Brian Bell (00:01.356) Everyone, welcome back to the Ignite Podcast. Today we are delighted to have Terry Wang on the mic. He is a founder who has spent the last seven years pattern matching across some of the least gr glamorous broken corners of software, like over the world logistics, senior living, and rental real estate. he's a previous portfolio founder now, now working on a new project. So we're excited to have him. Thanks for coming on, Terry.
Terry (00:23.238) Thank you so much for having me, Brian. it is a little bit unfortunate to think of them as unglamorous. I always thought of them as the most glamorous sectors. I love trucking, I love real estate, I love insurance now. I think they're actually a lot sexier than you might expect.
Brian Bell (00:40.696) Yeah, I mean that's coming from somebody who's I I never worked in logistics, but I did I definitely worked in real estate. So we definitely connected on that and kind of broad down. But I'd love to start with your origin story. What's your background?
Terry (00:52.794) Yeah. I mean, where do I even start about my background? Well, just to give the let's let's start from today and kind of work backwards. I think that's usually the way I like to do it. like Brian said, I'm Terry. today I'm working on something new, a project we call Clarity Labs in the insurance space. Happy to dive into that later. But the way that Brian and I met initially was from my last startup, which was called Release. It initially had a much worse name. our goal was to make renting a lot more flexible, both for individuals as well as eventually businesses, which Which surprise didn't quite come to fruition. We kind of got stuck on the individual's part. but we worked on that for four years, built out a insurance MGA with a cell captive underneath, very, very interesting and unique space, put together quite a bit of reinsurance capac capacity, a little bit of a little bit of venture capital. And before that, I led kind of product and growth roles at a couple different vertical SaaS companies, all a little bit fintech adjacent, all a little bit kind of built world adjacent. Prior to that, my actual background through school was actually in finance with a little bit of statistics, went to school at the University of Ottawa, grew up in Toronto, up in Canada, and have been bouncing around ever since.
Brian Bell (02:06.446) That's amazing. So what was the what did you do before release? Did you have another startup before that? Like how'd you get to kind of get into that startup?
Terry (02:11.269) Yeah.
Terry (02:15.493) Yeah, so may maybe the best place to start is kind of in the logistics world, kind of what happened with Freight Path. So may maybe it helps even jump one step before Freight Path. So at the time I was working in kind of a data science role at a company called Corel. So if you're familiar, Brian, I don't even know how old you are. You're 46. So you probably still remember Corel. If you remember WordPerfect or Corel Draw, like we were we were there. So today, today, right now, we're recording this.
Brian Bell (02:33.215) forty six. Mid forties, yeah.
Brian Bell (02:39.266) I do, yeah. Yeah, yeah, I remember it, yeah.
Terry (02:44.237) In early August. So this is so bending spoons is is very, very on the nose. And I feel like Corel was doing that just for software that was built between 1995 and 2005 instead of for software that was built in the last 10 years. So we're putting together all these different old kind of box software products and reselling them as this kind of PE backed entity. a little bit dull, a little bit slow moving. Love the people, but I think I want to move somewhere a little bit faster and ended up meeting meeting a guy named Gwen Malbeck, who who had left his job at IBM Consulting to start a company called Freight Path. and what and what Freight Path did was essentially to what we were building essentially was a vertically integrated transportation management system for trucking companies. truth be told, I knew nothing about trucking at the time. I thought I knew a little bit about B2B sales, but Gwen was a fascinating, fascinating individual, super, super charismatic. And it felt like it had all the hallmarks of something that I want to be a part of. So I put aside everything I knew. kind of kind of in kind of PE backed software world. And I jumped head first and I was supposed to be working on growth. My assumption was that we had customers. We had real enterprise scale customers. So the promise coming in was that we'd be working with one of the largest distributors of equipment parts. So Tormontcat, which distributed caterpillar parts in eastern Canada. And we'd be working with some of the largest furniture retailers in Canada. I was like, okay, we have lot of customers, we have good product market fit. I've read a couple books on this. So I know exactly what I'm doing. I have some I have some big company experience. I can bring that in. I jump in. The team is four people. the customers are on LOIs and the product does not have an ability for people to log in. So immediately I jump in. I'm like, my God, I'm totally lost. Right.
Terry (04:38.159) We ended up taking that from like pre-launch LOIs all the way up to, I think it was almost two mil in ARR signed before exiting in fall of 2021, bounced around doing some kind of growth leadership things before I kind of realized, hey, like I'm I'm a little bit too obsessed with this real estate thing to like to to focus on anything else. So that's how that long story short, that's how I ended up at release.
Brian Bell (05:04.875) Yeah, that's amazing. So I think and that's a that's a really good lesson for would be entrepreneurs out there if you have something that you just can't ignore. and you you're just thinking about it all the time, that's probably a good thing to lean into. Would would you agree with that? Yeah.
Terry (05:20.741) Probably a good thing to lean into, but I I think looking back at that time, I think placing myself early 2022. So like in my personal life where where where I was, I took a pretty steep discount when I jumped from Corral to Freight Path, which is normal. Like at the time, I think I was 19 when I did that. So not a whole lot of expenses. I was making pretty good money at Corral. I had a bunch saved up. So I jumped over to Freight Path. I was still making all right money. and I kind of was underpaid for about three and Half years. when we ended up selling everything, we sold the company in a couple different parts, a little bit of foreshadowing, but partially an asset sale, partially selling kind of the remains of the business out to one of our big customers. I realized, shoot, I don't have a job right now. Like that's kind of a problem. Maybe I should go find a way to bring some income in. Luckily for me, I think I had built up quite a bit of community. I had gone pretty good at what I was doing, which is really a product kind of Of oriented, a product-oriented strategy for growing early stage software companies, both immediately pre-product market fit and immediately post-product market fit. So I jumped, I had a bunch of growth offers come in, jumped into a few of them, played around with a few of them. I think what I wish I had done is spent a little bit longer in that stage. I knew kind of real estate was the space I would want to do. I knew kind of flexibility with this theme that was becoming more popular. But I think if we had spent another six six to eight months to really flesh out what our theses was, what we were doing, and to really kind of amass that kind of initial team, I think we would have done a lot better. But like we kind of rushed into it. We told ourselves this is the best time. Early 2022 was a time when startup fundraising was, I don't know if you remember, it was like a really, really hot market. Turns out that was like the last flash of the hot market before every kind of everything kind of went quiet for a little bit. So we said like if we don't raise right now, we do if we don't build startup right now, like there's never going to be a time like this again. We have to do this. But in retrospect, like timing isn't everything. Like I think your own personal timing matters just as much as the market timing.
Brian Bell (07:32.716) Unpack that a bit. I like that. Okay. I think about timing a lot from as an investor. So much so that I think I'm gonna write a book on it and just like cover all the great like investments that went well and didn't go well. This is like this book idea I'm kind of working on. yeah.
Terry (07:37.263) Yeah.
Terry (07:45.477) That's a that's an interesting one. I mean, me you'll probably talk about this, but like my mind, I wasn't even I was alive for this. I wasn't I wasn't very conscious. I was pretty young. But do you remember do you remember WebVam? Like Instacart before Instacart. Yeah, of course. Like you you were there, you were there for it.
Brian Bell (07:59.246) Yeah, of course, yeah. Yeah.
Terry (08:04.835) I feel like they had all the hallmarks. If you go back and read all of their original memos and you read all their offerings, like it felt like they had timing on their side. Right. Like everything they said was correct. and yet they were, I think, what was it, like 10, 15 years too early? Right? Like I would say, like when they launched.
Brian Bell (08:21.838) Okay. Yeah. Yeah, it was the right idea. Just wrung time. People just weren't ready to do their grocery shopping online and they built out all the infrastructure. I think they spent like four hundred million building out all the the logistics and infrastructure. And then, you know, it was kind of like you know, the gnome stealing the socks in South Park. You know, first we steal the socks and then question mark profit. Like, yeah.
Terry (08:31.665) Mm-hmm.
Terry (08:46.171) Well, but like I I think at the time, like if you place yourself in like what was that, nineteen ninety six, nineteen ninety-seven? Yeah, yeah. So if you place yourself at that time with the information that you have, like you don't know that start smartphones are gonna come across in ten years, or that everybody is gonna have a GPS in their pocket, or that mobile apps will be a thing. Like nineteen ninety-seven, nineteen ninety-eight feels like a time as good as any. You see this like rapid, rapid growth of the internet, you see computer adoption coming up, like Amazon's blowing up. Like this has got to be the best time to build this.
Brian Bell (08:52.95) Like late nineties, yeah. Yeah.
Terry (09:16.145) Company, right? So a lot of the times I think the problem with timing is that like you see what has come before. You don't really know what's yet to come, right? So maybe this is the best time. This maybe this is the best time so far to build something, but it might not be the best time period, right? And I think that is a challenge when it comes to startups. And it right and that that really matters because you want the best time ever. You don't want the best time like tuned in, right? Like that's the problem.
Brian Bell (09:33.334) Yeah. That's interesting. not the best time ever. But but the best time so far. Yeah.
Brian Bell (09:44.174) That's a good soundbite. That's a good soundbite. so what was the original idea behind release? What was the aha moment? And what was the original thesis?
Terry (09:51.942) You know, I wish I had saved more of the original documents. One of the challenges building a company today is instead of having these like memos that you send out to people that are like uneditable once you send them, you have like Google Docs that you like iterate on over and over and over. The problem is now you lose the original version. Now, like the first version of what you're doing, part of it is mythology because you don't quite remember what you were thinking. You like to think you were smarter than you were, but at the time you definitely weren't as smart. I remember me and my
Brian Bell (10:06.328) Yeah, as you're constantly editing. Yeah.
Terry (10:22.813) Co-founder, we were, we were, we were walking through all of the different things we thought about residential real estate, right? And I think everything basically came down to two things. One, people are going to value flexibility a lot more, right? So this general theme that, you know, like people are going to move more often. people don't want to lock themselves into really, really long financial commitments, especially around housing. And even if they were going to buy something, there would be this desire for people to bounce kind of location to location, home to home, where you would look at it more as an asset that you had and less. As kind of this home that you're going to build over the course of decades. That was one theme that we had. And the other theme, well, less of a theme, and I think more of a business strategy, was if we were going to build something in this space, we had to touch the payments, if we had to touch the lease contract itself, right? So it almost came about as us taking that core idea and building a company that was at the intersection of those points, which might have been the problem to begin with, right? When you take things that aren't quite full. Fully fleshed out and aren't quite kind of aligned up, and you try to create a concept out of those, I think you can miss the forest for the trees a little bit.
Brian Bell (11:32.654) And so if to to explain to the audience, the idea was, hey, why not have an insurance policy that basically allows you to break your lease, right?
Terry (11:42.883) Well, at the time we didn't even have that.
Brian Bell (11:45.228) Right, when you started, right?
Terry (11:47.215) We didn't know anything about insurance. Right? Like, so the idea was that, like, hey, what if there was this, what if there was this thing? What if there was this platform that you use to pay your rent and sign your lease? But few of the perks, why would you use this thing? I mean, like everybody had, like, you can just Venmo your landlord, right, and sign your stuff. So, like, why would you switch over to a new platform? Right. And we interviewed a bunch of people and we basically came down to like a few like big value props that we thought would land really well. One, you had this ability to move out if things weren't right. Right. So like, hey, like if something didn't go right in the first 30 or 60 days and you weren't totally happy, you could go move out and we'll cover the cost of things because the idea was that we would make some kind of money on the payments or some type of money on the initial lease signings and hey, like we would be able to afford a little bit of loss there, right? Or hey, like you realize you want to upsize at a certain point and we could run an internal marketplace to get you out of that lease, right? And the idea of running that second kind of value prop independently as an insurance product didn't actually come along until almost a year and a half into the company's lifespan.
Brian Bell (12:55.326) Interesting. And then how did it morph from, you know, the platform to the insurance? And was the go to market originally going after multi unit property owners or was it going after c individual consumers? Or how did that kind of change as you went to market?
Terry (13:11.695) Yeah. So initially when we started, we we kind of we we mapped out the market a little bit, right? So like any good founder, I think we looked at the all the options available. Here's like small ownership landlords on one side. So like you own a condo unit here or maybe a townhouse and you're renting it out to some folks, all the way up to like the larger multifamily space. and in terms of what we could do from a platform perspective, we thought both going, Hey, what happens if we like just build in stealth or just build I don't think building in stealth was as big a thing in 2022, but like whatever the hell we called it back in 2022. Build quietly, build this whole platform out, do what do what Figma did. So like build the whole platform, have this expansive vision and launch it all at once. Or were we going to pick like one small little bit of product that could be used as a wedge and build it out? Right. and we looked at all these different options. Initially, our thinking was actually, hey, let's try to build out this whole platform end-to-end and let's serve it out to some of the larger multifamily folks. Right. The problem was we did not, we we severely underestimated how hard it would be to build out the whole platform. And this is before you could just like spin up a whole web app by yourself. And this is before we knew anything about how we're supposed to be transferring payments or how money service businesses really work or how you're supposed to build a payment processor, how you're supposed to actually make money on the interchange there. So we didn't know any of this. We're figuring this out kind of as we go. And the thinking is like we built software before, we've handled some payments before, we've done a financial products. before like we can do all this we can figure it out as we go eventually early 2023 we realized that hey like this isn't actually feasible like what we're actually doing is building an inch deep everywhere and nobody is ever going to use this thing like lots of people look at us and saying like hey this is an interesting idea Terry's like an interesting person his team is a pretty interesting team but nothing here is captivating enough for me to really dig into right so we took that we looked at the whole platform and we said, Hey, what if we split it up into its different chunks and try to sell this to a smaller market? At the time, we raised a little bit of money from some folks down in North Dakota. So I moved out to Fargo and we're testing this in like a small university town, right? And we tested, hey, like what would happen if we just did that marketplace piece? What would happen if we just did the payments piece and nothing else? What happens if we just did like a tenant screening thing and didn't do anything else? And then it hit.
Terry (15:35.111) us towards the end, towards the middle of that summer. Like what happens if we just focus on that like core value prop that we originally had? Turns out pretty good things happen. People get excited about it, particularly in a college town. And we knew like, hey, this has got to be the thing that we do. We're getting some consumer pull around it. Multifamily buildings are really interested in this. We have no clue how the business model for this can work. But this is something with some pull and we should double down.
Brian Bell (16:01.038) Nice. And so what happened next?
Terry (16:05.093) So this is middle of twenty twenty three now. We know the I think all the key parts of the company had already come together for what the product would end up being. The idea was that you would be able to move at any time during your lease. There would be this sense of freedom and flexibility. You would pay some amount on a monthly or upfront basis. And in return, you would have this freedom to move out. And the the the kind of alternative was that you would either try to find some type of sublet or you would try to find some type of lease takeover or pay some big owner as lease break fee, right? what we didn't know was how we were actually going to administer this thing. So we kept on calling it a subscription or a benefits package. And eventually one of our investors came to us and said, Hey Terry, this sounds a lot like insurance. If it sounds like insurance and it walks like insurance, you should probably treat it like insurance. You should probably learn a little bit more about this. so they ended up connecting us to a ton of their portfolio companies who were in the insurance space, some of the folks in the Midwest in Des Moines who knew a lot about it. And we embarked on like a six-month learning phase where we learned everything there was to learn about the about the insurance industry. So I got my licenses at the time, in the state of Illinois. got those licenses transferred across a couple of other states, went in and read actuarial textbooks nonstop for For weeks, if not for months, made a couple hires in the space that knew a lot more than I did, coming in from clear cover, and like really, really pivoted the company from this kind of broad, we're going to change the way that people rent, kind of horizontal company, to something that was very, very, very vertically focused around this key value problem.
Brian Bell (17:44.686) Interesting. All right. So you pivoted, iterated your way towards insurance. It's a really interesting story. and you guys got some traction here, right? You guys were going to market, selling into multifamilies, like property owners. So tell us about where did it all break down? Like what was the the disconnect and what's kind of the takeaway from from all of this?
Terry (17:50.384) Yeah.
Terry (18:04.249) Yeah, so maybe maybe it helps to like maybe it helps to tell the ending of the story before we go back and talk about what went wrong, right? So the end result is that we ended up winding down operations at release March of this year. what had ended up happening was that as an insurance product, you basically have a business model that's reliant on something that's basically like gross margin. We basically talk about as the inverse. So your loss ratio, like what percentage of your premiums are you paying out in losses?
Brian Bell (18:12.162) Yeah, yeah.
Terry (18:32.503) And we had gone in when we had built out this insurance model anticipating that losses were going to be about 40%. maybe idealistically they would even be at around 30%. What ended up happening was that our losses were actually closer to 75 to 80%, right? So not good at all.
Brian Bell (18:46.946) Interesting. So people who were paying the premiums were chewing up eighty percent of those premiums and in claims.
Terry (18:52.419) Mm-hmm. So we were we were not we were not looking good there, right? And what ends up happening there is that you end up it's not the worst thing in the world, right? But you need a lot of volume.
Brian Bell (18:59.66) Which is I think in the in the the insurance industry that's pretty standard, right? It's it's yeah, twenty twenty percent yeah, margin is pretty good, right? I I don't know what Geico's at. I think they're world class and auto insurance and property casualty and they're probably around that twenty percent.
Terry (19:16.699) So there there's a lot of lessons to be learned when it comes to distribution. But for for for a broad kind of understanding of where insurance is, as kind of the admitted markets go, so the most popular lines of insurance everybody already knows and is usually mandated by somebody. So home, auto, yes.
Brian Bell (19:31.938) Yeah, you have to buy this, find somebody because you cannot operate this without insurance.
Terry (19:37.037) Exactly. Simultaneously, the government knows because we mandated this, we also cannot allow companies to have massive profit margins. So we have to regulate this thing really tightly. So what ends up happening is that margins end up floating anywhere between like 80% loss at the lowest and like 100% loss at the highest. Right. In the non-admitted market, so for specialty products that are either brand new, nobody else really wants to, that are totally discretionary, you see loss ratios. Exactly.
Brian Bell (20:02.956) Yeah, kind of like extended warranties on your T V, you know, discretionary. Yeah, Square, I think it is the company that does that or one of the squares. Yeah.
Terry (20:11.118) There's so many squares. But like discretionary warranties, kind of excess excess excess umbrella coverage on things like flood insurance for properties that like nobody else is willing to insure. Loss ratio is there because companies have a lot more free reign to price as they want to, can be anywhere from like zero percent in certain years. So, like there are no claims because it's such a small market, up to like 60%. And typically, when you go in to raise reinsurance capacity and to bring reinsurers into your quota, 40 to 50% is usually an area you want aim towards. Because you have so much pricing power, the idea is that you want to leave everybody a little bit of margin because it's harder to distribute your product, you're gonna have to give more on commission up to brokers or your wholesalers or whoever else is helping you embed your policy. So you're gonna have to have a little bit more margin spread throughout, right? and I think our weaknesses came down to two things. One is the fact that When you go in planning to have a forty percent loss ratio product and you end up with like a seventy-five to eighty percent loss ratio product, you're much worse off than if you had just started off with an eighty percent loss ratio product and were honest about it, right? Like it's almost the thing where you expect to make $10 and you actually made five. Like you're in a lot worse place if you already spent the $10. So that was part of the issue. I think the second component of what really went wrong was it was the way that those losses were spread throughout. It wasn't like we had like very, very even losses across all of our different verticals. Across our core multifamily verticals, I think losses were actually below 50%, right? But the problem was growth was really slow there. Like it was quite difficult to sell to multifamily folks that were slow. I think.
Terry (21:54.103) I think the core value prop didn't land as well for some of those folks. It was harder to integrate into their systems. The renters who lived in some of these buildings were a little bit older. So they're a little bit more averse to kind of trying new things. So we ended up doubling down into like the student market, right? And when it comes to student housing, much, much higher risk, as it turns out. In fact, this area was actually losing money the entire time. But adoption was really, really good, and people kept on wanting to sign up for it. Right. So what ended up happening was we signed these huge student deals and we knew that if we just had just kept on operating for another three, four months, the losses would climb even higher. Right. So what we knew was they were at 80, but a few months ago, losses were actually at 60. Right. And we knew that the student ones would start to rise and the multifamily ones were moving, but the student properties were making up a bigger and bigger and bigger proportion. And we had signed ourselves into deals that were loss leading from the get-go, and we could not get out of those. Right. One of the problems with insurance and with financial products at large is that once you sign up for obligations, you're kind of on the hook for those obligations. You can't just say, you can't say, like, I'm I'm just not gonna sell you this software anymore. Or here, take this software, it's yours to run. Let's renegotiate something. Right. Like when you sell money, money is the thing.
Brian Bell (23:08.514) Money is the thing. so kind of like top, you know, three, you know, two, three, four takeaways from this whole ordeal. And what are you kind of taking away as you kind of work on a new startup?
Terry (23:10.001) Money is the thing. It it's hard.
Terry (23:21.975) I think know the type of business that you're you're really getting into, right? I think for insurance, one of the big questions that we should have asked ourselves, is it an underwriting business first and foremost, or is it a distribution business first and foremost? Right.
Brian Bell (23:36.13) Meaning like mar are we really good at underwriting? So we increase margins there, or are we really good at selling and distributing and marketing's?
Terry (23:42.479) Well, not just what you're good at, but like what is actually possible, right? So is there a really large company that can be made from helping the existing kind of players increase their margins? Or is what you're doing really expanding distribution? Right. And if you're going to go net new, so introduce a brand new product category throughout, right? That I feel like is the riskiest of all because you're going in there and saying, like, hey, we have this hunch. This is something we believe should exist. We don't know how big it it's going to be. It's either going to work or it's not going to work. Right. So I think like what we would have done in retrospect is actually focus in on either the distribution or the underwriting, but certainly not dig into both at the same time and say, like, we're going to figure everything out with this net new product category that's been unproven. We don't really have a way to distribute it outside of selling it. really, really anchor ourselves either to the idea that we can help expand distribution for folks or that we can help expand underwriting margin for folks. And this is this is in a B2B setting.
Brian Bell (24:46.552) Yeah. So there's you know, we we know that, you know, fifty to sixty percent of our portfolio companies are gonna go to zero and that's pretty common, more common than than people think. You know, you hear that number, it's over half, right? for founders listening out there who might be struggling to find product market fit. How do you know when it's time to call it quits?
Terry (25:07.823) I mean, I think in the insurance space it's actually pretty easy. You hit this point where I think you have to look yourself in the mirror and say, like, if we continue f operating for any longer, we will not be able to pay out all the claims. And frankly, we actually cut it off too late. Right. Like I think we should have ended things off probably three months before where we did. And we probably could have had a healthier exit for everybody. Right. We would have had we would have confidently been able to to to exit paying out all the claims on time. So what ended up happening was we ended up having to go through an asset sale and then using some of the proceeds from the asset sale to reimburse some of the claims that we owed, a lot of the claims that we owed. Right. And that was not a good experience for all the customers. And it's something that I think I do regret. if we had cut things off earlier. We would have been able to, we would have been able to satisfy all those things. But as a founder, I think in the moment, as a fundraiser progressing, and it's hard to tell when you're in the moment if a fundraiser is going well or poorly, if this is your first time fundraising. In retrospect, it should have been going a lot faster, but that's neither here nor there. we probably could have ended things off a little bit earlier. if you're in a SaaS business, I feel like the point at which you have to call a quit is the point at which you're starting to pivot or you're starting to start a brand new company. Right. Like My thinking is, and I don't know if I'm right or wrong with this, or if I'm in the minority, or if I'm in the majority here, but when you when Brian, when you go out and back a founder or back a group of founders, you're you're really at the pre-seed seed stage looking at the team, right? Like, hey, Terry's a really great guy. No, Brian's a really great guy, like we really like these guys, we think they can figure it out, right? And you've almost picked like this kind of narrow scope at which to focus all your energy, right?
Terry (26:56.781) I think the point at which you need to really think about the idea of shutting things down is when you go from pivoting within that scope to like going left and right and changing the scope wildly and people from the team start dropping out. Like that's the point at which you need to look at yourself and say, like, hey, like what do we have right now? Right. Is there an opportunity for me to cut my losses, to cut my time and really focus on something more substantial? Right? Or do I still believe in some of these things enough to really double down? Right. And to to at least have that conversation.
Brian Bell (27:30.126) Yeah, and I see I see founders all the time. They'll raise four million coming out of YC because we, you know, half of what we do is YC. And they spend a year trying to do that problem, six months, maybe a year, eighteen months, and they're like, This is not working, but they still have three million in the bank, right? And so they have a bunch of capital to they could they could return the capital, but usually what the investors will say is like, like tell us about your new idea. Okay, go work on that and see if you can find some traction. So it's a it's a little bit of like Yeah. Yeah, yeah.
Terry (27:35.781) Mm-hmm.
Terry (27:54.531) Exactly. Like at least that's a conversation to have, right? And like you shouldn't just be pivoting willy-nilly around these things. Like these should be like considered pivots. I would almost like and maybe this is a challenge for younger founders, right? Like we knew we want to play in this real estate space and we knew this kind of general thesis. And until we stopped believing in this general thesis, we were going to pivot around and find a way to make things work. Right. But I think the challenge is if you go into a if you go into a startup thinking like we have a super talented team and I don't know what we want to work on, but I read this thing kind of on Twitter recently and this seems like a good problem. We're gonna write a YC application around and build a company there. what ends up happening is you realize very quickly in like six months, like, wait a second, I'm not actually any good at this, or like, wait a second, I don't care at all about trucking. Like we should probably go do something else. And you pivot around and you jump around and next thing you know, you've kind of lost your way in as a founder. Right. I think if you can spend more time at the very, very beginning and figure out really what you believe in, that helps things quite a bit.
Brian Bell (28:58.402) Yeah. Yeah. Any other takeaways before we pivot our conversation to Clarity, your new your new startup?
Terry (29:04.017) any other takeaways? Any other takeaways? Raise more money. Raise more money. Always raise more money. I feel like every single time we had fundraising momentum, we didn't realize we had fundraising momentum and we just stopped raising because we already had some money. And every single time we didn't have fundraising momentum, we would just keep on raising and like we would let the like the we would let the well run dry.
Brian Bell (29:09.41) Yeah. Make make hay when sun shines. Raise as much as you can. Yeah.
Terry (29:29.541) Right. So like really be honest with yourself there and like raise more than you think you need in good times, even if it's on valuations that like you might you might not be thrilled that you might have a little bit more dilution than you want. That's still better than having to raise when you're when you're really in a down environment.
Brian Bell (29:46.166) Right. Raise from a position of strength. Extend the runway a little bit.
Terry (29:48.879) The challenge is that you don't know when you're in a position of strength sometimes. Sometimes like the positions of strength actually look like weak positions because you think things are going to be all great after you sign this one big deal. And turns out once you sign this one big deal, everything actually becomes a lot harder. Right.
Brian Bell (29:52.387) Yeah.
Brian Bell (30:03.5) Yeah. Anything that you learned in the wind down, for founders listening who are in the process, about to wind down their startup that you'd like to instill 'cause you just went through this whole thing and
Terry (30:13.517) talk to your customers. if you're winding down and you're like debating it, like if you're already debating the wind down, like do it earlier rather than later. Like you waiting a few weeks actually makes everything harder because you have a limited amount of money and time and your customers' time is really valuable. So just have that conversation early instead of late. time is of the essence. So the sooner you can get that stuff done, the better. And from an asset sale perspective, I think the right way to go about it is like to try to preserve as much money, like preserve as much value as possible without leaving anybody hanging. If that makes sense. Right. And this is easier in the software world than it is in like financial products.
Brian Bell (30:54.158) There's usually something to sell there and there's there's some recurring revenue to to package and put into a yeah.
Terry (30:59.781) There's always something and you can package the things differently, right? Like this is not just from my experience, but like you can package different parts of your company off in different ways, right? Like you can package up most of the con like most of your CRM one way. You can package together most of the software a different way. You can sell some of the actual core IP if you have it. And then at the very end, at the very least, what you should have is a compelling team. If you guys want to go work on something else and you want to get a soft exit for or a soft land. Yeah.
Brian Bell (31:31.394) Right, right. Well, let's talk about the the new the new startup. Like what's the thesis behind that? And yeah, and and thank you by the way for talking through your your experience. I mean, not a lot of founders do that. I think this is one of one of my first times I've actually had kind of a post mortem show with the founder. So I think I think a lot of founders out there are gonna listen and and find a lot of value. So thanks thanks for being brave in doing that. That's it's shows a lot of character as a founder, I think, you know.
Terry (31:57.761) no worries. I mean, you can't hide from it. I guess that's like another thing to talk about. Like, you can't hide from these things. Right? Like, for better or for worse, I think one of the things I'm really glad about is that in kind of in startup world, we don't we don't hate on failure, right? Like it it's not a bad thing to have failed. It is a bad thing to have gone about failure in the wrong way, I think, or have to have gone around success the wrong way.
Brian Bell (32:27.502) Yeah, if you don't learn anything from it, you're like, I did everything right. I don't know what went wrong, you know, like that's when you know like, but if you're honest and you're like, Okay, if we did this and we kinda went the market that way and kinda thought about it this way and like you yeah, I think that's what's cool about Silicon Valley culture generally is that you can fail forward.
Terry (32:43.565) Exactly. And and I it's not something I take for granted because it's it's really not the same in every single industry, right? But you you you do have to own it in a way, right? Like in the course of in the course of building kind of Clarity Labs and kind of raising our initial round and kind of going through all the early conversations, people will ask, like, hey, what happened to release? Like, what were you doing for four years? Right. And if you try to walk around it or you try to not you if if you don't own it and make that part of who you are. you're probably actually worse off for it, right? Like the unknown that everybody, like the unknown is worse than the known. Right. So I I think that's probably last takeaway there.
Brian Bell (33:22.446) Well yeah, people will fill in their own their own conclusions and stories into that unknown, right? Yeah.
Terry (33:27.587) Exactly. Exactly. In terms of what we're building on right now, I think a lot of a lot of what gets me the most excited here is actually a lot of the learnings from the previous company. So this time around, I think we're doubling down into some of the strengths that we know we we have, right? Like first and foremost, before we even talk about the fact that we're building an insurance. And I've come to actually love insurance quite some time and kind of wish that I had actually gone in and been an actuary in some ways. I think the most important thing at this stage is to be working with people you're really excited to work with, right? So my co-founder at Clarity Labs at Diane, I've actually wanted to work with him for coming up on four years. So three and a half, almost four years now, right? We met while he was building his previous company. they were one of the largest screening companies, or they ended up becoming one of the largest screening companies in Canada and in the Midwest. at the time, they had almost nothing. They were just starting to work on their first initial screening product. And I really want to hire him. And I was like, you know what? I don't really have that much money to hire him, and he's really, really excited about building this thing. So, like, we'll figure it out. Maybe at some point we'll we'll work together, right? And we had a couple different chances of fate where I could have gone and worked with him, or he could have gone and worked with me. but it never quite made sense all the way until all the way until really I was I had kind of let things go at release and started to think about what was next. And I think the opportunity to work with somebody that you really, really, really admire somebody that you somebody that you know you can count on, somebody who you would personally invest money into, who you would personally invest your time into, I think makes all the other startup building things a hell of a lot easier. Right. And to have that from day one of building the startup instead of having it from like year three of the startup, I think really, really matters. Beyond that, in terms of what we're actually building at Clarity Labs and what we're doing, I think we're going in here with a clear, clear mission to help companies buy, manage, and understand their insurance. I think there's a pretty obvious way of happening with AI making it to where you can build things that you just weren't able to build before. Services businesses that felt kind of unscalable two years ago are all of a sudden a lot more scalable today. And we think there's this golden opportunity to bring what we call kind of enterprise-level sophisticated risk management to every company.
Terry (35:50.867) company out there. Right. So that's what we're doing at Clarity Labs. We're building out kind of a system of record for commercial insurance as well as this kind of AI native services layer on top to bring risk management to all these different companies across the world.
Brian Bell (36:05.086) Let's unpack that bit. What what you said a lot of technical terms there. What are you really doing? What's what's the problem that you're solving?
Terry (36:07.729) what part do you want to unpack? Right. I think at the core of it, it's that insurance is this thing that everybody has to buy at some level, right? We're just talking about like, well, what's important about insurance? Like you the margins might not be that well, but why can insurance companies run at 80% loss and still be incredibly profitable? It's because people have to buy your products, right? If your company, your clients are going to make you get certain insurance packages, your investors are gonna make you get certain types of insurance, your landlords are. If you borrow any money, your lenders are gonna make you get certain types of insurance, and you're gonna spend an unhealthy Amount of money on this. For a lot of brick and mortar businesses, it's actually one of the leading kind of operating expenses that you're going to see. So a multifamily world where we spent a bunch of time in the last four years, the single largest cost outside of your kind of mortgages and your debt is going to be insurance, right? So we know that this is a space that people care about. The problem is that most companies just aren't set out to really know what they're doing there. Like you might be very sophisticated at your own business, right? So if you're in multifamily real estate, you might know everything there is to know. about buildings and how to construct them and how to release them out. But you don't really know that much about property risk. You don't really know that much about liability risk. You don't really know much about how it's priced or what options there are. Right. And what that means is from a buying and kind of understanding problem, you're structurally at a disadvantage whenever you go out onto the market looking for insurance. Right. And unlike in other industries where you have a buyer side agent and a seller side agent, we're trending towards a world where there is kind of seller side expertise when it comes to insurance, but very little buyer side expertise.
Brian Bell (37:48.834) So how far along are you guys so far?
Terry (37:52.667) So it hasn't been that long since since I stopped working on Release so often.
Brian Bell (37:55.864) Yeah, you're got just a couple of months in, right? So
Terry (37:58.135) Exactly. So still in the early days, we spent a lot of this early time really digging in, trying to understand exactly where we want to work. We have a really, really deep network of insurance folks that we can tap into. Everybody from kind of the regulators in the space, so state level insurance commissioners, regulating bodies, standards organizations, some of the largest reinsurers and carriers on the market, as well as some of the most notable brokers that you might work with, both from a commercial perspective and a personalized perspective. So you can really dig into where the problems are. where the pain points are the most acute, what types of product lines you want to focus into, where the go-to market motion is the strongest. Right. So we took a lot of time focusing on that. And then with the way that AI is today, you can build up products very, very rapidly. Right. So our approach has been to iterate on product really rapidly, building out kind of, I think, the core pieces that we know will be most technically challenging and putting together these proofs of concept, working with some of our early design partners to figure out how we can get closer to our mission today. Right. We are in the market now. So there's a couple fairly large brokerages and commercial carriers using our products, although none that we are quite ready to announce publicly. And we're really excited to be working with those over the next six to 12 months as we get closer and closer to LICO. Public broad launch.
Brian Bell (39:13.422) After living through the adverse selection at release, how does that scar tissue change the way you're building Clarity Labs now in the early earliest days?
Terry (39:22.575) Yeah, I think when it comes to selling things, you can operate at a loss as a startup. Oftentimes you're you're going to operate at a loss. Like it's impossible as an early stage startup to have your ARR cover all your costs. If it if it weren't, you probably either you're building a very, very special company, or you're probably doing things a little bit wrong when it comes to how you're dealing with your expenses, or you're accounting for everything in the wrong way. But I think it's really, really an issue to have your gross margins fundamentally make sense, right? Even if they don't make sense on day one to know that they can conceivably make sense. And it's a lot easier in a world where you know your costs going in than when you don't know your costs going in. Right. So for me, the version of this is like we're not going to take underwriting risk. At least not for a while.
Brian Bell (40:13.151) So if everything works out, you know, five or ten years from now, what's different in this industry that you're operating in?
Terry (40:20.559) Yeah, I think I think five to ten years from now, I'd like to think that everybody's gonna be a lot more comfortable with insurance. Right. Our thinking is that everybody's gonna have one of these agents working for them to optimize their insurance, to make it easier for you to buy, to make it to where you don't really have to think about what you're buying or who you have to buy from or what you have to do with your insurance to get the proof of To get the certificate or proof of coverage that somebody is asking for, all that stuff kind of gets handled under the hood by a company that you're contracting out. The same way that like I don't really worry about how my how my accounting is done. Like this is a question for my accounting firm and for some of the bookkeeping services I use. Right. We think that that's gonna go, that's that's where the insurance world's going to go. That's where risk management is going to go. And hopefully we're the company to bring about that change.
Brian Bell (41:09.528) So you're a Canadian founder, Toronto, right? originally. Now you're in the Bay.
Terry (41:12.283) Toronto originally. now I'm in the bay. Although right now I'm actually I'm actually on some work travel in Toronto, but neither here nor there.
Brian Bell (41:20.588) Okay. Well kind of going back and forth. Good time to be in Toronto too in the summer. what is what's the vibe change, you know, having been, you know, a Canadian founder who's now in San Francisco? How how does that differ? How does that feel to you?
Terry (41:35.001) I think I resisted the idea of going to San Francisco for a while. I almost did it early in 2020. needless to say, that was not a good time for the bay. it was a it was it was the lowest, it was the lowest of lows in San Francisco at that point. It was like, ooh, I don't think anybody wants to be here anymore. so when I went back actually in the summer of 2024, it was like a huge shock.
Brian Bell (41:49.398) That's when I moved out. Yeah. Yeah, it was pretty bad, yeah. Yeah.
Terry (42:02.897) we were there actually onboarding a building that we had signed at the time. And I was like, I don't really want to go to San Francisco, but it'll be nice to see everything beyond the beyond the West Coast and totally different atmosphere. So ever since that moment, I think we knew that like if we're gonna go build a company, we're gonna go build a company where it matters the most. Right. And maybe that's one of the other lessons that I didn't touch upon that much. When we started a company in 2022, that was at peak. That was like the peak of like remote is going to be the way the world works. If you're not hiring remote first, if you're not building a remote first company, that you're going to get left behind. Right. So we really, really double down on. We said we are going to be a remote company first and foremost. We are going to tap into the best talent no matter where we can find it. And we are going to explicitly not have an in-person culture. I think looking back, that was a mistake. I don't think I would have been able to tell at the time, but today I think building an in-person presence is something that's super, super important for me. And if we were going to build an in-person presence anywhere, then you wanna pick the place where it's the best to do that. And I think the vibes in the Bay are immaculate.
Brian Bell (42:50.99) Really?
Brian Bell (43:07.47) I just make everybody at Team Ignite wear like a camera so I know exactly what they're looking at all day long and no
Terry (43:12.529) You can have a little robot that has that has everything that you do in the same space.
Brian Bell (43:15.682) Yeah. Follows them around. It's like a little drone camera and just follows them around. It's like sits up here. So it's like I'm always on the shoulder lo over look like looking over the shoulder. What what?
Terry (43:24.889) I think it might be differ it might be different for funds, honestly. Like I like like that's the thing.
Brian Bell (43:28.206) it's yeah. Yeah. We just sit here on Zoom calls all day and yeah, it's it's a different I think if you're try you building a company, it might be different. If I was if I was a startup founder, I think I'd probably I'd probably be in San Francisco or New York. Or or maybe one of the other hubs like Seattle or Austin or something, but and I'd yeah, I would probably have an office and I would I would selectively hire like I'm sure you would still like hire like one or two remote people if they're like exceptional. Yeah. Yeah.
Terry (43:32.921) I will say though, it is different when you meet up with people in person.
Terry (43:53.635) Eventually. Eventually. Like the other thing is like some of the the other thing is like you don't have to delegate things until really late off. Like one of the patterns that I really, really love from companies, right now. So we're we're setting up a lot of our infrastructure right now now that we've raised some cash and now that we're starting to grow a little bit at Clarity. we use Haven for all of our accounting and of our bookkeeping, right? they're doing quite well from an ARR perspective and they're growing quite quickly. their sales team is three people, and their founders are two of the three people. And they are super eager to hop on the phone and talk to you and walk through this whole process. And I ask, like, I ask them, like, hey, aren't you worried about automating this stuff or delegating out to a team? And he's like, Well, we'll do it eventually. We're far from that point right now. And I think I look back on that and I say, like, you know what? That's actually right. You know, like you can grow a hell of a lot more before you have to worry about scale.
Brian Bell (44:47.978) let's do some ra wrap up questions as we kind of wind down the podcast here. what's something that you believed five years ago, maybe before release, that y you totally would argue against now?
Terry (45:00.109) I wish you should have asked me that before the remote companies thing. I just I just don't think you can build startups remotely.
Brian Bell (45:08.063) that's interesting. What's a what's a popular idea in insurance tech that you think is wrong?
Terry (45:16.097) get flamed for this. I'm gonna get flamed for this. There's no way to there's no way for me to make everybody happy here. I
Brian Bell (45:20.078) You know, my wife worked in insurance tech. Yeah. You know, my wife my wife worked in insurance tech long time ago. they got acquired. there's a company, cov Blue Wave Technologies in Hawaii, and they got acquired by Coverall property casualty company. it was a long time ago, right? Almost twenty years ago now. Yeah. Yeah, they got acquired maybe, yeah, maybe like twelve years ago, thirteen years ago, something like that. Anyway.
Terry (45:28.995) Really? What company?
Terry (45:40.643) And not that long. Not that long.
Brian Bell (45:48.622) Yeah, I I'm pretty familiar with at least the property casualty side. And she worked at White Mountains Re, which is a reinsurance company.
Terry (45:48.965) Yeah.
Terry (45:55.307) so her she knows she knows the space then. She knows the space. Well, I think one of the tough parts is that taking on underwriting risk, you better know what you're doing.
Brian Bell (45:57.42) He knows the space, yeah.
Brian Bell (46:06.542) Yeah. But that's I mean, yeah.
Terry (46:08.089) Right, like I would not jump into that unless I like I unless I really, really, really knew.
Brian Bell (46:12.744) And I love your distinction that you kind of teased out between like required insurance versus optional. Optional insurance has to have a high profit margin, by by its nature, right?
Terry (46:21.743) Yes. And even if you have a high profit margin, I can tell you I would rather sell auto insurance at like a ten percent gross margin than I would some discretionary policy that I had to invent all the demand for that was making like 90% margins. Like the problem is that like distribution is really a lot more important than underwriting margins, right?
Brian Bell (46:38.413) Mm.
Terry (46:44.389) Like margins are important, yes, don't get me wrong, but like you can you can create the margins later. Like it's actually not that hard to start the MGA and to put together the capacity and to put debt behind it and take on your own risk. Turns out that stuff is a hell of a lot easier than actually getting the distribution in the first place.
Brian Bell (46:50.445) Yeah.
Brian Bell (47:00.632) Yeah. I have the the first American home warranty and my credit card, you know, every like year or two, my credit card gets stolen, some fraudulent thing happens and after they send me a new card. Everybody has this, right? we we do it, we we have it a lot. And they've been calling me every F and day to get a new credit card number. Like like like for nine days straight. And I'm like, maybe I don't want this.
Terry (47:13.03) Yeah.
Terry (47:25.454) why?
Brian Bell (47:27.362) You know, because it's actually like we have this like large house, lots of appliances and shit that can break. And we're like, hmm, for a hundred bucks a month, they'll just come out and fix whatever, right? and replace stuff. I'm like, it's a good deal. Like I've actually probably made money on it. But now it's like they've called me every single day for nine days. 'Cause it's a discretionary insurance product, right? You know, I don't need it. Like I don't need to give them a new credit card number. so
Terry (47:30.736) Yeah.
Terry (47:36.742) Yeah.
Terry (47:47.217) Yeah.
Terry (47:51.727) You should have the distribution first from it. Like imagine if that thing were bundled into your mortgage payments.
Brian Bell (47:56.534) Right. Which was kind of the thesis behind release, right? What if that was just bundled into your release payment, right?
Terry (48:01.827) I think the problem is that like the order of operations when you build is really important. The problem with rent payments is that it it's very difficult to make that much money on it. Right. And we looked at it and said, hey, it's really easy to see how this unique value proposition around this kind of flexibility can be a really high margin that we can grow. Where
Brian Bell (48:12.109) Right.
Brian Bell (48:22.572) Yeah. And that's what we saw in it because if like you were getting traction with these, you know, thousands of site units and we thought, well, if every if everybody in this industry just added this to the lease, it's a huge market. and then it doesn't have adverse selection, right? It's just it's and it's not an opt in because people opting in, like the student market, are more l likely to use it, right? Versus the, you know, the the grandma who's been live living in the apartment for seven years.
Terry (48:39.192) Exactly. Well that's what you need.
Terry (48:45.72) Exactly.
Brian Bell (48:51.822) She's like, I don't know, it's just included in my lease. And you know, that that doesn't if it's if it's opt-in versus opt-out, I I think it's a
Terry (48:59.525) We almost rushed in. We rushed in, right? Like I think the idea is that if we had been, if we were willing to spend more time building the really boring stuff that was just marginally useful, but that allowed us to build a ton of embedded distribution, then we could have gotten to the exciting stuff. And I think one of the key things is that like we rushed in because we thought, like, this is the only way we're gonna build this company. This is the only way we're gonna put together the money to do this, this is the only way that customers will trust us, is if we have the final value proposition. today. Right. The reality is that like you can sell that stuff and you can sell the vision of that stuff to other people while you build the frameworks that everything else has to live on top of. So if I could like almost go back, like when did you end up writing the chart to us?
Brian Bell (49:48.315) was probably twenty sometime in twenty three.
Terry (49:51.245) Mar late 23 or early 24, I'd say. So like when we go back to that. Yeah, like if I go back to that time, if there was anything I could change, let's just say that there was no product at all. I would say, like, hey, Brian, this is the vision. We're gonna bring flexibility to everybody, like, it's gonna be great. There's gonna be no kind of adverse election. We have this old we have an abundant amount of kind of leeway to price the way we need to price.
Brian Bell (49:54.658) Yeah, probably follow twenty three, if I recall, yeah.
Terry (50:16.805) But we're not going to build that stuff today. Like that is coming really, really soon. And we know how we're going to do it. And we have the partner set up for it. But what we're doing today is we're building out the payment rails for everything. And we're building this kind of necessary layer that's going to allow us to get into every single building in the US. Right. And we're going to layer on all these unique value propositions over time. And that's going to be the thing that really dramatically changes this company. Right. And you're buying in early. You're buying into this company before those things are live. Right. But they will come and that's where the margin's going to be.
Brian Bell (50:38.958) Yeah. Yeah.
Brian Bell (50:46.136) Do you feel like things would have worked out differently if you would have done the boring stuff and grown slower instead of going after the exciting stuff sooner?
Terry (50:53.817) I think you if we did the boring stuff, we could have grown faster, right? We could have grown faster from a distribution perspective, even if like the top line revenue didn't grow that much. Right.
Brian Bell (50:57.25) Mm.
Brian Bell (51:02.872) Yeah. Yeah. The lesson sometimes is like it's sometimes takes a long time. You mentioned Figma. I mean, Figma looks like this overnight success, twenty billion dollar company, whatever, but they wallowed in no product market fit for years. Years and years and years, right? Just kind of building and toying and iterating and eventually it all came together. But it took like four solid years for them to kind of
Terry (51:24.985) You have to do that though. Like you have to you have to be willing to move slow when you need to move slow. And you have to, I think, as a founder, be able to tell that story to get folks like you on board. Right. Like you don't just get like a blank check to go do that. Like not everybody's dill and field, right? But you have to sell that to people. Like somebody has to believe in your vision of working slowly towards this big outcome. Right. It doesn't work as well to pull the outcome forward and say we're gonna build a crappy version of that today, or we're gonna build the monetization for this thing before the core product is there. Right. Like you can't quite do that.
Brian Bell (51:59.756) Yeah. Well, I look I learned a ton. very grateful that you're willing to share all your insights with us. where can folks find you online?
Terry (52:08.625) I am sure that you'll be able to link to some stuff, but I will send over our updated site. You can reach us at claritylabs.inc and you can find me on Twitter where I am trying to be a little bit more active or trying to stop myself from scrolling so much, but trying to be a little bit more active in terms of engaging with folks.
Brian Bell (52:29.752) Yeah, it it was interesting you mentioned that social media. I I took social media off my home screen. It made a huge difference. I put it behind folders. And so I have to click a couple of times to get to social media. And now, even though I'm like kind of, I don't know, like a very minor influencer, I guess, in venture capital. I spend almost no time in social media. I just sort of yeah.
Terry (52:35.097) Mm.
Terry (52:48.283) So interesting thing there, I've actually come full circle on social media. So I used to, I think everybody used to spend too much time. Right. And then I got rid of Instagram. I basically got myself off of Twitter. I didn't even, I totally disappeared off of LinkedIn for a while. Like I was basically invisible. I was like, I'm gonna focus on building this company and doing all the things quietly. And I think that might have been a bit of a mistake.
Brian Bell (53:08.834) Yeah. I I still dip in five I probably spend five minutes on the business side and five minutes on the personal side a day. I kinda dip in, see what reels people have sent me, you know, kind of see what's going on really quick. And then I just I I duck you know, duck out and go read go read a book or an article or something.
Terry (53:25.445) Yeah, I think I'm all the way fully back where like I think at least in some ways you got to be where the action is and you got to stay on top of kind of where the pulse is on things.
Brian Bell (53:33.314) Yeah. I'm yeah, I do probably miss some deal flow not being on X every day. But but then s somebody will forward me, Hey, do you know what this person's raising? I just saw it on X. Like, you know, so
Terry (53:38.699) you miss some deal flow, but you also You miss a winner, but you also miss a loser, right? Like you gotta pick and choose where you win.
Brian Bell (53:45.688) Yeah, that's true. Yeah. Totally. Well, thank you so much, Terry. Really enjoyed catching up. congrats on the new startup. look forward to working together.
Terry (53:54.639) I appreciate it, Dunn. We'll catch you around.
