Cleo | Supporting Working (From Home) Parents

Hey, everyone, this is Heather Mack from Greylock. You're listening to Grey Matter, where we share stories from company builders and business leaders. Today we're talking with Sarah Jane Sacchetti. SJ is the CEO of Clio, a family benefits platform for working parents, or soon to be parents. Clio is one of a handful of health tech startups that have been working for years to improve the efficiency, access, and quality of health care. It's also one of just a few companies that have actually experienced growth during the coronavirus pandemic and subsequent economic downturn. SJ joined Clio in 2019, four years after the company was founded. In the six months since she's been CEO, SJ has been busy, to say the least. So let's hear more from her. Sj, welcome to Gray Matter.

Thank you, Heather. I'm happy to be here with you today.

Can you start off by giving us a quick overview of Clio?

Of course. So Clio stands as this really interesting intersection of two pretty in conflict worlds, the world of parenting and the world of work. And about four and a half years ago, the founders of Clio realized that there was a huge opportunity to bring employers a solution that made the working family actually work better. And what we mean by that is really supporting all of what I like to think of as the interruptions or the traps that get in the way as you grow your career and grow your family at the same time and support families through navigating it, support them through better healthcare, mental health support, parenting coaching, and even more. And you know, our end goal is to get people back to work from their leaves, but not just that, really get them back to work as their whole selves, create organizations and support that really help these working families thrive. And I think what's really interesting about that is working families are the fastest growing part of our American workforce right now. Millennials are going on their second and third children, right? And so, you know, Clio really saw this huge opportunity to enter what is really the employee benefits landscape with an offering that would really help them keep people at work and interestingly, help especially working mothers, right? Highly skilled working mothers not just stay at work, but climb the ladder and keep climbing the ladder. And I think it the company was founded at the exact right time and saw an incredible amount of traction and support from the employer community.

You know, health tech has always been a challenging industry, but startups like Clio have gotten more traction in recent times. We even saw the IPOs of four digital health companies last year after a long drought and so when you took the reins as CEO at the end of 2019, what was your assessment of the sales and growth potential? What were your top goals when you started?

Absolutely, absolutely. I joke with Sarah from Greylock, who is one of the main reasons why I joined Clio and I'm still very thankful to her, but she joked that she had no idea that she was bringing me into the CEO role at a pandemic and so much more would hit right afterwards. So I had been at a company, Collective Health, for about five years prior to joining Clio Leo and Collective Health was also at this intersection of the American healthcare economy as well as the workforce, right. And what population health looks like and what employers are trying to do to both curb healthcare spend as well as accelerate, right. All of the good things about healthy employees, right. Productivity, retainment, retention, attraction of top talent. And so I'd seen this world growing and at my time at Collective Health, saw this massive proliferation of all of what, you know, know the benefits industry calls point solutions, but which are actually incredible innovations that really support all of the specific issues that can interrupt someone's healthcare journey. Cost employers a lot of money, but not, not just about the economics of it actually keep people out of work, right? And so there's incredible companies you mentioned Livongo on diabetes and chronic care prevention, there's companies like Progeny on fertility support. Right. And all of those Companies are those two of the four IPOs you mentioned, right. From last year, really saw this huge opportunity in the employer market. And when at Collective Health, working on health plan innovation, right at the core of the employer healthcare spend, what I saw was this huge proliferation of all of these point solutions growing and having a massive impact on employer spend as well as employees quality of life and essentially innovating at not just the edge of healthcare, but actually at a really critical juncture, which is the employer spend. What I saw when CLIA was growing and I actually watched from the sidelines at Collective, because we had many clients in common, was this really interesting mix of both the health landscape of maternal health, mental health, of parents claims, and all of that's associated with those really huge areas, as well as the organizational and social support that they needed. And so when the opportunity came up with Clio, I was really excited and fascinated by it because it's a really interesting mix of both the healthcare needs as well as the social and navigation needs, right. So childcare leave management, there's so much also outside of the health benefits space that was seen. And so as I joined, I was really fascinated by the intersection and also just seeing the commercial traction that Clio had had over that first four years. Remarkable large cap companies, as well as really diverse small companies, all kind of voting with their dollars to invest in this area and not just invest, but stay happy and continue renewing and also growing kind of their contracts with Clio. So all of that drove me in well before we knew the world was going to change in front of our eyes in March.

We talked about this a little bit in previous conversations. So you said you came into Clio and you had a customer base who loved the product, which is really hard to do in health tech. Super important because you have good engagement, but you kind of have to make that bridge into it really being valuable for. For the employer, for the buyer. How did you take it from being, okay, we have a beloved product. We got that out of the way. That's great. And then really focus on the return on investment for. For the buyers of. Of the products.

Yeah, I think Clio really stands out as one of these really sticky, engaging, and like you said, beloved products. When I came in to Clio, I was amazed to hear not just the member reactions and interactions, we actually have a gu. A baby named after them by a Clio member. There's this complete, incredible relationship that's built through our product with our guides. And then we have clients, right, who are voting with their dollars to keep renewing, adding more and more products. It was my first experience with an enterprise product where I had two clients actually cry when they shared why they bought Clio. So there's this emotional element of what it means to support vulnerable working families. And it's very palpable. And I was just, of course, rejoicing to feel it in my first few weeks at Clio. And then on the other side, I saw, well, you know, how do we actually take this remarkably sticky, beloved product and actually go and cross the chasm into this world of ROI and scale? Because what I would say is what Clio's nailed is that amazing experience. And the return for the member experience is remarkable. Right? High nps, high stickiness. But what's the next step? Right? And as you go from kind of the series B company where we're at this amazing juncture point of a hundred enterprise customers, what does it mean to get the next 200? What is next the next 400? And how do we start to really scale our products, scale our platform, and not just be loved, but be told, hey, this was the smartest benefits decision I've ever made. And I think that's where kind of the data and ROI story comes in. And I think that's where both this mix of healthcare dollars as well as, you know, retention and return to work statistics started to become my cardinal focus, especially as we march what I call kind of upmarket up into the large enterprise and jumbo buyers in this space who look at this not as a few hundred thousand dollars investment a year, but a multimillion dollar investment over multiple years. And I think, you know, as you go up market, you see that conversation change and really started to point the company into being very data driven and really focused on what those specific outcomes can be that make this not just a great culture solution, but a really smart financial decision for a company to make.

So you came in in a different world, you've had to adapt to it. But what immediately was the impact also running a company, you as a parent, oh my gosh, how are we going to contend at this and then how do we lean into it and figure out how to, how to get, make the most out of it?

Yeah, it's a such a big question. And so the way I would think about it is maybe in kind of three categories. I think kind of the organizational dilemma, right. As a company leader and not just a company leader, a new company leader. Right. I, I had been with these folks about three and a half months when Covid hit. And so I'll talk about kind of the organizational dynamics. I think the second was the market dynamics, right. How do we think about this as a short term opportunity? How do we navigate this new world of selling and building products and, and thinking about our strategies? And then I think the third is just company identity, right. This long term question. And I think all three were called into question when Covet hit. And so I'll start with organizational. Right. As a new leader it was a crisis. I think we all acknowledge that across the world. It was this massive macroec economic and health crisis for a startup. It was just a huge, huge hit. Right. I think immediately we went from, you know, I think I was about to travel to New York to hire a really exciting sales rep who note we actually still hired even though I never met her in person. We had two really jumbo deals, really exciting. I had meetings with both that we were prepping for and then Covid Hits closed down the office. So organizationally I think was the first piece. And so what I had to do really quickly even as a new leader was stock of the whole company. Think about what was working well, what wasn't we actually had to make some hard decisions of kind of where our investments were going from the people side and say goodbye to some great folks and kind of let go of some really great folks that were part of our long term strategy to really pull in our organization to be really controlled and effective and spending every dollar and every man and woman hour on what we needed to accomplish right in front of us. And so that was the first organizational piece. I think the second was adapting, which we all now are adapting to right this virt virtual world and landscape and making as many decisions as we could, knowing that we didn't have perfect data, started to make some decisions on kind of our workforce, how we were going to handle our offices and all of that, and was really lucky to have hired a great VP of people who just happened to start that week. So very thankful to her to kind of dive in with us on all the organizational challenges. And we were also really lucky that we were already a pretty distributed and virtual team. So while there were some really sharp shifts for our San Francisco population, we had a headquarters in San Francisco and a dev team in Boulder, Colorado. We actually had folks all over the US and actually folks in 11 countries. And so we actually got trained by them because they had been working this way for a while. So thankfully, kind of the organizational pieces came together pretty quickly. And I would say the highlight of all of those was making really hard, fast decisions and knowing that those decisions were not going to be perfect, but making them with as much data and confidence as we had at the time. And then the second piece to the market, it was a ice cold pale of water on everyone's heads. What was really interesting in benefits is even though parental benefits now are in massive demand, the first few weeks of COVID there was nothing happening. All meetings got canceled. Fascinatingly, our buyer is a benefits leader or ahead of total rewards. And they essentially overnight got anointed as the benefits czars of their company. And so all of a sudden, even our most willing and excited buyer actually got given the hardest job they'd ever had. And so they had to say, listen, we still love Clio, we still love family benefits, we still want to talk to you, but we can't talk to you now. Right? We're thinking about really urgent responses to this pandemic and our workforce as health benefits leaders. And so that was pretty scary. So what we did was really, first and foremost, really look at our top line goals. Another moment of making hard decisions, having hard conversations and really focusing in and what can we accomplish this year and making some bold decisions about how we would go after that and how we could focus on it. And the second piece on the market side is really listening actively. Best signal is from our existing customers. And so started to spend a lot of time there, started to have informal as well as formal chats, had a fireside chat with all of them, started to study them, study our members, asking them what they needed more and more of. And so from a market perspective about two or three weeks after kind of the first crisis hit, we started to hear a signal that our early parents, so folks in their immediate er, birth or postpartum period needed more from us. So started to make some big decisions there on how to support them, educating also our customers on why that was so important. And the second thing we started to hear was obviously we thought we were going to be in this kind of crisis. Point of lack of childcare, homeschooling, all of what we were dealing with and now still are. I don't think anyone would have predicted that we'd still be here this many months later. And so what we started to do was really listen to that five of our seven team members at CLIO on the leadership team actually have kids under. And so we were really hard hit as well. And so we were realizing we were the reflection of what the market needed. In some ways we were really ahead of those needs because of how acute we were hit as parents and leaders of our companies. And so we started to from a market perspective study and create a product that was really tailor made to really not just get attention from these benefits buyers, but solve this now new problem that didn't even exist before. And then the third part, this long term strategy that I had been spending a lot of my time on in the early days, especially at our kind of between our series B and series C, thinking about what, what we stand for, where we're going to go as a company, what our vision is. I'll be honest with you, we had to put it on hold. We had to get really active and focused on what we can do right now and what we can do kind of in two to three week periods. So we even shelved our OKR process and turned it into a monthly metrics process like essentially put some of those big plans away to let the organization be nimble and get through that time. So that was kind of our first few pieces.

A lot of people are taking this time to talk about, you know, we've been through recessions before, you know, you still keep hearing that phrase Never waste a good crisis. This can mean a lot of things. From experimenting with asymmetrical marketing strategies and taking the time to focus on a project you otherwise wouldn't have time to do. What does this look like at clio?

Absolutely. I think one of the most interesting things about this time, like I said, is we already had a product, right, that fit into part of this massive problem statement that everyone was offering, which is, how do you support parents? Right. We were watching it on our zoom screens. We're seeing everything happen around us if we don't have kids, you know, I started to get like a, I'm thinking of you notes from colleagues and friends that didn't have kids. Like all of a sudden we had this collective awareness. For some reason, it took us, this COVID 19 crisis, to realize that working families are working really, really overwhelmed and underwater. And we already were. And so Clio was already there, right? We were already at that party. We were already offering employers a solution. And when you think about what does it mean to take advantage of this crisis, one of the first things that I had to think about with our leadership team is let's not overdo it, right? Let's not create something artificial or let's not take ourselves off of this track. We're four years in, we have a hundred customers who are continuing to renew. By the way, you know, our Q1 was 40% higher, right, in bookings than our Q1. 19 were seeing signals of, hey, this thing is already working. Because there was this knee jerk reaction in crisis to do something new. Do we offer this now not just to the commercial and employer market, but do we offer it to consumers? Do we add more services? Do we change our service model? And I think, you know, the first few weeks while there was so much I felt like kind of shouting about like, every company should make a change. This is your moment. I think we had to really sit with our data and see what's working and what would we shift. We had some debates early on about do we go direct to consumer. There was a lot of demand there. There's definitely an opportunity there. But we actually stuck to the vision that we've been building for the last four years, which is there's a lot more to do in the employer channel. There's a category that's growing and if we take our eyes off of it and try to serve a very different service model and a very different customer, we won't be able to commit to our customers and our enterprise buyers that we could have the level of Service. Right. That we've already committed to. So that was kind of the first thing is actually saying no to a couple things that seemed really exciting. Right. And there was money on the table, but we said no. And then the second time around when we started to look at it was, like I said, really looking at it from a customer first perspective. Because the childcare crisis was huge. But we had to understand our part in it and really think about what would we build that actually could have commercial traction and not take. Also take us off course. Right. Our core mission and product build. And that's where this concept of Clio Care came from. Was really listening. We, we, you know, virtually whiteboarded with about six or seven customers. We actually created our own little pilot circle actually with board member Sarah from, from Greylock, participated with us and just started to try things among our own population of employees at Clio who are parents, and then of course, with our customers. And that's when we started to get the traction of this is something we would launch. And by the way, we wouldn't just launch it. We wouldn't just move here because of COVID We think that there's a real opportunity here to explore how child care works, how you help support parents in navigating, finding childcare, support them and how they actually support their kids at home with milestone development, educational tools. And so that's where the product came from. And it was, in many ways, I think we would have done it in a year from now. Covid, in a way, didn't change the business, but I think it accelerated some core pieces of the business.

Yeah. Specifically talking about the parents pledge. Can you walk us through that?

Yeah. A lot happened in a really short period of time. I still kind of can't believe it hasn't been like two years.

When you ask about that one.

We, we started to get around this idea that we should launch a product here that's Clio Care. And it's been an awesome accelerant for the business and I'm really excited about it. The other thing we started to look at is about six weeks ago, we did a survey of our members. And our members have kids from one day old to five years old. Okay. So they're acutely impacted by this time. And so what our members told us was a lot of things. They said they obviously don't have childcare, but 75% of them were at pretty decent productivity compared to their baseline. But about 25% were below 50% of their typical productivity baseline. And they were nervous. Right. That in this economic environment, losing their jobs. A couple other data points came through and I read that this stat that we got back from our members and it was that one in five, 20% of them were thinking about leaving the workforce. When I read this, in a good, in a good way. It happened Thursday night at 9pm So I couldn't call everyone and start slacking everyone about what are we going to do about this? Because we'd already been working on our product idea. But I think this concept that this isn't just a nice to have, it was this massive call to action. It made me furious that we're going to see the bottom fall out of our diversity and inclusion efforts to keep especially working mothers in the workforce. And so had already been working, obviously on the product side, had been thinking a lot about partnerships in this space. I was talking to folks about awareness building, but when that stat came through, it was this singular moment of we've got to do something more. So started talking to our friends at the Mom Project, Paid Leave Us and a couple other great organizations and started to see, hey, there's something here, maybe we'll do a report. And so we started pulling out the report like, let's just educate everybody about this. Let's educate why employers need to do something more. And then was thinking about that and realized that's not enough. We've got to not just educate them, we've got to have some type of call to action. And we have to shine a light on the employers who I'm talking to every couple days who are doing something and are acknowledging it. We were starting to hear these stories of working mothers who were getting layoff notices or getting furloughed and wondering why their male counterparts weren't. And so we're hearing all of this, we're seeing that stat. And that's where this idea of the Investors Parents Initiative came from, is can we actually not just educate people, can we not just talk about it, but could we get a group of employers together to commit to doing something and starting to shine a light and set a bar. And one thing led to another and it launched with a ton of attention. We still are getting several employers every week, adding to it. Our first task force is in July and putting together recommendations. We actually just sent out big survey and asked for data from them so that they can start to share data with each other about what they're doing. Right before this, I was on a call with about 30 large employer jumbo employers across the US all talking about this so I can Share with you that I think it was a great moment to call people to action and get attention and to change the conversation from we have a problem to who's going to do something about it. And knowing that we can't wait for government reform, which I don't know how. I didn't say that without laughing. We actually have to do something about it. And I have to tell you, it was really overwhelming to see how quickly it morphed from an idea to a real task force of committed individuals and companies. It was very heartening to see that all come together.

Yeah, it's kind of like the worst case and the best case because it's. Everyone knows exactly what you're talking about because it's right there in front of. They're actually living this experience. You don't have a choice.

No one knows what to do.

Yeah, it's true.

The thing is, I had folks like in marketing and other folks. Funnily enough, I don't want to degrade my very beloved former profession. But listen, like, if you were like, oh, you can't say anything about it if you don't know what the answer is, is you can't talk about it if you don't have a product to solve it, you know, we can't do. I'm like, that's exactly the point. It's a very different thing to launch a product in a marketing campaign than it is to just say, let's get people together and call people to action. And I think it's something that companies don't often do, but I think we, you know, when you're in this space, I think it's. It's a really interesting way to just acknowledge that you don't need to have the answers to start the conversation with this, with this audience.

You did touch on this in your previous answer, but I just kind of want to reiterate, you know, there's some types of technology, video conferencing tools to support remote, remote work, that sort of thing, that are obviously seeing a huge surge in demand right now. And there's an acknowledgement that even after things get back to sort of normal or the new normal, there's going to be lasting changes in the way we live. So a lot of the technology that's been really widely adopted right now will, will stick. But how do you know that some of the customers who are specifically adopting new technology or how do you know that they're going to stick? What kind of indications are you looking to, to see, like, what's going to Be a kind of permanent shift. And what are these things that you know, are just, we're just doing for this moment. It's the short term strategy to get us to the long term.

It's a great question and I think I'm in a fortunate position that Clio was already in a growing category right before COVID hit. And then Covid essentially just accelerated that category, if you will. Market entrance, like every couple months, some of our competitors are raising new rounds. I mean, we're in a really good category, if you will. And so what I would share is I think what happened is Covid just pushed us all forward faster. And what was really interesting is as I came into Clio before COVID hit, right, we saw a really clear signal of that. We had a triple the amount of RFPs requests for proposals from large market customers in January 2020 versus January 19th. So we were already seeing this market pull happening around parental benefits. The realization had happened that this is something that makes sense for buyers to adopt. And then Covid hit and then I think to your question, how do we know what we're launching will stick? First and foremost, we look at customer signals. Enterprise buyers are actually buying more of Clio. Fascinatingly, even our buyers who have had massive hits and layoffs have protected their budget around Clio. And some have not only protected their budget around Clio, they've added more product and support. We have several products they've bought up to another layer of CLIO support for other parts of their population. So I think that's the first signal is, hey, we don't need to take ourselves off course. This is still working and the buyer is still looking for more support from us. I think the second thing is to your point with this childcare solution, is this, how do you know, right? Is this going to stick? And so this is the first time in our go to market that we've offered a short term contract to employers. And it is risky. Usually employers are signing two to three year contracts with us and in this case we're offering a six month contract to acknowledge that the buyer is in a very precarious budget process themselves. And so what's been interesting there is we're offering it, but nobody's taking us up on it. They're still asking for one year proposals. So there's a lot to be seen. But I think what we see is it's good to meet the market where it is in our perspective to acknowledge that, but that market's still pulling us into longer term contracts. And then I Think the third thing I'd add is, is taking big bets for us, really. The investment is twofold. We're unique organization because we're a services and a software business. And so our guides are about just shy of a third of our workforce today. And those are the folks supporting parents day to day. And then of course we have our amazing technology and app and platform. And so what we've had to do is kind of get creative about how we hire and how we think about servicing that demand and change our models. And so once we got to a place where we felt comfortable with that, we felt okay about kind of diving into these new worlds and essentially meeting ourselves. The way I think about it, I think about most of the world these days. I think about the business in two to four week increments of what did we learn in the last two weeks, what did we learn in the last four, and what are we changing? And so I can always say, hey, this is looking too service intensive. We actually can't support as many prospects as we hope. Let's get back to our basics. So that's how we're approaching that right now.

You know, you were saying how earlier the benefits managers and the buyers, they're harder to read reach. On our earlier call, you talked about you're getting a lot of inbound interest or figuring out how to partner with companies.

Yeah, the buying process for employer benefits, it's relationship driven, it's multi stakeholder, it's tied to annual budget planning. It has out of your idealistic five stage sales process, it really has like 17 stages. You know, it's a big decision, especially for large organizations. And so it has typically been a very people intensive and calendar driven process in that world. Right. We did the typical enterprise sales playbook. Right. We'd go to trade shows, we'd go to events, we'd shake hands, we'd, you know, do our formal presentations and you know, take folks out to dinner, you know, all of your typical protocol. And interestingly, we, we kind of stopped all that process even before COVID hit because I kind of saw this fast train coming because my brother happens to live in Italy. So I was seeing disaster knocking at my door soon. So I had actually canceled a trade show appearance for our sales team and myself in New York well before this event all hit. So, you know, everyone was scared. And my sales team, I remember, was so upset with that decision. They're like, what are you doing telling us we can't go to this trade show at Times Square in early March? It was Scary to say no, but I can't believe how far we've come. I feel like in three months, months, we've now proven that you can sell over zoom, can present over zoom, you can actually get through multi stakeholder mapping. Funnily enough, I think you can get to know people sometimes even better and faster. In this context, I saw a lot of, I remember there was a lot of Twitter stuff about you can't invest this way or you can't do this this way. And I was just looking at everyone well, like, well, I'm getting to know an entire organization this way. I was only in my seat for three and a half months before this hit. And so I think you can get a lot of business done. What we're seeing is people are back open for business. So the benefits buyer is no longer just Covid czar number two. Their budgets are still moving and now they're actually doing some really fascinating budget reallocation. So I'm sure that has some interesting things, you know, across the board for, for different go to market strategies. But for us it's really interesting because they're taking budget away from what I would call kind of pre Covid strategies and applying it to Covid strategies. So that's been a huge opportunity for us. Us and a conversation. I would say we're in kind of middle stage with, with a lot of employers right now and interestingly they're still really eager to meet new solutions. We're doing a lot of where our field marketing was before. We're doing these new virtual events and getting everything we can from it. I will share you get to the truth a lot faster in this new virtual context. Think people made you feel good at trade shows, shook your hand and got some tchotchkes. Now I'll go to a meeting and there's 30 employers and three of them email me in the next five minutes and that's all I need from that meeting. But I think you're getting away from some of the niceties we used to have. And in this virtual environment I think we're getting to higher qualifying processes like know who our real prospects are faster. And so it's been really interesting to see the team sell in this environment. But I, I will share with you. I think it's still very open and I think there's a lot of exciting things happening.

If you could just give some advice real quick for any entrepreneurs who are thinking about getting in the sector or who are already in it and thinking about incentives and thinking about the complexity there where the money flows, who's paying the bill and what they're paying for versus, like who uses it and what it actually has to do with outcomes.

Yeah. I don't think I'll shock anyone listening by saying that healthcare in the United States is just a story of misaligned incentives. And the reason it doesn't work is because the incentives are completely misaligned with healthier people and that there's no value Right. In our system today. So, so why I share that is I think health benefits and healthcare are amazing areas to work. I worked for years to get myself into for I, I used to be in enterprise software and consumer software. Really wanted to get into the healthcare landscape. And I think what we've seen in the last 10 years of both health tech investing and companies growing and some failing is that it's not just the idea and it's not, don't get, don't get obsessed with a solution alone. So finding a problem in the healthcare system is actually not hard. It's all broken. It's all a total mess. I think where you really need innovation is in the business model, is in the business of healthcare. And so if you can and should research. Right. How money travels through this system, who has, who is the payer. And sometimes the payers really surprise you. They don't make sense. And I think a lot of people come directly to a consumer modality. Great innovators, great technologists, great service creators. Right. Come to the consumer model first. In fact, I think almost all of our competitors in Clio's market went consumer first. I think Clio is the only one that went straight to employer, which is way more efficient. And I think it's just really understanding where the money goes because the best idea is there's so many incredible things to fix. But I think you really have to understand the payers. You have to get to know them and learn from the mistakes and successes of others. Right. And just know that it's not a software business, it's not a lot of people want to hire, build SaaS businesses in healthcare. I'm just gonna say there's not many of those. There's not many to learn from. And there's a reason for that. We are services businesses in so many cases. If you actually want to drive outcomes and understanding what that business model looks like and who's winning and who's not, I think is my biggest piece of advice.

Absolutely. Thank you so much.

You're welcome. Hopefully it was helpful. Yeah.

Thank you so much for joining us today.