Alex Frommeyer On Raising $170 Million To Modernize Dental Benefits

Alex Frommeyer has been a builder all of his life. He has taken that from childhood construction projects to engineering technology and is now creating a large and fast-growing startup.

During his appearance on the Dealmakers Show, Frommeyer shared his experiences raising $170M in capital out of Ohio, working with investors and board members, and even being fired as the CEO of your own business. Plus, Insurtech and the future of dental insurance in America.

Alex’s company, Beam Dental, has attracted funding from top-tier investors like Mercato Partners’ growth equity fund, Traverse, Drive Capital, Georgian, Nationwide and Breakout Capital.

In this episode, you will learn:

• How not to get fired from your own company
• The value of transparency throughout your organization
• Company culture
• The future of the dental business in America
• Alex’s book recommendation
• His top advice before starting a company

 

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About Alex Frommeyer:

Alex Frommeyer is the Co-founder and CEO of Beam Dental, a dental benefits company that offers employers a fundamentally unique approach to dental coverage by incorporating hygiene behavior into policy pricing.

He has two engineering degrees from the University of Louisville’s Speed School of Engineering, where he graduated magna cum laude andfounded his first company in 2010.

He is a Forbes 30 Under 30, a Rock Health alum, and a member of the Kentucky Entrepreneur Hall of Fame.

Connect with Alex Frommeyer:

• LinkedIn
• Crunchbase
• Bloomberg
• X

Read the Full Transcription of the Interview:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m super excited. We have an amazing founder today. He’s been building and scaling a really interesting business that started first touching on the service side and then figuring out how to productize it and how to scale it up. They’ve been at on incredible journey and remarkable. So without further ado, let’s welcome our guest today. Alex Frommeyer, welcome to the show.

Alex Frommeyer: Hey, thanks for having me. It’s good to be here.

Alejandro: Originally born in Kentucky, and you were there in the middle of the woods. How was life growing up there?

Alex Frommeyer: It’s true. I’m from Kentucky originally. I grew up on top of a big hill. We lived on maybe 100 acres. It was mostly woods, so that’s where you could find me pretty much every day growing up. I was running around in the woods, and I ended up taking a little section of those woods and building treehouses. But not just one treehouse; I built a whole neighborhood of them. I ended up building, I think, nine different treehouses, by myself, in the woods. My grandpa gave me a bunch of lumber, nails, and tools, and I dragged it off into the woods and started my love of building things. That still persists today. That’s why I went to engineering school and why I have done startups my whole career as well.

Alejandro: How was that transition because here, you were exposed to the love for problem-solving, for building those tree houses? But how did that translate or shift into engineering? On the engineering side, you knew, “I’ve got this. I love this. Let’s take it to the next level on the problem-solving side?

Alex Frommeyer: I think what I noticed is that my interest when I was putting together one of these treehouse projects was, I actually didn’t enjoy the finished product as much as I loved the process. I remember asking my dad one day what I should do when I was a grown-up because I loved building treehouses so much, and I knew that wasn’t a job. He told me I should be a civil engineer, so that’s what I technically am. I have a couple of degrees in civil and structural engineering, and I’ve always maintained this passion for building things, but much more so the process, the imagination of how can I turn this tree with this non-standard set of branches and different challenges. How do you get into the tree? How can you craft the house? Where do you go to make the right platform? There are all these unique challenges, and that was what I found myself falling in love with. Once I built the treehouse, I’d play in it a couple of times, and then it was like, let’s go find another tree and do it again because I loved the process of building. For me, going to engineering school and starting companies and building something new is just a different version of that same process that I’ve been in love with since I was six or seven years old.

Alejandro: That’s amazing. In your case, too, you went to the University of Louisville there in Kentucky, so you didn’t go far from home. But this allowed you and gave you the opportunity to meet your co-founder. What was that process of meeting them, and then how did you guys go about thinking, “Maybe there’s something that we could do together.”?

Alex Frommeyer: Yeah, my co-founders and I all started in Engineering School at Louisville at the same time. It started out pretty simple. We were in a bunch of classes together, all those entry-level calculus and physics courses and the engineering program. We were just friends. We did homework together. Two of us were right next to each other in our freshman dorm, so we were friends, and we hung out a lot. I think at that point, I had already been interested in being an entrepreneur and owning my own business, but I had no idea what that meant. I really didn’t know any entrepreneurs. I assumed that you had to be 40 years old and have 10-20 years of experience before you could ever own your own company. So I thought of it as this distant future thing I might like to do one day, and I didn’t think that much more about it. It was really interesting that after some period of time, maybe it was a couple of years into the engineering program, we went on these co-ops or internship programs, and we worked for—this was part of our engineering school—you worked for a real-world business, making real money, operating and going to the job every day. It was structured into the program, so you did three semesters of these co-ops, and it’s supposed to help inspire you to build relationships with those employers to then get a job at one of them, ideally, right as you graduated. But, for us, it had the opposite effect. We saw how these companies operated from the inside and the type of work that we would do when we finished our undergrad program, and we thought, “Oh, is this it? Is this what being a professional engineer really means?” I think that started to coalesce this idea that maybe there was something more creative and more dynamic that we could do with our time. At that point, we started working on building our own company in the background.

Alejandro: That’s very interesting. One thing that I find amazing is that the three of you guys had similar backgrounds because, typically, when you go for co-founders, you try to see who can cover what. In this case, you had similar backgrounds, so how did you go about dividing and conquering?

Alex Frommeyer: Yeah. That’s a really good question. I would love to say that it was incredibly intentional at the very beginning when we were deciding to go into startups together, but maybe it was more intuition-driven. We’re actually very complementary to each other from a skills-tradeoff perspective. Even though we all have technical backgrounds, I was always the very sales, business development, and marketing-focused of the three of us. That was my core interest. I was technical-based but very interested in, let’s call it, business development. Another one of us was so interested in legal and compliance and regulatory that he actually went to law school for a little bit and passed the patent bar and still, today, does a lot of that work in our insurance product, which is everything having to do with the department of insurance, regulatory infrastructure, legal and compliance, all the regulatory affairs, and that’s his special skill set. The third helps run our people’s team. That’s Dannon, amongst our co-founders. His superpower is being able to read and understand people really well, He’s helped many of our teams at Beam, focuses on organizational design, and HR, and people function. We all have this technical home base where we share a lot of interest, but we each wanted to operate in a slightly different arena, and that’s allowed us to adapt and always be focused on taking our unique skills and molding them to whatever the business needs.

Alejandro: In your case, you came out of university and meeting your co-founders, but you guys had no idea of dental. Obviously, you landed there. You had people in the family and friends that were involved to a certain degree with it, and you started thinking about this more from a service perspective, but how was that transition—first, with the understanding that this was what you wanted to tackle, this segment, to then progressing from a service-based business to an actual product or platform-based business?

Alex Frommeyer: Our first company was so simple. It was an engineering services company. We were undergrads. We had no idea what we were doing. We just knew that we wanted to avoid taking jobs at the companies where we had done those internships. We took my living room, a house that I was renting just off campus, and every day, we would use this living room space. We transformed it and put a bunch of foldout tables in it, just a bunch of chairs, and we would do either homework, working on our coursework in classes, or you would go into the other room where we had some other tables set up, and that was where our business was. Our business, by the way, was pretty simple. My job was to network, starting with the university, which was my only network, and meet as many people as possible, tell them that I wanted to use technology to build products and services, whatever that meant, and “Do you have any work for us?” They would introduce us to other business owners or people that were doing research at the university. We eventually built this network of people that were willing to pay us minimum wage or maybe a little better to work on some R&D projects or some little things that were sitting on a shelf, and we did everything. We said yes, to everything. So for the first two years, the business was me going out and trying to win work, which would have been building a website, doing some custom electronics. We did a lot of technical writing. We did a lot of patents. We worked on a lot of intellectual property. We did stuff that was decidedly very tech-oriented and then some work that was pretty far afield from it. But we sunk our teeth into the work. We loved the process of learning and iterating through it. Every day, we’d come home, and you’d basically have to decide which of the rooms were you going to walk into? The business room or the homework room? Over time, it was clear, just based on where we were spending all of our physical time. We were much more interested in the business than we were our classes. We started migrating more and more of our time into the business, but there was still something missing. We were doing all this work for other companies, for other researchers, for other people helping them take their ideas to market. What we wanted to be doing was taking our own ideas to market. The problem was, we didn’t have any ideas. So I actually turned to our family members. We all have families that are in dentistry and in the dental industry, including my sister, who is a dentist. We started trying to develop products that would be our own intellectual property related to the dental industry. We saw that dental was this big, valuable, but very fragmented and under-innovative market, and we saw that market probably had value locked inside of it that no one else was focused on extracting. Our intuition was right. What we saw in the early days was Beam, which we initially styled as a vendor, a company that would build technology for large dental insurance companies could actually itself become a dental insurance company. So without knowing it, we had created one of the first insurtech businesses. That now seems super obvious, but back in 2012, 2013, when we started Beam, that phrase, insurtech, didn’t exist, and we didn’t know day one that it was even possible to build an insurance company from scratch.

Alejandro: For the people that are listening, Alex, what ended up being the business model of Beam that everyone knows today?

Alex Frommeyer: We started Beam as building the industry’s first and only dental wellness program. The way we thought of it was that dental insurance companies don’t have very much and very good data about who is the most likely to go to the dentist and what services are they going to need when they do go to the dentist? We built a wellness program that would focus on preventative care such that people would a) get the products they need: toothbrushes, toothpaste, floss, etc., to have good preventative care. That means, hopefully, fewer visits to the dentist over time, and you don’t need a bunch of root canals. That would be the idea. Then paired with that would be technology via an IoT solution, which was the Beam brush, which pulls in data about the usage of the brush, and we thought that data could be used in the context of underwriting. If people are taking great care of their teeth every day, it’s less likely that they’re going to need a bunch of intensive dental work done over a long period of time. That was originally the basis of the business. Then when we realized that the whole industry needed to digitize itself to be able to even work with a company like Beam, we decided to solve the problem ourselves by building our own digitally-native dental insurance company from scratch. Today, Beam works with employers from two people all the way up to 2,000 people and everything in-between. We bring them a best-in-class, totally unique digital-first dental insurance solution. Then we also do some other employee benefits like vision insurance and life and disability as well.

Alejandro: As you were alluding to it, it was like a first-timer for someone to do something like this. I’m sure that reaching product/market fit was a beast to accomplish, so what was that process like, and when did you realize, “I think we’ve got something here.”?

Alex Frommeyer: It was a brutal process, and it almost took us out of business, actually. We had built the first version of the business, the wellness program, and we raised some venture capital to help support our expansion into dental insurance. It’s complicated. There’s a Department of Insurance in every single state, so if you want to operate an insurance company, you have to become accepted by the Department of Insurance. This was like a very binary bet. If the Department of Insurance said we couldn’t enter a state, and we needed at least one, then we couldn’t even legally market our policies, and the business would be over. We had done all this work with the Series A that we had raised to build all of the infrastructures, all of the software to support billing and invoicing and enrollments, in claims processing, all of the necessary pieces of the puzzle. But we were burning capital every month, of course, and no other investor was going to invest in what needed to be the Series B until we had some sort of sales traction and product/market fit. The problem was that there was no Department of Insurance that had said, “Yes. You can come market in our state.” This was 2014. We were within about 30 days of running out of money when the Department of Insurance in California said, “Yes. You can enter the state and begin marketing. At that point, the business had to lay off over two-thirds of our employees to just have enough money to survive the period of time from when the Department of Insurance said, “Yes, you can begin marketing to actually then sell some policies and show some early traction. It was a brutal process doing a RRIF. I was actually fired from being the CEO for a while. I had to climb back into the good graces of our board of directors, and we had to show that Beam deserved to live and that we really had built a solution that was different and better than what the industry had at the time. Luckily, we built some phenomenal relationships with broker partners and distributors. Small businesses everywhere started buying Beam as a clearly differentiated product to the Delta Dentals and the other product out in the market for small businesses at the time, and the company just took off. We ended up selling about 10,000 policies within that first year. That allowed us to raise the next round of capital. Just before our plane hit the ground, we were able to pull it up, and now Beam has 260 employees. We’re operating in 42 states around the U.S. and growing quickly.

Alejandro: I’m that experience for you, especially the layoffs, was a really tough part of the journey for you. Like anything, in those difficult situations is where there are lessons to be learned. For you, what was the main lesson to be learned, and also, what did you do to keep pushing yourself during those dark days?

Alex Frommeyer: I think the biggest thing I learned was how to be a better partner to our board, our investors, and just the folks around us. We’refirst-time founders, so we were in business just ourselves, just the three of us originally. I had never had a board before. I don’t know why I thought the way that I thought at the time, but I viewed the board and inner investors not as an actively adversarial relationship, but I viewed it very skeptically. I always wanted to give just enough information, but not too much, because I didn’t want anybody to know what my real plan was. It seemed so ignorant now in retrospect. But at the time, I felt like there was a ton of strategy behind how I was communicating to the board. I really needed to become, and I did become a completely different type of leader because of that experience, which was, I realized because I had to realize this, that I wasn’t bringing my key partners in and showing them the problems and allowing them to help me guide the company through adversity and guide the company through the toughest days. Instead, I was actually creating skepticism from them by not letting them fully in the door, showing them only what I wanted them to see. So even though it was obvious that the company wasn’t going well back then, I didn’t appear to either understand that was true, or I was actively subverting the process instead of being transparent and open about it. I’ve taken that to heart and made it my exact leadership style where whether it’s our board and investors, the market, my management team, or all of our employees, in a broad sense, we communicate frequently, opening, and very transparently because I want hundreds of people helping me solve these tough problems. Step one is knowing what the tough problems are. We’re very communicative and collaborative at Beam because I’ve seen what it looks like when you aren’t collaborative and communicative, and I’ve seen how beneficial it is to have that transparency iterated throughout the business. I think that’s, for sure, the biggest thing I learned through that period of time.

Alejandro: That’s amazing. A lot of times, you see it where entrepreneurs have that mentality, too, and I think it’s learning the dynamics and also how to leverage your board to your advantage so that you can push together. You see that a lot on boards where it’s more rather than discussing and figuring out how to resolve strategic issues, it becomes more like reporting, and that’s it kind of dynamic, which ends up being very toxic. Would you say that was a shift as well that you guys experienced?

Alex Frommeyer: Yeah, for sure. Entrepreneurs often become entrepreneurs because they don’t fit well within the system or the infrastructure, or they want to actively rebuke the system. I’m exactly the same way. That’s what I think we observed; my co-founders and I observed when we were in engineering school that all this bureaucracy and infrastructure and how these big businesses operate is really unattractive. We have a bit of that rebel streak in us, for sure. So, ironically, in order to be a successful entrepreneur, you have to accept that system again. There are ways you can make it work for you and be very thoughtful about how you construct your board, for example, and how they can be strategic thinking partners instead of just, to your point, folks that you report some numbers to, and then everybody goes home. That is advice that I constantly find myself giving to other founders and entrepreneurs that I know because many of us come from a world where you’re trying to get away from the infrastructure of a thing like a board of directors. What I’ve found is that by fully embracing it and trying to make it work for me instead of turned into that tension or that adversarial relationship, it’s actually been hugely valuable to being successful and growing over the past few years.

Alejandro: How much capital have you guys raised to date?

Alex Frommeyer: We’ve raised around $170 million all-in, which is something we’re really proud of, in general, as a business. But here in the Midwest, where we’re based in Columbus, Ohio, $170 million is incredible, and we’re seeing more and more businesses based in not California, New York, Boston, Seattle, that are raising big rounds and building big successful businesses. It’s also a really fun time to be doing what we’re doing in a place like Ohio.

Alejandro: Do you think that it has gotten a little bit easier over time. How has that been, the transition of going from one financing cycle to another? As we’ve heard, you had the Seed to Series A. Then in Series A, you had a big breakdown, and then you continued from that until you raised the capital of $170 million that you’ve raised in total today. How has that progression from cycle to cycle been?

Alex Frommeyer: We’re lucky in that the business has continued to perform, grow, and develop quickly, and we’ve had access to capital, and we haven’t had any other moments like that one that almost took us out completely as a company. I’m also the type of person that’s very uncomfortable with somebody else’s money. Investors are, of course, seeking a return, and we’re using the capital the way we should be to help grow and develop the business quickly. But culturally, we’re the type of people that don’t come from money, and we’re very uncomfortable owing someone something.

Alejandro: Yeah.

Alex Frommeyer: So we’re waking up every day uncomfortable with a sense of urgency and tenaciously working to build the company as quickly as possible and build something special in our market because, of course, we want to give our investors an incredible return, and we will. But we also want to build a business that can stand the test of time, and being profitable and not being addictive to all of that venture capital is an important component of it, so I think we’ve been more profitability-focused than many other businesses, and we’ll continue to be thoughtful and strategic with capital, but we feel like we’re in an incredible position today. We raised an $80 million round at the beginning of this year led by Mercato Investors out of Salt Lake City. They’re a phenomenal partner, and it’s been a great ride.

Alejandro: In terms of size, so the people can hear it and get a better sense of the scope of Beam today, how big is the company? Is there anything that you can share in terms of the number of employees or anything else?

Alex Frommeyer: Yeah, sure. Starting back in the living room days with three of us, we are now 270.

Alejandro: Wow.

Alex Frommeyer: We’ll go to 300 this year at Beam. We’ll cross 300 employees. We’ve gone from that first state, which is California, to now operating in 42 states around the U.S. So employers in 42 states are actively buying Beam policies, which is really exciting. The company revenues have tripled in membership over the past two years. So we’ve seen really rapid growth in our solution being, not just different, but better, the easiest in the market to work with, the smartest underwriting models in dental insurance, and with that preventative focus, the toothbrushes, etc., we have a unique solution that employers love distributing as an employee benefit to their teams.

Alejandro: Alex, imagine that you go to sleep tonight, and you wake up in a world five years later—a tremendous snooze. You’ve never slept like this in your life. You wake up in a world where the vision of Beam is completely realized. What does that world look like?

Alex Frommeyer: Beam at its terminus or at scale, I think, has completely revolutionized how the dental industry works. We started the business because we learned not just that dentistry is fragmented, but the fact that really stuck with us is that 100 million Americans don’t have dental insurance. There’s a huge uninsured population, which means when those 100 million people need dental services, they’re paying for it out of pocket, and dentists aren’t cheap. That means that often, people just don’t get care, and they’re living in pain because they have an abscessed tooth or they don’t get cleanings for years and years because they either don’t have the money or there is some sort of inconvenience of not having that coverage already built. So we think, similar to health insurance, with the Affordable Care Act, which focuses on getting every American coverage of some type or coverages like auto insurance where you legally have to have auto insurance if you’re going to drive a car. Dental insurance is not really subject to that same level of legislation interest. So we’re trying to get more people coverage the old-fashioned way, which is by building a compelling product that you want to own because you’re going to get value for it. Similar to any other financial service, people will purchase a financial service if it has some sort of value or return to it. So we think Beam has this unique opportunity, and five years from now will certainly be there, we hope, to totally revolutionize via our technology the value proposition of dental insurance at its core such that every American has it, whether it’s through Beam or another provider, we think we’ll be the iconic category winner of dental insurance over the coming years.

Alejandro: Now, imagine if I have the opportunity of putting you into a time machine, and I bring you back in time to that time where you were still in the university, you and your co-founders, and thinking about something you would do and bring to life, and you had the opportunity of going back in time and assuming that younger Alex is going to be listening, you are able to give yourself one piece of advice before launching a company. Based on what you know now, what would that one piece of advice be that you would give to your younger self?

Alex Frommeyer: I’ve learned so much about leadership over the past few years and just how much it transforms a business when there’s a real investment in culture. If I were starting a new business today or going back to the very beginning, the intentionality of culture is something that I arrived at over time, but in the earliest days, we had a ton of intentionality because my co-founders and I were such great friends, and we had built such strong relationships before we ever started a business together. It would be amazing to replicate that level of relationship and multiply it throughout the whole team the whole time. So, today, when we are investing deeply in our culture, both articulating our culture and then reforming it or refining it over time, we’re almost playing catch-up. My goal is to go back to just the three of us in that living room and trying to figure out how to replicate the feeling that I had when it was just the three of us is what a great culture, in my view, would be because it worked so well back then and getting it, of course, to multiple to 300 people is impossible, but that’s what we’re going for. I think if I go back to those days, what I would be advising myself to do is be really intentional about the first employees, the first ten, the first 50 to really create that intentionality around that living room culture that we had built so that way, the whole company scales with a level of thoughtfulness and a level of transparency that we only later came to.

Alejandro: I love it. Alex, what is one book that you wish you would have read sooner? Which one would that be and why?

Alex Frommeyer: No Rules Rules. It’s a new book, so I’d have to take that in the time machine with me. Reed Hastings from Netflix’s latest book, and it’s a phenomenal kind of undressing of the Netflix culture and how they went from their living room, effectively, to the Netflix way, now on a global scale, and it’s something that plays out a ton of corollaries and has great advice on exactly some of the topics we’ve touched on today.

Alejandro: That’s great. And for the folks that are listening, Alex, what is the best way for them to reach out and say hi?

Alex Frommeyer: My email is [email protected]. You can find Beam Dental on Twitter and LinkedIn, we hang out on LinkedIn a lot, actually since we’re working with employers, but we would love to chat anytime.

Alejandro: Amazing. Alex, thank you so much for being on the DealMakers show today.

Alex Frommeyer: Thanks so much. Thanks for having me.

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