Creating a New Product Category with Katelyn Gleason of Eligible
Katelyn Gleason (@katgleason) has been never satisfied with working for somebody else, and she's never been afraid to break into a new field and aim straight for the top. Today, she's the founder and CEO of Eligible, a rapidly-growing business in the difficult and highly-regulated healthcare and insurance industries. Learn how she used the knowledge she gained as a salesperson to develop a category-defining product, and how she goes about learning whatever is necessary for overcoming the next obstacle in her path.
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Transcript
Courtland Allen:
0h 0m 7s
Whatâs up, everybody? This is Courtland Allen from IndieHackers.com and youâre listening to the Indie Hackers Podcast. On this show I talk to the founders behind profitable internet businesses and I try to get a sense of how they got to where they are today, how they make decisions both in their personal lives and at their companies, and how the rest of us can learn from their examples to go on to build our own successful internet businesses.
Now, this show is just one part of Indie Hackers. Thereâs also a website that you can find at IndieHackers.com, where thereâs an entire community of founders and aspiring entrepreneurs helping each other get started and helping each other resolve the sort of day-to-day, practical challenges that you run into as a founder.
In addition, there are full transcripts of every podcast episode, including this one, at www.IndieHackers.com/podcast.
Today Iâm talking to Katelyn Gleason, the founder and CEO of a company called Eligible. I think Katelyn is proof that passion and grit and tenacity are really the key ingredients to being a successful entrepreneur. Paul Graham, the creator of Y Combinator, has called Katelyn his role model and for good reason, I think. Katelyn has been successful at a great many things, from acting, to sales, and now as the founder of her company, which develops APIs for medical eligibility, claims, and payments.
So Iâm super excited to have you here, Katelyn. Welcome to the show and thanks for joining.
Thank you.
Courtland Allen:
0h 1m 25s
I just spoke with Steli Efti, who was part of the same YC batch where I first met you a couple years ago â or I guess that was six years â excuse me, seven years ago now.
Al long time ago now. (Laughter.)
Courtland Allen:
0h 1m 37s
Yeah, tell me about it. But you know what? I never stopped hearing about you. Iâve continued to hear good things about you and about Eligible since you started the company right after YC.
Really? I thought Iâm quiet.
Courtland Allen:
0h 1m 51s
You know what it is? Itâs because we were Facebook friends, and so I see your posts there.
Okay, Iâm not quiet on Facebook, yeah.
Courtland Allen:
0h 1m 56s
No, you definitely talked about whatâs going on there.
I use that for marketing and for recruitment, so yeah.
Courtland Allen:
0h 2m 1s
Well, I think everything that Iâve seen and everything that youâve been doing is awesome.
Thank you.
Courtland Allen:
0h 2m 4s
But I have to admit, I know very little. Weâre going well out of my area of expertise. I know nothing about the health care space, I know nothing about insurance, I barely even go to the doctor, and so in this interview youâre going to have to do a lot of explaining.
Yeah.
Courtland Allen:
0h 2m 19s
So why donât we start with you explaining to the audience what Eligible is and how it works?
Yeah, I always like to give the quick anecdote that a lot of people can relate to. So you know when you go and get some lab work done â or you say you never go to the doctor, so maybe you canât relate to this. But essentially, most people, if they go and get a lab, theyâll kind of stop at the front desk after done with the lab, and the front desk will collect something like $20.
And then two months later, that same person winds up with this mystery bill for $100. And they kind of go, âWait, why?â And the reason thatâs happening more and more these days is because thereâs this saturation going on in the health-insurance market with more and more plans carrying not only a copay but also now a deductible and a coinsurance.
So estimations for a patientâs liability upfront are typically wrong. So most people are kind of being told, âOh, here, let me get your copayâ and never that theyâre going to get this random surprise bill. So Eligible targets that problem, and a multitude of other problems, but thatâs the biggest problem. Thatâs our area of focus today.
We work with large health care institutions to solve that. So our health care institutions tell their patients at scheduling how much theyâre going to owe upfront, they build our APIs into their software inside of their call centers or inside of their iPhone apps for a patient to schedule, and then they tell the patient, âHey, you have a deductible thatâs going to be $150 or $120.â And then the patient actually pays that. They pay what they owe for the service right after itâs done, not months later.
So yeah, they use APIs to do that, and thatâs our area of focus. So I hope that brought some clarity to what we do.
Courtland Allen:
0h 3m 59s
That makes a lot of sense, and weâre going to dig into some of the details here, because I think theyâll certainly be important to understand how you were able to start this business.
Yeah, Iâd love that actually, yeah.
Courtland Allen:
0h 4m 8s
I think most companies that are involved in sort of insurance and health care, I just assume that theyâve been around forever. Iâm like, âOkay, well, this company got in because they were part of how this insurance industry got created or theyâre part of how the health care industry got created.â But you created Eligible â when was it, 2012?
Yes, 2012. And actually, we incorporated in 2011, November 23rd, 2011. But 2012 is when we got into YC ourselves as Eligible, so thatâs really when the company started churning.
Courtland Allen:
0h 4m 35s
Yeah. So I got ask you right off the bat: Breaking into an industry like this is hard. What do you think has been the hardest part of starting a company like Eligible?
My god, thereâs so many hard parts. Do you want me to pick one?
Courtland Allen:
0h 4m 49s
Yeah, just pick a random hard one.
Oh, my god. Let me actually give you an intelligent answer, because there are so many hard parts. The biggest thing for us is the need from day one to have the infrastructure in place to be in tip-top shape from a compliance and privacy and security perspective. The vast majority of our investment over the past five years has been in automating every certification and compliance order that we could possibly get.
Our systems, our teams, our customers, everything top to bottom is ironclad when it comes to compliance, security, and privacy. And we truly have no other choice but to make that upfront investment. So the hardest part is, because of that, you just have to go slower than you would like to go. There really isnât a âmove fast and break thingsâ here. You canât break things. Itâs health care.
So I was lucky enough to have come from drchronoâs, so I think that that experience definitely made it very clear to me that I had to start from scratch there. One of the very first things that Eligible did was we â I personally at my kitchen table started digging into the HIPAA compliance spec. Itâs a 5010 spec and itâs a data spec. Itâs an electric data interchange. Itâs called X12 EDI. And that was one of the first things that I really learned. Thereâs an eligibility X12 EDI transaction, and it was the first thing I learned to really get into this.
So definitely, the hardest part is you have this enormous amount of kind of you got to pay this tax, this compliance, privacy, and security tax. And you donât get to move on and pass go until you sort of pay that tax, so thatâs definitely the hardest part.
Courtland Allen:
0h 6m 37s
Yeah. And hopefully, all of your competitors are paying the same tax that you have.
Oh, yeah, oh, yeah. And thereâs a huge moat now because of it. So now we are definitely, because of the grit and the tenacity and the just sort obsession on probably my end, this OCD, that now we definitely benefit from that same tax. I would be silly not to admit that. We definitely benefit from it.
Courtland Allen:
0h 7m 1s
Moats, I love it. Weâre going to about moats. Weâre going to talk about all sorts of strategic stuff here. Before we get into it, let me just ask, to provide some context for listeners: How successful would you say Eligible is? How big is it, how many employees it is, how much revenue do you do?
Yeah, thereâs only certain sort of factors that we share publicly, so I can tell you this. So the company is already processing on a monthly basis billions of dollars in health care expenditures that cross hands between patients, providers, and insurers, but something like close to 20 million transactions per month. So itâs really high volume.
That reaches â because some of our partners are large health care systems and other ones are large vendors that service hundreds of large health care systems. I think the last time we checked, we touched over 100,000 providers on a daily basis.
Courtland Allen:
0h 7m 47s
Thatâs quite a lot.
Yeah, the reach is really large at this point. Some of our customers are huge vendors that have actually â you would probably consider them incumbents that have been around for a very long time.
Courtland Allen:
0h 7m 57s
All right, so letâs get into this. First I want to know how you know all this stuff. No one comes out of the womb like, âAll right, weâre going to help reduce deductibles and build APIs to help doctors andâ --
Are you saying my theater degree didnât make me qualified? What are you saying? (Laughter.)
Courtland Allen:
0h 8m 13s
Well, letâs start there. How do you go from being in theater to deciding that you want to start a company and that you want to start a company in the health care space?
So I kind of came up very, I guess, lower middle class. And I donât say that to my family because theyâll get offended, but definitely middle class. My parents are incredible at love and affection and all that stuff. And I was really fortunate that way, and they always had thought I could sort of take over the world, so really fortunate that way. But I have a lot of grit in me built in since the time Iâm 13. I literally started working when I was 13, and I just have wild pragmatic optimism. So Iâm very practical, but Iâm also wildly optimistic.
And I guess the original question was, âHow did you learn all this?â Well, I fucking taught it to myself. (Laughter.) I donât know what else to say. Literally, I talked to everyone I could possibly talk to. I read everything I could possibly read. I tested, I built, I took this job at drchrono. I did everything I had to do â the work, the grit, the real work. Thereâs nothing you can fake here. I did the real work to get here, so thatâs how I learned.
Courtland Allen:
0h 9m 22s
I like your description of your childhood because itâs so similar to mine. So lower middle class, very loving, supportive, you-can-do-anything-you-want parents. And I think whatâs funny about growing up that way, at least for me, is I kind of never realized that not everybodyâs childhood was like that until I became an adult. And I was like, âOh, some people had very unhappy or difficult or unsupportive childhoods, and Iâm pretty lucky to have had what I had.â And I think it certainly gives you this degree of confidence that you can do things.
And thereâs so many clichĂ©s about, âOkay, just believe in yourself and you can do it.â
No, no â yeah --
Courtland Allen:
0h 9m 56s
And really corny, but thereâs a lot of truth there.
Yeah. My dadâs like Walt Disney. Iâm not kidding. He is just like, âMake a wish.â And I think I just had to teach myself was, âYeah, you make that wish, but you go work your ass off for that wish.â And I had some really key people in my life even during that age all the way up until now that are still in my life that â just friends and colleagues and stuff that really made me realize, âOh, no, itâs great to make that wish and itâs important, but youâve got to work for that wish too.â
Once those two things click together, thatâs when it really happened for me.
Courtland Allen:
0h 10m 28s
So when was the first time that you decided that the work you wanted to do might involve being an entrepreneur?
Interesting, okay. So that really goes far back. So I was around 17 or 18 years old. And first of all, I started working at 13. I was something called a pastry girl (ph) at a restaurant. And then I came up through that restaurant and then I ended up sort of running the restaurant by the time I was 16 or 17, literally running it, and working full time. And then I actually got a job at retail and I worked there for another two or three years, and again, working full time. So Iâve been working full time, I think, since Iâm 17, right around 16, 17, so 40 hours a week.
Courtland Allen:
0h 11m 9s
Can I ask why? Were you just trying to support yourself or was it just ambition?
I wanted that shirt, I had to go buy that shirt, and I wanted that (inaudible). You know what I mean? It was like, âYou want to go do that, you want a car, you want to drive it, you want to put gas in it?â I paid everything; insurance, the monthly bill, whatever. So it was all about me wanting things, basically.
So yeah, thatâs how I â and then when I got into business, it was because I was kind of â I felt like I was working a lot, but I knew I could make more money. That was literally what it was. I was like, âOkay.â
So I started investigating different paths. And my friend had a sales job. And sheâs like, âOh, itâs so great. I make this commission.â And I was like, âWait, whatâs commission?â And sheâs like, âOh, you actually get paid every sale you make.â Iâm like, âOh, I will own that. Where do I go, where do I go, where do I go?â And Iâm dead serious. And I was just (inaudible).
So Iâm going to school for acting, whatever. I was going to Stony Brook University. And I get this sales job, and I donât even think the company is still in existence. It was a business-to-business directory. Now, this was 2003, so this was before LinkedIn, but they could have been LinkedIn. Thatâs what they were actually building. And looking back, Iâm like, âThat was pretty useful.â It wasnât a great product, but it connected people. It totally could have been something really great.
And here I am; I just start selling. And I start engaging professionals and I start connecting them with other professionals I know, and it was so natural. I did not have to â all I had to do â they taught me a script, and Iâm already going to acting school. And Iâm like, âI know how to (inaudible) a script, I know how to do a pitch, and I know how toâ â they would teach you objections and rebuttals.
And all of a sudden, by 20 Iâm running that â I built a sales team for them and Iâm running the sales team and thereâs 40 of them. And Iâm making them a lot of money and Iâm going to school acting the whole time. So there was just this whole â I donât know. It just became really natural to me.
The reason I left that company was because â and this actually shaped the rest of my life â was it pissed me off that they didnât care about the product. I saw the opportunity. I saw what it was capable of, and they just wouldnât fix the product. They wouldnât improve the product. They were totally fine with it just sort of being what it was.
Courtland Allen:
0h 13m 24s
Interesting.
Yeah. So for me, I didnât want to just sell and not be proud of what I was selling. I knew I could sell.
Courtland Allen:
0h 13m 31s
I think thereâs something about being in sales too where youâre constantly dealing with customersâ objections and their complaints, where you become acutely aware of the problems in any product. And it must be infuriating when theyâre not fixed because it makes your job harder.
So much harder, yes. And for me, Iâm obsessed with empathy and I feel for people. So I was just feeling for these people. Iâm like, âBut itâs broken. We need to fix it (inaudible).â That sort of (inaudible).
So existential crisis. I was like, âIâm never doing business again. I donât care.â My mom and dad were like, âYouâre making more than daddy right now.â Iâm like, âI donât care. I donât care about money. Iâm an actor. Iâm going to go waitress.â And I actually did. I didnât care. I didnât want to be in that corporate world. I felt like that was everything. Everyone was just a person who was going to sell and not build something great.
Courtland Allen:
0h 14m 20s
So besides some of the negative things about not caring about their product, were there any things that you learned, any skills that you picked up doing sales that have sort of carried forward to this day?
Definitely, yeah. I definitely know how to run sales. Thatâs what I do.
Courtland Allen:
0h 14m 35s
It sounds like any business that you become a part of, you end up running it.
Yeah.
Courtland Allen:
0h 14m 39s
From restaurant to sales to whatever.
Restaurant, retail, then sales, and then Eligible, yeah.
Courtland Allen:
0h 14m 47s
Why is that? How does that happen exactly?
I donât know. Itâs a very gregarious thing. Itâs a very loving-life sort of thing. Iâm just excited by challenges. I think Iâm also fortunate. I like to work. I actually prefer to work. If I go on vacation, Iâm still working. Itâs just probably in a creative setting. Iâm doing something creative. I donât know why that is. I would attribute it to hard work. I donât know, I donât know.
Courtland Allen:
0h 15m 17s
Yeah, thatâs fascinating.
Thatâs a really tough one. I donât know. (Laughter.)
Courtland Allen:
0h 15m 22s
Well, maybe weâll figure it out in the course of this conversation.
Okay, you tell me.
Courtland Allen:
0h 15m 24s
Or at the very least, we can just make something up.
You tell me.
Courtland Allen:
0h 15m 29s
All right. Well, letâs talk about how you eventually got into the health care space. Youâve mentioned drchrono. I know what drchrono is, but people listening have probably never heard of drchrono. How did you get involved with drchrono and what was it?
Okay. So where we left off was: Here I am, this artist. Iâm like, âIâm going to just work at nighttime. Iâm going to go to every library in New York City during the day and try and audition.â This was my premise.
And then all of a sudden, I got really sick of working in restaurants because they have a different lifestyle. I donât drink, I donât do drugs, I donât smoke. I wake up at 5:00 a.m. and I start going at 5:00 a.m. It didnât fit the restaurant lifestyle and it got me actually really depressed. And I was 22, 23. I canât remember; something around there. And just going through that existential crisis of, âOh, my god, I got to get out of here.â
And I started reading all really old, historic, what I call âromanticâ â Iâd find Benjamin Franklin books. All old (inaudible) sensual and romantic. Iâm not even kidding. I love old history.
Courtland Allen:
0h 16m 34s
Did you just call Benjamin Franklin âromantic?â
Yes. I just --
Courtland Allen:
0h 16m 37s
I donât know if anyoneâs ever said that.
I know. Itâs just very romantic to me. I donât know what to say. It just became very romantic to me. And I read Ben Franklin and I just read about Virginia Woolf, and I even read Ayn Rand and I just read every â I donât know. I just read every book. I just read everything, and I just became a voracious reader.
And I did that for a couple years and I kind of stuck with this. And then, eventually, I was looking for a sales job because I kind of gave up. Iâm like, âOkay, Iâll go back to this because I need to make money. I got to pay the rent. So Iâll go back to the corporate world on one condition: I will sell if I can somehow impact the product, if I can somehow be involved in the product.â
So I went on Craigslist in New York City and found drchrono and I went to the first interview. And I walked into a co-working space. Now, I didnât even know startups existed, so I had no idea what a â I thought the whole floor was Mike and Danâs from drchrono. I was like, âOh, cool. This is great. Wow.â And I didnât â I left and I still thought that. I didnât know.
But they explained to me, âWeâre coming out with this new product.â (Inaudible) was a new product line. âWeâre coming out with new product.â And it was super exciting and it was awesome. It was like, âOh, my god. This is exactly what Iâm looking for. Iâll help them with something theyâre not good at.â They didnât like to sell. âAnd I willâ â they had invested a lot of their own money, they werenât able to raise capital. This is 2010 in New York City, so it was a little different time. And it just seemed really perfect to me.
And when I tell you I dropped everything and I just became their apprentice, I guess. Is that the word? I just dropped everything. I literally just focused 90-hour weeks with them. I did everything I could to get that product live with them, to sell (inaudible) for them, so much so that when Mike and Dan got into YC, they brought me with them.
So there I was in health care. And then all of a sudden, I was in engineering and startup land and designed their iPad, their EMR iPad with their designer. I was very much engaged in the product lifecycle. So all of a sudden, it just landed right from the romantic Ben Franklin book. (Laughter.)
Courtland Allen:
0h 18m 52s
I remember seeing you and the drchrono founders in Y Combinator. I donât think it ever even occurred to me that you werenât a cofounder.
I think everyone thought that. I think Iâm the only employee ever to go through YC.
Courtland Allen:
0h 19m 3s
Yeah. You just did the whole thing with them.
Yeah.
Courtland Allen:
0h 19m 6s
What did you get out of that process, if anything?
PG (ph) and Jessica were amazing with me. And I guess maybe I â I donât know if I ruined that or â I donât know. They never (inaudible). Iâm not sure. But I was in it myself the next year and they (inaudible). So no, but I donât know why that happened. It was the most life-changing experience of my life. I want to cry.
(Inaudible) here I was in New York, and obviously, Iâm searching. Obviously, itâs existential. Iâm searching. I want this world where people create their own reality, and Iâm so willing to do the work to be a part of it, but I wanted it really bad. And all of a sudden, there it is. Itâs so normal in YC, Mountain View to build your own company. It is so normal for me to live in a hallway, basically, with my computer and my laptop or whatever and be coding and learning how to code. Thatâs normal there.
Courtland Allen:
0h 20m 0s
Yeah.
And this totally changed my life. It totally changed my life. Everything about it changed my life. I remember the first time that PG was on office hours. He does walks, and we were on a walk. And it was me, Mike, Dan, and PG, and Iâm in the back. I stayed back because itâs not my company, so Iâm in the back. And all of a sudden, he started talking about revenue and Iâm like, âYeah, Iâm growing it 10% week over week.â And he was like, âWho is this?â (Laughter.)
Courtland Allen:
0h 20m 26s
âCome to the front.â
âWhat? No, no, (inaudible).â Heâs like, âShe doesnât fit. You guys donât fit. What is theâ â (laughter). âI donât know. Iâm trying to help.â But it was instant. I knew at that moment, I was like, âOh, (inaudible). Okay, cool.â
Courtland Allen:
0h 20m 40s
What made you decide to start your own company rather than continue with drchrono?
Oh. First of all, I will say Mike made the best decision. Heâs the CEO. And now Iâm running my own company. The day I told Mike I was leaving, he walked me home to my apartment. We did actually all live together. Weâre super close. Weâre really good friends, all of us, super close, great people.
And he walked me home that night and he said to me â he was like, âDudeâ â heâs like, âWait until you have a child of your own.â And I was like, âHuh?â Heâs like, âJust wait.â Heâs like, âThis is going to happen to you.â Because of course, as an employee of a startup, you know everything. You know how that CEO should be doing their job, you know how that product should be run, you know everything. Of course, I had CEO syndrome. I was thinking I knew everything. I knew nothing. And he called it. Heâs like, âYou have no idea how hard this is or how hard itâs been,â and he was right.
So why did I leave? Partially, because Iâm just insatiable. I couldnât ever be satisfied. I didnât know that at the time. I thought I left because of them or they werenât giving me the opportunity, but it was all me. I was ready to move on. I was ready to go start my own. So great for Mike for being like, âNo, go start your own. Youâre not going to run my company. Go start your own.â (Laughter.)
And really (inaudible) respect tremendously and have the upmost respect for.
Courtland Allen:
0h 22m 8s
So maybe thatâs the answer to why you end up running every business that you join. Youâre insatiable and you need more, more, more. And if you canât run it, then youâre going to start your own.
And thatâs great, and thatâs why I canât give up on Eligible ever. There were times â itâs been almost seven years. There have been really dark, dark, dark times over and over and over again. And I just canât give up. (Inaudible.)
One other thing though. They did have an annoying thing. They wouldnât make me the VP of sales because I didnât go to Stanford or MIT.
Courtland Allen:
0h 22m 37s
Really?
And now I look back and Iâm like, âDudes, was it because I was a girl? You know what I mean? I donât know. So anyway, so thereâs two sides to every story. So 90% of me is like, âYou know what? Good for them. They did the right thing.â And at the same time Iâm like, âDude, I worked really hard. I built all this out for you. All I wanted wasâ â it sounds stupid now, but all I wanted was that recognition or that credibility of, âHey, sheâs done thisâ and kind of have that in my wheelhouse of saying, âHey, I did that.â
Courtland Allen:
0h 23m 6s
And in a lot of ways, thatâs the most important thing. Once youâve gotten your basic needs taken care of, having more money is great, obviously. But if nobody acknowledges you or recognizes you, then it feels pretty empty.
Itâs the only thing for me. I donât care about money. I didnât grow up with anything, so to me Iâm like, âWhatever. I can live. I donât care,â yeah.
Courtland Allen:
0h 23m 21s
So letâs talk about ideas. A lot of people listening in are trying to start their first company, and one of the biggest hurdles that you need to get over early on at least is to decide what it is that youâre going to work on, to come up with an idea that at least sounds good in theory. How did you decide what you wanted to work on once you left drchrono?
So I was just talking to my boyfriend about this, so itâs really interesting. So I think I was very much lucky to have been poor or whatever, to not have any sort of fallback. I had no fallback whatsoever.
So I remember when I first left drchrono â and I just told you the story and I was just gung-ho and, âOkay, Iâm going to start something.â And I definitely had a lot of different ideas. There was no question. I had a lot of different ideas. And I almost wanted to shy away from health care just because Iâd just gotten out of it. And Iâm like, âGod, do I really want to pay that tax? Do I really want to go through all the privacy compliance and security that I know Iâm going to need to? Do I have the wherewithal, the engineering, the expertise?â And then for whatever reason, I decided, âOkay, this is the right move.â
But I think timing was also part of it. I think that there was an inflection point where I only had $5,000 I the bank when I left drchrono, and I only had 25k in credit card line that I could use before I would have nothing. So I only had that. And by the way, I paid it off with no interest before the interest kicked in. I got investors by that time.
So from my perspective, the time crunch, the urgency is what made me. I donât have a skill like you. Iâm not an engineer by trade. Sure, I can build shit, but I canât go and be hired as an engineer, so I have no fallback.
So I think that urgency of, âI must make something work right now, and I know that this is a huge market, and I know that I can sell this.â So there was that. And I think thatâs why I ended up going that way.
Courtland Allen:
0h 25m 23s
What did the idea for Eligible look like at the beginning when you first created it, and how did the things you learned at drchrono and working in the health care industry inform you that this would be a good idea to work on?
So it was very clear to me â two things. First thing, trend in the industry was very clear to me. All of a sudden, this new saturation of deductible plans was coming up. Thatâs number one. It was happening. There was a shift. And what this means is that the insurance company is paying less and the patient is paying more.
But the second thing I realized is that thereâs no technology for patients paying providers, none. Even drchrono, all these guys, they all focus on insurance paying providers.
So this shift in the industry, I knew, was going to really mess things up for people and they were going to need technology to solve that problem. That was crystal clear to me day one, crystal clear.
So you asked me kind of how did I see it, so what did I learn from drchrono, how did I --
Courtland Allen:
0h 26m 30s
Yeah. How were you aware of these trends? Was it just through doing sales and getting exposure to be able to talk directly to customers?
I think this is my only real â if I were to say I have a skill, I definitely have an ability to listen to users very closely, and then factor out 10 years from now what theyâre going to need. And if you think about it, itâs seven years from now. So I definitely â and itâs just from listening and empathy, I think. Iâm not sure.
But I was hearing, crystal clear to me, âEverything is moving to the patient.â And I was hearing, crystal clear to me, that there was nothing to support it, nothing. And if you talk to any provider, any billing system, any backend system, none of them were actually saying this. You want to know why? Because they didnât understand it. They didnât know.
Itâs one of those things that itâs kind of like Stockholm syndrome. Itâs so chaotic, thereâs so much going on that people just kind of say, âItâs this hard. Itâs got to be this way.â But I was able to kind of identity, âNo, thereâs a problem. We just need to fix it. We just need better technology on the patient-billing side and that will fix it.â
So that was clear to me. And originally, I think your question was, âWell, what did you originally plan out to build?â So in my perspective, the way that this kind of worked for me is that I wanted â I have had a passion to solve this for the consumer not in the way most people think. My passion is that, my premise is that people forego having medical treatment because they are worried about what they might owe.
Courtland Allen:
0h 28m 7s
Definitely.
So they will â right? So they will not go and get that preventative care. They wonât get that lab that will them if they have cancer. They wonât go get that colonoscopy if that will them that they have cancer because theyâre worried that theyâre going to get this random bill that theyâre not prepared for. And anybody â it doesnât matter if you know health care or not â that you state that to says, âYep. I didnât go and get this spot on my skin looked atâ or âI didnât go and get my diabetes pump.â
And my dad was actually foregoing getting his diabetes pump and getting skinner and skinner and skinner. I was like, âWhatâs the deal?â Heâs like, âWell, what if itâs going to be really expensive?â Iâm like, âGet your freaking pump.â It was like a $20 copay (inaudible).
But this is my premise. So Iâve always been very passionate about the advocacy route of, âNo, I want to be able to get these tests. I want to know how much itâs going to cost.â I know everybody wants to know that, so that was clear to me.
So when I first started Eligible, it was, âOkay, maybe Iâll just go completely consumer. Maybe I will kind of try and build this system for the consumer to check their deductible, check their coinsurance, check their copays, and be able to just see that.â And thatâs kind of where I started.
And I needed to work with providers and work with insurers to do that. So immediately, I kind of went and found â I literally went door to door. I found a provider in Mountain View who was willing to work with me, which was super useful. I told him the premise, I told him the story, I went and built a partnership with â kind of like Stripe did in the very beginning. I built a small partnership with an aggregator who kind of already had insurance connections.
And I was like, âOkay, I have insurance connections, I have this provider to work with.â I went and found one of my â cofounders back then. Heâs no longer with us. I gave him stock, but heâs no longer with us. But I found him on Stack Overflow. I was asking everyone on Stack Overflow about EDI questions, insurance EDI questions, and API questions.
He was answering them all, so I was like, âDude, we should do this. We can do this. I can get us into YC, I think, if we can just build something. I really, really think we can.â So he joined me and we did do that.
Eventually, that all came together and it ended up being an iPhone app. And when I got into YC, and with the providerâs permission â the provider I was working with in Mountain View â when I got into YC, we were checking with (inaudible) his benefits. And he had just gotten an MRI and he had just gotten a huge bill for because he had a high freaking deducible. This is 2012. No one knew what a deductible was.
So he has his bill and heâs like, âI just got a bill for this. We had this bad Blue Shield of California plan and I just got a bill for this. This is right.â And I was like, âI know.â And he did it right there in real time on the iPhone, right there.
Courtland Allen:
0h 30m 58s
In the middle of your interview?
In the middle of our â yeah, the interview. No, it actually wasnât the interview. It was a precursor to the interview. It was --
Courtland Allen:
0h 31m 4s
Oh, okay, the pre-interview.
Yeah, yeah, yeah, exactly. The app told him exactly where he was at in his deductible.
Courtland Allen:
0h 31m 11s
Oh, okay, very cool. So I got to ask you all sorts of questions about the super-early phase, because I think thatâs where a lot of businesses die who donât get the point where theyâve got an app developed or where theyâre able to get somebody to invest or theyâve got --
On their credit card, on their (inaudible), 100% on my credit card.
Courtland Allen:
0h 31m 27s
Yeah, so youâre funding this all on your own on your credit card. How much runway did you have?
Yeah, so I â itâs an estimate and I hope Iâm not completely wrong here. But I left drchrono with 5k in the bank, and then it was about 25k in credit card line that I had. And it was because I had perfect credit and Iâd been building it since I was a kid. So I could take out this credit and not pay any interest, and I had something like 10 months to pay it off before interest could kick in.
So that was my runway. That was my investment in myself, and it was bad. It was really, really dark times in a way because it was scary. If I failed, I would have been so screwed.
Courtland Allen:
0h 32m 6s
Yeah, for sure. Did you ever stop and think, âMaybe this is too risky for me. And I should just get a job and maybe build this business on the sideâ?
Yeah, I did that at drchrono. It didnât work out. (Laughter.) No, Iâm kidding. No, I really didnât because I didnât do anything on the side with drchrono. I was completely focused on them.
But it just doesnât work. For me it was so extreme. So I had every family member â my fiancĂ© at the time â we were together for 15 years, and he was like, âYouâre insane.â Heâs like, âThis is insane. You are crazy. Youâre walking away from drchrono. You just killed yourself for this company and theyâre doing well and youâre finally making a salary.â Because, mind you, when I was at drchrono, I was a contract sales rep. I only (inaudible) on commission. So I finally had this salary and Iâm leaving and heâs like, âYouâre insane.â
And here I am in this Mountain View â I donât know if youâve ever been to Red Rock in Mountain View.
Courtland Allen:
0h 33m 8s
No, I never went.
Youâve been to YC and (inaudible) --
Courtland Allen:
0h 33m 11s
I missed out on a lot of stuff back then. I was pretty much heads down writing code the entire time.
Trust me, I get that, but thatâs all I do. But every morning, Iâd get my latte to code. Fuck that (inaudible). (Laughter.) No, Iâm kidding.
But so hereâs the deal. My apartment was next to Red Rock. And literally, every morning I would wake up and go get my latte and walk back to the apartment or walk to the Mountain View library and sit in the grass with my latte and my computer and build shit. That was it. Thatâs what I did. So people really thought I was crazy, so it was crazy for sure. And that was my runway, my (inaudible).
Courtland Allen:
0h 33m 47s
So I asked some people on the Indie Hackers forum to submit questions, and you got a lot of them. So Iâm not going to be able to read all of them, but I will read a few.
Adith Victor asks: âKatelyn, as somebody who started off as a non-technical founder, how were you able to communicate your vision and your requirements for the product to the early developers that you worked with?â
I now have the proper words to articulate how I did this. So I didnât in the past. So what I didnât realize is that what I was focused on, and which is actually really good, is I always focus on user requirements and the goals. So what are the product goals? I refer to it: âWhatâs the x, whatâs the x? Not the y, not the implementation approach, not how weâre going to go about doing it. What are we trying to do, the what, whatâs the x?â
So I would always in detail focus on the x and give user stories. Now, I didnât know at the time that they were called âuser storiesâ or âuser requirementsâ or âproduct goals.â I had no idea, but thatâs what I would always focus on. And then if there were a question on the approach that we would take â and this came â I mean, when I tell you I know how this entire system works from our S3 logging to RabbitMQ to â there is nothing in our infrastructure that I donât have some sort of understanding about. In the very beginning, I worked with my engineering teams to literally set up our VPN. So there is nothing I donât know.
But it always began with the goal of the product. It always began with the goal of the user. And with that, building out very small delivery plans off of really clear implementation decisions that weâd made, thatâs intuitively what we ended up doing. I just didnât know that thatâs what those things were called.
Courtland Allen:
0h 35m 32s
Thatâs awesome. I talk to a lot of people who have a background in marketing, a lot of people, obviously, who are developers and started companies. But I think coming from a sales background and also combining that with being a genuinely empathetic person is such an advantage, because then you automatically do the things that you need to do. You care about the user stories and you care about making sure that youâre actually solving a problem for them, and the implementation is secondary to that.
Yeah, yeah. You either love it or hate it. And a lot of my engineers have really just adored that about us, because they say itâs very different than most companies where itâs a big âwhyâ discussion usually, itâs a big implementation discussion, and the x and the what and the user can sometimes really get lost.
Courtland Allen:
0h 36m 17s
So letâs talk about your first customer. How did you convince a provider to sign up, and what did you have at that point in time? And I realize Iâm asking you to remember ancient history here, so --
No, it is a really long time ago. So one of the first ways that we really started getting customers â and they were paying us a few thousand dollars a month because we had already built something useful. Building this iPhone app with this aggregator made us realize to get rid of the aggregator. So we retired the iPhone app, so we retired that product, we retired the aggregator. We were like, âWeâre building our own connections.â Like, âNo, no, no.â
So thatâs when we really started to be able to bring in customers. I think another thing that always shocks people is we got so many customers just from posting on Hacker News, I guess because weâre an API, so it was an integration. We had really simplified â building this iPhone app with this aggregator made us realize, âScrew this old format. We can build an API on top of it.â
And I know itâs going to sound so lame, but I remember when I had the idea because I was at the computer history museum in Mountain View. And there is a walkway over â I have no idea why I remember this, but I walked everywhere at that time. And I was walking home from it, and I just remember having this idea. The concept became really clear to me that, âHey, we donât have to buy this old infrastructure to parse this old format. An API can do this. Look at Twilio. Theyâre doing this.â What is, OFX (ph)? âWe can do this. We can just have them send us parameters, and we can give them back JSON.â
And at that time, I didnât even know what JSON was. I was like, âWeâll give them back a string of variables.â âWhat?â And Iâm on Stack Overflow like, âIs this a good idea?â And everyoneâs like, âWhy donât you use JSON?â And I was like, âJSON, JSON.â I know everybodyâs going to be like, âSheâs so lame,â but itâs actually what happened. It is what it is. Seven years ago; I donât have to be embarrassed.
So for us, putting that together and putting the JSON together, that actually created super â that created value. Thatâs an invention in the health care industry that I never get credit for, by the way. But thatâs an invention in the health care industry, so much that Iâve had incumbents that run IT teams for huge billion-dollar companies say, âYou know what? Your YouTube videos from 2012 saved us like $10 million last year.â Iâm like, âWhat?â Like, âOh, yeah, we redid our whole infrastructure around the idea of having an API instead of this sterling commerce EDI parser.â
Courtland Allen:
0h 38m 36s
You should be charging for these YouTube videos.
I know. Iâm like, âOh, okay.â Yeah, so that in itself was enough of an innovation and it created enough value to generate cash flow. We werenât profitable yet at that time, but it was enough to have early customers who were willing to pay us. It cut down our integration time instantly, so it was enough. And by that time, we had a solid, small team and we â yeah, it worked really well for us.
Courtland Allen:
0h 39m 3s
So you figured out a lot of things right in the early days, and I think that probably contributed to how fast and how quickly you were able grow.
This question comes from a member on the forum. Louis Nicholls asks, âWhat are some of the biggest mistakes that you made in the first few months in your company?â And to that Iâll add: If you could go back and sort of redo this early history, what would you change?
I donât know if I would change anything from the early history, because when youâre early itâs only you that youâre hurting. I would change stuff from later history when I had a bunch of employees and I wasnât fast enough to catch up to everything I had to learn. And because of that, I hurt people.
And thatâs actually what hurts me the most, because I was trying to figure out now how to run this larger corporation. Weâre a global corporation. We have people everywhere. I have designers in Europe, I have people in Canada, I have people in India, I have people in California, I have people everywhere.
It was really hard for me to keep up with that as fast. And I think the way that I dealt with it was sometimes by just being super excited and coming off really aggressive and scaring people. So thatâs actually my â if someone ever asked me, âWhere did you screw up or what do you feel bad about,â I feel really â I just wish I would have done all of this more gracefully.
Courtland Allen:
0h 40m 21s
Letâs talk about those changes because your company, I assume, like every company has changed and evolved and grown a lot as youâve hired, brought on new people. And Iâm sure the ways youâve had to hire have changed and the ways that youâve had to find customers have changed.
What are some of the biggest milestones between you first getting into YC and you actually having dozens of employees and then servicing dozens of customers?
The biggest thing for me, as I said, we are in a business where we are creating a category, and this category has never existed. And very few employees and investors have the patience and the wherewithal it takes to create a new category. Itâs a lot of uncertainty and there are a lot of unknowns.
And when we walk into an institution and we have a potential ACV, which is your annual contract value, of a couple million dollars with that institution, the sales cycle becomes a bit â of really deconstructing their departments and their interworkings, and are we working with their IT team? Is that whoâs going to be buying us, or is their finance team? Itâs really unknown because youâre creating a category.
And while I was doing that, I had to also sort of be creating my own corporation. So there is just â thatâs the biggest milestone, and it all kind of came together about two years ago in 2016 because we had grown the company 8.4x. We had brought it to profitability and we were profitable for a whole year, and then we raised significant capital.
So doing that, all of a sudden the stakes are so much higher. All of a sudden, youâre now not the underdog. You need to perform at this high-growth density. And you hire all these people at the same time, incredibly intelligent people, and then youâre fighting to keep up with that.
And ultimately, what happened for us in the first year, we had spent so much time on compliance and everything, we very much felt that we landed in the chasm. We very much felt for the year that there was some stagnation. We had grown so much and we were profitable. And that year when you first hire everyone, itâs, âOh, my god. Is everything all right? What am I doing wrong?â
So that was the biggest inflection point in what would I definitely change there, is I just would have handled it more gracefully. I got us out of it, and now weâre all right. But I did it like a warrior where itâs like, âChill out, chill out.â I got us out of it, but it was very aggressive.
Courtland Allen:
0h 42m 54s
Give me an example of some of this aggression.
Okay. (Laughter.) And itâs only because â okay, so hereâs my philosophy, and Iâve now since changed it. My big thing is: If I understand concepts, I donât need to know the words. So if youâve ever heard Richard Feynman, he talks about this a lot like, âWho cares what that bird is called. I can tell you everything about that bird. If you know the name of the bird and you know nothing else, you know nothing about the bird.â
Courtland Allen:
0h 43m 20s
Whereas a lot of times, people who are sort of bullshitting are the exact opposite. They donât know the concept, but they will just say the word --
(Claps.) Bam.
Courtland Allen:
0h 43m 27s
-- and then pretend like that means they understand.
Yeah, because I know it on such a deep level, user requirements and these vision product goals. And it really screwed me up because I felt like I was surrounded by people who just knew the names, and somehow that made them be smarter than me. Maybe itâs an insecurity or something. I really struggled there. And the only way I can get through that is to kind of just fight through like, âWhat is it?â
And then finally, it came to me: âOh, I got to know how to communicate with my team.â And ultimately, thatâs my fault and something I wish I would have learned faster is this nomenclature that you guys all learn when you go to engineering school. I just knew it by learning it intuitively, instinctually, by doing it. And I didnât have the vocab, and that was actually â when I fixed that, thatâs when everything was fine. But to find the fixing, I kind of was just freaking out. Maybe itâs a (inaudible). I donât know.
Courtland Allen:
0h 44m 22s
No, thatâs fascinating. Itâs really interesting because you said at one point youâre trying to figure out how to make your business work and how to explain to customers what youâre doing and solve the problems in the industry. But at the same time, your company is growing and so you have these dual challenges that youâre trying to juggle. And is it really possible to do both of those things perfectly? Itâs challenging to even do one.
Yeah. I just wish I could have done it more gracefully.
Courtland Allen:
0h 44m 44s
Yeah. But I want to talk more about this category-creation thing because I think itâs a fascinating topic. Because I think a lot of people donât really, especially first-time founders donât talk about it. They donât understand the difference between creating a category and entering an existing category.
No one talks about it.
Courtland Allen:
0h 44m 57s
What is the difference and how does that lead to sort of a different experience as an entrepreneur?
Yeah. So when you enter an existing category, your price is already set, so you really canât go in there and start really taking a price and making it your own because itâs already been set. Thereâs a great a16z podcast where theyâre like, âThe price of Kleenex is the price of Kleenex. You canât set that price. That category (inaudible).â
But when you walk in and youâre actually sort of building out, essentially, almost a new department at the institutions that you work with, and we work with very large institutions, now all of a sudden youâre capturing so much value for them, youâre de-risking so much of their revenue or youâre making them so much revenue that you can charge an order of magnitude more than your commodity counterparts.
So this sort of category creation and what weâve been going through â thereâs one example of an account we just went into pilot with for the next three months. And they formally were paying us maybe a few hundred dollars a month, and this pilot is priced at something like 26k a month. So just that one example â I just pulled a â pluck a random example out. And itâs not that their volume is changing, itâs just that we have expanded our value prop. So weâve built more and more products and services to make what we do to them more and more valuable, so we increase their revenue, we decrease their cost. Now they can go from 15 full-time employees to two.
Courtland Allen:
0h 46m 24s
And itâs hard to overstate how important that is, because I donât know if youâre familiar with patio11, but him and also Marc Andreessen always shouts from the rooftop that one of the best ways to make more money in your company is to raise your prices. And if you create a category and youâre able to basically set the price because youâre not really limited by competitors and youâre not limited by the status quo, then you can raise your prices through the roof and at the same time increase the value of your company by five or 10 or 20x without having to find that many more customers.
How much of this were you aware of before you started Eligible, and how much of this was stuff that you learned on the job as you were building your company?
So hereâs the thing. I was new. I was determined to create a category. And your investors â itsâ a very lonely road, because everyone will push you to sell to an existing market. Why? Because itâs simple, it is known, you know who youâre selling to. Theyâll push you into a commodity business, a rat race. So itâs a very lonely road.
So again, itâs one of these instinctual things that I was â my work was leading us here. It was leading us to building our own category. Again, I didnât have the freaking words. I didnât have the words. So Iâd like to say I knew exactly what I was freaking doing, but because I didnât have the words, it was a little awkward.
And thatâs why, actually, Iâm becoming such a proactive person in talking about it, because I want other founders to not feel so lonely and to know that, âNo, the goal at the end of this horrific path is worth it. The value you create â this is how revolutions get created, this is how you change the world, this is howâ â in my opinion, by creating this new thing that didnât exist before.
But it has been very difficult in the sense that I wasnât able to name exactly that, âOkay, weâre entering this market, we know itâs huge, weâre literally going to be able to take this pot of gold and move it to that pot of gold by building this new category. And this exactly how weâre going to do it.â I kind of wish I was able to lay that out day one.
Courtland Allen:
0h 48m 27s
Thereâs so much on that that I want to respond to, and we only have another five or so minutes here. But one of the difficulties, I think, with creating your own category and one of the reasons why people direct you away from doing it is just that itâs hard to explain to people what youâre even selling and why itâs valuable if theyâve never had anything like that before.
How have you tackled this challenge and explained Eligible to your customers?
I love it, because in the a16z podcast they call it, âCalling the baby âugly.ââ You donât want to call someoneâs baby âugly.â Thatâs literally what we have to do. Weâre walking into an institution and telling them that the status quo that theyâre used to cannot be anymore. So you really have to reset the playing field. You need to understand what theyâre doing in their current state, and then essentially debug it with them so that they fully understand this new world and the new capacity that which they can do this.
So one really tangible example: So we use a lot of data science and we build a lot of machine-learning models off of historic data for these folks. And previously, what they were doing before us was they were keeping algorithms in spreadsheets and they were completely human-driven, but now weâre actually algorithmically driving those through data models, which constantly get updated verses them trying to sit there in a spreadsheet and look through their whatever (inaudible) models.
So thatâs a great example. But you got to understand, the hundred people at this institution that currently right now sort through a spreadsheet are important to these people. So the institutions find these people very important. So to say, âNo, you donât need people doing this in spreadsheets anymore. Weâre going to put this in data science models. Weâre going to do this automatically,â itâs a really hard thing to do.
Courtland Allen:
0h 50m 15s
Letâs talk about moats for a second, since you brought this up earlier in our conversation. I think when youâre creating your own category and doing something new, you donât necessarily have that many similar competitors at first. How long does that stay the case? Have competitors to Eligible popped up? And if so, how do you think about keeping your value proposition unique and differentiating yourself from others?
I think that the level of depth there is to our offering now â so as I was saying earlier, this expansion of a value prop, the level of depth is also another moat. So I think that folks would have to get through the initial moat. And they could say, âOh, we do that.â But then anyone who sat down with them would know they donât, because if they sat down with us and sat down with them, theyâd know they donât.
So they have to get through the first moat. Now the second moat weâve built over the last two years is this business-intelligence moat, which would be another few years for them to get through. So Iâm sure theyâll come up, but we just have a nice runway without them right now, the new ones.
Incumbents who pretend that â so they just slap on some website and itâs like, âIâm an incumbent. I already own the account. Iâm the account owner. Iâve been with these people for 10 years. We go to dinner every month, whatever. Yeah, weâre going to do what Eligible does.â Theyâve been saying that for five years, but they canât even do what they do, these incumbents. We start to look at what they do and weâre like, âTheyâre not even doing their own job. Theyâre saying theyâre going to end up doing ours. No.â
Courtland Allen:
0h 51m 40s
Right. Do customers believe them?
I think they believe them in the first three years. But by year four, itâs like, âWeâre still needing this. Itâs on the roadmap, right? Itâs on your roadmap, right?â âYeah, itâs on our roadmap. Q4.â No.
Courtland Allen:
0h 51m 51s
Yeah. So whereâs all this going? Where is Eligible in 10 years? Where do you want to be?
(Claps.) No, itâs a hundred-billion company, bro.
Courtland Allen:
0h 52m 2s
So itâs going to be huge and youâre going to be there forever.
Forever and ever.
Courtland Allen:
0h 52m 6s
Why?
Why not? Itâs a worthy cause. I really think that because it has such high impact. I was dead serious about that story about my dad. He really didnât get the â it was a life-threatening product that he needed, this diabetes pump. He literally skinny. I kid with him. âYour next step is the grave. You are bones right now. You need this pump.â He gets the pump; he gained 20 pounds. And he was not doing that because he literally didnât know what it was going to cost him every month, and that to me is a worthy cause.
Courtland Allen:
0h 52m 44s
Thatâs awesome. Well, Katelyn, I have enjoyed having you on the podcast. This has been great. I wish we had more time to talk, but maybe I can rope you into coming on the show next year, and weâll talk about whatâs new with Eligible.
In the meantime, can you tell listeners where they can go to find out more about what youâre up to?
Sure, Iâm on Twitter. Itâs @KatGleason and on LinkedIn.
Courtland Allen:
0h 53m 3s
All right. Thanks so much for coming on the show, Katelyn
Thank you.
Courtland Allen:
0h 53m 7s
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