A Product Market Fit Show | Startup Podcast for Founders
00:15:02 · Pablo Srugo, Rafael Broshi
[00:15:02] S2: You started in the crypto space and then you ended up now in the AI space. One way which came and went, most startups that start in one wave. Especially the first wave, doesn't really work. It's hard to ride the next one, right? So let's just go deeper on that. Tell me a little bit more about the product you build and how that, up and down went, and then we can move through that story. [00:15:24] S0: Sure, so essentially we built an insurance product, we started selling it in the US. Launched in forty seven states, in the admitted market. The insurance market has two separate markets, the admitted is the more regulated one. We had to be backed by a real insurance carrier, in this case they were out of Hartford, Connecticut. They endorsed us to be able to launch in forty seven states. So, the US is not one market. It's fifty different markets, which makes it extremely difficult to scale and what happened was that the product was great. I mean, everyone said it was great. It sounded genius. The only problem was, and that's a big problem. There was no product market fit. It means that there was no real pain that we were solving by offering this kind of product. [00:15:55] S2: This is insurance for crypto assets?
00:15:57 · Rafael Broshi
[00:15:57] S0: That was insurance for social media accounts and crypto assets for digital assets in general, and what you learn from that experience is that it's very, very, very hard. And I don't think it is a startup's job to change a market or create awareness, OK. Yes, you have to ride waves as a startup. If you're lucky, you're going to start and the wave is going to grow with you. But you need to look at a market that is opening. It's like an earthquake when you see the earth shatters and you start seeing a shift, and you start seeing a huge gap. OK, that's exactly what happens now or when we started in the AI for customer experience space, right? So something happened, new technology, ChatGPT came out, a consumer app based on that technology. That made everyone open their eyes and say, wait, I can now offer better support. I can now cut costs. I can do things that everyone tried to do for fifteen years with NLP, et cetera, but didn't work. And that, also meant that every company that has tried to do that up until this point and have poured millions of dollars or hundreds of millions of dollars. Now at that moment, there was an even playing field. Everyone that put money on that was thrown away. Obviously their distribution remains the platform, like Intercom or Zendesk. But in terms of technology, you had the exact same shot of succeeding as Salesforce or Zendesk, et cetera. So I think those kinds of shifts in the market, unlike where we were in insurance, where we had to educate the market. There were a lot of tailwinds. It's a very kind of traditional market where you don't see a lot of new insurance products going to market. The newest insurance product that went to market is probably Cyber and it went to market in like 1997 and only caught up in 2015. So I don't think that's where you should fight. So a lot of people think that starting a startup or building a new product means we're innovating on every kind of layer, right? We're innovating on technology, we're innovating on an idea and what they expect is that when they tell the idea to someone, someone would say, oh my God, this thing is genius. But in most cases, from what I've seen from friends who succeeded or you can see about it online, that's the exact opposite reaction. What you're usually getting, what we got when we were in the insurance business is, wow, that's genius.
00:18:44 · Rafael Broshi
Everything was genius other than the fact that not a lot of people wanted to buy it. Right now or when we started AI for customer support, the main feedback we got is, isn't everyone doing it? And, that's a bummer but you shouldn't care, right? Because innovating usually means innovating in one place. You're innovating in distribution, you're innovating on service, you're innovating on technology, you're innovating on simplicity and product features, on time to value. But not a lot of companies are able to build a completely new space. By the way, OpenAI with ChatGPT, yes, they built something completely new but even they started in 2015, and they created something that changed the world. But this is not the ordinary story of a startup.
00:19:37 · Pablo Srugo
[00:19:37] S2: It's so true and I find it especially the case if I talk to somebody. Let's say not in the startup world or not a successful founder and like a late person, whatever. And I'm telling them about companies I work with, the ones that are probably doing the best get the least attention. He's like, well, this doesn't sound that cool. The ones that are having the most trouble because they went for something so crazy. Those are the ones that are like, wow, that's the game changer one. But to make that into reality, yeah, you've got the Elon Musk's of the world or whatever, and I think maybe if you're a hyper successful founder who can attract insane amounts of capital. You know, at the get go, who can have incredible kind of relationships at the biggest levels and that's what it takes to move a market, by the way. And even then, not to say that your odds of success are high, it's just maybe then you have a fighting chance. But if you're a first time founder or even a repeat founder that's not Elon Musk level repeat founder, it's true. These are most of the things that work. Decagon is a great example. I mean, Decagon is like a $5 billion business today doing AI for customer experience. If I were to tell somebody that didn't know that story, it's like, how? What do you mean? Isn't that a solved problem? A lot of these things you think are solved problems are not and, you have to go and talk to, like in your case, the person that actually is doing this initiative at an insurance company that can tell you, actually, there's budget for this right now. We're trying to solve this right now, and we haven't solved it yet. And then you're in the right place, right time.
00:21:09 · Rafael Broshi, Pablo Srugo
[00:21:09] S0: Yeah, exactly. I think what you said last is spot on. You want to build something where there's a budget for it right now, or you're very confident that there's going to be a budget for it in the next six to twelve months. The thing is, those kind of tech waves. If they haven't started yet, they might start tomorrow or in five years. It's still very, very close. But if it starts in three years, you're not gonna be there, you're gonna start building too early. Even if you don't run out of money by the time the wave starts. Someone that started building two years after you will have better technology and less tech debt, right? So building something for a wave that's going to come has a high reward, but it's incredibly difficult, and usually what happens is you think you're late but you're incredibly early, right? When we started I said, wow, we're late, we're incredibly late, but no, we were early. So same here, right? People think about, you know, AI for carriers, right, for insurance carriers, and you see all those McKinsey reports and seventy percent of carriers said they're using AI. Yes, they have 45,000 people, they're using AI, they might have replaced one person with the kind of efficiency. It's like a lot of carriers haven't even moved to cloud yet. [00:22:32] S2: Yeah, that's what I was gonna say. I mean, that's the one that I always go back to. Cloud's been around for a long time. People are still moving to cloud just to give you a sense of how long it takes.
00:22:32 · Pablo Srugo, Rafael Broshi
[00:22:32] S2: Yeah, that's what I was gonna say. I mean, that's the one that I always go back to. Cloud's been around for a long time. People are still moving to cloud just to give you a sense of how long it takes. [00:22:41] S0: Yeah, we just spoke to a large carrier that sends status updates of a life claim by mail, physical mail, every three weeks. It happens a lot in the US. So there's going to be a huge transformation now in AI. It's not going to take a year. It's not going to take two years. Enterprise takes time. It's going to take five, ten, fifteen years. The only difference is that unlike cloud, what I think we're going to see is that companies in commoditized industries, such as insurance or banking, where the products are pretty similar, will not have the opportunity to wait for three years and say, hey, let's wait for those things to work and then we'll start. Because companies that are not going to jump in right now are going to be so far behind because of the kind of leverage you get with AI. It's going to be incredibly hard to close. OK, so that's what I think makes this wave a bit different than others. [00:23:37] S2: It's just a faster wave. Yeah. [00:23:39] S0: Yeah. It's a faster wave where you're seeing the kind of crazy technology that you'd imagine those kind of financial services players adopt in five or ten years. They're adopting it now, OK so e-commerce players adopted it eighteen months ago. Banks, asset managers, insurance carriers, credit unions. Now's the time they're starting to implement those solutions.