David Dorfman On Building And Selling A Company In An Eight-Figure Exit And Now Tackling A $72 Billion Problem Affecting Millions Of Americans - Unclaimed Funds in State Databases

Speaker A: Welcome back to the Dealmakers Podcast show with serial entrepreneur Alejandro Cremates, best selling author of the Art of Startup Fundraising and co founder at Panthera Advisors. In this podcast, we ask our guests about their successful acquisitions and financing rounds.

Speaker B: All righty. Hello, everyone, and welcome to the Dealmaker show. So today we have a really awesome founder, a founder that now he's on his second startup, the last one, quite deep, quite a successful outcome. Um, you know, really fully bootstrapped is the way that he likes to do it. Uh, it involved private equity, but again, you know, I think that he's really quite the founder when it comes to automating things and figuring things out, you know, in order to streamline. I mean, we're going to be talking about how they thought about building on the first one. It took them three years to ramp things up. Also, like some of the stories of the things that they are now covering, uh, with their current business, but most importantly, what you guys like to hear, which is building, scaling, financing, and exiting. So let's welcome our guest today and without further ado, David Dorfman. Welcome, um, to the show.

Speaker C: How's it going, Alejandro? It's nice to be here. Thanks for having me.

Speaker B: So originally born in California, in Los Angeles. Give us a walk through memory lane. How was life growing up in Orange county for you?

Speaker C: Yeah, uh, born in Los Angeles, grew up in Orange County. It's always, uh, feels like a bubble, people say, um, but it's definitely great. A lot of interesting talent in the area. A lot of my friends started out to do different startups and businesses. Um, so it's a great area to grow up in. But I think ultimately California, um, is the tech capital of the world, so it's always nice to be there.

Speaker B: How did you, um, get that bug of wanting to automate things? I mean, where did that come from?

Speaker C: I guess, uh, early on, as a child, I always wondered why things were the way that they are. It felt like things were outdated. And, you know, when the computer came around and Internet came around and keyboards came around, it just felt like a lot of the things that we were doing day to day could be replaced or automated to bring back more of our time so that we could focus on what's important. So everything from, you know, schoolwork to to note taking to project management in my life, um, and ultimately, you know, how we started our first company with automating my sister's dental office.

Speaker B: I mean, that was Quite the year. 2008. Your father loses the job, your sister starts a dental office. And how do you find yourself in the middle of it, pushing and doing things with them?

Speaker C: Yeah, it's actually a funny story. It was a dinner conversation where, uh, my dad told everyone in the family that he was getting laid off from Toshiba at the same time. That same conversation, my sister was talking about her opening up her first dental practice after she finished her dental school and MBA at usc. And, uh, she kept telling us that there's this hole in the market, that there's no solution to automate her patient intake, that currently half of this time spent for patients are sitting in the front office filling out information that they've already provided us. And ultimately at that same time, there was discussions about the iPad coming out. And we thought, well, since my dad has some free time now, uh, and I had just graduated high school and getting into college, we thought, well, what can we do as a fun side project to help my sister be able to take in more patients and have patients being in the actual operatory and not sitting in the front office.

Speaker B: So how does that go from like a, ah, fun conversation at dinner and a weekend project to all of a sudden building a business?

Speaker C: Yeah, so it started off just, um, my dad and I spending a few weeks building a very simple prototype, understanding her requirements. And ultimately we had surprised her. She had no clue that we were building something. And one day my dad calls her and says, hey, why don't you check this out? We sent you an iPad. Go ahead and take a look. Tell us what you think. And ultimately it was a very simple patient intake form that would ingest data, uh, that already exists in their system and allows the patient to review and update any kind of changes, and all those changes will be updated back into their system. Um, it took us months to kind of perfect this full product, from automating the intake forms to understanding what forms are required, and going from just intake forms to consents and different types of treatment plans as well. Um, she also was very vocal in the communities. She was a part of a community called the Dental Town, which is now on Facebook. Um, and she was just talking about her struggles and sharing that this is the solution that she had us build for her. And it kind of garnered some interest from other fellow dental offices that wanted to try this out. And ultimately we found a few champion offices that provided us their feedback as much as possible so that we can really understand what works not in just her office, but in all offices of all different sizes.

Speaker B: How was it like, uh, working with a family? You know, how was that experience Too.

Speaker C: It's the best thing and the worst thing at the same time. Right? So working with family, you know that they always have your back and your best interest in mind. Um, but when it comes to discussions, you know, there's, there's no limits in some, some conversations, right? But you know, through those conversations at the dinner table. And what's nice is, you know, it's not really a work thing. It's something that we're passionate about. So, you know, figuring issues out and figuring problems out. Luckily we, you know, I was working at my sister's dental office in the summertime. So I was seeing firsthand how this actually helped and what were the gaps that were still existing just because we built an iPad product. Then the next question was, well, how do we know when a patient's arrived at the dental office? How do we know what documents they need to fill out? How do we know what payments they need to fill out? Um, so we started to build an entire suite of software solutions based on the gaps of my sister's office, along with all of our champion offices.

Speaker B: And how do you go from three years of building where your mom is like, guys, what are you doing? Right? I mean even maybe you guys should get a job or something from that to all of a sudden you start to make money, it starts to become, ah, a business that is self sustained. How do you go from building to actually making money?

Speaker C: Yeah, that's a great question. So when my dad got laid off, they gave him, uh, a package that he's able to access certain funds at a sooner point because of that layoff. And ultimately my mom was working, you know, double time and overtime and holidays at the hospital. And it got to a point where my mom told us like, this isn't really working out after a year. And it kind of, you know, it hit our ego for sure. But at the same time we knew what we were doing was an actual necessity. It's not like we found an interesting opportunity to make money like we want to sell some kind of courses or something. We knew that there was an actual gap in the, in the dental office. So we kept pushing, we kept getting feedback from our clients. We would go to dental trade shows and we would have people pass by our booth. And it took a few years for people to really recognize us, that we're still around, that we're still providing value. And at the time it was a one time fee. We were desperate for customers, we wanted people to sign up, so we offered them a small one time fee. And ultimately we Just wanted their feedback on how we can provide more value in their practice. Um, and it got to a point where we started to become a point of conversation on these online communities and Facebook groups. And people started to reach out to us and say, hey, what is this that you guys offer for the intake forms? Um, and slowly we were replacing the old Topaz signature pads in offices. We had a deal where we would come in and we would buy all your signature pads for the price that you would actually buy them for, and we would replace those with iPads. And you know, over time, with providing amazing customer experiences and providing hands on, you know, support to all of our clients and really listening to their needs, we started to create a real good end product. Right in the beginning, it was almost like we were building a paper plane in the sky as we're flying, um, figuring out what we need to build to go to that next mile. And ultimately we were able to end up with an actual product that allowed customers to fill iPad forms and before they even come to the office to fill online forms, so that patients could immediately, when they enter the office, not have to sit in a waiting room and can be immediately brought into an operatory.

Speaker B: So what was that moment like where you all realize, um, I think that maybe we'll put on hold what the mom is asking us to do to get our job and maybe we really go and double down on this.

Speaker C: Yeah. So when we were selling a one time price, uh, we were kind of one of those things where we needed to continue signing up new customers to continue paying for development costs and growth costs. And we kind of thought we need to pivot to a monthly subscription that allows customers to easily digest that first time fee and also allow us to have a continuous revenue stream that allows us to predictably hire and, and scale our team. That way we can provide a better return on investment to every one of our clients. So when we got our first, I would say 15, 25 clients, um, some of those that are still with us till today, we really thought, okay, how can we allow more customers to sign up with us without thousands of dollars of setup fees and integration fees and one time fees? So as we pivoted to a subscription model, we immediately had an influx of customers. We were offering as cheap as $150 a month. Um, no contract, no commitments. We were very secure with what we were offering. We knew that we were offering value and all we needed to do was just prove that by getting our foot into the door of the offices.

Speaker B: So then for the people that are listening to get it. What ended up being the business model? How did you guys end up making money?

Speaker C: Yeah, so we would offer a monthly subscription. In, um, the beginning, we had just an ordinary paperless plan and we started to extend into new features. So we had online scheduling come out, we had, uh, insurance verification. And what we built was our bread and butter, which is the patient dashboard. If you were to imagine a bird's eye view of the office, you take off the roof of the office and you can see every patient in every operatory and how long they've been in every operatory. And at a glance you could understand what patients need to premedicate, which of the siblings is in which chair. So I can walk in and know that this is Alex and this is Alexa. Um, and understand that Alexa has a latex allergy. Right. So immediately, without having to review an entire case, we provided an entire bird's eye view and snapshot of what's going on. So we started to extend our product lines and we had three main plans, right? So there was the base plan, just to get into the door. We would offer paperless solutions. We then we expanded into reminders, reactivations, and all the automated patient communication side of things. So that was our bundled plan. And then we had what we called the works plan, which was everything under the roof, including insurance verification, online scheduling, the whole nine yards. Um, and ultimately based on the package that they would select, there's different pricing, all no contracts, it's all month to month. A lot of the competitors at that time were, you know, kind of taking advantage of people, having them sign multi year contracts with, uh, you know, 15 day opt out policy that had to be sent in the via mail. And we wanted to combat that with a very transparent policy.

Speaker B: So obviously you, you are able to build this into a significant, significant scale. I mean, over 125 employees. Whether it was product, customer support, you expand in North America. Um, one thing that really happened too is that as you're experiencing this growth, all of a sudden Covid comes knocking and it brings everything to a screeching halt because I mean, people were not going to the dental office any longer. Right out of fear. So what happened there? And how did you guys navigate through all those murky waters?

Speaker C: Yeah, so we had three offices, we had over 120 employees that one day we needed to figure out how everyone can transition from working in an office to working from home. And the last thing that we expected was all of our clients calling us to cancel their services to reduce any overhead that they have. Everyone thought they're not going to need Yapi, they might as well shut their service down. And ultimately we thought we were going to lose a lot of our business because of that. So we offered a free extension to all of our customers. They didn't have to pay us unless they were using the software. But we didn't want them to actually uninstall, um, because we know that once we let them go, it's going to be a lot harder to get them back. And um, you know, we were able to transition all of our employees to remote. We started to create different ideas for, you know, Covid friendly, uh, dental offices. So, you know, being able to check in from the parking lot and being able to be notified when you need to enter the office instead of waiting in the waiting room. And ultimately when offices started to struggle because they thought this would be very quick right there was that, you know, six week, uh, stay, uh, at home kind of idea. And ultimately offices were not being able to pay their own bills and pay their own rent and they started to think, okay, well now I need to really go back into office and reopen my office and see patients because otherwise I'm going to have to file for bankruptcy. And as they reopen, they realized that no one wants to touch a clipboard, no one wants to touch a pen, no one wants to hand any credit cards to anyone because of COVID So it almost became viral overnight and a necessity for offices to reopen. So we started to build features like contactless payments, payment on file, payment plans, treatment plans, remote check ins and virtual consultations, which ultimately allowed the offices to be able to have an amazing experience bringing back patients into the office. Dental offices were one of those places where patients were super scared because you have a doctor working in your mouth. It's very close contact. It's not physical therapy where you can have a six foot rule of distance. So it was very important apex point in our business. And ultimately when offices were reopening, they were all discussing with one another, hey, so what are you doing to make your patients feel safe in the office? And one of those was Yapi. So we had a huge influx of new customers coming in and we started to build more and more products to help clients feel safe.

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Speaker B: free access because guessing is not a fundraising strategy. So what was that moment like too when now you're finally able to navigate this thing and things are back to where they were. But eventually M33 comes knocking and all of a sudden that transitions into an acquisition. Quite the ride coming full circle. So make us insiders. How did that come about and why did you guys decided to pull the trigger on it?

Speaker C: Yeah, so during that time there was uh, a lot of consolidation going on in the industry. A lot of big uh, name companies like Henry Schein and Patterson were acquiring a lot of softwares in the industry that were providing software solutions. Um, and M M33 had been knocking on our door. They reached out to us to offer us an acquisition. They had a few other uh, patient communication, uh, companies, not specifically for dental but for other verticals. And uh, we had also a lot of other offers on the table. But we were looking for someone that wanted to support us founders and not just capture more market share. You know we, we did this um, to help the industry and we didn't want it to go back to what it came from ultimately. So it was a very interesting kind of inflection point in our lives. Um, you know my dad wanted to kind of retire at some point and that was kind of an opportunity for him too. But at the same time we wanted to be able to provide more value at scale. Right. And it became a point where you needed to really have a good backing of investment to really 5x or 10x your value that you provide to the industry. So ultimately we had come down and uh, we met with the M M33 founders and they were very, a starter founder, um, centric, uh, ah, acquisition firm. So they wanted to keep the original founders. They wanted to allow us to continue building what we're building and execute on our vision. And ultimately in 2021, um, we had an eight figure exit to M33 equity. And uh, I was able to stay on during that transition as my dad and sister were finally able to retire and enjoy their life. But that was kind of like the new chapter of my life right now. How can we now take this to the next level? Um, and this was a very exciting point because all Of a sudden, we had resources that we never had available to us, Right. We were able to hire an engineering team and have a head of product and have a CFO and a COO versus my dad and my sister and I sitting at a table trying to figure out what do we do together to figure this out. Right? So it was, instead of building a paper plane, we're now in a normal plane that has stability and we can plan out our further route.

Speaker B: What was the family dinner like the day that you guys inked the deal?

Speaker C: Yeah, I mean, uh, it was a touching moment, right? It was very emotional, right? Like, this is like sending your kid off to college, right? Everything that you've worked hard for finally coming to fruition. My mom is happy, right? So she finally saw all the hard work that she had put in working overtime and double shifts finally came to fruition. And to me, this was like the biggest lesson in my life, right? That just because something isn't working out right now, that doesn't mean that it's not going to work out long term. Right. And the people who are most successful, they see through those hard times and they have the grit to continue working hard and continue building and continue pushing their passion. Right? So it was an amazing dinner. It was, uh, it was emotional on every side. Right. And, uh, it was a new chapter for me to be able to now transition this company into a large enterprise organization.

Speaker B: So in your case, you know, eventually, you know, during this time you go to a barbecue, uh, and basically you meet someone that, uh, became pivotal to you and someone that has that was telling you, too, about an experience that he had with Chase, uh, that was ultimately the sequencing, you know, that got you to Blue Navy Recovery. So walk us through that sequence of events. What happened?

Speaker C: Yeah. So every conversation at a barbecue is always great, in my opinion. But I went to one of my good friends barbecues, and he was telling me about an experience that when he came back from Polytechnique Masters in Paris, that, uh, he went to Chase, and Chase kept telling him that they have no record of his account, and he thought he left his entire checking, savings and retirement accounts there. And when you leave money at a bank, you think it's safe there. That's why you leave money at a bank. And ultimately he came to find out that after three years of no activity on any bank account, they're required by law to send that money to the state controller's office as unclaimed property. And he kept telling me about the frustrations that he was having trying to recover that money, the opaque process that is not very clear to what documents you need to provide proof of and how the whole process works. And he had to mail in physical, signed documents to the state's office. And ultimately after a year, he found out that he had sent in the wrong documents and he had to start all over again. So what should have been simple, it was a two year ordeal for him to get his entire life savings and investment accounts back into his pocket. And this kind of caught my attention because when I looked, I found out that I have unclaimed property, My dad has unclaimed property, my sister's dental office has unclaimed property. And it was something that I found out. 1 in 7 adults in America have unclaimed funds that they are not aware about. And there's about $72 billion. And just 10 years ago, that number was $40 billion. So the problem is growing at a very rapid rate. And there's a lack of understanding for most individuals that they even have this money. And then the next step is, how do I even get this money back?

Speaker B: So then what happened next? You know, after you were exposed to this, what, what do you guys do about.

Speaker C: Yeah, so ultimately we got access to the California state database of unclaimed funds and we started to see what can we do? Let's build a proof of concept. Let's not spend too much time on creating a name. So we were in San Diego and we saw the navy and we thought, blue's my favorite color. And we're helping people recover money. So let's do blue navy recovery. And we started to call people personally and we're like, let's just see if we can help people recover money. And we're not going to charge them anything. We'll take a, uh, a success fee. And we closed our first deal and second deal and a few months later we had closed, you know, 20, 20 deals or so, and we started to see traction, we started to see common trends that most people didn't have any clue about this money. So we hired a call center, we sourced our own talent in the Philippines, and we were able to really exponentially scale our outbound call team. So at this point, we're calling around 20,000 people a week, notifying them about their unclaimed funds. And if you just listen to the calls, it's amazing because you're calling people that, you know, telling them that they have money that they didn't even know about or forgot about. That was long time since they talked about that money. And now we're able to help them get that money back. It's not like we need to convince them about this new Nike shoe or this new lifestyle product or this new crypto coin. It's literally getting money back into the right hands.

Speaker B: So what happened, for example, with a lady that lost their husband as an example?

Speaker C: Yeah, so that's one of our. One of my most memorable stories is, uh, a lady, unfortunately lost her husband out of the blue, and she had to sell her house because he was the income of the household. And, uh, they had to pretty much look for a new house in a different city. Her daughters would have to go to a new school system and make new friends until we called her and told her that we found about a half a million dollars in an account that she was unaware of. She was the executor of the trust and the will. She. She was responsible for everything, but she just wasn't aware of every account that her husband had. And when we called her and notified about her about this money, she immediately thought we were a scam and went to the police station. And her husband worked as the chief of police there. And they looked her husband up and they was like, no, this money is true. He had half a million dollars in an investment account that she never was aware of or she had forgotten about. And obviously going through the mourning of losing a partner, you don't really come to think about all those things that happen throughout your entire relationship. So we were able to get her money back. She was able to keep her house. She can pay off the remainder of the house and have some money for their kids to be able to stay in the same school, not have to make new friends. And she was crying to me, and she still calls me till this day, telling me how amazing we've changed her life, not just financially, but psychologically. Um, you know, the worst thing that a kid could have growing up is having to start all over in a new school and make new friends and also for the whole family member after what they've had to go through.

Speaker B: So, Blue Navy Recovery, how do you guys make money?

Speaker C: So we take a percentage of whatever we successfully collect. In some states, the state will act as an intermediary. Uh, we take anywhere from 10 to 25% based on the case size. So the 25% allows us to help cases that are smaller in size. Um, but in some states, there are certain caps and limits which we have to abide by. So we take a percentage whenever the client gets successfully paid. So we don't ever have to collect anything upfront. So there's no risk at all for our clients.

Speaker B: So then where are you guys at now? With Blue Navy Recovery?

Speaker C: Yeah. So, uh, we've been able to successfully recover over $8 million now for about 10, about a thousand clients. And, uh, this March, we got accepted to the techstars accelerator program at usc. And when we got into the techstars program, we kind of built a business model to understand what is it going to take to get us to the next milestone. And ultimately we kind of came to the fruition of we need to pivot from an outbound sales product outbound sales motion to a product sales motion. So we built a platform that where individuals and businesses can come online, they can enter just their phone number. And with that phone number, we immediately search across all the states using every address that we could find associated with that phone number, and we compile all the documents. It's been going very well. Um, we've done over 500 cases in the last month. Um, and it's been something that has been scaling out. Amazing. Um, we are also entering the enterprise market. So we're now working with a large university here in Southern California. We've identified nearly $2 million of donations and refunds that they have missed over the years. So we see that this started out as a consumer problem because that's really where it hurts individuals. But there's a lot of unclaimed property for businesses and enterprises such as mergers and acquisitions and bankruptcies and dissolutions and just simple refunds and checks that most large organizations that have, you know, parent companies and child entities, there's a lot of money that gets lost. And the last thing that we're proud to announce is our first HR benefit. So techstars, we're launching for all their employees a, ah, monitoring service as an HR benefit that every month every employee of techstars will receive a free report of all the unclaimed funds owed to them and their immediate family members. And we will help them, um, recover all those funds. So we had a lady who we helped already. She didn't get her last paycheck from Facebook. And when she came to techstars and started to work there, we immediately notified her about that last paycheck that she never received. And we were able to help her recover that money as well.

Speaker B: So let's say you were to go to sleep tonight, David, and you wake up in a world where the vision of Blue Navy recovery is fully realized. What does that world look like?

Speaker C: Yeah, so, I mean, it looks like, uh, a time where people don't know what money they have sitting at the state, that they are completely aware of the assets that the states are holding onto them. And then they know that we are going to help them, that we always have their back. Um, we're going to be continuously monitoring for any new unclaimed property and that they know us as a household name brand for finding any lost money that's left behind. As everyone knows, the gas prices and inflation, that money is something that becomes more important that everyone could use. And we just want to be able to return every dollar back to every American pocket.

Speaker B: So now let's say I, um, put you into a time machine and I bring you back to that moment where you're coming out of that dinner with your sister, your dad, um, 2008, you're thinking about this new idea that, uh, you guys just had. And let's say you're able to show up in that dinner right now, you're able to bring yourself back in time, butterfly effect, and sit down at that table. What would be that one piece of advice that you would give to your younger selves, given everything, you know now for launching a company?

Speaker C: Yeah. Um, honestly, probably stay humble and stay curious. I think a lot of people, you know, miss a lot of information and opportunities in their life because they think something is perfect and something as simple as unclaimed property. Right. Um, when I tell most people about that, they don't even know about this industry. They don't even know about things like this. And I think, you know, when you stay curious, you get to hear people's vulnerable situations in their lives. That allows you to have an opportunity to help them. And staying curious allows you to create solutions that you would have never thought you would have been able to create. Right. So when we first started yapi, we would have never thought that we would have been building Covid Solutions, um, for telehealth. When we first started Blue Navy, we never thought that we would have a platform that people can come onto and search for them and their loved ones. So really it's stay open, stay humble, and stay curious.

Speaker B: I love it. David, for the people that are listening that would love to reach out and say, hi, what is the best way for them to do so?

Speaker C: Yeah, so you can email me, uh, davidluenavy ah.org I'm always happy to talk. Uh, for any kind of partnerships or if you'd like us to do a free check for your organization or for your loved ones and yourself, um, you can also check us out@bluenavy.org happy to discuss and you can also find me on LinkedIn as well.

Speaker B: Amazing. Well, David, it has been an absolute honor to have you with us. Well, thank you. Thank you so much for being on the Dealmaker show today.

Speaker C: Thank you, Alejandro. It's been a pleasure.

Speaker D: If you like the show, make sure that you hit that subscribe button. If you could leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they also appreciate it. Also, remember that if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me@alejandroantheraadvisors.com

Speaker A: you've reached the end of another episode of the Dealmakers Podcast. For free resources and materials, head over to alejandrocremadis.com thank you for listening and see you at the next episode.