[Founder Talk] Asia’s next Insurtech unicorn with Roseline Koo from CXA
Podcast Introduction
BEYOND UNICORN is a biweekly podcast hosted by Widelia Liu — tailored contents created with private investors in mind. Through in-depth conversations with founders, investors and experts, we highlight thought frameworks to assess value, deep-dive into company’s value drivers and actionable strategies around topical investment themes.
Episode Notes
Today’s guest is Rosaline Koo — founder and CEO of CXA group, Asia’s leading Insurtech start-up running a Software-As-A Service health and wellness platform. We began our conversation with Rosaline’s personal story, how an accidental journey that provided her with the knowledge and network to launch and grow CXA, we examined how CXA disrupts the traditional insurance industry, its revenue streams, current and future value drivers and lastly, looking forward to its unicorn aspiration, profitability and exit plan.
Key Takeaways
- Traditional insurance industry is laden with inefficiencies created by the layer of middlemen including brokers (usually 15% commission), agents (first-year premium as commission), third party administrators (TPAs) which charge clinics 15 to 35% of the medical bill
- CXA cuts away the middlemen and establishes direct-to-consumer channels connecting health and wellness providers to end consumers via their workplaces
- Through its platform, CXA offers employees the choice and option to extract value from the “free money” (i.e. voluntary contribution provided by employers as part of employee benefits) which goes back to the company if it remains unspent by the end of each policy year
- CXA’s key value propositions: 15 to 25% saving on employers’ healthcare cost; digitalised health and wellness ecosystem connecting all value chain players
- CXA is on path to achieve profitability by 2020 assuming no additional allocation to growth capital and attain its unicorn status within 3 years
Tweetables
“I feel like I’ve had a very accidental journey. There was no intention. So, it’s just… maybe it’s like Forrest Gump. Things just kind of happened.” @RozChowKoo
“If your legacy is a channel that makes most of your money, anything that threatens them will threaten your whole firm because they will walk.” @RozChowKoo
“Essentially, we are a marketplace that’s a closed network with free money that if you don’t spend it by the end of the policy year, it goes back to the company” @RozChowKoo
“Not from the beginning but maybe ever since we hit a hundred million. Once you hit the magic 100, you think, “Oh, if I can hit a hundred…I’m already a tenth of the way” @RozChowKoo
Episode links
CXA Group: https://www.cxagroup.com/
Roseline Koo: https://twitter.com/RozChowKoo
Libsyn website: http://beyondunicorn.libsyn.com/
Subscribe on iTunes
Transcript
Widelia: Welcome to the show, Rosaline. I’m so happy to have you joining us.
Rosaline: It’s a pleasure to
BACKGROUND STORY
Widelia: You have such an interesting personal story. Let’s begin with the multiple career switches you made in your life. Can you share with us what they are and what prompted each move?
Rosaline: So, I feel like I’ve had a very accidental journey. There was no intention. So, it’s just… maybe it’s like Forrest Gump. Things just kind of happened. So, my first career, after graduating from engineering school, was to work in a factory for Procter and Gamble. And I worked there as a factory manager for two years. But went to business school right after, and after business school, I stayed in New York. And that’s how I got into banking. So, I actually had a choice, either move to non-profit or banking. And since the non-profit annual salary was the same as my monthly salary in banking, I just said, “ Oh, okay, I’ll choose banking.” And so, that’s how I made the first shift.
The next shift after banking… I was supposed to be a banker in the same bank in London. But my husband instead got transferred to Singapore. And so, I moved with my husband and my daughter to Singapore. That’s how I got out of banking, it’s because they told him… London, and I transferred to my bank in London, then they said, “Oh, I’m sorry. Move to Singapore.” So, I moved to Singapore. And I didn’t have a job. Because I didn’t expect to move to Singapore.
But after three and a half years, one of my friends, in 1999, started an internet company and asked me to invest in 1999. That’s the beginning of the dot com. So, I invested. And then, I launched him.
And so that’s what happened. So that’s how I got into technology, because I invested. And I happened to be in Asia. And then, Bain Capital saw me launch and asked me to join a giant start-up. So, I was the builder of this giant start-up. And I only left it because I was commuting to KL every Monday morning coming home, every Friday night, I had two children at home in Singapore, and I discovered my daughter had epilepsy, a learning disorder. So, I quit. Because I’m the mommy, right? My husband didn’t quit. I quit.
And so, after I home schooled her, got her fixed, one of my clients from my internet company was an insurance company, they asked me to build up their e-business. Because by then, I’d built two internet companies. And that’s how I got to insurance. So, it was really because I was bored and my client asked me. And then, because I built a new channel, a direct channel, I didn’t want to pay the brokers, I stole 200 clients from the broker, and so they hired me. I was disintermediating them, so the biggest broker hired me.
Widelia: And that’s ACE insurance?
Rosaline: So, I moved from ACE, and then I moved to Mercer. So, yeah.
Widelia: So, Mercer was the-
Rosaline: The broker.
Widelia: … the one that you are helping to build the e-channel.
Rosaline: No, it was ACE. I was building an e-channel for an insurance company, and then I was stealing clients from the broker. Because I didn’t believe in paying brokers. And so, the biggest broker hired me. And I ran their 14 countries.
Widelia: Which is Mercer.
Rosaline: Which is Mercer, yes. So that’s… so it’s really been an accidental journey because of something that happened in my life. But all of these experiences prepared me to build my start-up. Because when I was in banking, I ran 401K retirement services. So now, I built the 401K of healthcare. So, when I ran the insurance company, I actually learned about insurance, and I was running all the bank channels. When I was building my start-up, the second start-up ended up being a regional payroll provider. I was providing HR services. And then, when I ran Mercer, I learned all about the healthcare needs of multinationals in 14 countries. So, it all came together. It’s only in looking back that these random career choices made sense.
FOUNDING CXA
Widelia: Yeah, that’s really fascinating. And it is during your time at Mercer that basically you got the idea to launch CXA.
Rosaline: Yes, exactly, exactly.
Widelia: And can you just give us more details in terms of the problems that you identified in the employee benefits market and how CXA solves these problems?
Rosaline: Yeah, so it’s really… so we grew eight times. But every single client in every single country complained the same complaint. It’s like, “Why is healthcare cost rising exponentially all the time faster than inflation, faster than revenues?” They also said, “Look, why is it the same benefit for everybody, right? And I have five generations under one rooftop.” The last thing they complained about was, “Why is there a physical, paper, medical receipt? Why can’t this industry be fixed? No one can reimburse me. So, what’s wrong with this industry? Can you fix it?” So, I actually figured out how to fix it. And I asked them for $10 million to spend on technology to build something to fix this problem. But they said no every year, for five years. That’s when I left to build my own. And I spent my own $10 million to build CXA.
CXA’s KEY BUSINESS AND CORE VALUE PROPOSITION
Widelia: And just to talk about this solution that you found, which has now been transformed into CXA-
Rosaline: Exactly, exactly.
Widelia: … what are the key solutions or key value propositions behind CXA?
Rosaline: So, the key is us monetizing the money each company spends on employee into a wallet. So, it could be insurance or it could be like a health screening budget, the see-your-GP budget, get TCM, your dental budget. So, we monetized it, and then we built a marketplace of choices so that each employee decides what they need. But because there’s so much duplicated spend, if you’re married to someone that’s working, their company covers the whole family, you can’t actually go to two insurance companies and get the same reimbursement. It’s wasted, it’s duplicated. So why not free up that money and prevent disease from happening or, if you’re really healthy, use it to get healthier?
So that’s how we shifted the same amount of money into reducing healthcare. But not only that, now we’re actually building a whole value chain and eliminating the middle men. So, the middle men, for example, brokers, take 15%. Agents take the first-year premium. TPA’s, third party administrators, actually charge the clinics 15 to 35% of the medical bill. What if I remove these three layers? Then I can cut cost immediately. Then I can go out to clients and say, “15 to 25% off your healthcare cost.” Because I’ve actually taken out the middle men and integrated the entire ecosystem.
Widelia: But that must be a very difficult challenge to accomplish. And especially considering the Insurance industry is a very established one with many players’ interests deeply intertwined with the status quo. So how did you go about disrupting the status quo?
Rosaline: Yeah, so think about an insurance company, they never built a digital distribution, right? They use brokers, agents, banks. They never digitize their product. That’s why there’s a physical piece of receipt, medical receipt where people manually reimburse it. Then they never actually connected their supply chain, hospitals or clinics or the drugs, right? They hire a third-party administrator to connect it. What if I eliminated all that and digitized the entire thing, the supply chain, the distribution, the product itself? Can I take massive amounts of money and waste out? That’s what we’re doing.
Widelia: And yeah, but how did you manage to do it? Sometimes I wonder why big incumbents with ample financial resources didn’t jump on the digitalization trend that is disrupting almost every industry?
Rosaline: Oh, I’ll tell you why. And this is only because I worked for the insurance industry. If you’re an insurance company and most of your revenue comes from insurance agents, if you try to digitize, they will try to hurt you because you’re taking away their bread and butter. So, if your legacy is a channel that makes most of your money, anything that threatens them will threaten your whole firm because they will walk.
Widelia: So why didn’t the agents themselves try to digitalize in a way to-
Rosaline: How can you? Their whole value proposition is get all your friends and relatives to buy, push insurance at them, right? Where the commission levels are whole first year premium or multiple years. So no, it goes against the whole business model. Why would you cannibalize them? So, the whole business model has to change. But how do you do it if you have the legacy business? You can’t, right? So, you’re killing yourself. So, it’s easier to be an insurgent outside when you don’t have to protect a legacy business to do this.
Widelia: So, coming back, I think the key disruption we discussed is literally trying to cut away the middle man that has been involved, so effectively connecting the insurance company directly with people who need insurance.
Rosaline: Yes, but more than that, we’re now white labelled by banks who own insurance companies. And these banks, every bank has direct consumer clients and also, they have corporate clients. What if they can cross sell their entire corporate base and all the employees of the enterprise clients healthcare and insurance and connect the whole ecosystem for them? But not only that, because we’re covering for insurance for each employee, we actually know when people get married. We know when people have a baby, because you have to cover for dependents. We also know when they join a company, when they leave, we know all their demographics, their birth dates, their gender. So, if you know this information, the bank can cross sell mortgages and loans and savings and investments.
Because in Asia, no one will marry you unless you can buy a house or car. If you’re rich, everyone will marry you. You already have the money. But most people aren’t. You need a mortgage or an auto loan. And you can bundle that with auto insurance. So, the banks are using our data to cross sell their entire captive base but also the employee of their entire captive base, with additional financial services by offering a health ecosystem that gives them 25% off doctors and insurance.
And so, if someone is using our app, whenever someone gets sick or to the gym when they want to get really healthy or to manage their diabetes, they’re always on, you get all this additional information to cross sell financial services. So, our business model has many revenue sources. Essentially, we are a marketplace that’s a closed network with free money that if you don’t spend it by the end of the policy year, it goes back to the company. So, I am a closed network with revenue sources everywhere, financial services, healthcare, lifestyle, insurance.
Widelia: Yes, so we discussed how CXA started with a marketplace — cum — I would say brokerage business.
Rosaline: Mm-hmm (affirmative).
Widelia: And now, it has shifted to white labeling, which you mentioned when you are integrating the tech platform with the banks.
Rosaline: Yes.
Widelia: So for the white labeling solution, is it a technology platform-
Rosaline: Totally.
Widelia: … but you also mentioned.
Rosaline: I integrate online, offline. It’s a tech platform that integrates the whole health ecosystem: the doctors, the health screening, the e-pharmacies, the teledoc, the gyms, the yoga, the disease management, the smoking cessation, the TCM, the dentist, all of it.
Widelia: So the key value proposition for this white labelling tech platform is not exactly on the technology itself. But it’s literally on the ecosystem of wellness-
Rosaline: Totally, yes.
Widelia: … that you are a building up with the different-
Rosaline: Exactly, exactly.
Widelia: … players. And this basically gives you the competitive edge over, say-
Rosaline: Yes.
Widelia: Because I was thinking that banks… All these companies that you’re working with are all well capitalized in a way.
Rosaline: Totally, but they’ve never built an insurance system or health ecosystem or the ability to capture data on employees of their commercial base to cross sell them personalized, at the right life stage, the right service at the right time to the right person.
Widelia: So how is this white labeling solution? Is it highly customized, or there’s different sections that are… basically, for example, the wellness providers that is already on the ecosystem, they will be basically passed through a cross-
Rosaline: Yes, exactly.
Widelia: I would love to understand how that works.
Rosaline: Yes, so if I’m in a city like Singapore where I have a broker and I have a white label deal with a bank and a Telco and an insurer, right, it’s the same ecosystem. It’s just packaged slightly differently. And for each SME or corporate, they can tailor and configure for their own company, the amount, how much… or some companies can say, “Gyms are allowed,” others will say, “No, I don’t want that.” You can turn on and off the menu. But you can also configure the benefit levels and the types of claims for senior executives that you can say includes all these things and this amount versus a low-level staff, a much lower amount, maybe no dependents. It’s all configurable.
Widelia: And the revenue model for CXA, is it going to be a… basically like, I would say, technology licensing fee plus also a brokerage commission?
Rosaline: Yes, not just a brokerage commission, but it’s like an e-commerce transaction plus SaaS.
Widelia: The e-commerce transaction part is on the brokerage commission part.
Rosaline: No, could be on the gym, it could be on the doctor’s visit, could be on the health screening, it could be on the work site insurance, it could be TCM. It’s endless. We have thousands of vendors. It could be travel in China. It could be coffee, movie tickets, Starbucks, Taobao.
Widelia: Yeah, that’s just a whole gigantic marketplace.
Rosaline: Yes, health, wealth, lifestyle, learning, personal development. It’s the free money. Because if I can monetize not just the insurance but housing allowance, annual leave, transport allowance, rice subsidies, retirement budget, wellness account, performance bonus, I am the free money for the corporate employees. So right now, it’s health, wealth, lifestyle, but you can add learning.
Widelia: And you’ve mentioned about the free money. So, I think going back, each employee of a bigger company, they are usually given this X amount of money, which is their employee benefits, in a way, which means that before the company makes a decision on how to spend this money. But now, the money is being parked into a wallet of CXA account?
Rosaline: Yes, now the employee decides. But the employer can say, “Here’s the default. You have to at least get a little bit of life insurance, a little bit of… in case you need to go to the hospital or the doctor or you have an accident. But all the rest, you decide.” We’re just monetizing all the benefits and wellness’s perks, but negotiating massive discounts because of our volume for everything. And the good news about the banks and the Telcos is for their credit cards or their rewards program, they already negotiated massive discounts. But if their white labeling my platform, they can bring all those vendors on with all those discounts. I just share revenue with them.
Widelia: And for the employees, whenever a client works with CXA, are you the only platform where all the insurance or wellness choices have to be selected through the CXA platform?
Rosaline: No, you can go outside and you just pay for something, you get reimbursed. So, you can always do that.
Widelia: So, do we have any data from the existing clients that you are working with by offering CXA platform versus them going out and selecting-
Rosaline: Yes.
Widelia: … an individual insurance? How is the usage and take up rate like?
Rosaline: So, our average take up rate for insurance, digitally, is about 33%, a third will use their flex dollars wallet or their own money, using credit card, to buy additional insurances digitally.
Widelia: So, the 33% means that in a company, 33% of the employees will be buying insurance.
Rosaline: Additional insurance. So, they still get to select what the company-paid insurance is that covers them if they stay at the company. But they can top up that amount or use some of their wallet to buy additional, personal insurance that goes with them and is portable, even when they leave that company.
Widelia: So right now, those compulsory insurances that is being purchased by the company for the employees are not done on the CXA platform.
Rosaline: It is. That’s the enrollment. We do the enrollment for the compulsory piece.
Widelia: Okay.
Rosaline: And there’s a voluntary piece on top of that.
Widelia: So, the free money that we talked about is the voluntary element of it.
Rosaline: Yes.
Widelia: Okay.
Rosaline: So, let’s say… Let’s give a case. Your company gives you $10 000 worth of insurance that’s compulsory plus money for wellness, right? For health screening, for the dentist. We just monetize the whole thing. The company decides, “Okay, at a minimum, you have to take $3000 worth of compulsory insurance.” But you can top up that amount or if you can draw down some… For some companies, they let you free up the entire hospitalization amount if you upload your certificate that shows you bought Integrated Shield in Singapore. And 70% of Singaporeans buy Integrated Shield, completely duplicates the company’s cover. So, you can free up most of the money and spend it yourself.
Widelia: Again, when the employee from a company, let’s say Google, or different, bigger companies, which are CXA’s clients, when they come and use the platform… was it an internal platform within Google that you-
Rosaline: Yes.
Widelia: … built for them?
Rosaline: Yes, yes.
Widelia: Or was it coming totally off to a separate CXA platform?
Rosaline: So, for most big clients, we’re single sign on, is in their intranet and is part of their annual enrollment exercise. We are the annual enrollment exercise, powered by CXA.
DATA COLLECTION, MANAGEMENT, ANALYSIS AND PROFIT MODEL
Widelia: Amazing. So, I think two others… two areas which I want to delve deeper, I think one part is one data. So, I think with digitalization, the key benefit is to have access to data.
Rosaline: Yes.
Widelia: And with the data, you can make so many analyses that can potentially create the cost saving, which you mentioned.
Rosaline: Yes, and some recommendations on health.
Widelia: And so, how’s data being tracked and analysed in CXA? So, can you explain about data analytics capability there?
Rosaline: Yes, so we are essentially a data play. So, the first amount of data comes from the company and each employee. Because otherwise, you can’t cover them for insurance unless you know age, salary, gender, dependents, work life events. And so, you get that first. That data is structured, right? So that’s the beginning data. Secondly, employees go in and select their base insurance. And then, they have a wallet and they shop. But also, we enable the health screening. So, we upload directly from the labs, the blood test results. And we make recommendations to them about their risk of diabetes, hypertension, cholesterol.
But we also, since we integrate into the clinics, we get the diagnosis and the drug data. We also have a lifestyle assessment, either from the phone, taking their steps. But if we know your blood tests, we know your age, we know your gender, we know your drugs, we know your diagnosis. We know your lifestyle habits, we can predict… we can do early prediction of disease. And we can actually hook you up with the right providers in our marketplace that help you manage your diabetes or your diet or your mental health.
Widelia: And how is… because there’s a lot of different data providers along this whole chain of data collection trail-
Rosaline: We just capture directly from the source. Our entire marketplace of providers and partners are fully integrated. So, it’s not like users have to enter any information. It’s captured as you go see doctors, as you go to the hospitals, as you go to the gyms, as you shop, as you do your health screening, as you manage your diabetes.
Widelia: The fact that you’re able to collect the data at source is a great advantage in terms of ensuring data accuracy
Rosaline: Yeah, it’s not entered. It’s captured as part of the journey we built.
Widelia: And how are you analyzing this army of data? Are you having your own…? We talk about AI so much. How is AI being deployed in your current business?
Rosaline: We have our own data analyst here and our own data scientist.
Widelia: So, you are having your… building your own machine algorithm-
Rosaline: Yes.
Widelia: … machine learning algorithm-
Rosaline: Yes.
Widelia: … and using AI to-
Rosaline: Give the recommendations.
Widelia: … give the recommendations.
Rosaline: Yes, yes, that’s our recommendation engine.
Widelia: And this, going forward, would it be a key value driver for CXA?
Rosaline: Totally, totally, that’s how we can recommend financial services and healthcare services and lifestyle services and products.
Widelia: Data is very sensitive in a way.
Rosaline: Totally.
Widelia: How are you thinking about having the right management of this data and also having the appropriate monetization of this data?
Rosaline: Yes, so that’s the key. Because data privacy is the key to our model. Since we have such sensitive personal data, everything is… anything that’s personally identifiable is encrypted in transit and at rest. The only… So, we had to build that algorithm that only goes to each employee themselves. What goes to the company is aggregated and anonymized, “4% of your population are at risk of diabetes. I would suggest you bring a diabetes program in.”
So, we score everything. But we have to have personal consent for anything. So, we built it with GDPR, PDBA, HIPAA, and no data crossing borders. So, the complexity of building this country by country, company by company, partner by partner, all integrated at source, has been years, brick by brick. It’s not an easy model. And there are regulatory issues in banking, in insurance, in healthcare, with HR, and across countries. So, the complexity of the model is huge. We’re trying to simplify it.
Widelia: Yes, definitely sounds like a huge and gigantic task. But once you had that first mover advantage, I guess it also creates a kind of advantage which would take a competitor a few years in order for them to-
Rosaline: Yeah.
Widelia: … catch up.
Rosaline: Yeah, it could be copied. It’s just years to do.
KEY TO FUTURE EXPANSION — WHITE LABELING
Widelia: Yes. And I think during the conversation that we had just now, another big area that you were mentioning is this white labeling and how it has been… kind of going to be the future main driver of CXA’s business.
Rosaline: Mm-hmm (affirmative), especially in scaling. We started with it six years ago, but we got kicked out of the bank because the insurer got kicked out. Another insurer won. So, we started with two channels, brokerage and white label banking for insurance. But it just took us six years to get back because our timing was wrong. So, we started with both channels.
Widelia: So was it… when you say it takes you six years to get back, this time, the second time when you went back, was it that the banks were calling-
Rosaline: It was a different bank, many, many different banks. So, I never gave up on this second channel. Because it propels you and it’s exponential growth. It’s easier to go to one bank with 350 000 corporate customers than it is to go to 350 000 corporate customers one by one. So yeah… so no, we always had the model. It just took me a long time to convince the banks to do it. But now, we have many.
Widelia: So now, banks… and just now, we talked… so banks are the key-
Rosaline: Not just banks, but banks, insurers, Telco, healthcare firms, payroll firms, we have many variations of this now.
Widelia: But banks were the initial-
Rosaline: Yes.
Widelia: … target of when you designed this white labeling solution.
Rosaline: Yes, because I was a banker. And when I was running insurance, I had the bank insurance. I used to run the bank channel.
Widelia: So, it really is all the past experiences-
Rosaline: Yes.
Widelia: … and the past networks that you built across-
Rosaline: Exactly.
Widelia: … your entire career that is contributing.
Rosaline: Which was unplanned, obviously. It’s just that only when you look back does each piece add up to now.
CXA’s International Expansion Plan
Widelia: And maybe we talk a bit on the international expansion. So, I think CXA has already gone through the initial stage of, I would say, testing product market fit and creating your value proposition. Now, you’re properly entering into a scaling phase.
Rosaline: Yes, yes.
Widelia: And so, we talked about white labeling as being a very important revenue stream for the scaling of the business.
Rosaline: Yes.
Widelia: And then, in terms of international markets, so can you share with us what is your thinking on the international expansion?
Rosaline: So, it’s entirely demand driven. So many are driven by our investors. Because I allow the strategics to invest in us, but they white label us. It’s just that some of these contracts are over 10 years and are global. So, they… It’s a road-map of where they want us to be. Because the solution can be in any country as long as… everyone’s… there’s companies in every country, and they all have insurance. And they all have employees who need to see doctors. And they all have diseases. So, it is a global solution. So, we want to focus on Asia first. But we have to get to Europe and then the Americas with many of our contracts, but first, get Asia right.
Widelia: So, healthcare, and especially employ… employment, and there’s so many different regulations, and it’s highly, highly localized.
Rosaline: It is, always. But there are some commonalities that are core. So, there’s typically a core of medical benefits, right? And typically, … So, with some countries, it’s paid entirely by the government, and you supplement it because you want your employees to go to the private hospitals and not just the public hospitals. So, you cut the queue. But in the common cores, there’s still benefits, there’s still doctors, you still have prevention, there’s still diseases. So, everything is a variation, but the core is 70%. 30% is the variation.
And it’s just localizing. So, we actually understand globally, since I’ve been in the business, what’s core, what’s configurable. That’s how we scale.
Widelia: And I know that when you first started scaling, you went out and bought brokerage, I would say, licenses.
Rosaline: Yes.
Widelia: But later on, there was a shift in strategy to become… to form partnerships with the kind of bigger, local, insurance companies.
Rosaline: Yes.
Widelia: And can you share about the learning there and how is it going to be for the future?
Rosaline: Yeah, so I started out knowing I would do three countries in brokerage. Because they’re the regional headquarters. Singapore, Hong Kong, and China are the regional headquarters of where the decision makers sit. So, I knew I needed licenses in those countries. And then, my husband said I can’t use any more money, so I stopped buying brokers. That’s how we did it. Then I decided, “Okay, if I can’t buy any more, who has a footprint?” And so, we found some partners. Because for some clients, they said, “Do all 14 countries for me.” And I’m like, “Oh, I’m not going to buy 14 brokers in 14 countries.” And my husband said, “Don’t use any more money. You spent all our money already.” And so, I found partners. That’s how we make these decisions. That was it. That’s the truth behind how I made our decisions. My husband said, “No more, that’s it.”
Widelia: Sometimes it’s not that scientific, right?
Rosaline: Sometimes it’s just your husband runs out of money. And that’s all we have.
Widelia: And so, in terms of… I know that in China, you had a partnership with Fosun Group
Rosaline: Oh, we still do.
Widelia: You still do. And they are such a very, very big conglomerate. They have business in almost every sector, every industry you can think of. So, when you say you have a partnership with Fosun Group, what exactly does CXA do, and how do you work with these partners that you build up, like say, Fosun Group.
Rosaline: So Fosun, we bought our own broker in Shanghai and Beijing, but so many of our clients are not in those two cities. Fosun, for the… because in China, it’s really province by province, the licenses. And I don’t have a national license. They have a national license. So if I have a Shenzhen client, can I use your license? But we are the platform. It’s just sometimes I need to use their license. But that’s it.
Widelia: So, they are also not involved in business development.
Rosaline: No, no, no, it’s just really leveraging their license.
Widelia: And right now, CXA is in how many countries and what are the future expansion plans?
Rosaline: So, we have clients in 20 countries. We have a presence in about eight countries. So it’s just one by one, how do we… where is it worth putting a presence? If I could get away with not putting a presence, I will. So, for some countries, we fly in and do stuff for a while. And then, it’s just when it gets so big, it’s like, “Oh, okay, let me add a person.” So, I’m trying to be as lean as possible.
Widelia: And coming back to the white labeling solution, so for white labelling, it is… you don’t have to have a presence in-
Rosaline: Exactly.
Widelia: … the different countries. And so, that’s-
Rosaline: Exactly, what a scalable model.
Widelia: Yeah, I see.
Rosaline: What a scalable model. If you get the largest bank, the largest Telco, the largest insurer, the largest TPA, you build the ecosystem, maybe I just need a person there to be account managing. What a high-margin business, especially because I just have to have a platform, and I just integrate partners. But sometimes you can fly in and do that.
Widelia: Yeah.
Rosaline: Because the partners are doing the selling to their consumer base and their enterprise base.
Widelia: And yes, and what you would help with also, say, from your experience or best practices you learned in different countries in helping and supporting them.
Rosaline: Exactly, but I can have a fly in model so I just have a person model. You don’t need that many people to scale that way.
Widelia: So right now, looking at… We are talking about 2019 right now. So, what is the revenue distribution coming from white labelling versus your original marketplace versus brokerage?
Rosaline: So, many of the white label deals are launching right now. So, it’s predominantly brokerage. But each year, it’s going to get to half pretty soon, then much more so distribution.
FUTURE PLAN AND TARGETS
Widelia: And this would… Would you say that you would be spending your main efforts in driving this white labeling segment of the business over the next two to three years?
Rosaline: Yes, yes, but everything we’ve built for our white label, benefits our Fortune 500 business. So, as I integrate all the clinics and eliminate the TPA’s, as I build a rules engine so that even medical insurance is 15 to 25% cheaper, I can use all of that ecosystem and the discounts for the Fortune Global 500 where I have a brokerage license and offer them the same discounts. So, it’s all self-reinforcing. It’s a way to capture the largest companies in each country and get the smallest companies through distributors. So, I have a large company distribution and everybody else. It’s one of those domination strategies that reinforces each other. Because it’s the same platform.
Widelia: And just thinking in terms of… so this white labeling solution is effectively SaaS-
Rosaline: Yes, exactly.
Widelia: … kind of-
Rosaline: Exactly.
Widelia: … business model that we’re looking at.
Rosaline: Yes.
Widelia: So, when you go out and basically develop… business develop clients using this SaaS, is there a network effect?
Rosaline: Yes.
Widelia: Does people have… the more clients you have and the more integrations that are possible.
Rosaline: Yes.
Widelia: So, it’s not a matter of, let’s say, if I’m bank A, I want to be different. So, I want to be… having a superior platform compared to bank B. And that’s not the-
Rosaline: It’s the same platform, same network. It’s just that the product makes may be different and the bundle may be different. But yes, it’s exactly a network effect. That’s what we’re building. The more buyers, the more sellers, the more massive discounts, the more users.
Widelia: So white labeling SaaS solutions is the key to profitability.
Rosaline: Yes, the enterprise SaaS is very highly, high-margins versus one by one enterprise sales.
Widelia: And I think you mentioned that you’re aiming for profitability by next year, 2020.
Rosaline: Yes.
Widelia: Is CXA on path to reach profitability?
Rosaline: So, we are. Some of our new investor coming in are all saying, “Why don’t you invest a little more? Do more geographic expansion. Delay the profitability. But go for growth for now.” So, we’re weighing the two options. So, some are asking us to invest a little bit more in growth first. Delay the profitability, maybe a quarter or two, get the geographic expansion.
Widelia: Yeah, so it’s always a fine balance when-
Rosaline: It is a balance. So different investors say different things. So that’s what we’re weighing right now. So, should we just go for growth? Many are saying yes, do that.
UNICORN DISCUSSION
Widelia: And now, onto my favorite section, our unicorn discussion. So CXA is currently valued at 250 million USD in your latest financing round.
Rosaline: Mm-hmm (affirmative).
Widelia: It is so close to that unicorn status, which is the ultimate dream for so many entrepreneurs. Is unicorn an aspiration for you at the very beginning?
Rosaline: Not at the beginning. At the beginning, it was just like, “Look, build this company.” So, in the beginning, it was just, “I’m fed up. I’m going to go build my own.” So no, not from the beginning but maybe ever since we hit a hundred million. Once you hit the magic 100, you think, “Oh, if I can hit a hundred…”
Widelia: “I’m one tenth there.”
Rosaline: Yeah, “I’m already a tenth of the way. What do I need to do?” So, once we hit that, that’s when it first tipped us off that, “Hey, maybe we can make it.” So now, we’re much closer. And we already have the contracts. It’s an execution issue. We already know what our revenue line looks like just with signed contracts, so it’s, “Can we execute to get there?” So, we don’t… so really, it’s execution. But I’m always an optimist. Every founder’s an optimist. It always takes longer than you estimate, everything. But it’s within reach.
Widelia: So, what are the milestones? What are the milestones that you will see over the next two to five years? I would expect that to be a reasonable timeline for CXA to reach the unicorn status.
Rosaline: Yes, we think within three, but it’s really launching these distribution deals, showing the traction among all the corporate enterprise clients and the traction among the employees of these enterprise clients. So, we have three tiers of revenues as we go SaaS, the distributor, the employers, and the employees with the free money. So, these three tiers, it’s really showing all the case studies and getting larger and larger. Because some of our white label deals have hundreds of millions of clients. So how do we show traction? And what are our learnings? So yes, more countries, more distributors, more users, more revenues. We have a lot to do.
Widelia: So, is IPO part of the plan, and once you reach a unicorn status, then what will be… if we try to dream further, what will be after you reach your unicorn status?
Rosaline: So, it’s… We can’t decide should we do a trade sale, should we do an IPO. I have a feeling the answer will appear, right? We’ll know more. Right now, it’s just, “How do we just get flawless execution as we launch all these white label deals?” They’re launching now, in the next few months. So, they’re all launching. So how do we just execute? So, it’s hiring, geographic expansion, launches, launch after launch after launch, right? And perfect the model.
Widelia: I think you found the-
Rosaline: So fun, fun… It’s fun. It’s accidental.
Widelia: It’s accidental, but-
Rosaline: Piece by piece.
Widelia: Yeah, but you are doing so well and such an amazing journey and I think now you also cracked the code for reaching… bringing CXA to the next level. I really look forward to keeping up to date with CXA’s development and hope to have you back on the show as a newly admitted unicorn in the very near future.
Rosaline: That would be great.
Widelia: Thank you so much for sharing your insights with us.
Rosaline: Thank you for having me.
Ending Remarks
I first met Rosaline at a Christmas dinner back in Dec 2013 — right around the time when she was launching CXA. Fast forward to today, CXA has grown to become a posterchild start-up within Asia’s InsurTech space with a valuation of US$250M. To me, her entrepreneurial journey seems to be smooth-running but what I didn’t know were the untold challenges and difficulties she shared with me after recording. I am so happy to see her pull through the difficult phase and bring CXA back on track for exponential future growth.
Her optimism, resilience and persistence can be attributed to her colourful life experiences which unfortunately we didn’t have time to cover during our interview. I highly recommend you to listen to an interview by Steve Stine from Inside Asia where Rosaline shared about her personal stories — https://www.insideasiapodcast.com/episode-22-2/. It provides great perspective on Rosaline as an amazing individual.
Wish Rosaline and team CXA great future success!
Widelia
Disclaimer
This podcast is for informational purposes only. All opinion expressed by Widelia and Podcast guests are solely their own and should not be relied upon as a basis for investment decisions.
