[Raised $61 million] Ep.131 - The First 100 with Cobi Blumenfeld-Gantz, the co-founder of Chapter | Facebook Marketing | Partnership Marketing

Cobi Blumenfeld-Gantz, the co-founder and Chief Executive Officer of Chapter, a Medicare advisory platform that uses a blend of technology and a trained team of advisors to decipher all plans at a microscopic level, ensuring that members can enroll in the plans that are best suited for their needs based on cost and coverage. Chapter has raised to date $61 million from notable investors such as Addition, Narya Capital, Susa Ventures, Maverick Ventures, XYZ Venture Capital, Core Innovation Capital, and Health2047 Capital Partners, and Peter Thiel.

Where to find Cobi Blumenfeld-Gantz:

• Website: Free Guidance from Licensed Medicare Advisors - Chapter (askchapter.org)
• LinkedIn Cobi Blumenfeld-Gantz | LinkedIn

Where to find Hadi Radwan:

• Newsletter: Principles Friday | Hadi Radwan | Substack
• LinkedIn: Hadi Radwan | LinkedIn

If you like our podcast, please don't forget to subscribe and support us on your favorite podcast players. We also would appreciate your feedback and rating to reach more people.

We recently launched our new newsletter, Principles Friday, where I share one principle that can help you in your life or business, one thought-provoking question, and one call to action toward that principle.

Please subscribe Here.

It is Free and Short (2min).

Transcript

Let's do it. Broadcasting from around the world. You're listening to the first 100. A podcast on how founders acquired their first 100 paying customers. Here's your host, Hadi Rodwan. Good to have you on the show, Koby. How are you doing today? Great to be here. Doing well, thanks. How are you? I'm doing amazing. Thank you for stopping by and sharing your story about Chapter. Koby Blumenfeld-Gantz is the co-founder and chief executive officer of Chapter, which is a Medicare advisory platform that uses technology and trained advisors to help people decipher all the plans at microscopic level and be able to enroll in the coverage that. they need. And you've raised to date around 61 million from notable investors like Addition, Mariah Capital, Sousa Ventures, and Peter Thiel. Kobi, take us back to the founding of Howe moment. Why do you want to solve the Medicare problem? It's a pleasure to be here. I kind of accidentally wound up in the Medicare space. I worked at Palantir, a large software company for almost seven years. And as I was spending a lot of time with US government employees who were in the process of getting older, I would constantly talk to them about what they were planning to do in retirement because it's such a common topic of conversation in the government. And people would say that, oh, I'm planning to read, I'm planning to travel to Europe. And I'd say that sounds amazing for how long? People would respond with, oh, a month, two months. So that's amazing. What about the next two to three decades of healthy life you have? And really no one has a good answer for how to think about this phase of life. We have a really cogent understanding of what it means to grow up and get educated. Hopefully live with a family. We have a pretty strong narrative for what it means to build a career and build a family. We have no reasonable and coherent narrative for what it means to be older, to be retired. Should you go hit golf balls into oblivion in Florida? Should you move to a Sun City? environment in Arizona. Should you travel all around the world? And all of these are reasonable, but I think it's very challenging for people to even approach these types of questions. And so what we're really building a chapter is this broad retirement platform, starting with Medicare. And the reason we're starting with Medicare specifically is really because it's the on-ramp to retirement. It's a problem that every single American faces when they turn 65 or retire. And I saw my parents struggling with it specifically. and was pretty appalled at how it antiquated the processes. And so that's what got me and our early team excited about solving Medicare is really this honorary venture retirement. Amazing, thank you for sharing this. I know there's 60 million Americans that are eligible for Medicare and they're looking for thousands. I've read like 24,000 options available and it's difficult, hard, you as hard to figure out what coverage and then the open enrollment comes which is time constraint. Take us back to the early days of chapter. What was your early acquisition strategies to find these people and convince them that they need to go with you and not with a traditional broker? Yeah, my parents were our first two customers because they had such a bad experience. We learned a lot about how the system works and how enrollment works and what tools are available just by using existing tools and using guinea pigs of my parents to help us figure it out. As we got... more knowledgeable about the market and the technology that was available, we realized that there was really nothing that sufficiently looked at Medicare as a data problem, which it really is, and looking at all the data components that you need to answer the question of what Medicare plan should someone be on. And so we in parallel built our data platform and our broad Medicare navigation platform while we were doing a lot of emailing friends and family of friends, friends of family, we were. doing seminars at local religious organizations, at synagogues and churches and different communities we could find really anywhere where there's a population of people who need Medicare guidance. And we did a lot of things that quote unquote didn't scale to start. And it was quite effective. We ended up enrolling a couple hundred people in Medicare plans within the first few months. And from there really honed our understanding of what the problems were, what the right products were to build around them. and then started to more aggressive or more concerted rather partnership marketing and marketing writ large as we thought about how to scale from a couple hundred to much larger. How do you scale a company that relies on the human touch? So you have advisors, you have technology, but you have advisors. How do you scale that, especially that there's a huge number of people in the US that would require Medicare? Yeah. I think... What part of it is certainly building technology that allows our Medicare advisors to be superhuman in how they approach their understanding of Medicare and the workflows and then automating as much of the process as we can. What Americans really want help on and the reason they really want to talk to someone is they want reassurance and guidance of how does the Medicare program work? Are they making the right decision? And that I think requires a human touch certainly. But looking at every plan, looking at all the details of plans, filling out documents, that can all be automated. And so we can make that process far more efficient. As the market matures as people who are 60 years old today and more comfortable with using phones and laptops than people who are 75 today, as that younger cohort becomes Medicare eligible, more and more people will be willing to do more and more asynchronously or more and more online. So our approach is always allow people to talk to a human. And today that's how the vast majority, almost all people enroll in a Medicare plan. But over time, there will be some people who not only are willing to but want to do the entire process themselves and autonomously. And so we'll allow that more seamlessly than is possible today. Even today in terms of scaling, it's still a scalable model. Lots of businesses require humans. Even the best enterprise SaaS companies require a lot of humans to deploy software. So I think it's a bit of a myth that everything... is done with machines today in any company, then I think that it's not that hard to get our Medicare advisors quite efficient, at least economically. If you were to pick three top challenges you had in building the technology, what were those? A lot of challenges in building the technology, one is certainly data access. So getting access to plan information is really hard, particularly in a market where there are incentives to make it challenging to access that information. Insurance carriers aren't incentivized to share that information. The government is incentivized and does share a lot of the information, but it has a lot of errors and it's not particularly high quality. And then different private companies are incentivized to share certain subsets of information. So bringing all that data together and just getting access to it reliably, given that it changes, some of these data sets change every week. And so having it reliably at high scale is quite hard. That's sort of one set of challenges. Second set of challenges is around how do you display that information? These are really complex products. In a data structure, these have hundreds of data tables to represent one Medicare plan. And so what is the right amount of information to show and the right data model or ontology to use to show that information, both to our Medicare advisors and to the end consumer. So that's a really hard set of problems. And then the technology, I think, when early stage companies... really hard, I think, because you don't have a stack that you're already working with, which is nice and that it's de novo, but it also makes every decision seem pretty consequential and it's largely a function of what skills does your team have or are they most comfortable with as well as where do we think technology is going to go over the next two to five years because different libraries and different technologies change so quickly that if you build your tech stack on a thing that is no longer the best thing in nine months, it's tough. So making those decisions. either correctly upfront or acknowledging that you're not going to make them correctly and being okay with that and knowing that you're going to have to rebuild a bunch of stuff in nine or 12 months. I think both are certainly acceptable. It's just important to be explicit about it. Amazing. Can you go through your business model? Today you mentioned partnership marketing. Do you go direct to the customer or do you go through channels or both? Today we primarily work with partners. So we distribute through partnerships. So it's more B2B2C than direct to consumer. We partner with healthcare organizations, health institutions, healthcare providers, financial advisors, wealth managers, content publishers that have a lot of readers of Medicare content, and then a lot of health technology companies or digital health companies that have a large audience of people who need Medicare guidance. We partner with them and then we use them to distribute primarily. Sometimes these are compensated relationships, often they're not in the healthcare ecosystem. It's actually illegal for us to pay healthcare providers, so there's no economics exchange there. In the financial advisory space, it's mostly non-compensated, no economic changing hands, and in content publishers, there is economic changing hands because they're basically, you know, SEO, our recharge businesses, and this is how they, this is their core business, this is our core business, and so it makes sense if they're choosing a trusted, a trusted company, and we're choosing a trusted company and that we help each other on the trust aspect there. In terms of our business model, fundamentally, we're an insurance brokerage. Our services are free for end users. and we get paid by insurance carriers when someone enrolls in a plan on which we get paid by insurance carriers. And I say that because I think we're one of, if not the only insurance brokers in the country, maybe the world, that actually looks at 100% of options and recommends the right option, regardless of whether we get paid. So we will enroll you in a plan on which we are no money. And we do that every day. The reason we do it is because I think it's crazy that that's not required. Like when you're talking about people's health, it's to me unacceptable to provide. a recommendation for a health insurance plan that isn't the best one given what's available for the consumer. That's part of it. And the other part of it is I think, frankly, it's long-term profit maximizing for chapter. I think aligning incentives with consumers is best for everyone in the long term. If we can't enroll someone in a plan that earns us money today, hopefully they'll have a good experience with us and they'll refer us to someone on whom we can earn some revenue. But the number one metric for us is are we providing a good service to our members? Economics are certainly important, but they're secondary, if not tertiary. and we align incentives across the entire value chain. It's not just that we enroll people in plans that earn us no money, it's also that we still pay our Medicare advisors when they enroll people in plans that earn us no money. And so we're actually getting hit twice. And I think like, if you aren't willing to sacrifice economics to serve your mission, you're not really making a hard trade off and you're not, it's easy to be a mission driven company when there's nothing you have to give up to be a mission driven company. It's hard when you actually have to make hard choices. that sacrifice your own economics and that's those are the decisions we made. I have a question, a follow up question on this. So what's your early thought process on deciding between going through partnerships, a B2B2C versus a D2C because both of them have advantages. As a start, when you're starting your company's brand is not known. So D2C makes sense, but it's more expensive. However, the B2B2C is less straining on your cash flow, but it's a longer sales cycle. How did you navigate this early thought process? Yeah, it's spot on. We spent a lot of time exploring both and trying to figure out what was the right area to invest in. For us, it was a combination of two things. One is, where is our team particularly strong and where do we have expertise? I did a lot of partnerships with business development work at Palantir. My co-founder did a lot of business development work at his prior startup. In general, I think on the PD and sort of marketing side, we were just stronger on the partnerships front than on the direct-to-consumer front. So part of it was that, but we tried both. We tried a bunch of early partners. We tried a bunch of early DTC and there was, and certainly is some promise, I think, in direct-to-consumer, especially once you have a brand. I think it actually takes costs down on direct-to-consumer once you have better domain rating, better product setup, better user acquisition flows. It just all kind of helps each other there. Partnerships, exactly as you said, it's a much longer sales cycle. It's harder to get started, but I think it's also more defensible. because someone can't just come in and spend ads on the auction market and bid up your prices. So there are certainly trade-offs. We're constantly testing and iterating across all channels and seeing if they're more effective and faster ways we can grow. But to date, partnerships has remained the best use of our time. Amazing. If you were to go back in time, you had limited funding and you want to put all your eggs in one basket, where would you invest in which acquisition channel day one? We didn't have a ton of funding when we started. We're very fortunate now, but when we started, we did not have $60 million. So we were in that position. We started looking at Facebook, Google, and partnerships. Those are the three areas we initially tested. We tried to test a very little amount of dollars on each. And it was pretty clear that partnerships would be the lowest cost because in many cases, it's $0 acquisition cost. And so the question was, can we get a sufficient number of partners sufficiently quickly? to hit our growth goals without spending a lot on DTC. And at the beginning, we just had to try both. I think it's really hard to know. There are some products in some markets where it's obvious, but in this market, it's not at all. I think you just have to try. There's no way to know a XCN2. What are things that you brought with you from Palantir and what are things that you had to unlearn as you're starting a new company? Yeah, I think about this a lot. Things I brought with me, one is holding an exceptionally high bar for talent. I think everyone says this. I think very few companies actually do it. The way that manifests is, of course, tapping into a network of really strong engineers that I was fortunate to have from my time at Palantir, ensuring that we're not just filling roles because we need to fill roles, but being willing to keep roles open when we can't find the right person. I probably interviewed, I spent two and a half months, probably 10 hours a day on the phone with candidates before we like to hire our third or fourth employee. There's a lot of candidates we went through to find the right person. Yeah, there's a lot of interviewing that goes into it. And being, I learned a lot about how to interview. I interviewed a lot of Palantir and how to ask the relevant questions. I think culturally, there's a lot of really excellent lessons that Palantir has created and imbued in its culture around holding customer pain points as the first order thing you need to focus on, making sure you're solving a real problem, not just like an easy problem, and really thinking about the strategic implications of each decision. There's a lot that I think doesn't translate from Palantir, both in general, because Palantir is a unique place, but also for an early stage company, or most early stage companies. One is certainly that there needs to be a little bit more, I think, top-down focus at the start. Palantir, it's a highly federated model where every team is doing its own thing. I think when you're a small company, you have to be really critical about the one to two goals that you're shooting for, and focusing the entire team on that one. on those one to two things. Having everyone work on separate things is great. At Palantir, it doesn't really work, at least didn't work for us. There's a whole set of cultural implications as well to how Palantir thinks about really sensationalizing pain is the way I'd say it, I call it, or lionizing pain, where it was always a good thing to have to pull an all-nighter and make something work. And that's always necessary. Sometimes it's good that teams were willing to do it and it was Palantir solving really important problems. So like there are real implications. just staying up all night and making sure that accounts get what they need and end users get what they need. But I think it kind of misses the point that you can actually build software in a way and attack problems in a way that that's not required every night, that that's the exception and not the norm. And that people are thanked when it happens for their hard work, but it's not celebrated as like the gold standard. And so I think that's one of the differences in culture we've been trying to create a chapter. Amazing, thank you for sharing this. So you know proximity is king and previously every startup wanted to be in Silicon Valley because this is where the top VCs are. COVID came in, now the virtual proximity became a norm, but VCs scarcity became less and less. But now the VCs had so much in their inbox, so they started weeding out even the good candidates. You're in a market that's both unsexy and poorly understood, which creates another layer of obscurity. that you have to overcome, but you still managed to raise from Peter Thiel a huge round in 2021. How did you manage to convince him or first reach him and then convince him to join? So I think Medicare is definitely an unsexy topic, just as a function of most people in their 20s and 30s aren't thinking about issues they'll have when they're in their 60s and 70s. So it's been as probably more challenging in terms of recruiting than anything else, just because It's not a problem most people who are building technology today have ever thought about. In terms of fundraising, I think I got connected to Peter through some of our existing investors and through the Palantir ecosystem. But I think there are a lot of investors who really like unsexy problems. In many ways, it's kind of sexy to investors to have an unsexy problem. It's this weird setup. I do think it's definitely not right for every investor and it definitely limits the number of potential. investors that we could talk to. And then it was a pretty typical fundraising process from there, I've been with Peter. So it wasn't atypical from that point on. Amazing. I had on my podcast, the founder or the author of the founder, which is about the PayPal mafia, Jimmy, and he shared so many interesting stories about Peter. Now he's on your board. Can you tell us a piece of advice he gave you? Probably one of the most helpful things he you have to focus on one channel that works and that will scale. And I think for most of Peter's advice, it's directional. It's not meant to be taken totally explicitly. But I think he was spot on that we were trying to tackle too many go-to-market channels to start and trying to test too much and not giving a single one enough time or effort to make it work. So that was one big piece of advice. He also had a funny saying early on, which was that... We were terrible at, I still think we're pretty bad, at communicating what we do and broadly our marketing or our marketing message. It's not really marketing, it's our messaging. Marketing's a lot broader. I think we're okay at some parts of our marketing, but our messaging is pretty poor or confusing at least. He described our early sort of product as, he's like most companies, it's a really nice wrapping with not nice stuff inside it. We're the inverse. Our wrappings are terrible, but our underlying product is great. So we need to fix that. So that was a funny sort of Peterism that he imbued in us that has stuck with me. The other piece of advice he gave, which I took to heart was, when we were hiring our first lawyer, find someone who's exceedingly mission-driven and aligned with what we're doing from the mission standpoint, because that will, like a lawyer who just doesn't care is like, even if they're very smart, it's just like the worst thing you can get. Amazing advice. Thank you for sharing this. What is the principle that you live by that has helped you in your journey? A principle I live by? I try to be calm. That's, you know, startups are, I think every company, it's not just startups, but particularly startups are very high highs and very low lows. And when people say that, they often don't share that it's more common to have lows than highs. The highs are much less frequent. And so keeping in mind that we just keep doing the right things. Things should work and we have to work to make them work, but it's important to be calm and have perspective and realize that most great companies are not built overnight. And so you have to be patient, but not too patient. I'm very impatient. I think a lot of the challenge is knowing where to be patient and knowing where to be impatient. If you're too patient on certain things, it will kill you. But if you're too impatient on other things, it will also make your life very, very hard. One last question, Kobi. What's the next chapter for chapter? The next chapter for chapter is really expanding beyond Medicare guidance, or at least beyond Medicare enrollment. We think about our suite of products today is really focused on how do we ensure people get the right Medicare plan. We're starting to build products that help people get the most out of their plans. How do they activate their benefits, get the most out of whatever they have and make it super easy to activate no TC credit, to get a hearing aid, to get whatever benefit they need from that plan. So we're really excited about that. whole host of issues that people have around, how do they really think about spending their money and their time in this phase of life? And so we're starting to really think about how we can tackle that and earn people's trust so that we have access to tackling those problems. Koby, thank you very much for stopping by. This was an amazing episode. Where can people reach you and are you hiring? We are hiring. People can reach us at our website at askchapter.org and we have a careers page, I think it's slash careers or on LinkedIn. So yeah, we should be pretty easy to find. Amazing. Thank you for stopping by and we wish you the best of luck on your journey. Likewise, thank you. Thank you so much for listening to the first 100. We hope it inspired you in your journey. If you're enjoying the podcast, please subscribe to our podcast on Apple iTunes, Stitcher, Google Play, or Spotify, and share it with a friend starting their entrepreneurship journey. Leave us a five-star review. Your support will help spread our podcast to more viewers.