Jacob Sheridan’s best advice for early-stage entrepreneurs: Don’t try to start a business.
“Try to find a problem that’s a big problem,” Sheridan says. “Come up with a creative way to solve it. Make sure that people are willing to pay you for your creative solution. And then once you have enough people that are willing to pay you, that's when you start the business.”
Sheridan used this formula to launch TPA Stream. He was introduced to Eric Sukalac, a friend of a friend who had a ton of medical bills, but also a pre-tax health care account designed to cover a significant portion of these expenses.
With an expectant wife, Sukalac found the account was very helpful, but it required a whole lot of correspondence to complete the process, Sheridan says. “He got to a point in 2014 where he was just so fed up with having to send medical bills time and time again.”
Moments of peak frustration can sometimes lead to great inspiration. In this case, it led to the launch of TPA Stream, a health insurance administration software company.
TPA Stream was the winner of the KJK Entrepreneur Pitch Competition at the 2019 ASPIRE Dealmakers Conference in Cleveland.
Find your reason to be
In the midst of all this chaos with his medical bills, Sukalac came up with his own solution.
“He built a tool that logged into his insurance companies' online portal on his behalf every day to see if there were any new claims, download all that data and securely send it to the third party managing the (pre-tax health care account program) for his employer,” Sheridan says. “That's ultimately how the company started, out of Eric's problem.”
It wasn’t an easy time for Sukalac, now COO at TPA Stream; Sheridan, the company CEO; or Steve Fuhry, its CTO.
“We bootstrapped the company for a few years where we didn't raise money,” Sheridan says. “We had full-time jobs and we made things work. It's definitely hard to do, but it's the right way to do it. It's the right way to build a scalable organization. A lot of entrepreneurs that I talk to are so focused on raising money when they really don't know what they're doing. They don’t know that they're going to find success selling the widget or the software or whatever it is to their end customer.”
If you’re not confident in your business model, how can you build a business? Focus is a critical, yet often elusive, goal for early-stage entrepreneurs.
“As you're starting a business, what are you focused on?” Sheridan asks. “Are you focused on raising money? Are you focused on making sure that you have something really great and that you have customers for the thing that you're building? I really believe in making sure that you have customers for the widget, the product, the service or whatever it is you're building and make sure you do that before you really try to grow the company.”
TPA’s co-founders wanted to build a solid foundation for his company that would boost his odds of success once the business was launched.
“We believed in building that foundation to support our growth and moving a little bit more slowly early on to enable us to speed up in the future,” Sheridan says. “It’s a very basic concept: Walk before you run.”
Make warm connections
TPA Stream raised its first round of funding in January 2018.
“We raised a significant amount of money from two angel investors,” Sheridan says. “That was a very important time for us that allowed us to scale the company and really start to grow more quickly than we could with our own funds and the revenue that we were collecting.”
The company’s first enterprise customer was another big step that opened the leadership team’s eyes to the opportunities that were out there for their business.
“These larger contracts, these larger enterprise customers can take more time to close,” Sheridan says. “But they really help you grow and elevate your company and the services that you provide.”
The company has also received support from JumpStart and just this week, it raised another $1.4 million in a seed funding round led by North Coast Angel Fund.
Sheridan does not try to diminish the difficulty that often comes with building connections with potential investors, customers and stakeholders.
“One thing that I've learned is the value of your network and the value of a warm connection,” Sheridan says. “I don't cold call or reach out to investors without an introduction. I talk to one to two investors on a daily basis. They will most often reference someone that they've talked to in my network that has recommended that they talk to me, or different people in my network introducing me to other investors.
“Some of the folks I'm talking to now are essentially people that I've talked to through being introduced to five to six different people. And so it's unbelievable the reach that you can achieve with your network.”
Be a good listener
Another strategy Sheridan has found helpful is understanding what’s important to the investors that he talks to.
“Some investors really want to find people that are willing to take their advice,” Sheridan says. “They just want to make sure that you're listening. When they say something, they want to make sure that you do something after they give you a piece of advice or a recommendation. You don't have to take all of their advice, but you need to listen.”
Beyond that, it often come downs to someone who can tell a good story.
“Businesses are stories and the best investment pitches are really good stories,” Sheridan says. “Our company was started from one of our co-founders having a problem and he built a tool to solve that problem. That's the kind of story that people are looking for.”