Show Notes

What’s the difference between being a consultant and running a startup? The answer might lie with InRule cofounders Rik Chomko and Loren Goodman. The two were working as consultants in the decision management sector, but when they found a pragmatic way of conducting business that could be turned into a product, they made the leap. With that, InRule was born.

Rik and Loren recently sat down to talk with Midstage startup coach Roland Siebelink to discuss their journey from consultants to founders and the value proposition that has made InRule successful. The two cofounders also shared a lot of the lessons they’ve learned along the way.

• Why it’s helpful to narrow your market and dominate one niche before expanding.
• The difference between creating new products and selling old products to new people.
• How Rik and Loren make sure not to add friction to their cofounder relationship.
• Why it’s important for cofounders to share the same values before scaling the company.
• The benefits of having a coach to guide you to the right answers.

Transcript

Roland Siebelink:Welcome to the Silicon Valley Momentum Podcast. This week we have as guests, Rik Chomko and Loren Goodman of InRule. Welcome, gentlemen.

Rik Chomko:Hello, Roland.

Loren Goodman:Hello, Roland. Good to be here.

Roland Siebelink:Thank you for joining this podcast. It's great to have some seasoned entrepreneurs on the podcast this week.

Roland Siebelink:Maybe that's a good segue into the InRule story. We have been working together for a number of years. InRule recently accepted some growth capital to really boost further growth in that space. And I understand the space to be described these days as decision services. Is that right?

Rik Chomko:Decision platform. Decision management.

Roland Siebelink:Decision management. Okay. What does that mean? What does InRule do? And what's the use case for what kind of a customer?

Rik Chomko:I think for us, If we look at our core customers, It really comes down to four major industries: insurance, financial services, government, and healthcare. Places that are highly regulated and have a lot of decisions that they are in a position to automate. That's what we do. We help these organizations automate these decisions. I like to say, also augment them, so it’s a decision recommendation. It's not always saying this is the absolute decision. We're just gonna automatically approve or not approve this opportunity.

Roland Siebelink:What use cases are we thinking about then, Rik?

Rik Chomko:Yeah, I was going to go into one of the use cases. One of the bigger ones, which is loan origination. Generally, anytime you go to get a loan, there's an engine sitting behind it and a whole algorithm and set of rules that filter through that say based on you know the type of house you want to buy, and the amount of money you want to borrow, and what credit history you have, and how much is a down payment on the house, It runs through a whole bunch of rules and calculations that say, “You know what, this person looks like a good risk for us. Based on that risk, we're also going to recommend these sets of products.” And then as they go down through the process, once they select the process that then says, “Okay, well, based on that, what rate can we offer them that we think will be profitable and they'll be comfortable with that rate in terms of paying down the loan.” And then finally, the last piece is, when I get to the closing - you've seen that list. “Hey, you gotta bring your license. You gotta bring your last three paychecks. That kind of thing. Those are called stipulations. And the product is also used in that process to say, “What are the things I need to bring to the closing in order to get the paperwork done?” And then within that same era, you might use it for commission calculations. You might use it for any part of your process where you feel like there is a lot of detail. There's a deep decision you want to make and policy that you want to enforce within your organization. That’s generally one example. And we can go into a whole bunch of other examples like claims processing and healthcare and insurance pricing for all kinds of insurance, whether it be healthcare or property and casualty insurance. If you want to say how much it's going to cost to ensure the Fine Arts Gallery that you have, it's a special set of rules and calculations that determine that. And usually, that runs through an engine like ours to help determine that.

Roland Siebelink:Okay, very good. How did you get into that space? I'm guessing it's not that you get out of college and you're like, “Oh, I'm gonna be working for loan origination, solving the problem of loan origination in the world.

Loren Goodman:I think that's something we discovered in our own experience. It was interesting. Laziness is the driver of all innovation. The TV remote was not invented by someone who wanted to get up and turn the TV channel. When we were doing consulting work together, we'd written an engine at the time that automated various aspects of the calculations and also put the customer in charge of making them. We did it because it made it cheaper for us to deliver. We could do a fixed-bid project for less and get them to do some of the work. What we noticed was this passion for access to automation. When people have the ability to do something in the first person, there's something a little bit magical about that. And I see it. Watching kids mix paint and see what color it becomes. Not only did it get automated but it got automated better. And it got automated with a sense of ownership that was transitioned from. There was no more arguing about the content of a document and who was right and who was wrong. Instead, it was, “I made this. These are my rules” versus if you write something in Word, I don't think you credit Microsoft for writing it for you in Word. You didn't type it in, you crafted it in Word. I think that we found this and we played to this strength. And then behind it was a set of algorithms to make it work. And then we were like, “Well, this is actually maybe a product.” And turns out there's an entire space that existed for that product. We came at it from pragmatic taking bullets in the field, as opposed to from the academic side of the algorithms behind it.

Roland Siebelink:Coming back a little bit to the InRule story, looking back at all this time since you started the company, moved from consulting to more of a product company, and now accepting your growth investment, what have you learned as entrepreneurs? What have been some key pivoting points or points where you said, “Okay, this is really a big learning that makes us better as entrepreneurs, makes us a better company?”

Rik Chomko:For me, the first one is to pick your market. Try to pick a niche that you think you can be successful in because if you try to be all things to all people, it's going to get really difficult on you. And I did learn that early on from one of the folks that worked with us in the organization. We decided to focus on a particular technology stack versus trying to be - back in the day, that would have probably really hurt us. And then I did specifically remember a moment where we were at a conference. And I said, “Man, wouldn't it be great if we just had this feature in the product and it did XYZ, and we could sell to all those other people.” And he looked at me and said, “You can't. You just can't do it. Not right now. Keep it in mind for the future. But if you try to add, that's a whole nother new product effectively that we will be selling to a whole new group of people, a whole new group of personas, if you will. And that's not a smart move.” And I remember that. And I think focusing on a niche market. Don't try to be all things to all people. Get really good at your niche and then expand from there.

Roland Siebelink:It's very counterintuitive for entrepreneurs usually, right?

Rik Chomko:It's tough. I'm telling you. When you look at having to walk away from business and that business might be critical to you making the next paycheck, it’s really hard.

Roland Siebelink:Explain to some of the earlier stage entrepreneurs that are listening to this podcast, why would you limit your market artificially that way? What's the driver behind that?

Rik Chomko:Because you can get very distracted. For me, the distraction factor is one of the things. You pull resources away from working on you already may have a set of successful customers in one area. And usually there's enough - if you pick your market right, there should be enough business to go after in the market you picked versus trying to go off and do this other thing. It might be adjacent to what you're doing, but it's not core to what you're doing. And that is really distracting.

Roland Siebelink:Yes, you have to keep re-inventing new products versus just selling the same product to more people, right?

Rik Chomko:Right. You pull these resources: engineers, sales people, pre-sales people, you pull them over and you start focusing on this other problem. Then everyone else has to get spun up on what the problem is, what the solution is. And then actually develop it and then go market it and sell it. You think about all the effort that goes into that. And then you're pulling all that away from the core product.

Loren Goodman:I was going to add, on one side of it, I look at it just simplifies thinking when you narrow what you're doing. And it's really hard to do because I want to do everything. And there's nothing we can't do. In order to make a decision, making it so that you can think about it in smaller and smaller scopes, makes a better and better decision. In terms of what I have learned from being an entrepreneur - and this is something I learned from Rick actually - was to protect and never threaten relationships. Because stress can be ridiculous. The first customer is a piece of cake. That's a walk in the park. You already knew the guy who started the business. Second customer, not as hard. You got your network, you're playing it. Third, fourth, fifth, a little tougher. Maybe one you don't know already. When you get into the six to 10 - and this is in enterprise software, these are big contracts. But you get to six to 10, when all of a sudden you've exhausted your personal network. And now you're setting up your booth at the trade show and you're out in the wild. I always contend nothing interesting happens in the shallow end of the pool. That's the moment. And I found when I speak to protecting relationships, it is that in those levels of incredible stress that it's very easy - and Rick and I have been working together across multiple companies - and I don't know many people who have been business partners as long as we have new who basically can't stand being around each other. One of the things with Rick is we protect that relationship and we never add friction. Operating from that standpoint, it's very hard to do when you're furious with the other person. Never bluff. I think that transparency and our ability to communicate is the only reason we could collectively fly a plane 100 feet off the ground through a forest.

Roland Siebelink:That's a very good learning. There's a lot of startups, scaleup companies where the co-founders are worried about having constant conflict. Rick, what's your take on that? How do you keep working well with your co-founder through all these stress and all these ups and downs that every business inevitably goes through?

Rik Chomko:Values do get challenged when the going gets tough. What are your values? What do you line up on? And I think that's an important thing to consider if you're going into business with someone, do you have the same set of values? And don't believe in the same things? Because if you do that, those tough times will be a little bit easier, should be easier. And then being honest and transparent with each other. Everyone is always going to have moments where you're not seeing eye to eye on things, but to keep that in and not be transparent. But you also have to be respectful. And I think that's another big part of it. Because if you lose that modicum of respect, then we run into problems where it becomes more of an argument that you're not going to make progress on. But I really do believe in making sure your values are lined up. Because if they're not and if you don't believe that - if you don't believe doing best for the customer versus making a few extra dollars is the right way to go, you're gonna have an argument at some point, and it's gonna go the wrong way.

Roland Siebelink:And you can’t reason for his principles anymore, right? How do you discover those values with your co-founder?

Rik Chomko:I don't think we were really purposeful in it. Starting out. I don't think we had any idea what they were. We just maybe got a little lucky there in that we did share the same values, but Loren probably has a story.

Loren Goodman:I was excited to find out you had values. It's funny, you bring up the thing about doing right by the customer. Rick and I will eat our shoe to make a customer happy. If it came out of our mouth as a brand promise, we follow through on it. With other mindsets that can create a great deal of friction. But we believe we're playing the long game. I agree on the values. I don't think we've ever actually overtly discussed it. But we do very much align on how we do right by our customers.

Roland Siebelink:Yeah, and you have a set of core values already set in stone when we started working together. When I was your coach for a few years, right?

Rik Chomko:Yes, and I guess along those lines is if you can come and figure out some agreement on what those are, it does help as you start to scale, as we found out working with you. Once we knew what those were, then being more consistent in how we reward or not reward along those lines I think helped me realize a new level of thinking and growth around a company. And then also reinforcing those values when you had a chance to communicate to the company. Looking at something that someone might have done right and communicating something that reinforces the value that we believe in across the entire company, I think, has a pretty good geometric effect on it.

Loren Goodman:Don’t keep track and compare sacrifices. There's going to be time when Rick's on vacation and I'm working 80 hours a week. But there will also be a time when I'm on vacation and Rick is working 80 hours a week. But I think the moment you notice that you're keeping track of your sacrifices is the indicator that's time to talk, that's time to get it out in the open. Because if you don't feel it's balanced and there's an imbalance between risk and sacrifice, that's a key piece of the recipe.

Roland Siebelink:Great advice. I love that. Loren. Tell too many entrepreneurs and co-founders, I think.

Rik Chomko:Yes, and I think what's underneath that is trust. There's a level of trust there that says, “Hey, I know that you work your butt off at some point, I'm running into a personal problem or I've got something that I need to step away for a little while to do whatever it is and then trust that you're going to come back and deliver some equitable amount of value to the company.

Roland Siebelink:Excellent. Okay, We've almost been talking for an hour. I'd like to finish with a quick fire round that I like to focus on tips for entrepreneurs. The people who are a little bit behind you, that have started their company in the last couple of years. And maybe let's start with what kind of a book would you recommend to them? Are you currently reading it or a book that you've recently read that would be really helpful to some of the entrepreneurs in our audience..

Rik Chomko:I will give you one that I've read that I thought was really good for entrepreneurs and anyone that's in a position of senior leadership in a company. It's “The Hard Thing About Hard Things” by Ben Horowitz. Everything you read generally in a book is all the great things that happen when you're leading perfectly and the way to do it all perfectly. But he talks about all the hard decisions that he had to make. Firing friends and running a company into the ground. That, to me, was really insightful and frankly pretty refreshing to hear that it isn't always a perfect path and that it's a roller coaster ride.

Roland Siebelink:I love that book too, Ben Horowitz, right?

Rik Chomko:And then the other one that I'm reading now is “Mindset,” and it's all about growth versus fixed mindset. I've heard of the concept before. I've always been intrigued with it, never really sat down to read the book. I'm getting through that and I think there's just some great examples and hopefully have a chance to educate or at least share it with other people in the company. I’ll point out it's very easy to fall into a fixed mindset. You think about growth, both personally and professionally, it can lead to some great things.

Roland Siebelink:Absolutely. Loren. What about you?

Loren Goodman:Well, it's interesting, Rick. You took mine. My initial one. But the other ones that come to mind, One is a book called “Zero to One.” It captures innovation in such a unique and crisp way. The other one I liked was “Lovability,” which talks about creating a little bit of something of what people love versus something that solves their problems. And lovability starts with you using your own stuff every day, making sure that it's personal. I found that to be fairly inspirational.

Roland Siebelink:Okay, another question I had on my quick fire round. If you could work with any leader for a week, who would it be? Loren, let's start with you this time.

Loren Goodman:Well, the cliche answer would be Rik Chomko. I actually think I would take probably Bill Gates or Satya Nadella as people. And Satya, specifically. There is something about his belief and focus. I watched a great leader. I was in a meeting the other day and I just watched a great leader, how they express something in a completely un-offensive way. It's just a set of skills. I would say, I feel like if I spent a week with Satya Nadella, I would walk away with a doctorate in being awesome, just just watching him operate every day.

Roland Siebelink:That's awesome. What about you, Rik?

Rik Chomko:Yeah, I'm going to go there more historical. I just can't think of any one tech leader. I’d like to draw from all of them. But I love Abraham Lincoln and reading about him. And Teddy Roosevelt and Winston Churchill, so it's hard for me to really pick any one of them.

Roland Siebelink:What’s the trait that you aspire to in picking those examples?

Rik Chomko:I think they have all been inspiring in tough times. They overcame adversity and they were inspiring, but they also stood up for their beliefs. Maybe those are the two main qualities that draw me to those examples. And that's why I’d want to spend time with them.

Roland Siebelink:Some sense of real integrity there, even in the face of severe hardship is what you’re saying.

Loren Goodman:And that's the moment that matters 100 times more than the next most important moment.

Rik Chomko:And also, they were great communicators. They all had great examples of where they communicated to people what their vision was and why they think. And then following up with solid execution.

Roland Siebelink:Excellent, very good. One last question, the quick fire round. If an entrepreneur feels like, should they be using a coach, yes or no? What's the main benefit you think you get out of a coach as an entrepreneur?

Rik Chomko:I'll go. You have a chance to step back from not having to orchestrate and facilitate the thinking of your team and participate with them versus having to - that's one part, just in the facilitation part and having someone there to run that and walk you through and be more of an unbiased observer and not bring in emotion or other things. You, as a leader, get a chance to participate with your team and do the thinking with them. I think you have a subtle way when you're doing that as a facilitator to dismiss someone's idea because you don't think it's right, whereas a facilitator coach will always give it the airtime it deserves. And I think from a coaching standpoint, as a coach that's talking to other leaders, especially in the software space, I think it helps that you have a perspective. As an entrepreneur, founder, you can get a bit insular at times and not have the perspective of wider things that are going on in the industry. I guess I'll put those two things as number one and two.

Roland Siebelink:Very good. What about you, Loren?

Loren Goodman:I think to Rik's point, when you're working with a coach, you eliminate the mood of the room, and you're forced to recreate the context of a problem you're coping with, having to voice it all. It's just so useful - working with you, for example - having to explain how we got here or explain the history or explain the decision. In it, the words to think about it and eliminate the emotional side of it naturally arise. By the time I was done telling you the problem, the answer was quite clear. But it was the way that you didn't weigh in and the way that you listened.At times, I'd be like, “All right, Socrates, let's skip that part. Just tell me what you think.”

Roland Siebelink:That did come up a few times. I do remember that.

Loren Goodman:But I would say, with the scale up in its whole, everyone could say, “You got to trust each other. You gotta have team trust. It’s like “I trust these people.” Understanding what it means and really creating - there's one thing I got from you that I've applied to almost every aspect of my life, which is how to give feedback. “I witnessed. I felt.” Not “you did.” Not “you wanted to.” Not “you were trying.” Inferring nothing of the mindset whatsoever. Simply my senses took in this information and then my mind felt this way. When you put that on the table like that - to quote my wife, she is the world's leading expert on her own opinion. Everyone is. When you are only expressing your opinion and what you sensed from your perception, there is no room to argue.

Roland Siebelink:Very good. For those people that are interested in learning more about Inrule, where should they go? What's the best way to get started in understanding what InRule can do for them?

Rik Chomko:www.InRule.com, and feel free to reach out to Loren or myself Rik at [email protected] if you want to reach me. Loren is at [email protected]. We'd be happy to answer any questions you have.

Roland Siebelink:Great! Thank you, Loren Goodman and Rik Chomko, CTO and CEO of InRule, our guests on this podcast Silicon Valley Momentum this week. This was a pleasure to have you on, gentlemen. And we are looking forward to all the impact that InRule will be making with its new growth capital.

Rik Chomko:Excellent. Thank you, Roland.

Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the world.