Oscar Garza: Insurtech in Sports (Full Transcript)
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Full Transcript:
Ronen Ainbinder:
A lawyer, a sports enthusiast and an entrepreneur coming to the show all the way from Cancun. He's the CEO and co founder of journey, a platform use to organize and promote sports through technology. His mission is to democratize sports using network effects to improve insurance, marketing and management in sports. This man accepted my invitation to the show with no doubts, ladies and gentlemen, Oscar Garza!
Oscar Garza:
Hey, nice. It's nice to meet you, Ronen.
Ronen Ainbinder:
Every single time that I meet an entrepreneur. I'm really curious to know their story. I would love to start your conversation today by talking about your background, how did you come up with journey, what was the pain point you wanted to solve
Oscar Garza:
I’ve always been really into sports since I was a little boy I was in the Mexican team for fencing, then I make a transition for Taekwon-do when I was doing law the law degree in Mexico City I was doing mountaineering and mountain climbing so you know I've always been really passionate about sports. On the last year of of my law career, I had one of my best friends he was from the Monterrey and entanglement array they are really like into, into entrepreneurship and he was you know just saying like we should start a business we should start a business and I was like hey well I had this idea that for all the sports that I do from ice hockey to fencing.
It's always super hard to find people to do sports with. So why don't we do like a social network to find people to do sports with. He was like, Well, that sounds cool. So we started working, and he started coding we started you know doing the daddy of what we wanted to do, and after a year of work, we came up with this like really wacky social network that it was to find people to do mountaineering with. And even though it was full, you know, it was like really really MVP if actually work, you know, we will always find people to the mountaineering with, and you know I was delighted, but from there on, we were like, Okay, well, now we need to make money off see so what's the next step forward.
So we started to see if we could get into other like distant services, how could we like monetize the idea. And the first idea we had was to get into an OTA (online travel agency) so we already had all this community for mountaineering. So we thought what what we call get the guides in here and then just like, get a commission for every sale we do throw through a platform that took us like six months to make. And I mean it was working, it was selling. We already had some investment at that point, but it was not a scalable at any point because you know there was not a problem there to be solved like all the guides could sell through Facebook, like people didn't care paying cash. So, there was no need for the actual marketplace.
So we start saying well you know our core mission is to get people doing sports, that's what we really love we're really passionate about doing sports about getting people active. So what can we actually solve that was the next question we posed. And we found that sports schools you know the the regular football teacher that Taekwon-do dojo and all those kind of businesses, they really have terrible, terrible management. So the next thing we need is to transform the ATA that was, you know, these like payment gateways that have like the online payments to get into subscriptions. So, we create the platform that any sport school, regardless of the size regardless of the money call get into subscription model for all the students to actually subscribe to the class.
And we started getting the, you know that the fees like they they could not collect that were like 30%, so they didn't collect 30% of the revenue because they have such a mismanagement, and we've got that to 5%. So from there, we started growing and, I mean, it was good, but we only got like a 5% margin, out of the whole thing was like critical challenge, like too much stuff. And when looking for other types of ways to monetize the network that will rehab, where we have athletes we have clubs Federation's all these kind of people that were using our payment platform, we started looking for other problems that athletes get. And we noticed that there's this thing called the INEGI is their national authority for statistical things in Mexico, so they do all the, all the polls all the polling in Mexico, and they have a special poll for sports for sports inclusion in the country. And in that poll they state that the third largest cost for sport abandonment, in the country was actually injuries, for injuries. And, you know, I being excited on the high performance athlete, I got my jaw broken on the New York open in 2015, and it was really painful, and was really expensive. The only reason I could afford it is because I had insurance.
So it's like okay well you know for any reason, the obvious answer is insurance. So let's see how the like sport insurance industry in Mexico and see what can we like disrupter, and well when we actually like dig into it, we were already there, the sport insurance in Mexico is practically non existent only 4% of the athletes in Mexico has any type of sport insurance. And this is terrible because when people get injured they cannot pay they cannot afford to get treatment. Therefore they just like leave sports, and that's it. That's why they abandon sports.
So we really get into insurance, we started like looking into eat, how did the industry work and I'm a lawyer, so I cannot like know the last part of feats. But when getting into the business part of it, we noticed that there's this thing that called it's called group insurance, the larger group, they lower the cost for insurance. So if you go as a individual athlete together. Sport coverage. Yeah, you will need to pay a lot of money for it. But if you got a huge group of athletes and get coverage for the same thing, then the cost exponentially declines, because there's less cost for Acquisition on the insurance side, but they're that's where you get the cuts from costs. So we were like, Oh, we have a market network, we can use that market network to bargain, a huge group insurance and get the cost down and accessible for people, so we can get it. And yeah, people start buying the insurance and we start talking with big like b2b like sport federations. I mean, the Mexican Taekwondo federation of 150,000 athletes, just them. And there are like 60 Sports federations in the country. So yeah, you know, it kind of claims there's a lot of people doing sports in this country.
So we start talking with the business we started talking with pleats they started buying the product, and from there on, it was like well we, how can we make this even better. And right now we're currently developing solution for claims. And for better subscription for better on the writing, and for various service. So yeah like let's summarize that whole thing. The problem was that people could not afford insurance, the solution, we use the market network to get the cost of insurance to a payable level that defensibility. Well, if you want to compete against us, you really need to have a bigger group than us, and we're not saying steel now.
So for every single athlete that we get into the, into the platform, we get a really defensible thing because their annual insurance contracts last for a year, which they will not jump from one company to another during the whole year. So it's a little bit of a winner takes it all and I kind of love it because you know as an entrepreneur when you kind of see these like blue ocean opportunities. Yes. Can I throw yourself, you know like, like we say in Spanish: “Como Gorda en Tobogan”.
Ronen Ainbinder:
It really sounds like the opportunity of building a community before was one of the factors that influenced towards adapting yourself to the, to the new idea to pivoting to insurance, and that kind of like grabbed the market of athletes without insurance quickly. And I think we're going to touch a little bit further on that, but I want to ask you a little bit about the platform behind journey itself, the technical side of it so how are you leveraging technology to connect between sports and insurance.
Oscar Garza:
Well, the first thing you, you get to know is a technology some service of the, of the actual needs of the actual problem, we're not using AI we're not using like huge new things we're not using buzzwords we're using plain old technology, or in creative ways to make better connections that, think about social networks or marketplaces or market networks, as in your case, it's not actually the complication of the technology, both the way the underlying connections between point A, you know user A and user B quicker, of course, to guarantee there is like a fluidity in that connection.
You need to be really no low legible in, you know, from Amazon Web Services the infrastructure in which your platform runs and how he's going to do to Georgia defense against cyber attacks which we normally, you know, have some every once in a while, and how to defend the content, and really need to understand how the UX, you know, influences the behavior of the, of the athletes of the users in that case, and how you actually make them recurring users for the platform. So, I mean, like, why aren't we using AI, we're using PHP, we're using the regular thing, but he never deploys. Now, any startup that begins and here in Mexico we have this really funny thing that there's not a lot of a lot of funding to go by. So in United States I think just California has more VCs than the whole Latin America region.
So, yeah, you need to play the game on the, on the rules where you're playing it so we're not playing in the United States, we cannot get our $1.5 million seed investment, or you know just getting into a lot of things and so we really need to be like a guerrilla warfare and be really tactical about what we develop.
First, you need to develop low tech, see if it works, and then increase the complexity of the tech we're using so what's right now in Diovan for us tech wise. We are starting to hire our data science team, because, you know, we're doing insurance. One of the big things in insurance are claims, when people actually get injured, and you know they need to use insurance, and we don't want people to do that.
The next big question that we're doing is, how can we understand the specific like claims rate, according to a specific cohort, to a specific, you know, specific sport and see how can we influence the behavior of our users in order to lower the accidents that it's a win win win the insurance company wins because it has to pay less claims, we win because we could get a better price for every insurance sold, and the athlete wins because they get less, less injuries, and they can get to be more on the field on less on their health, till there. So yeah, how do you actually get the connection with data science, and how do you influence the behavior with content, and the legal VFA I hope to you the labor to come to in one in one moment in one time.
And in order to like measure it against the actual total claims that we do. So that's in the oven right now. There's other things that we need to like improve like the the customer experience on the claims using chat bots in order to instead of, you know, we're millennials, we don't really want to call anybody. Like, I feel I cringe every, every ones that I need to call for pizza, so I don't really want to call a nobody, not even for insurance thing. So if we can get chat bots in order to watch amortize the whole claim process to make it seamless to improve the customer journey. Well that's a big win wait but you know chat box is not rocket science. I mean it's a but it's not rocket science. So we're getting into that. And we're also getting into more like a distribution site things, you know, SEO, those kind of things, which is not really rocket science to but it needs to be addressed.
Ronen Ainbinder:
I really want to emphasize what you said, of using classic technology but using it in a creative way. I think that's key in, in many of like founders and entrepreneurs, kind of like, get a little bit scared, before they even get into the technology because they're like, Oh, we get to use machine learning and we're going to use AI and like the most advanced software out there, but it's not really true you can have, you can have so many like functionalities in the simple stuff, as long as you are created with it so i think that's that's a, that's really interesting and I appreciate what you what you said about it.
You mentioned that insurance is actually something that, at least in Mexico, there's barely any culture around it, in insurance in the United States or in Europe, maybe they have a culture of, you know, paying for insurance having insurance, being safe and transferring the risk, but it is one if not the hardest products to sell. So I'm curious to know what are some of the challenges that you've faced, while convincing people to get insurance, specifically for their sports practices.
Oscar Garza:
So first let me give you a little bit of context on how big is the problem of insurance in Mexico. So, in the States, 67% of the US athletes have health insurance, from a private source. In Mexico is 4%. So yeah, like we are lacking. But in order to understand why that's true, we really need to understand why people don't buy it. And the main reason why people don't buy it is just play no cost.
The national polling authority they say it like they when they polled people they say, I cannot buy it, I, I know I need it, but I cannot, I can just not pay it. The regular health insurance in Mexico is worth three full salaries, treat full salaries like monthly wages of the average worker. So when you need to dedicate 30% of your annual earnings to insurance, you will not be doing that.
80% of the population in this country, and only gets access to about 20% of the population but from there you know there's a lot of miss the addressable market there is 20% of the population, then you get other, like in marketing efficiency that drive it up to 4%.
In particular, how do we convince people that they need sports. Well, I will say they don't even need convincing when you're around. Let's give you an example. When you were a boxing athlete. Well, every day, you are just punching things you are being polished, you go to competitions.
The main objective of the competition is to note your opponent out by punching him in the head. They understand the risk is really tangible to them noses get broken pants get broken, you know there's a lot of thing to it. And whenever they tell that we just tell them, we have an accessible solution for you, they really get into it. Like, you don't need to pay.
You don't need to pay, $800, a year for the insurance. I thought to do a $15 a year.
Well, just not much selling to there, and the product actually works. They think that we actually need to do is to educate them on what we're selling because everyone has like a vague notion of what he shows me is like, yet you pay money, and if something happens to you, they pay you well there, there are you know the devil is in the details there a lot of like teeny tiny niche fields that athletes really need to understand to understand what they're buying into.
Just like creating the content forging the language, educating them using webinars using the, the, the racers in order to better like better authorize the athletes, is the way we are actually educating the athletes on the need for buying insurance, but more the, like, what they're buying into. I think our hardest challenge because, of course, we do have a lot of challenges is that many people don't think this is true.
They never heard proposition like this. They've never like even they thought insurance is this really expensive thing that they come up for when we come with our, you know, almost unbelievable too good to be true proposition for them. Well, they don't really get into the basics of the market of how group insurance words and how we can use technology to lower the cost per acquisition on the insurance side, lower the prime rate and they don't get into that they think this is a scam. So yeah, how do we create you know trusts in the other side.
Well, we can do it through their Federation services for the reasons when they talk to me and they see our work company and they talk with a lawyer for the reasons that are already our clients. Well, it's a pretty easy sell to b2b is really easy sale to do.
B2C on the other hand, more difficult. So when we need to actually like get into like the small little athlete, like the individual athlete and how do we convince them. Yeah, there's a lot of work that needs to be done on the public relations side. And we're working with the two insurance carriers that we have. It's Sudan and South Sudan is from Colombia, really big insurance carriers in Latin America champions from Switzerland. Really the insurance carrier in the whole world. So yeah, they're like really respectable brands, they're getting our product into their websites in alert for, whenever they ask me, How can I trust your company. I just send them to the insurance side. So that's a easier way to trust us, and there's, you know the public relationship, all that kind of thing. So, I mean, that's still a parcel has not been sold. We will need to work on it, but that's 20% of the population we're still selling
Ronen Ainbinder:
It sounds like the key to selling insurance in Mexico is get them into groups, because that makes it a bit cheaper and then accessible for everyone else.
I want to ask you, with the current shift in sports practices, due to the pandemic.
Now suddenly everyone wants to practice sports in a safe environment. So, what are you guys expecting, have you think the dynamics in team sport, and personal fitness would change in the long run, due to the pandemic. And is there a way you'll be looking benefit from these changes, what do you think about, there
Oscar Garza:
There are winners, and there are losers with this pandemic. We kind of a winner because at the end of the day we can ensure people training other homes for training at the gene so for us it's you know their, their risk is more or less the same. So yeah, we're still selling on the side of the gene some the side of the Federation some the side of the, you know, online trainers. There are big shifts going on the big winner from this current time, of course are industries like Insta Fit, you should probably make a podcast with them they're beautiful people there. Of course, they, they have this business model pretty. On the current time where they had an audience, and they just gave like, you know, online training to the audience, we will see a lot of that in the near future.
They're already making a good, a good time for themselves. A lot of gyms, are getting into these leasing, “digitizing” their services, going online course. But it's not that easy to just do it you like when you were like I don't know sports world, and then you just want to change everything and become online.
Because there are underlying reasons why one business model is truly different to another so one business model is subscription for the institute cannot know online business, and even my appear that for a king, the business model will be also subscription because you actually pay month to month, but that's not the case they actually the case is that you pay month to month to use the equipment, so their business case is more about getting all the right equipment in the right place, and then leasing it online, or not leasing it but no give it access through a monthly fee to the, to the users. That's really different thing because users are expecting, equipment, they're not expecting the service, have been taught how to do the exercise so yeah there's, there will be some challenges there for the Olympic sports.
I mean, I just don't see how things can be changed like in the long run, perhaps, with the audience perhaps with their venues, but in the sport itself, they cannot really be changed that much because people need to train where the equipment is you cannot just try and track on your house.
That's not how it how that works. So yeah, jeans and tracks that kind of specialized train blazers will remain open exhibition sports like than seeing or cat testing karate or Taekwon-do. Yeah, they will go in line of course there will be a lot of businesses doing live streams of events for people to not get into the venues and consuming online, but for the athletes there will not be much change there, but I really think, even though if we find like the vaccine and everything works out right and everything goes through reality, there will be more streamlined, there will be more people doing exercise in their homes, there will be more defeats in the world.
Ronen Ainbinder:
I think maybe there's some opportunity in the pandemic because it's creating consciousness around, you know, being safe. So maybe now people will be like okay so I'm going to go practice, maybe soccer, but you know it'd be, it would be interesting, or it would be better a good idea to maybe hire an insurance about it. So I'm safer, regardless of, you know, getting sick by COVID or something, it's just, I just want to be safer.
Oscar Garza:
Yeah, yeah i mean that's that's a really important motivating factor for the sales that we're currently doing. And for the, for the ratios we're calling currently selling it. Of course there's more how you say that there's more focus on how, how to be safe, or practicing sports, and yet part of that equation of course insurance so that's a big thing for us, but also we'll be on how actually people like getting to safer environments.
So we also have that side of the business where we are helping people get the content they need to actually practice safely sports and also in forming the federations and the clubs and the genes, the best safety measures. In order to avoid injuries.
Ronen Ainbinder:
That's great! My last question is, is a more personal one. It's more about getting your spirit as an entrepreneur and knowing what you're made of.
If you could have a billboard, or a sign a big sign, which would be seen by millions of people every day, what would you write on it, and, and why would you write those words?
Oscar Garza:
Be Accountable. I'll just and write things, perhaps not the same thing every day for about accountability like:
Accept when you're wrong, like understand that you will not be right the first time like take risk and prepare to fail prepare for your worst case scenario and actually get comfortable with being uncomfortable, those kind of things so I'll just like try to great thing for people to understand that things are general the world's not fair. And you really need to move.
I think, living in US, Canada is like living in a nice mode. Living in Europe is like living on medium mode you know medium difficulty living a
Living in Latin America, now that's hard mode. Asia, Africa, they're also hard mode there. But yeah, like, things will not get better by themselves. We need to actually prove them, or we will remain as we are, and we're rolling into get into a better position.
Ronen Ainbinder:
I would say that that's a legendary way of ending the show. So thank you so much for sharing your story on this Halftime Snack. I'm super happy we had chance to speak, it was great to have you on the show Oscar!
Transcribed by Otter.