CEO Stories: Empowering Customers to Take Control of Their Digital Wallets

This Is Capitalism: David Callis

RH: This is Capitalism. I’m Ray Hoffman. David Callis was a young rising star in the insurance industry, specialty was global risk, when one day he realized he was being hit with bills and charges for things that he had forgotten he’d ever signed up for. That was the genesis of his entrepreneurial idea, a company called Hiatus, which uses big data to see what you are being billed for compared to the average consumer.

He was born three days before the 1987 market crash, which means, like so many young entrepreneurs, the Reagan years and even most of the Clinton years are history to him. In fact, he came of age right about the time the economy was coming apart at the seams, 2008. So I was wondering, at that formative and uncertain time, what did David Callas think about capitalism?
DC: Well, I studied economics. So when I was at Sewanee, my major was global studies with an emphasis on economic policy, so looking at a lot of third world countries and how their economic policies effect the outcomes in the country. So I think that I always had an appreciation for the free market and all of the benefits that are derived from that. When I was in college, it was really theoretically based, I didn’t really have much experience in practice, in the real world.

RH: And you were surrounded by the collapse of the U.S. economy as you were right in that 2021-year-old period.
DC: Right. 2010. So that was right in the thick of it. I think if I had graduated in 2009, that’s probably the only year that would have been worse.

RH: I see you interned, you must have been 21 or 22, with the Scowcroft Group in Washington, as in Brent Scowcroft, the former National Security advisor. I’m wondering what you came away with.

DC: Yeah, that was a really interesting experience. The group of people that he cultivated were so interesting–people from the private sector and obviously within the federal government were working there. And it gave me a lot of exposure to the way that the government works. It’s sad to see that generation of leadership is slowly starting to wane out.

It was really enlightening to understand sort of the way that they approached foreign policy issues. I think that there was a level of statesmanship that those people had that I worry that the political environment may not reward that level of statesmanship as much as it used to when these people were at the head of government.

RH: If you were to use a character-type word to describe Brent Scowcroft and the others that you met there, what would that word be?
DC: Humble. When they spent time in the government, they were very appreciative of the fact that they were serving something bigger than themselves.

RH: So let’s go all the way back to the genesis of the idea of Hiatus.
DC: It started out as a personal problem where I was unable to track my subscriptions. I didn’t know what I was signed up for. There’s a lot of digital subscriptions that were coming out when the idea occurred to me to build a subscription manager. I talked to Todd Gower, who was building enterprise software, and he had the same problem so we built a minimum viable product and it seemed like it was solving a pretty big pain point. It got to the point where we had built this product, we were sort of sittin’ there with our day jobs thinking it would be more of a risk not to do this–Hiatus–full time. So in hindsight, it was a pretty logical step and a natural evolution into what is now a growing company.

RH: But let’s go back a little bit farther now because I am not quite sure how much time that you were spending on developing this while working your day job. I want to get a sense of your life.
DC: Yeah a lot of nights and weekends. The hardest thing about building a start up is going from zero to one, zero being the idea and one being a product that’s out in the wild. And a lot of work particularly on Todd’s side when you’re actually building the software and building the technology. From what I was doing, it was almost more conceptual, just trying to understand how this would turn into a business, different use cases for it, more imaginative, versus what Todd was doing, which was probably a little bit more concrete.

RH: And you had a draw back in the fact that you didn’t go to business school and you didn’t have a bunch of businesses growing up and this is the first one.
DC: Yeah. So the real education was actually talking to the users. I think that they don’t teach you that stuff in business school–how a product is going to be used. And by how it’s going to be used, this is everything from seeing an advertisement or hearing the idea on down the funnel to your behavior in-app.

There is no threshold of education that you have to pass to get that information and to make those conclusions as to whether to invest more invest more time into it. So that was I think a lot more informative than many of the classes you could take in business school.

RH: Take me on a tour of your office, whatever it was, and your typical days in February, March, and April of 2016 as you were just starting this company.
DC: It was a 600-square-foot studio apartment in DC that Todd and I were working out of. Super cramped. Bed sitting right in the middle of it, a little dining room table, and a couch and that was about it, but we had our computers and we were able to build a company basically out of that.

RH: And I see within a month of starting Hiatus you had a survey out. Sixty-two percent of consumers waste money on subscriptions because they don’t cancel the automatic renewals. That survey had to help just in terms of putting out a news release.
DC: It was a really enlightening moment for us just to see how much waste was out there because of the way auto payments were set up.

RH: So you have an app, how do you get it off the ground? How do you get people to see it?
DC: First, talking to friends and family that you know just to see how they’re using it, where they are deriving value from it. And then beyond that, reaching out to press, reaching out to bloggers who have a big network of readers who can test out the product and help you grow your user base.

RH: I imagine there was a procedure involved here, probably starting with bloggers just because the press didn’t know who you were.
DC: Yes. So there was a lot of emails that you were sending out, calls being made to see if people would take an interest in writing about you. And fortunately it was a big pain point and a lot of people can relate to the subscription problem that I had and Todd had and took an interest in writing about us.

Beyond that, when you get your product out into the world and you see the way it is used, you see where the deficiencies are and you can improve on those, you’ll have a good product, a product that people want to use, a product that people want to talk about. So that has also led to some good growth.

RH: How quickly did you have to move to a slightly different iteration or a remodeling or refocusing of anything?
DC: Well it was everyday. As the user behavior data came in, there were all sorts of things that we were tweaking. I mean it could be just a few pixel difference and how you have set up the user interface that can lead to completely different user behavior. It was a constant iteration.

RH: You came out with an app for IOS only, no Android. Why did you go with the Apple system first?
DC: Our idea was to go very deep into one technology, understand that Apple IOS user really well, understand how to make the technology work on that platform really well. I think we’ll eventually get to the Android. There is a big market there and a really large wait list that we have of people that want to use it. Another thing we are thinking about doing is developing a bot, like a chat bot, that you don’t really need to download an app for but can be used through text message functionality, which will not only address certain IOS users who don’t want to download just another app but also the Android market.

RH: And within a year you raised a million dollars in seed funding.
DC: Yes. So that was a really nice milestone for us to hit just because it allowed us some runway to test different concepts and build out the business model and understand really what the market was doing at a much deeper level. So yeah, we have used that money to harden the technology, our software is only becoming more and more educated. So that subscription scanning capability, for example, is just becoming more accurate. And ultimately our goal was to help consumers save money. So we’re putting the proceeds of that investment into different spaces that we feel like are under-served within consumer finance.

RH: When the money came in did you feel any different sense of responsibility, a responsibility toward the lenders, or was your level of responsibility just the same?
DC: Oh yeah, you might think that it’s sort of a milestone that you hit and everything is just wonderful and you have all this money but it’s actually just a means to an end. I would say we had a little bit of celebration when that came in but it was nothing prolonged. We were back to work within the hour.

RH: But did you feel a greater sense of responsibility with this first round of funding as opposed to what you felt before it arrived?
DC: It’s a different sense of responsibility that was new to me. Ultimately our responsibility as a company is to consumers and using our unique position of having really good technology and a really good understanding of the problem and the market.

RH: What did you learn about raising capital that you didn’t know before you did it?
DC: Obviously a lot of things within the legal realm that I wasn’t too familiar with. So there was a lot of late nights trying to understand certain aspects of that. But fintech is a real hot sector within venture capital and there is a lot of money going into it. When there is a lot of money going into it, you obviously have to understand where you fit within that market because these are investors with unlimited opportunities and places to put their money. So as much as it was trying to understand the capital markets, it helped us learn a lot about what our position within the fintech ecosystem is.

RH: What impressed you about your investors?
DC: How oriented they were around this consumer problem and how interested they were in empowering the consumer with technology. I think that at the core of what we are doing there’s asymmetric information between the vendors, the financial services providers, and consumers.

And it really impressed me how well they understood that and how we could sort of bring the level of knowledge within the consumer space up to par with what the vendors have in terms of information and pricing and what would be the best deal for consumers or the best approach to the financial services market place. So that was really impressive.

RH: How is this application of capital that was invested in this one-year-old start up going to radiate forward in just this next year alone?
DC: The way we thought about this capital raise was it allowed us to test different technologies and different approaches. So we sort of were thinking all right, we would have two or three tries to get one right and that first test turned out positive. So I think that we were really fortunate to realize that people will take financial advice that is generated from software and onboard to a financial service. That was a really big moment for us.

I would say that was the breakthrough moment for us because we could now do what we have done with bill and negotiation services across many different use cases within financial services. So if your student debt, if the rate is too high or if your insurance rates are too high, using our software we can refer you onto providers that can lower that future expense for you. Consumers will take that advice and will act on it and we can build a scalable business from that.

RH: Scaling over the next year, I’m wondering, just the very short term, what is that capital going to allow you to do?
DC: Our metrics are how much we save consumers and I think that capital we have raised will allow us to save an enormous amount of money for our user base. Beyond that, I think as we’re building out those different revenue channels, we will continue to hire engineers and harden our technology and build some really cool stuff internally.

RH: How large is the company now; how many employees do you have?
DC: Eight.

RH: So it has quadrupled in a year
DC: Growing pretty fast.

RH: When will you know if this is it, this is the idea that you really want to build into a broader financial service company?
DC: Well I think it is. I think this has the potential to be consumer’s access point to finance. We are delivering contextual financial advice to users, it’s relevant, it’s non-intrusive. We are really interested in, and I think this is lacking with the incumbents, with the big banks, we are really incorporating behavioral economics and consumer psychology and baking that into our product to nudge users into making better financial decisions.

That is something that I do not think the financial services market, or the incumbents within the financial services sector, have done very well. It’s something that we have tested, and albeit on a very small scale, we have tested it and proven it out.

So I think that our investor base and team were really dedicated to seeing this through and building it into something that four or five years down the line is competing with Wells Fargo and companies like that.

RH: And you’ll have a lot more than eight employees at that point.
DC: We’ll see. If you’re building your technology right it scales pretty easily and it’s not as capital intensive as you might think.

RH: Were you as big a dreamer in your pre-entrepreneur life as you are now?
DC: Yeah. I was always dreaming about doing something in this entrepreneurial role but now we’ve got a really interesting product and really exciting space. So yeah, I think my dreams have definitely grown.

RH: And if he is anything like the typical entrepreneur, David Callis’s dreams are liable to grow even bigger still.

This is Capitalism. I’m Ray Hoffman.