SPP: Rebecca, again thank you very much for being on our podcast today. We are going to be talking to you about your startup Cake Health. Can you go ahead and just give us a little background about Cake Health, background about yourself, where you came from in the industry?
Rebecca: Absolutely. So my background is in corporate strategy and market research. So it’s all been around consumer adoptions of different types of technologies from hardware to software and internet behaviors. I worked in house at a large tech firm, straight out of college pretty much, advising their strategy, competitive research. And then I moved to a research firm running big quantitative research projects for other companies, but it’s all proprietary work so it’s nothing that ‘s been published.
So I don’t have a healthcare background actually. The way Cake Health came about was through just a need of my own. And a couple of years ago just having an experience with the healthcare system and somebody close to me being becoming ill all of a sudden. And he had a high deductible plan, which was gone over night and had a lot of expenses. I was really the person close enough to the situation to really see what’s happening, but also got me thinking about something similar had happened to me. I didn’t know if I would be financially devastated or not.
I lived alone at the time and it’s just got me thinking about how do we make these financial decisions around our healthcare the most important thing about it. The most expensive thing that we pay for there’s really no visibility into, not only with the coverage that we have, but how it’s impacting our household finances. So that’s where the idea came about. It’s almost been a year actually since my official, it’ll be a year tomorrow officially since I left my job and went full time entrepreneur.
SPP: And congratulations on that, by the way. Had you had any experience with startups or did you just completely do this out of the blue and not really know where to start? I mean how did you know how to go through this whole process? What kind of gave you the idea that this was going to work and you could leave your job and take that leap of faith?
Rebecca: Well I was always very interesting in startups. So I was very involved after hours with startup events. I have a couple of friends who have been very active in starting organizations of their own like Girls in Tech and Women T.0. So I’ve always been involved in those organizations as well. And San Francisco is just a great place to start networking and getting to know how that whole ego system works. And I was always doing that long before I ever left my job. And so I knew it was something that I wanted to do.
Also, there’s an accelerator program that at the time that I came up with Cake Health I had just applied to, and knowing that I wanted to do my own startup, it’s called The Founder Institute. And this was their very first class. It was their pilot kick off. We were the inaugural class just seeing how this was going to work. And so they created a program that really taught you how to be an entrepreneur, a startup founder, and what that really means. So going through that process actually taught me a lot as to setting the expectations as to what I needed to do.
The idea for Cake Health actually didn’t come until almost halfway through the program. I was toying around with different ideas and this was just something that I didn’t even know was going to be the idea, but it was such a strong influence in my life at the time that it ended up growing from the sideline into that main focus.
SPP: Oftentimes people feel like they should have this idea forever and work on it and it comes to fruition and it’s like oh I knew what I was going to do. I knew I was going to start this business. But I think what’s unique about your situation is you were kind of thrown into something that could be unfortunate. And took it into how can I help other people, how can I make these things easier, which is what any good business accomplishes.
Rebecca: Yes. So it was totally unexpected that this would ever be the direction that I went into, but it’s also the company where I feel like I have the most passion because I come from that been there as a frustrated consumer and really want to fix it.
SPP: Right. And I think we all have when it comes to healthcare. I mean I know I recently just started a new job and I had to pick different benefits. To be honest at this point I barely have a clue what I’m doing. I was just like oh this sounds good. And that’s why actually Jon brought your company to my attention. And I first thought obviously was how as this not been done yet? And second was like it’s brilliant.
So I was hoping you could kind of dive into the nitty-gritty of what you are looking to accomplish specifically? Like what kind of things will people benefit from using Cake Health and the services that it will offer?
Rebecca: Sure. And I can even take a step back and explain a little bit of the why it hasn’t been yet and really the timing of the market right now is right for this. Five years ago if you were to look at how plans were structured and covered the majority of plans were fully covered by employers. And so people didn’t have to worry about out-of-pocket cost. The main reason people didn’t go to the doctor is because they just didn’t feel like making the time.
Today that has shifted so dramatically just over the course of five years where it’s significant where if you’re an employer that still offers fully covered plans, you’re in the minority. And we’re paying so much more out-of-pocket upfront before insurance
actually kicks in today. The average user that we’re seeing signup has a deductible of around $2000 dollars. For the average person that is a lot of money.
Rebecca: There are some statistics out there that say almost 50% of people that have medical bills less than $2000 dollars are in debt because of that. They’re having to pay it off over time. And there really hasn’t been tools created or the end user to make those decisions, because they’ve never had to before. And nobody could have predicted that change so rapidly, except for a small number of startups.
So what Cake Health can do for you as a user. So we have compatibility with the top insurers. When you sign up we make it as automated as possible so that all you need to do is give us your login information for the insurance site and we can pull in all the plan related data, all your usage, your claims, and actually make sense of it for you. So that we can show you where you are in meeting your deductibles, how much your out-of-pocket cost have been. If there are any bills or claims that we see show up we tell you. Is there anything outstanding? Has it been rejected? Do you even owe anything?
That alone clears up so much confusion for people. Because the way they’re doing it now is having to wait for both the Explanation of Benefits, and oftentimes people just wait at the end of the day to see if that envelope changes color. And that’s when you’ve been taken to collections like oh I know that I owe something now.
Rebecca: So at the very least we can tell you what’s going on at any given point and time and if you need to do anything about it. Now going back to your experience in selecting a plan with your employer and not really knowing which you should choose, we have a recommendation engine around plans that actually applies your costs and usage history to new plans. So it’s almost like trying on new plans for size before you commit. And we’re offering that for employers.
So we’re partnering with employers so that we can offer this to their employees. We can’t quite offer that direct to consumer yet. This is something that just really takes all that unknown decision making. And you don’t really know what your usage is. You can use a calculator, but I’ll give you an example. When I first pulled my data, because I was Patient 0 I was User Number 1, and we pulled all my information. I was making assumptions about my own usage that were not true. And I thought oh I’m so healthy and I almost never go to the doctor, so I think I’ll just pick this plan. Because maybe I’ll go two or three times a year. That was really incorrect. When we pull in my information I had gone to the doctor so many more times. I would have picked a plan that perhaps had a lower co-pay had I known this.
Rebecca: So this is the types of things we can help you do, just try on a plan before you make a decision.
SPP: Okay. Being how you’re kind of on the forefront of all of this I was wondering what you think about the government’s new proactive approach to healthcare, and Obama specifically, his take on what he’s trying to do? Do you think it’s a positive, a negative, how will it affect you?
Rebecca: It’s amazing coming from someone who knew nothing about healthcare and knowing just abstractly that healthcare is broken. And we all know that but it’s hard to really know what that means. And the more I learn about US Healthcare the more I understand different layers of complexity and how in different layers the system really is broken. Parts of it were not even touched, but also Cake Health we’re not even touching. But it does take and the infrastructure is so huge that it’s really difficult to change unless there’s a big initiative or a mandate. And that I think was necessary in order to see some of these changes that are starting to happen.
So one of the things about Healthcare Reform is they’re actually doing a lot of things that are not visible to the average user yet. It’s a lot of infrastructure building and a lot of really unraveling some of that foundation and rebuilding it in a way that’s more efficient and will hopefully be more cost effective for everyone. So there is a lot being done but it’s just happening under the surface at the moment. And I actually now that I can see really what’s happening I think I’m a big supporter of Healthcare Reform. It is hard to understand what it actually did early on, I think for everyone, but now I think as its starting to manifest it’s really a good thing.
So because the cost of healthcare is rising so rapidly it’s really necessary to try to control that and fix it. That’s what Healthcare Reform is doing. One of the things that is happening in healthcare is that the ownership of the decision is being passed down to the end user, but it’s not necessarily a result of Healthcare Reform it’s a result of the cost that people can’t really, or companies can’t really burden anymore, and so it has to be passed down to the end user. Well the end user then has to become a consumer so then the consumer has to start having more information to make the right decisions. And not all of this has played out yet, but we will start seeing more decision making tools around healthcare decisions, healthcare selection, services, cost transparency, wellness programs, and really trying to get in front of the chronic condition issue. Because what people have been traditionally doing, as costs have been passed down to them, is avoiding care. And that’s only perpetuating the situation.
SPP: Right. And Cake Health is in the perfect position to provide that to consumers, which is awesome.
Rebecca: Exactly. We’re bridging that gap right now of decision support tools for their decisions around healthcare and the ownership that has already been placed onto them.
SPP: And since you’ve successfully brought Cake Health to market we’re going to look at you as being the expert for our next questions. I read somewhere that you had said that you’d planned a certain number of months, it was like nine or ten months that you had to live off of savings, I guess when you quit your job. What didn’t you plan for looking back that you should have? And also what would you have done differently if anything?
Rebecca: I haven’t really thought about his but planning for living off of savings the timing of that I have to say worked out really spot on. And I say that because I was pretty much down to my last month of rent in savings when we has just raised our first angel fund, seed fund. And so that it was that next month that I was able to put myself onto some sort of salary so I could start paying rent. So that just gives you an idea as to how close we were cutting it, but I think that’s the story that’s pretty common among entrepreneurs.
SPP: Now did visually seeing that account get lower and lower kind of give you guys the push to say “Okay we need to bring this out now” or it really was a perfect timing thing where hey we’re running out of money and now we just got this seed funding.
Rebecca: I would say that surprisingly seeing the funds dwindle didn’t scare me as much as knowing that the space was starting to heat up. And so that was really the motivator to start getting things into gear and start getting ready for the launch and fundraising. I had pretty much timed the fundraising so there was enough time leading into meeting investors and following up, and all of that scheduling, so that there was a couple of months of lead time to buffer for that.
So I would say just know if that’s what you’re doing make sure you start having those conversations early enough so that you don’t run out of your own cash. For some reason I felt oddly confident that something was going to happen where I would be okay. And whether that would come from family or I would have to move some other investments around or sell off some things. Something would happen…
SPP: Right. And that’s actually…
Rebecca: …that would allow for that.
SPP: That’s something that we talked to Tony Hsieh about. We talked to him a few episodes ago and he mentioned the worst thing that can really happen to people now is you have to move back in with your family or friends. Like a lot of people have this great support network that they can fall back on. So if you do want to come up with an idea just go for it, and if you do have to fall back on them you can. Where 20, 30, 40 years ago that wasn’t necessarily the case. It’s always cool talking to people that knew that that support could be there if necessary, but still made that jump anyways.
Rebecca: Yeah. I mean it’s a leap of faith. And it was actually scarier leading up to the last day of my job than it was the first day of entrepreneurship. It was a dramatically different feeling. I think the fear of that unknown is worse than just jumping. When you jump I had this euphoric feeling for probably a month or two that I was doing the right thing. And you don’t feel it until the day after you’ve already done it. So you have to do it in order to know whether you’ve made the right decision.
SPP: Going through the whole investor process, I mean how was that for you? Was that something you had gone through before, completely new experience for you? I mean I’m assuming it’s completely nerve racking and stressful.
Rebecca: Yes it was very stressful. It’s very time consuming too. And since I had never done it before I really had to get it out there and meet a lot of people. And so having gone through the Founder Institute and Adeo Ressi was still there to give me guidance on how to approach fundraising and how to just really – the approach that I took was to really start – and there’s a strategy to it too. Initially talking with investors in the first couple of weeks and scheduling a lot of meetings, but it was all asking for advice. Because you want to get that feedback, you want to get the advice. And actually through getting that feedback and advice we also got a couple of our first investors.
And so I would say approach this situation humbly if it is your first time starting a company. If it’s old hat you can probably approach it differently, but this is what I did as a first time entrepreneur was ask for advice. Learned a lot in those first 20 to 30 meetings, secured a couple of investors, and then really lock down four weeks straight of just nonstop investor meetings. And it was tough because it was just myself and my cofounder Andy at the time. And so I tried to keep him as focused and out of the fundraising picture as much as possible, only bringing him in when he really needed to be so that he could stay focused on product, otherwise it just would have stalled completely.
What made it even more challenging, and I don’t recommend everyone approach it this way, was it was also at the same time we found out that we were accepted into Disrupt. And so knowing that we now had to not only fundraise and prepare for a launch just with two people, was a little painful and it took a lot of time. So I would try to separate your launch from your fundraising if you can. But yeah we had to do it. We brought on our first employee two weeks before our launch. So it was a very busy time for us.
SPP: Now I watched your Disrupt video and you guys did an awesome presentation. You guys got rave remarks from everybody on the panel. Can you tell our listeners a little bit about what exactly Disrupt was and what you had to do?
Rebecca: Sure. Yes so TechCrunch Disrupt is a big startup conference. It’s really a startup competition for what’s the newest, most innovative disruptive startup that is coming out. And so oftentimes companies will be launching apps disrupt they can’t have launched before. They can’t be companies that already have a product available to the public. They have to be really early stage, really launching something there. It’s so it’s really disruptive. It’s also a place where just lots of startups and lots of the investors come together and see what’s happening and what’s new and networking. So it’s all about startups there.
And so we were part of this competition. I believe there were 25 startups that were in the competition and then there’s a final round. I can’t remember how many startups were in the final round. Typically there’s five I think they may have added one or two more this round, but we made it to that final pass. And at the end the winner gets a check for $50,000 dollars and the title of being the Disrupt Winner, which gets you a lot of press. So that’s what Disrupt is. What we had to do for it, and I don’t know if you’re asking how we had to apply or what we do during?
SPP: Yes I mean during the actual conference. I’m sure not all of our listeners are going to know what Disrupt is.
SPP: I knew what it was because I read TechCrunch but for those out there that don’t know what it is, if you could just explain what you had to do for the process, not really to apply but what you had to do there for the conference.
Rebecca: Sure. So what we did at the conference is, and all the 25 startups that are accepted will give an initial demonstration of the product. It’s essentially your pitch of your product. And you have maybe six minutes to do it. And there’s a panel of investors or oftentimes they’re seasoned entrepreneurs or just very high level executives of well known companies. And they’ll be judging you and asking questions about technology, business model, all sorts of things. And so after the first 25 there’s a selection process to go to this final round and then you do this pitch again with a different panel. Very high level people like Marissa Myer from Google or Ron Conway who’s the super angel of Silicon Valley, SV angel. And after those five do that final day pitch they select the winner. And so that’s what we did.
SPP: I kind of wanted to end it on where do you think your business is going? How do you get it there? Kind of what’s your map for the future?
Rebecca: So there’s a lot that we can’t say yet but I do know that we are working…
SPP: Oh come on, give us the insider information. I’m just kidding.
Rebecca: The thing that I can say is that we are going to be working closely with employers and creating solutions that are very – will offer support for employees. And we can do some of the things that we currently do with Cake Health for employers and employees but there will be additional functionality that we can add on top of that.
So that’s what we’ll be doing. I think there’s a real opportunity for us to be that intermediary between the end user and trying to really figure all of this stuff out, but give them such support in doing that where we’re not just giving them tools we’re giving them decisions. We want them to feel so sure at the end of the day that they know at any given time what they need to do, what the right options for them are. So that’s were see Cake Health going. It’s not just some dash boarding tools. We’ll be developing a lot more recommendations and functionality to help that decision making process.
SPP: Well that’s awesome and best of luck to you. I mean Cake Health looks amazing from what I’ve seen.
Rebecca: Thank you.
SPP: Yes. Good luck with everything moving forward. Again we appreciate you being on our show. It’s always awesome to talk to people like yourself, so thank you very much.
Rebecca: I enjoyed it. Thank you for having me.