SMV11: Branch Insurance Co-Founder Joe Emison shares how less software code drives speed to market.

In this episode, you will learn:

1. Why you should do 50 customer interviews before building your product.
2. Why Joe recommends only building software code that is differentiating.
3. How less code & less employees translates into faster speed to market.
4. Which company became a Unicorn with only 13 employees.   
5. Why Columbus is an excellent place to build a tech company.  
6. Where to buy Joe’s book “Serverless as a Game Changer”

Joe Emison is the Co-founder and CTO of Branch, a personal lines insurance company that is a unicorn startup company headquartered in Columbus, Ohio and one of GlassDoor’s Best Places to work in 2022 and 2023.  He is also the author of one of the Top 50 books on Amazon for cloud computing entitled “Serverless as a Game Changer: How to Get the Most Out of the Cloud”.  

Before Branch, Joe built five other companies as a technical co-founder, across many industries, including consumer electronics, local government, big data analysis, and commercial real estate. Joe graduated with degrees in English and Mathematics from Williams College and has a law degree from Yale Law School.

Joe has a unique perspective on building software based startups. A big part of his philosophy is that he buys most of his software components and he only builds software code for what’s differentiating.  

He believes that  the most effective technology leaders are the ones that are able to really focus and minimize what code they're writing into just the necessary parts.  I encourage you to purchase his book and listen to this episode to learn more!  

Transcript

Speaker 3: 0:08

Welcome to the Smart Money Ventures podcast, where we highlight active leaders in the global ecosystem of venture capital, entrepreneurship and innovation. We give you access to insights from successful investors and entrepreneurs that most people just can't get access to, and the only reason they take our calls is because we've been in the trenches with them for decades. My name is JD Davidson and I'm your host for this episode of the Smart Money Ventures podcast, and today we have a very special guest who I have great respect for. Joe Emerson is the co-founder and CTO of Branch, a personal lines insurance company that's a unicorn company, headquartered in Columbus, ohio, and is one of the glass doors best places to work in 2022 and 23. He's also the author of one of the top 50 books on Amazon for cloud computing, entitled Serverless as a Game Changer how to Get the Most Out of the Cloud.

Speaker 3: 0:55

For Branch, joe built five other companies as a technical co-founder across many industries, including Consumer Electronics, local Government, big Data Analysis and Commercial Real Estate. Joe graduated with degrees in English and Mathematics from Williams College and has a law degree from Yale Law School. Welcome, joe, and thanks for joining us today. Thanks for having me To kick off the program. Let's start with the story of how branch insurance got started. What was kind of the aha moment that triggered the decision to say let's start this company.

Speaker 2: 1:25

The aha moment came from my co-founder, and one of the things that I have discovered over the past 25 years is that my specialty is really in how to build things very efficiently, effectively and sustainably. I tend to work best as a number two, a sort of a CTO, almost COO, with a CEO. In this case, my co-founder came to me and said I've worked in insurance all my life. I see a huge hole in the market, which is that the largest segment of the market in personal lines insurance. The people who buy home and auto insurance, usually as a bundle, are very poorly served. It's really hard to buy, it's really hard to shop, and then they retain for 30 years. They have lots of specific needs and nobody has really built, nobody wants these customers, no one is really optimizing for their overall experience, and so I thought it was a great idea. He's a wonderful guy and I had done a number of joint ventures with him, and so I said I can help build that very effectively and very efficiently.

Speaker 3: 2:40

That's awesome, because what I like about that is a lot of times you see startups get started from we have this cool technology, let's go see if there's an application for it. I like the fact that there was an existing problem that was well known by an industry insider and said let's go build the technology to solve it.

Speaker 2: 2:56

I have built multiple companies that were look at this cool technology, let's see who we can sell it to, and those are very frustrating, especially in the product market fit aspects of them.

Speaker 3: 3:10

It's a product in search of the problem in the market to solve, whereas the other way is a pull through demand.

Speaker 2: 3:18

I will just say, ironically, it's a lot easier to get the. Here's a cool, unique technology, here's all the applications. It's a lot easier to get that funded than it is. We really understand this problem and this customer base and we're going to build something, but we're just going to be really good and really specific at building it. That's much harder to raise money for.

Speaker 3: 3:41

Absolutely All right. So you got you and your co-founder. You decided to move forward. Talk about the initial skeleton building. How did you pick the first five people? What was your launch? What did that look like? How much did you raise? Did you put your own money in?

Speaker 2: 3:55

Yeah, so we raised a seed round and actually the size of the seed round got larger because we brought in rocket mortgage. Every time you put together a round or any financing, it has its own life and its story, and so we had a vision of what we were going to do, which is build out for one state and just get live and prove that we could do that. But it became clear that we needed to show more, and this was in. We were raising this round in 2018. So it became clear that we needed to raise more money and show more in a given time period, and so we closed the round in May of 2018, and then only my co-founder and I were the first employees, and we brought on several contractors.

Speaker 2: 4:46

So our first five team members were one insurance expert who was brought on to help build all of these insurance programs, because there's a tremendous amount you have to do from a regulatory standpoint. And then the other people on the team were software developers, because we had identified what we needed to build, and a big part of my philosophy is that I buy absolutely everything and only build what's differentiating. But this core how do you differentiate for the bundled home and auto customer required that we build a number of things that no one had tried to build. Nobody, and nobody still has a way to kind of buy a bundle other than branch Everyone else. You have to buy them individually, and so it's very painful.

Speaker 3: 5:30

Yeah, what I like about what I'm seeing in your business and some others is that you're identifying really inefficient industries that don't have a good end user experience and taking some of the sort of tried and true software methodologies of let's focus on the customer experience and work backwards. Talk a little bit about that philosophy.

Speaker 2: 5:50

Yeah, I learned a tremendous amount about this when I spent 12 weeks in Redwood City in Silicon Valley and I have always been the person who's wanted to build, build, build as quickly as possible. And in that incubator I did do a little building, but largely what we were forced to do was do interviews and interviews and interviews. And what was amazing was I would, we would reach a point, I would say, okay, I really want to build this, and I would start building and we would keep doing interviews and I would realize that what I was building wasn't going to be helpful. And so I eventually was trained over a significant you know, over those 12 weeks and the subsequent months, that just keep doing interviews and keep honing in and you and if you do this enough, you you get to a point where the level of certainty is incredibly high. You, the thing in your head is being reinforced by most of the interviews you're doing.

Speaker 2: 6:48

And actually in that product we built it and the first version we released, which was within three months of starting, had product market fit immediately. We just we knew exactly what people wanted and we put it out and people were able to use it in production immediately. I'd never done that before, and so in this case I mean selling insurance is a little simpler in that you're buying a financial product. That's a commodity. But we had a very clear vision on you should be able to put in your name and address, get a price and click buy. That was always. The vision was name and address review by, and we built that and lots of people had come before us and had wanted to do that but had not had the full range of expertise that we had had. So a huge amount of what we were doing initially with our initial employees was understanding how do you do that? You have to change the insurance product, you have to file the right things with the regulators, you have to use data in the correct way, et cetera.

Speaker 3: 7:45

So you're really streamlining what's the quote that describes branch insurance. You're streamlining the way insurance is purchased and processed.

Speaker 2: 7:52

Yes, yeah, it's bundled home and auto insurance, the way it was always meant to be.

Speaker 3: 7:58

The way it was always meant to be, and there's a community aspect to that too. You're getting back to the purpose of what insurance was when it was first started. Talk a little bit about that.

Speaker 2: 8:06

Yes, a lot of people have very negative views of their insurance company for a whole bunch of reasons, and I think a large part of that is the insurance industry's fault, with things like vanishing deductible or there's a pitch in a lot of insurance plays which is you shouldn't have to pay anything and you should just get a lot from your insurance.

Speaker 2: 8:32

The reality is, the beginning of insurance was a bunch of farmers sitting, or there are lots of different ships initially, but in the US, a lot of farmers sitting around a table who are all neighbors, who are all actually didn't put any money in initially, but were just all committed to.

Speaker 2: 8:49

If somebody's barn burned down, everybody would help them through money and through labor, bring the barn back up, and so there was a great, wonderful community self enforcing aspect where everybody understood the value of insurance and you didn't have we hear this from our customers right, you raise rates because there's high inflation, there's increasing impact of climate change, and you raise rates and what you get are they raise my rates and I didn't file a claim.

Speaker 2: 9:19

And the goal with our brand is to help people understand that money didn't go to executives, that money went to replace someone else's house, to help somebody put someone else back on their feet when they had something bad happen to them. It's not, and so the idea of I didn't file a claim therefore X just really misunderstands everything. Also, the deductibles we have are the same level of deductibles we had 40 years ago, like a $500 auto deductible really doesn't make a lot of sense. It should be much higher. But we've been trained and used to this and so the insurance companies are a big part of the problem, but we really. It would be a lot better if everybody understood that insurance is a communal good.

Speaker 3: 10:08

Right, absolutely.

Speaker 3: 10:11

Let's talk a little excuse me, sorry about that, I'll cut that out. So what we're talking about is transforming an industry and making it more user friendly, and a lot of what you talk about in your business and in your book is how to build a tech stack that serves the customers well, and it's disrupting a lot of industries. Mark Andreessen has a quote that says software is eating the world, and that was some time ago. And it's true, because now we're seeing this wave of innovation where the way that customers are acquired and served and preserved over time is completely different from the old line. Talk a little bit about that.

Speaker 2: 10:47

Yeah, I think a lot of this. I fully agree that software is eating the world. Every company is becoming a software company. The one thing that Andreessen didn't say in that article and that I think a lot of people don't properly draw is the next step is therefore the most successful companies will be the ones that can effectively develop software, and so that's always the question is how do you most effectively develop software? And so my philosophy has always been how do you build on the shoulders of the giants that have come before you?

Speaker 2: 11:20

And we have a huge problem in technology that we have no continuing education, and so the typical flow in technology is somebody that the most knowledgeable about the current state of technology people are those who are in their 20s right, are just coming out of college. They they've just learned it and they're learning all the new things. That are very excited and very willing to learn new things. They then enter the workforce, execute in a certain way that they've learned, and they essentially continue to do that and raise through the ranks and eventually become leadership and don't actually learn new things on in any regular way, but every 18 months there are really significant advancements in different parts of the stack and different parts of how we do things in how we develop software, and so the people in leadership in corporations leading software development tend to be decades behind what the current state of the art of development is.

Speaker 2: 12:20

But the people who really know the state of the art don't have the experience to understand which of those things are probably ill advised and dangerous and need to wait for more maturing or probably just bad ideas to begin with. There's a lot of new technology that that I look at that I say I don't want to touch that because I it feels bad to me for you know whatever articulable reason. So I think absolutely, the more we have people focusing on how do I develop software effectively, how do I learn new things and that is largely this focus of the book is is how can you think philosophically to get you that edge without spending every minute of every day just research, researching things?

Speaker 3: 13:01

Absolutely so. I'm enjoying the book and I really enjoyed your talk where we connected at Bourbon and Books, but what I'm hearing is that not only is the book both for technical and non-technical people, it's really almost like what I'm getting a flavor of is. It's almost like how to build software products using Legos, as opposed to building the plastic.

Speaker 2: 13:22

That's perfect.

Speaker 3: 13:23

That's a good analogy, yes, and I agree that there's a blend of sort of the old school software you know, people that have been around for a while and have stubbed their toe and learned some valuable lessons and the new skills, and I like the fact that your book really encourages the fact that we need each other but that there's always new ways to do it and we all have to move in a nimble way. Is that a fair way to? Absolutely yeah.

Speaker 2: 13:49

And to really ask yourself think about this waterfall of do I need to write any software? Can I just use some existing software as a service? Or if I can't use an existing software as a service, maybe I could customize it with their API. But if I can't do that, maybe I could use a couple services and glue them together with a relatively small amount of custom code. Or maybe I could use libraries or you know whatever it is like. How do I understand that? Writing code and maintaining code is the thing that slows me down and makes everything worse, and so the less of my custom code that I've got, the more nimble and the more able I will be to deliver value.

Speaker 3: 14:27

You know, it's almost like manufacturing a product, it's almost like manufacturing a car. Right, gm and Tesla and Mercedes do not manufacture water pumps. Yes, for a reason that they're not in the water pump business, they're in the car business. I love the fact that you're componentizing the building out of software products and you don't have to build it all.

Speaker 2: 14:50

Yeah, absolutely, and I think you know for people who've been in the industry for a long time, they're probably remember trying. You know, some of the initial efforts to do this componentization with services in, say, 2005 or 2010,. The network was very unreliable and services were unreliable, and so this seemed like a bad idea. And there are still very unreliable services. So it requires a new level of filtering and skill. You can't just wildly pick some things that are advertised out there, stick them together and hope that they work. But you know, so, like anything, it requires putting some effort in putting some intelligence in testing some things out. And so we have this problem where, if you know a certain way to do something, you kind of give it like 10 seconds. Oh, I see some problems with that, I'm not going to, let me stick to the thing I know, and so that's the hump that everyone should try to get over, I think.

Speaker 3: 15:45

Well, and you're advancing something that started a long time ago. I mean, obviously, github is a collection you know, code library of components that you can use. But even before that, I was the finance guy at Organic Online in San Francisco in 2006. And the team there we actually hosted the beginning of the Apache server, brian Bailand, brian Bailandorf, with the CTO of Organic, when I was the finance guy and he was telling me when I was interviewing, he's like, well, you know, we got this thing back here called Apache, and I'm like, well, what's that mean? It's like, well, a bunch of software programs got together and patched this thing together and I'm like, well, it carries 90% of the whole internet's traffic and it's a code library.

Speaker 2: 16:25

Yeah, apache is great. Yeah, that's fantastic.

Speaker 3: 16:29

It's amazing because it was, to your point, one of those communal assets where they said hey look, you know, let's build the best of breed, let's create a infrastructure where we can approve the code as it comes up. And I just, I think that you know, your book extends that idea that we don't have to build and be responsible for QA every piece, you know, just like a car company doesn't have to manufacture the water pump. Yeah, yeah, no-transcript. I think that's a fascinating way to look at it, because it means that leadership in technology now is less about writing code and more about selecting the right components.

Speaker 2: 17:05

I think I think the most effective leaders are the ones that are able to really focus and minimize what code they're writing into just the necessary parts. And I think that where I see sluggishness and inability to deliver effectively are when a company has had to break that, instead of being able to say we're just gonna have this expertise and we're gonna essentially outsource and use services for the rest, they, instead they have the platform team, they have the back end team, they have the front end team, they have the API team. And this exists in companies that are You're not selling things to software developers, they're not, they're not building their own technology. This is in a very like direct to consumer or business to business products that just don't require Any of that internal expertise. The customers don't care, it's not, doesn't need to be done any differently than you could do it on a managed service.

Speaker 2: 17:58

But yet, and as soon as you have that divided focus in your organization, you're spending so much money on it and you're unable to really to put the correct focus on these are the things that make the move the business forward, and I, when I go into a company, I've done lots of consulting.

Speaker 2: 18:16

When I'm in a company and I I see the engineering team do releases or announce things to the company. It's always a red flag to me when there's like an all company meeting and someone from a technology team stands up and says and we released blah, blah, blah and nobody in the company has any idea what that thing is or how it's connected to anything that anybody else in the company does. I mean it, it you know. It is like we Whatever our platform team upgraded Kubernetes and we change the way our container allocation works so that it's 98 more percent more efficient and like, and this is amazing and this is how Spotify does it, or something you know like. And then there's like that is a huge disconnect in a company. That, I think, is a horrible red flag in the vast majority of cases.

Speaker 3: 19:03

Technology for technology sake sometimes. Yeah, you know what's interesting about that is a lot of our audience are entrepreneurs, investors and aspiring entrepreneurs and investors, and what I'm hearing and what I heard at your talk about the book thing the other day, was that you can build a company with significantly smaller number of employees, particularly a smaller number of software engineers, and if you can lower the cost of launching new companies, how does that sort of change the playing field for start up? I think it.

Speaker 2: 19:31

I think it changes it enormously. I think we are. There's a. There's a great guy who is a. I think it was an analyst for Andreessen Horowitz in 2016, sam Gersten staying, and he's worked for Stripe and I can't remember where he is now, but he wrote.

Speaker 2: 19:46

He wrote a piece which was called the death of the 10 X engineer, and, and he asked the question when will we have a unicorn that has only one employee, the one employee unicorn? Now, to be fair, instagram got very close to that. I think they were at about 13 or so employees when they were required this is also talked about in my book for a billion dollars, but I think that it has become much, much, much more likely and possible, especially for solopreneurs. But again, the problem, going back to something we talked about in the beginning is that you really need to understand the problem and build to the problem, and so I think you're. In the dev tool space, I think there's probably likely a significant amount of this and in the, in the JavaScript ecosystem, one single developer has built a competitor to node JS called bun. That has just I mean, he just did it himself. I mean it's the best, most recent example of really a Herculean task but made so much more efficient by being one person.

Speaker 2: 20:53

I often have in my head this view that one developer, in general is, is more efficient than two or three developers. You have to get to kind of four for, like, run time. You know over time for that to be to deliver more, and then, and then beyond that you probably have to get to, you know, 12, and then 25, and then 50 and then 100. And so you have these break points where now obviously you can divide the work up into several different projects. You don't have the communication overhead, but the coordination and communication is a really significant piece of overhead here.

Speaker 2: 21:29

So my, my overall belief is that if you're in a space where somebody can develop and really understands the problem space, we're going to see a lot more of these people who just build, build a product themselves and just make that income. And I think there are dozens of software developers who have built up to half a million or a million dollars a year of ARR on, probably take some two or three hours a week to maintain, and I think we'll see more of those. I think that, though, the unicorn is still going to be pretty rare in that case, not for the lack of development, but for the product market fit issue. So I wouldn't be surprised, though, to see a company that was a unicorn, that had one developer and, you know, 10 salespeople and, like you know, three marketing people you know, and a product person and a designer. Right.

Speaker 3: 22:25

Absolutely Well, and there's. There's examples of that, where you know people put together products by componentizing things together into a product, and they're essentially just a value edit reseller right, that's even manufacturer, that's absolutely true.

Speaker 2: 22:38

There are also non programmers who have put together through kind of no code solutions, products. I will say that as a customer of some companies that were built that way, I will say the technical debt that those companies run into seems to be massive. And so the number of of examples I've run into, many examples where really a poor technical co-founder built an initial thing, even with components, even with no code, that that ended up costing that company a lot more than than it would have otherwise. But you know, maybe that's still the right way to go because it was low cost to begin with.

Speaker 3: 23:19

Right, exactly so. Technical debt just basically means that you get so far into it and you have to start over and rebuild.

Speaker 2: 23:26

Yeah, you, you have. You have baked into whatever your existing code base is certain pain points so that you can't actually develop the new things you want without immensely higher cost than if it were done correctly.

Speaker 3: 23:43

So it's interesting, what I'm hearing is less code, less employees, and that probably means faster speed to market.

Speaker 2: 23:50

Yes, I mean, I do think every company is going to have this inflection point where you need to be resilient to the loss of individual people and so at those points in time you're going to need, you know, I think you can go one developer for a while, or four developers, or twelve developers, but at some point in time you're going to need to like double that amount, or maybe even triple that amount for redundancies sake, for, you know, just to make sure the company runs on its own and is it doesn't have single points of failure. But I think, for the initial speed piece and the part of the company where you're default dead and you are trying to make sure that you know you're you're getting to some sustainable point where the income will support the expenses, I think you're willing to take those risks of key people and then you can save a lot of money, I think, by by having this serverless mindset and how you build.

Speaker 3: 24:45

I completely agree, and so that leads me to sort of. The next question is why Ohio? You've built a lot of companies and you spend a lot of time in the Carolinas. You obviously could put this company anywhere because of your experience and background and success. I know that you evaluated. You know 100 or even more cities. Tell us about that process and what hones you in on central Ohio.

Speaker 2: 25:11

You know, the overall process was we went. So we pulled a bunch of data from a lot of different sources and we did a bunch of analysis for what things we thought were the most important for to start our company. So I think if we had had other, if there had been, there are aspects of an insurance company where it's being able to have a low expense ratio is very important. So insurance was when it was standalone, was based in San Francisco, was competing against progressive in Mayfield Heights Ohio. That's immediately you're just at an enormous cost disadvantage because it's just much cheaper in Mayfield Heights Ohio. So having some sense of cost of living. Now I will also say that I think my analysis generally applies outside of this type of business. But you know, certainly people choose lots of places for various reasons and I'll just make this observation and I gave a talk that's a longer form of this called why we chose Columbus. If you just Google why we chose Columbus, I think you'll find us from a conference called Monk Tuberfest. But for all of the venture capital pundit viewpoint of like, we're contrarians and we we only invest in people have crazy ideas, like. One of the things that's absolutely wild is you say like, and I'm going to start a business in Columbus, and they're like, don't ever work, so like the contrarian does not extend to moving or even thinking that people could be in a different place and and move. And so you know, there are these wild comments that people have where, like this was more true about two years ago, people would say like, ok, I'm either going to live in Palo Alto or Austin or Miami, or like, who cares, I might as well kill myself. You know, like these are like really crazy things to say, given you know where the actual population is dispersed. But the short answer and and and if I were doing it again is what I'd look at is I would say our key criteria were we need to be in a large enough metro and it needs to be growing. So I'm a big believer in investing things that are growing, be with things that are growing, and obviously not everything can grow at a, you know, at a high rate for all the time. But if you're at a place that's just shrinking, I don't think that's a good place to be, because it means that the pie is shrinking. If you're a place that's growing, there's just surplus for everyone, right, and so you want that so large enough metro, growing metro. And so you know a lot of metros aren't growing in the US, the larger ones.

Speaker 2: 27:55

A low house price to median income ratio. So look at the affordability of housing, look at the school system. Are there good public schools also, hopefully within the affordable housing areas? So there's some metros where there's some affordable housing, but it's not where the, where the good schools are. And then having not having terrible traffic and a lot of times this is a feature of how spread out the metro is and so you have these like very large metros where it's just the traffic's just horrendous. Those were our criteria and you know, when we look at them and look at our cutoffs, columbus is really the only metro that all of the meat, all of those criteria. But you know you could tweak the criteria and decide I need a little less growth or I'm okay with, like you know, worse traffic.

Speaker 3: 28:45

Well, you seem to be on the front of it, a front end of a trend, you know, because Jobs Ohio and other economic development agencies have done a tremendous job. Obviously, everybody knows about Intel coming here to build one of the largest, you know, manufacturing chip manufacturing plants in the world, but at the same time that's created a ripple effect. So talk about what you think that ripple effect will likely look like in Central Ohio in the next five to 10 years. It is hard.

Speaker 2: 29:10

It's hard to know because so much of the investment is on the manufacturing side and on the talent that is required for manufacturing, and so there's very good. Columbus is definitively one of the insurance hubs for the US and certainly also has excellent healthcare startups, and so I think that, in terms of intellectual capital and intellectual capital investment and high paying jobs for knowledge workers, I think that more you know, if I think about competing with the tier one cities, it's actually those more that I think about than the Intel's, although I think it's going to be great for this metro area. We're going to have, you know, a continued population growth, and Columbus has this enormous advantage that it can. I mean, around Columbus is cornfield, so you know Columbus's ability to grow out is is massive compared with kind of any other metro, which a lot of which are, you know, sitting on large bodies of water that stop them from growing in one entire direction, right, so, like Columbus's ability to just grow is is massive, and so I would expect that Columbus sees the kind of is an early on, an early version of, like a Phoenix or a Dallas, in terms of how much it's going to grow and the investment it's going to get, and so I'm excited about that.

Speaker 2: 30:45

I would. I would love to see more investment in, and more specialization and even more fields, and so I mean it's amazing CompuServe being started here, I think, in Upper Ellington. You know there's no reason why the proximity to all these data centers should be excellent for a variety of other uses. But I'm actually waiting to see that next. You know, very knowledge worker faced industry that that will grab a hold in Columbus.

Speaker 3: 31:19

Yep, and I think we will do that. I think one of the reasons that I decided to move back from California was I met the folks at Upstart and they you know San Francisco headquartered company backed by Silicon Valley VCs and I asked them why did you set up your second office outside of California here? And it was very clear he said that data science talent coming out of Ohio State and the other local universities and I'm like that is important and that's significant and I don't think everybody knows.

Speaker 2: 31:48

Yeah, I mean there's amazing talent coming out of Ohio State. It's really expensive talent when we we have effectively never recruited. I mean we're cheap, so we've effectively never recruited from Ohio State. We obviously have a lot of Ohio State grads but you're competing with I mean you know all of the Silicon Valley, seattle, you know Washington, et cetera. Firms are spending millions of dollars to recruit out of that talent pool. So it is a big talent pool. A lot of them would do want to stay and so I think it is a great place to be able to recruit. It's costly to recruit them.

Speaker 3: 32:24

Absolutely Well what I found in the last few years. You know kind of networking around town and getting to know all the entrepreneurs. There's a lot of entrepreneurs that have not yet started their first company, but they very much want to. What are some of the best practices and lessons learned that you would share with them and advice you would give to people that are considering starting?

Speaker 2: 32:42

their own? I think there are. There are two books that I think are fantastic. One of them is called Lean Customer Development by Cindy Alvarez and there's another book that sort of its first chapter is essentially a mini version of that book, but I would read that whole book. And that that second book is called From Impossible to Inevitable by Jason Lemkin and Aaron Ross. Aaron Ross wrote this book called Predictable Revenue, which is like sort of the Bible of how to generate B2B software as a service revenue when he was from his time at Salesforce. Those two books, I think, reading those, really understanding them.

Speaker 2: 33:22

And then the other piece of advice is unless you have done 50 customer interviews like you shouldn't be building anything. You really gotta understand that problem. And there is this process which is in lean customer development and, by the way, it's called customer development, not product development, because that's the focus. You really wanna understand the people and the problems they have and the context in which they have the problems, and then you can start proposing these solutions. But the mental model I have is like you go wide on the number of people that you're gonna talk to and then you narrow down. Okay, now I've got like my set of people. Then you're gonna go wide on the problem set. You're gonna talk about all sorts of problems. Then you're gonna narrow down. Now you're gonna have people and problems. Now you're gonna go wide on potential solutions like low res wire frames and just sort of throwing things in front of people and having them talk about them. Then you go narrow in terms of the number of potential solutions that you have and you do this until you get like here's my one or two personas that I'm launching with and here's this one problem I'm solving for and I've verified it matters. And when I show up to them with the, with this example thing that I want them to use, maybe even for free or to try it out, they're actually gonna care enough to do it because it matters enough in their life.

Speaker 2: 34:42

And so the most common mistake I find from beginning entrepreneurs is whatever they're focused on in building. When they show up to get someone to use it, no one's actually gonna care because on the list of problems it's so far down that they just don't care. So the problem is they'll talk to them oh, is this a problem? Yes, would this solve the problem? Yes, but they're never actually doing this thing. That's asking will you actually care enough in a given day to interrupt your schedule to look at this problem? The only other major piece of advice is I spend 90% of the time when you know entrepreneurs young entrepreneurs come to me. I spend 90% of my time talking about go-to-market with them.

Speaker 2: 35:26

And so there is this still, this belief that if you build the better mousetrap, the world will be the path to your door. And it's simply not true, and you know you will have to fight and claw for every sale that you get. And if you don't have, if your belief is something like well, it'll be like Uber. Uber didn't spend any money on advertising and you know, somebody just told me about Uber and so people will just tell people about it. Like that's not happening, like you need to have, you need to understand.

Speaker 2: 35:58

And again, another reason for it from impossible to inevitable. It does talk a lot about you need your 10 first customers that you don't know they're not related to you and are not required to use it and that they're the hardest ones to get. That's what you need. And when you get 10 regular customers, you know and you've done that work, then you'll get a better sense of okay. What does the next piece look like? But I've helped people start companies and giving people advice where it's taken them eight years to get to 10 customers. So you know, and they're doing very well now. I mean, the ticket price is very high on the product but it can take a long time.

Speaker 3: 36:40

I'm glad that you said that. You said if you haven't talked to at least 50 customers, you really shouldn't be building product yet. And it's true because, you know, I've been in the startup world and studying it for decades and somewhere along the line of 60% of the reason companies fail is because there aren't enough customers to buy the product that they've made and it's like, well, I mean, you kind of wanna say duh. But to be fair, I think that we all, all entrepreneurs are trying to figure out something to make it better, faster, cheaper, and so we do have the tendency to sort of go down the rabbit trail, fall in love with the product. But I think the most important thing that we can do, as those of us that have been around for a while, is to help them frame the questions and help them find the people to interview and point them in that direction, Because I you know, even though they're not yet doing that, it's an easy fix to help them adjust their sites away from the product and towards the customer.

Speaker 2: 37:36

Absolutely yep, and you should also know that a lot of and I think this is talked about in the customer development but a very high percentage of interviews you set up, people will know show or they won't be the right person. And you have to be honest with yourself. If you talk to someone who's just not the right person, you can't count that it's not an interview, it's not. It's not like 50 interviews, it's like 50 customers. It might be 150 attempted interviews. It's a lot of work, but you will save yourself so much in the long run and really building up that skill to like that will be a useful skill in your go-to market. You will now have all of these people who are real potential customers as well. You have to treat them appropriately and not, you know, not abuse the relationship where you're initially just asking them questions about it.

Speaker 3: 38:25

But yeah, Exactly, and that's what I do when I work with entrepreneurs. I try to help them identify. You know, okay, here's where you would source a list of those people and get in touch with them. And then, secondly, I also you know you ask them did they do customer interviews? And they're like, oh yeah, we did, and I also try to help them frame. You need to ask them, all the same six questions and, as an investor doing due diligence, what I would prefer is if they would bring a grid that says here we talked to these 10 customers, we asked them these six questions and 80% of them said this so show me what you learned, not just did we talk?

Speaker 2: 38:59

I think that's fantastic. I don't know, do you use respondentio at all?

Speaker 3: 39:03

You know, I've studied that a little bit and I'm gonna start using it.

Speaker 2: 39:07

It's great I mean it is you will end up having to pay about a hundred bucks a person. But your ability that that solves this 150 conversations for 50 people problem for a lot of customer segments is not everything. I mean we once did a commercial real estate broker product and that one, like you, just couldn't get enough tenant rep brokers doing enough volume. So we just went to New York and like went to a bunch of you know meetups and talk to and found people that way, cause like a third of the commercial real estate value is in New York, that's in the US, is in New York. But yeah, I totally agree, that's the challenge.

Speaker 2: 39:51

Lately I will say I have gone more to using there are a lot of like independent contractors in the Philippines who you can give like a profile set and they'll go find people and then writing really good cold emails I find is the. I mean, if you write a good cold email like people will answer them, I will answer good cold emails. But I get a lot of emails and most of them I just delete. But you know, it's very possible and often better, I think, on a very, on a very small budget to find people. But when I've worked with companies that had budgets and when I was working for this private equity firm and trying to validate things out, I would use respondentio all the time and I would say you know, 99% of the people that you get on there are exactly who you want. Super helpful.

Speaker 3: 40:39

And it's really good Cause in the same way that you're streamlining the development of products and companies, you can also streamline the process of doing your customer interviews and helping entrepreneurs do that. I think it's something that we, as an ecosystem, can help them do.

Speaker 2: 40:52

Absolutely.

Speaker 3: 40:54

Let's talk a little bit about the ecosystem in the Heartland. The ecosystems on the coast are obviously fairly mature, very well connected, working together, all those types of things. Talk about what has already been accomplished in the Heartland region and what work remains yet to be done.

Speaker 2: 41:13

I also think of a lot of our world as being national and international right now, and branch is a remote company, and so a lot of the employees are outside of the Heartland region as well.

Speaker 2: 41:27

I think that the key things that really matter are is there high speed, you know, affordable internet that's here, and is there a community that you can get together with in person? And so Ben Blanchera has been a wonderful human being for spearheading this community, certainly in Columbus, and so I think that is one of. I think that is that's a great part of the ecosystem. There are a founder groups that get together that are really great. They're certainly not the same size that they are in New York, la, san Francisco or even Austin, but I think all of the key elements that we need are here, but I think I do tend to view the communities that I'm in of people building and people that I reach out to for advice tend to be more of these kind of what was formerly known as Twitter-based, you know, internet-based communities that end up being very specific to specific problems that I'm working on.

Speaker 3: 42:44

Yeah, I think you're right Building connected communities and having a series of informal events where people can get together, because that's how you discover co-founders, that's how you discover customers, that's how you discover investors, and I think it's important to build that both offline, in person, as well as online.

Speaker 2: 43:02

Absolutely yeah, no, and I think it's. I think I would love to be, I would love to go to more events within the local community and there is an aspect of founder of a business and then having three children that in school, that impinges on schedule. But no, it's been wonderful that there are all these regular events and I've really appreciated it and I think it's certainly a lot better than Asheville and North Carolina, which I was in. I do think maybe one observation to make there is that there was a level of proclialism in Asheville where the quality of what's being built and the businesses just aren't on the same level. But the businesses being built in Columbus are national companies doing it with national quality, and so I think that's the.

Speaker 2: 43:58

There is a real qualitative difference. I noticed this sort of everywhere in Columbus as well. Like the schools are better, the construction companies are better, Like everything is just you reach a certain size, I think, or, and you're growing, and then there's a, there's a demand for a certain quality that's met and at a certain size you just can't achieve it, and so there's just a lot. There's a lot more that people think is good, but it's actually quite mediocre.

Speaker 3: 44:24

Yeah, I think you're right. I think there's a critical mass at which sort of the snowball gets big enough that it starts being self-perpetuating, and catalysts for that. Like Ben Blancara, like you know, revolution with Steve Craigs. You know the rise of the rest bus tour. That's what brought me to Columbus. You know I grew up here but I was 30 years in California. I came back. It was funny because I went to a pitch fest, competition at Tech Coast Angels in California. Two weeks later I came back and went to the rise of the rest and what was interesting was the companies in Ohio were more de-risked and had better revenue profiles than the ones in California and I thought that was fast.

Speaker 2: 45:03

I mean they'd have to right Right by definition.

Speaker 3: 45:06

Right by definition.

Speaker 2: 45:08

As many dreams out here, right.

Speaker 3: 45:11

Well, and I think that that bodes itself well to the idea that, you know, there's so many communities in the heartland that want to say, well, we want to be the next Silicon Valley, and I will say, no, actually I don't think you do. I think you actually have the ability to be the best central Ohio that you can, and you can borrow some of the best practices that worked out there and tweak them, but you also have unique strengths that the coastal areas don't. So don't sell yourself short. Be the best central Ohio that you can be, because there's wonderful things.

Speaker 2: 45:38

I mean I think you know it's certainly in our selection criteria. There just isn't I'm not aware of another metro that is as that has as mild a climate and has great schools, affordable housing and it's just like easy to live here. It's just, it's just a very pleasant. So I can't imagine a better place to raise children than central Ohio, like I just I just don't think it exists and I've lived lots of places in the US. So you know the the hurdle seems to be that it's not perceived as cool. You know there's like a branding problem and and I you know I think that just happens over time, you know right, right.

Speaker 3: 46:22

Well, I think, if we continue to build great companies like branch and we continue to invest in this ecosystem, over time, that that will happen, because people will begin to see. You know, I say you don't have to sell something. That's great if you just be great.

Speaker 2: 46:36

Yeah, I absolutely agree. Yeah, there's a, there's a show Show. Don't tell aspect of this that that I think we're doing, and so it may take a while to get fully noticed.

Speaker 3: 46:47

And that what that lends itself well to company building also. Yes, one of the other quotes from Mark Andreessen. He says is be so amazing that they can't to grow you, which is actually Steve Martin, because it was like Steve Martin was just flat out silly but he did it so consistently and he did it so well. It was just so amazing. Like you can't, you can't ignore him. And when you do great things like streamlining insurance and making it easy for the end customer to purchase and use your products and, more importantly perhaps, to understand them better, than eventually it will hit that critical mass. Now you guys are doing a state by state rollout. Yes, kind of what I heard was that your initial seed investment was to prove the model in a single state and then, once you hit that milestone, then you go raise the money to do.

Speaker 2: 47:36

That's right. Yeah, yeah, and it is a state by state.

Speaker 3: 47:42

So how many are you in right now and what's the rollout plan?

Speaker 2: 47:45

So, we're in 36 plus DC right now, but we're not in California, florida, new York, and so we're growing and expanding as fast as our loss ratio allows us to. And so we've just been in this historic weather events and historic inflation, and so at the moment, we're verifying, yes, we are at the right loss ratio in order to be able to grow and expand to more states, and it takes a little while and insurance to see how that plays out. You can have an event happen like your car can be damaged. You might not file a claim for two months.

Speaker 3: 48:28

Right, yeah, absolutely, absolutely. Well, as we're approaching the end of our time together today, I always like to share a couple of takeaways. Obviously, tell us where we can get more information about your book I see it's on Amazon and then also any parting advice for entrepreneurs.

Speaker 2: 48:48

I think that, in addition to all the advice that I've talked about so far, there are too many people who judge success by whether their name's in a newspaper, some publication, or how many employees are in their company or how much money they've raised, and that's not success and I know that it's at every point. I think people really want that. They want that public acknowledgement. But I'll tell you that the most people who've raised lots of money had large amounts of money paid for for their companies. A lot of them, maybe even all of them, but certainly most of them would tell you, if you built a company just by yourself that generated a million dollars of annual recurring revenue with not a lot of work and not a lot of internal cost, that is like the Holy Grail. That's actually what everyone is looking for, sort of no hassle, no HR department, no, just nothing to worry about. It's just there. You built it and that's the happiest that I think anyone can be. And I think the more that people understand that as the core ideal.

Speaker 2: 50:08

And obviously in insurance you can't do that insurance. We're shooting for something so much bigger and really want to. I mean, we're trying to make a change in a big industry and that's exciting, that's a wonderful mission and it's a wonderful thing to rally people around. But I think if you're a pure entrepreneur and you have in your head, like what's the platonic ideal today of the best business I think it's like five or fewer employees you make a business. It doesn't take you that much. You build it up over time, it doesn't take that long and then it throws off cash for you and it doesn't matter if you're written about in a newspaper anywhere, it's okay. People don't read newspapers anymore.

Speaker 3: 50:53

I completely agree, I think find what you're really good at and a passion that you want to pursue and just do that really well and everything else will fall in place?

Speaker 2: 51:01

Yeah, absolutely.

Speaker 3: 51:03

That's awesome. Well, this has been great, Joe. I really appreciate you making the time today. Thanks for joining us.

Speaker 2: 51:07

I'm happy to do it. Thanks a lot.

Speaker 3: 51:10

That's it for this episode of the Smart Money Ventures podcast. Thank you for joining us. Our guest has been Joe Emerson, co-founder and CTO of Unicorn Company Branch Insurance and author of the book Serverless as a Game Changer how to Get the Most Out of the Cloud, which you can purchase on Amazon. Thank you for joining us and we hope to see you again on the next episode of the Smart Money Ventures podcast.