they might know that it's coming up. And then maybe for a broker, they might see like, "Oh, carriers are now starting to underwrite using social media history to underwrite the products, and this specific carrier has lower rates in this category because of this new underwriting method that they're using." Is that all true?
Ryan Sachtjen:
Yeah, I think those are examples that certainly could be. You've got a bunch of these scenarios of what would be the most helpful information that you could give to a broker at the time when they're going through this process? One of them actually could be, if you had information to know that... Let's say you got a renewal from your medical carrier, your dental carrier, and you were able to actually get a high level of confidence check that those renewals are actually still well below market in terms of the price.
Turner Novak:
Because you see everything else that's happening in the market?
Ryan Sachtjen:
Because you see what else is happening, is there the value that you may have of just actually avoiding the process altogether? Because the utility of that is, "I'm going to go check the market to see if there's maybe a better price or plan." If you know that that customer is super happy with their providers on the carrier side, there's not real motivation at the employer level to change insurance companies because there's disruption for employees and things like that that change. That's a moment where you can actually avoid the process in full altogether but still drive the outcome for the employer.
So there's these moments where thinking about how do you get more predictive in using the information really drives a lot of potential behavior change, because this is an industry where, like when I was at Sun, I think the number was they processed something like 145 to 200,000 inbound RFPs per year.
Turner Novak:
From brokers?
Ryan Sachtjen:
From brokers, and then a ton of manual costs into that, which is leading into higher expenses within their premiums, and they're closing historically at a five to 8% close ratio.
Turner Novak:
Oh, wow.
Ryan Sachtjen:
Okay. And so really low close rate, and they are spending all of this time and money to try to acquire these products. And a lot of it is just you're turning and turning and burning through these systems, and it doesn't drive a lot of value.
Turner Novak:
Yeah, I can definitely see. I guess I can see there the benefits to both sides. One of the things you mentioned was that you've learned that carrier volume is so important, so it would be like supply side volume is just so important in the marketplace. Maybe that's obvious to some people, it might not be obvious to others, but why is it so important?
Ryan Sachtjen:
What we found was when you think about trading partners together and their motivations, a key part of the supply side is obviously the understanding and anticipation of what the volume would be if they are working on in a marketplace or in a network. One of the things that we learned quite quickly was when we were first starting the business and we were still in our infancy in terms of broker demand, we had a friend who ran the sales organization for a large insurance company.
Turner Novak:
Okay.
Ryan Sachtjen:
And so, we had basically asked for a favor to get us a big meet with their senior leadership, technology leadership, et cetera. So we went to their home office and it was myself and my co-founders and we had put together this, here's what can be, I'm going to vision cast, this is where this is all going. And, much of it is the same as it is today, but it was talking about what does connectivity mean? How does that deliver value to them as the carrier? What does the analytics look like? How they can think about all of these things that help improve their business in a meaningful way. And so, we went up there and there were probably 10, 12 people in the meeting and everyone is in, their body language is good. They're leaning in, and we got them at that moment. And then at the very end, their senior, I think it was their CIO or CTO asked a very valid question, which was, "So, who are you working with on the broker side?" And at that time we had two-
Turner Novak:
Okay.
Ryan Sachtjen:
... and we're trying to sell the third.
Turner Novak:
You were trying to close them, or...?
Ryan Sachtjen:
No, no, the third broker.
Turner Novak:
Oh, the third broker, okay, yeah.
Ryan Sachtjen:
And so I'm trying to pitch them this idea of an integration project, and it was going to be a pretty significant deal. It's not trivial for this insurance company to engage. And we had them there, and then they asked the volume question. And then of course we had to share that, well, we've got two or about three, and at that time it was like 20 million of premium volumes, nothing. And, that was the moment.
Watching everyone's face change in that moment was the confirmation, at least within our space of how much volume matters. Because if that question would have been asked in that moment, back when we were starting the business and imagine that we had the network that we had today, it would've moved forward immediately in that moment as far as the integration and the way the partnership would've developed with that particular insurance company. But that was also the moment because volume matters, and matters almost exclusively where we knew that to be true.
And we've seen those moments here, especially as you're building any marketplace of your enterprise value with a value that you can deliver to customers is a lot of times really, really tightly coupled in the size of the network, size of the volume. When you look at network businesses that have gotten to a point of critical mass and they've achieved that, where now I can just drive a ton of value because I know that there's captivity on both sides.
Turner Novak:
So, did you then strategically find smaller carriers? It was your $20 billion, or $20 million, or $30 million volume was big enough for it? How did you ladder up?
Ryan Sachtjen:
Yeah. So, I think what we had to figure out was we could still cut commercial terms with that carrier. We just weren't going to be in a position to establish an integration project. We were pitching them this API integration idea.
Turner Novak:
Got it, okay.
Ryan Sachtjen:
So we had to start with the commercial terms and build up into a larger volume base as a premium for that carrier so that they could say, "Oh, this is now a $200 million premium opportunity project," versus a $20 million opportunity. So we focused really intentionally on, "Okay, we're not going to be successful in trying to pitch these larger scale integration projects right now because we don't have enough volume to matter. As we build that up, then we will, and then we will go do that." And now that same carrier, we are integrated with and we've achieved that outcome.
Turner Novak:
Okay.
Ryan Sachtjen:
And so that was a big bit of what we focused on was, what is something that you can pull forward now and doing that in a way where that was commercial terms, and we could do that pretty quickly.
Turner Novak:
Okay. And this is a little bit of a different topic, but I wanted to ask you about this. We should include it in the fundraising section. Rick told me that you fundraised without a deck. Is that true, or was that just the first round that you did?
Ryan Sachtjen:
I mean, I will say that we have never run a formal process to date. And so, have there been times that we put together a deck to outline the business? Yeah, we did. We had to do a partners meeting with Emergence and things like that-
Turner Novak:
Okay.
Ryan Sachtjen:
... but we never... In its traditional sense, I have a deck, I've got my data room and off we go. We still to this day have not, we've been fortunate enough to grow the business and had early opportunities to build relationships with investors, who then made a move to invest in ThreeFlow. And so we have avoided that process in terms of running something that's formal, and I'm going to run it for 12 weeks, and I'm going to go through and meet with everyone. And I think that's been advantageous for us in that, it ejects you out of the business for some period of time.
Turner Novak:
Yeah, it does.
Ryan Sachtjen:
And obviously, that's a reality for a lot of founders and a lot of companies. But we've been able to again, be fortunate enough to work early with Rick and Joe, an early stage sort of investors, and their relationships with downstream investors also was really helpful. And that allowed for us to start the conversations with companies before we were raising, and just share with them the business and get them introduced to the business in a way where they were comfortable in that as an opportunity. And, that then afforded us a way to then have the conversation around their participation on the cap table.
Turner Novak:
And so then, what are some of the best hires that you've made look like?
Ryan Sachtjen:
I think we were reflecting on this recently about the composition of who are the stars on the team. And I think there's this continuous pattern matching that we see, which is this combination of critical thinking and problem-solving-
Turner Novak:
Okay.
Ryan Sachtjen:
... that when we think about whether it's in the EPD org, which is our engineering and product design organization or it's our revenue org, and you look at who are the star performers, whether it's an IC, it's a line-level manager, it's a director, or it's an executive, it's those that have a world-class talent level of critical thinking and proactive problem-solving sort of behaviors and emotions. I was watching this interview with former President Obama and he had said something similar of just get stuff done.
Turner Novak:
That's great. Yeah.
Ryan Sachtjen:
And it sounds so simple, but it's so true of what you want just desperately is when someone's like, "I got it." And you have confidence that they will take it, and deliver the outcomes that you need. And it sounds like-
Turner Novak:
The most simple way of defining it, yeah.
Ryan Sachtjen:
... of course that's true, but if you're really intentional about... If I'm participating in an interview process, I spend a lot of my time trying to probe in for, tell me about more about yourself, and then giving me an opportunity to learn about times where that has shown up for them professionally. And if it's there, it jumps off the page because they've got all of these different examples of how that's pulling them into these other projects.
And you can have someone who's really good at breaking down and naming why this problem is a problem, but it has to be coupled with this mindset of moving proactively to solve a problem and not waiting to then get the permission or the direction of how to go solve that problem. Because even at our stage, we're still figuring out a bunch of stuff as we're going into new segments, and what you want disproportionately is those that can solve for problems and also this idea of hiring for slope, those that are just moving up and accelerating and growing at a disproportionately fast pace. And I'd rather have that individual who maybe doesn't have the same amount of experience, but has the demonstration of the critical thinking, problem solving, and the slope over someone that maybe has a ton of experience on this particular area.
And especially right now with the acceleration on the AI front, it's not like there's people that have all of this experience, people that are really good engineers are just figuring this out on the fly because they're interested in it. And so then that breeds their ability to understand something, and then leverage it to move even faster. Which is super exciting, I think a big unlock for those that are trying to figure out what they want to do and what gives them joy in their own career is just finding those areas of solving problems and getting stuff done is so tremendously valuable. And part of again, what we look for and part of when we look at who are the stars within our team and our org, it's that. You're like, "Oh, awesome, you just took it."
Turner Novak:
And so, with a lot of the AI stuff that you're doing, it's a lot of ingestion, and summarizing, and spitting the right information back? I guess it's a lot of those types of problems with LLMs that you're solving right now?
Ryan Sachtjen:
Yeah, it's a lot. I mean, structuring document sets is our really first core use case.
Turner Novak:
Okay.
Ryan Sachtjen:
We do that across "proposal" documents. We do that across policy documents. We're launching a medical product here soon, and that's a big part of the unlock for us too.
Turner Novak:
This is health insurance?
Ryan Sachtjen:
Health insurance-
Turner Novak:
Okay.
Ryan Sachtjen:
... with [inaudible 01:36:54]. So previously, we were supporting the self-funded medical, and we're introducing this year fully insured medical for all market segments. And one of the things that we needed to do there was we had to figure out ways to process documents at scale across something called an SBC, which is basically a review of coverage that you have on the health insurance side, as well as a proposal document. There's actually coordination between those two documents. And so for us leveraging not only the underlying foundational models that we're using, but also how we're building the vertical structures above it that allow for us to have very intentional cascading strategies around how are we breaking down the document sets so that we can actually focus the LLMs to have really high performance, because we've cleared out all of the noise based off of our knowledge.
And so, a lot of the prompts engineering that the team has done allows for us to do that, and then also introduce things like a rag strategy on how we might refer to the current plan design because we need to move motions and we need to do workflows that relies on what is the current, which of course a general foundational model is not going to have that information. And so, leveraging both allows for us to, at the end of the day, just make it helpful and easy for the user because they just want that. They just want it to work like magic.
Turner Novak:
Yeah, they probably don't care what model-
Ryan Sachtjen:
They don't care.
Turner Novak:
... you're using-
Ryan Sachtjen:
Yeah.
Turner Novak:
... or that it's even AI.
Ryan Sachtjen:
Right.
Turner Novak:
They might be scared that it's AI.
Ryan Sachtjen:
Yeah, that's right. In fact that is the thing, especially in a highly regulated space, where sometimes that actually breeds more of-
Turner Novak:
Uncertainty, yeah.
Ryan Sachtjen:
... [inaudible 01:38:38] should talk about this kind of thing. They don't care, they just want it to work. They just wanted to work in a way that they expect it.
Turner Novak:
Because, I was going to say, what's the element then of you're working at a startup. You're trying to take advantage of the latest technology, but then there's also the most incumbent probably legacy type of industry you could think of. How do you combine them both together? What are the challenges there?
Ryan Sachtjen:
I think you need to align incentives in the right way. I think what I've observed is most of the big insurance companies, the people there have a desire, they want to move faster, they want to leverage it, but they have constraints because they have big tech that's old. And it's super easy for people to say, "Oh, it's ridiculous. You've got this old tech," but they're a $4 billion business that has acquired 19 insurance companies over the last 20 years.
Turner Novak:
They might have 90 different systems all stitched together, yeah.
Ryan Sachtjen:
And so it's just such a cop out in my opinion, where people say like, "Oh, they're these old legacy incumbents, and how dare they." They're still running a $4 billion business, and so what I find of these individuals, we were having dinner with one last night, they're all in on trying to figure out how do they leverage knowing that they have this working constraint. And so a big part of the AI now, as I mentioned a bit earlier, is that you can start to think about moving on things faster if you can limit the constraint that they've historically operated in. Which is, I've got 19 systems and I have to figure it out. I know this is going to break everything and I can't do that, but if you're telling me that this new tech, because you're a new startup and you're doing something interesting, actually just helps accelerate a thing that I have an incentive to get done, they're actually quite open and progressive to that idea. It's just a matter of how do we execute on that, and move it into an actionable plan.
Turner Novak:
Do you benefit from, one of your underlying carriers has 19 different systems, you integrate with all of them and you built it so it flows into the ThreeFlow platform, pun intended, I guess? And then when you work with the new carrier that maybe has half of those similar types of systems, are you already integrated? And, that it makes it easier for them to start using you because you've already done the hard work of incorporating all their software, the older tech stacks?
Ryan Sachtjen:
Not really. Well, it depends on the insurance companies at times. If you look at their tech stack, there are some insurance companies where all of their tech stack, they custom-built themselves.
Turner Novak:
Really? Okay. And so each time you have a new customer, the ThreeFlow team might have to build some stuff to incorporate everything?
Ryan Sachtjen:
Yeah.
Turner Novak:
Okay.
Ryan Sachtjen:
So a big part of one thing that we did was a lot of insurance companies, as crazy as it sounds, they do not have a external API for quoting and rating. So, it doesn't-
Turner Novak:
Okay. So, you build that for them basically every time?
Ryan Sachtjen:
And so, one of the things that we did the first time was we built into them, and then they were co-developing them at the same time and it took forever.
Turner Novak:
Okay.
Ryan Sachtjen:
And so we said, "Well, let's not do that again. Let's actually flip it, where I know you don't have one." And so we can actually help you move faster if we build the API and take a point of view on the specs and the design of it, and then allow for that to be what you built too. That unlocks two things, one, pace of the integration between us and that one carrier. But, it also allows for us to be concurrent in a number of projects that we can do at the same time. So it gives us more scalability because you can build to the ThreeFlow API, and I don't have any bandwidth limit on how many carriers can do that at the same concurrent time.
Turner Novak:
Because of why?
Ryan Sachtjen:
Because we've already built the specs out to it. So now, you can build into me in the same way that you could get documentation on any available external API, go get specs on a Salesforce API. And-
Turner Novak:
Okay, yeah.
Ryan Sachtjen:
... if they're not constrained on number of people that can build to that API. It's just this is live in production, you can build into it.
Turner Novak:
Okay.
Ryan Sachtjen:
And so, that was one bit that we realized pretty early because A, you've got a custom software stack and you don't have an external API. The other part that we do see at times is, there are some carriers that do use some third party systems. And so in terms of quoting and rating or policy admin systems, there is what you described this opportunity to do a one to many where then you build the infrastructure into that third party system. And then, that unlocks connectivity across a wider distribution network of carriers. And, we've done that in particular in on the cell phone and medical side. There's a couple of those third party players that we have a relationship in with those firms that then they distribute out to a bunch of carriers, so we get a one to end outcome on that.
Turner Novak:
Interesting. Okay. So it sounds like there's some things that are kind of set and forget it, you've got a good system of they can easily tie into. But then, there's also an element of there's some engineering work that's always happening of figuring out how to integrate with our custom system.
Ryan Sachtjen:
Yeah. No, there is and it is definitely part of the partnership that we have with the carriers, but there's work there.
Turner Novak:
Yeah. Well it sounds like there's some compounding advantages too as you add more carriers and build a network, but then there's also some defensibility of just not anyone can just spin up and do it.
Ryan Sachtjen:
Right.
Turner Novak:
There's still constant work that needs to be done. So, it's interesting on the spectrum. It feels like you're in an interesting spot there.
Ryan Sachtjen:
Yeah.
Turner Novak:
And-
Ryan Sachtjen:
Yeah. Yeah.
Turner Novak:
Oh.
Ryan Sachtjen:
For us, it's making sure that we've got that building, and that connectivity pipe really helps aid the defensibility of ThreeFlow. But it also accelerates the value drive to these customers, which then further extends our defensibility in the business. Because for us, ultimately the game is how do we help facilitate all of the volume? And if we can help everyone do stuff better, then you put yourself in a really strong position of someone else coming in and trying to take that position, it's going to be a lot harder.
Turner Novak:
And, the companies? You've talked a little bit about Chicago, but the company's actually based in Seattle, or you live in Seattle. What's the team office set up? Is anything remote? You're all in person?
Ryan Sachtjen:
We are remote, so we are fully distributed as a team.
Turner Novak:
Okay.
Ryan Sachtjen:
We do have an office in Chicago that the team utilizes, whether it's you live locally, there are some folks that come in and work in the office. It's also what we've defined as our summit center, which means that if you've got a team and you want to get together for a couple of days to do a whiteboarding session, you've got a dedicated space. It can flex to be large enough for a sales kickoff team, and that's worked quite well. And part of our, the arc of us adding head count to the team was really in the sort of pandemic era.
Turner Novak:
Yeah, [inaudible 01:45:45].
Ryan Sachtjen:
Just before the pandemic, we were 19 people. And so, we hired a lot with that being intentional on it. And then the balance for us is blending opportunities for people to spend time together in person, build that human relationship and connectivity, but then also be able to recruit from anywhere. And this is, obviously people have strong opinions on-
Turner Novak:
Yeah, on remote, in person, yeah.
Ryan Sachtjen:
... remote or in person. And, I think it's going to be just based on what fits best for you. And we've been successful in building a culture that has depth to it and do so in a distributed way, but it does require for you to be more intentional about it.
Turner Novak:
So any advice, or anything that you think you specifically did well to make it work? I assume your opinion is that it's working, so how did you make it work?
Ryan Sachtjen:
I think first you have to have named focus on it. So, things like we incorporate this into our strategic planning of how do we engage the team, whether it's through the week, or it's by allowing for teams to get together. And so, we're really intentional about that.
Turner Novak:
Okay.
Ryan Sachtjen:
The other way is how we incorporate the values of the business, and how that shows up in terms of the cultural element. And then how we hire, and fire, and promote based off of those values, and how that ties back into the ability for us to do that even in a remote setting.
Turner Novak:
Okay.
Ryan Sachtjen:
And so, there is no silver bullet to it. I think it is discipline and focus to make sure that it is part of how you show up, and it's making sure that you're creating dedicated time for people to have that moment that would otherwise be you and I walking to go get a sandwich. And, I ask-
Turner Novak:
Yeah, how do you do it?
Ryan Sachtjen:
So, we've done a number of things that have been successful. One that we've done is we call it lightning learnings-
Turner Novak:
Okay.
Ryan Sachtjen:
... which is something that we do on a normalized cadence. And the premise of it is, it is a topic that is non-work related.
Turner Novak:
Okay.
Ryan Sachtjen:
It's something that you are passionate about, and it is an opportunity for you to teach the team about it.
Turner Novak:
Okay.
Ryan Sachtjen:
And so, we've had a bunch of folks on our crew do everything from ultra marathon running, to cooking, to knot tying, to all the things that you would learn about someone if you were maybe strolling down the street, but giving really dedicated time for people to share something that they have passion around and then give this opportunity, where people can shut things off and have this moment. And, it's been really successful. And so we've got everyone contributes, where it's an open invite of if you want to be on the lightning learnings.
Turner Novak:
Okay.
Ryan Sachtjen:
And so part of what we try to do is during all-hands for new hires, there is elements of introduction, and we ask a little bit about them. And usually you're able to glean some elements that is a tie into, "I want to know more about that." And so you can help encourage them to say, "Hey, after all-hands, people were asking about you were a game designer in Japan for a year, and they wanted to know more about what it's like doing that in a different kind of market. Would you be open to sharing that and doing that as a lightning learning?" So, it's been a fun cycle.
Turner Novak:
Yeah, interesting. Okay. And then, I think one thing you mentioned is that you just figured things out sort of. There's not a lot of playbooks for doing some of this stuff. Like a stereotypical SaaS company, you can just go to some VC blogs and learn a bunch of things and it's al... But with this industry with insurance, there's not a whole lot out there. So, how do you figure these out? What's the general process of figuring out a playbook when they don't exist?
Ryan Sachtjen:
Yeah. I think that the way that we've always approached it is one, just a biased action and starting and trying. We think strategically on a three horizon framework, so what's impacting today, what are the opportunities that are emerging, and then where is it all in service or in effort for? And using that three horizon framework has been helpful in just knowing where you're marching towards, but then be intentional of what's the stuff that's critical right now. And when you break down the opportunities to go chase and the problems to solve, the lane is there's nothing that's magical oftentimes.
You can use and leverage frameworks in different ways to accelerate the motion, but just pushing through and getting started is a mentality. It's actually something I really appreciate about Shaheeb, he's our CTO. His bias to action is like, "I'm just going to try something," and just start, and it will be maybe 30% correct. But, I'll use that 30% to increase my velocity over time. And it's a common question that I get from people, even just friends and family of, "Did you know how to fundraise?" Did you know how to hire? We didn't know how to do any of that stuff.
And I think, you can learn a bunch of bits and pieces from different items or frameworks, but for me and for us, molding that into something that's unique for ThreeFlow and for our team was really important and at its core is just go. And if you just go, you move and iterate faster. When you sit around and pontificate about the problems and the ups and downs of it, it just slows you down. And you're just not going to know until you get something out, and I'd rather have something be moved on faster that maybe doesn't have the results we want because you just learn that much faster as a result.
Turner Novak:
Paul Graham has this saying where it's like, "Action produces information," or something like that.
Ryan Sachtjen:
Yeah, yeah.
Turner Novak:
So if you just do things, you'll learn things, and then you figure out what to do next, essentially.
Ryan Sachtjen:
Yeah, a lot of times it's often very simple in premise of just being intentional about what is it that you're trying to get done, making sure that it's really clear with communications amongst the team that's working on it of what are we trying to achieve, and then moving with intention. And I think you do those things well, and you see the outcomes that are produced.
Turner Novak:
Yeah. Well, this has been a lot of fun. Where can people follow you, find out more about you, ThreeFlow, anything you want to call out?
Ryan Sachtjen:
Yeah, check us out at threeflow.com. We've got a number of opportunities too if you want to learn more. If you're within the industry, you can find out and hit us up for a demo request to check out what we're building. Otherwise, you can find me on LinkedIn and yeah, I look forward to have everyone learn more.
Turner Novak:
Amazing. Well, yeah, this was a lot of fun. Thanks for doing it.
Ryan Sachtjen:
Thanks so much.
Stream the full episode on YouTube, Spotify, or Apple.
Find transcripts of all other episodes here.