Opportunities Ahead

What trends are you seeing overall when it comes to insurtech investments?

Willadsen: With insurtech investments up over $7 billion for 2020 and rising significantly year after year, we are seeing a large push toward transactions happening at a very fast pace and at what I would consider very high valuations.

For BTV, what are the investment themes that interest you the most?

Keough: The whole narrative behind BrokerTech Ventures is around how do we help our clients identify risk sooner and drive down costs faster. We haven’t met a client yet that wants to pay more in premium, so how can we have this intersection between tech and insights and customer all come together for higher quality, lower cost? At the end of the day, what we’re trying to do is get solutions that fit our core customer and help our core customer drive down the cost of risk over time.

Willadsen: Some of the examples that went through the accelerator last year that fit that core category would certainly be a MakuSafe (safety, data and analytics) or a ChalkBites (virtual reality training), which are really focused on improving our customers’ risk. Additionally, we’re interested in connectivity between our clients and the broker and then the broker to the carrier. Broker Buddha, which came through our accelerator, is an example of the application process. Our early-stage investment tower has invested in Highwing, being the connection from the broker to the carrier and visibility into our books of business for them.

You have the accelerator, the early-stage investment tower and now the capital tower. How do those all work together?

Keough: The accelerator is really intended to bring the unknowns into the known—individuals that believe they’ve got a lens or an experience that they think can help either enable or disrupt a part of the value chain. The accelerator brings them into the light. We share some level of financial investment with them to propel them forward. We give them access to customers and our intellectual capital and the industry relationships.

The early stage really are people that have a business that’s already up and running and may need just to be propelled forward with better access to customers or better capital structure. They may already have a business model and some level of customers, but they need distribution.

Willadsen: One of the main reasons a startup would fail or not fully recognize its value would be simply that it would run out of capital, so we feel that providing that allows them to go much further faster, combined with the insights that the startups receive either through the accelerator or early-stage relationships with BrokerTech Ventures. As an example, the participants that went through our first accelerator—none of them have actually done an exit yet—but the information that we’ve been able to glean is that their values have increased roughly $70 million, collectively, after coming out of the accelerator in a very short period of time.

Once they are a little bit more mature and are doing actual funding rounds, that’s when we foresee the capital tower coming into play, and not only related to participants of the accelerator, certainly, but also other technologies that fit the general theme of BrokerTech Ventures.

Tell us a little about Highwing, which was created by IMA and is being spun off. You participated in its $4 million funding round. What interested you there?

Keough: What we found interesting about Highwing is that a broker leaned into a capability and tried to scale it from within. We saw a lot of opportunity in what Rob [IMA CEO Rob Cohen] and the team have built in Highwing. We also think that it’s at a point in the value chain that has high opportunity for efficiency. We also like the fact that our carrier partners and agency partners saw value in the team that’s leading Highwing as well as the capability itself and the potential. If we can create a highway of exchanging data in a more efficient manner, the industry wins, and we all win.

You also participated in the $6.6 million seed round for TrustLayer. What did you see there?

Willadsen: The digitization of verification of insurance is certainly a more streamlined approach and something that can help make insurance easier.

Keough: We look at not just the capability but the leadership team. Co-founder John Fohr is an exceptional leader. He’s got an impressive team. He’s also got a capability that, like most entrepreneurs, they see one application, and working with BTV and our agency partners, what they learn is their application has wider use cases. That obviously creates more value for them. So we invested in John and the team as well as the capability.

Startups need a good idea, but how important is the leadership team?

Keough: I put weighting on the people over the idea, because you could have the right idea and the wrong people and it doesn’t work. If you have the right people, they can pivot from a wrong idea to a right idea. For these startups, it plays a big role in their success. I may be biased, but having started a company from scratch, I think I would go to the leader.

What do you see as the most promising areas going forward for the BTV capital tower?

Willadsen: We feel that the biggest value that the BrokerTech Ventures connection offers is the insight into the technology and the ability to be able to help guide the leaders; therefore, that leads us primarily to an earlier-stage investment. That doesn’t mean as we build out a fund that we won’t round that out, but we definitely feel our magic comes in making those early connections and being able to guide the entrepreneur.

What’s ahead for BTV?

Keough: In 2021, we’re looking at standing up international accelerators as a primary focus. We’ve got an initiative today already up and running in Israel. We’re looking at partnering with some European brokers and Latin American brokers to help start up incubators and accelerators in those countries, and that would be a feeding system to North America. Everybody wants to see if they can enter the U.S. marketplace. When we think about BrokerTech Ventures as the platform for the industry, that worldwide lens for the accelerator is an important lens for the industry.

Two, as we see what’s out there, we want to help propel the capabilities forward, and the second major initiative is the capital tower that we’re looking to stand up. Deploying our own capital to accelerate some of these capabilities forward, whether it’s through the accelerator, through our early-stage companies in partnership with carriers, brokers, the venture community, we think that everybody can work together to create a more efficient industry in the future.

Where are you in that standing-up process?

Keough: I would say that we’re in framework conversations right now. If you go back to the original genesis of BrokerTech Ventures—the folks at M3, Mike Victorson and Tom Golden, deserve credit—it was really a financial vehicle that was going to be used to have brokers fund capabilities. Now, we’re just circling back to Mike and Tom’s idea. This time, we will have a widely supported fund that’s up and running the second half of this year.

Is the funding for the capital tower coming from BTV members or also outside?

Willadsen: We’re still developing that. We would like the participation of all the BrokerTech Ventures members, but we’ll be expanding that potentially to individuals and other entities that are outside of BTV.

We’ve been talking about investments, but do you see brokerages also acquiring insurtechs?

Keough: I’m certain, given the amount of money out there, that you’re going to have more of these startups get acquired outright at some point in time. Private equity has found the industry, and they’re not going to leave.

If you’re the entrepreneur, at some point you want to realize a full return for what you’ve built, and that leads itself to some exit at some point. Where you sell and to whom, everybody looks at that maybe a little bit differently. If you’re looking at selling to one firm, that could turn into a competitive advantage for that one firm. If you’re looking to be an industry solution, BrokerTech Ventures and our ability to scale capabilities to the industry in a non-proprietary way as a wider application, that’s another opportunity.

Brokers are realizing the value of leaning into the technology for two reasons: we have to control where the industry is going for the benefit of our customers; we also know that our role as brokers is the most valuable part, because we have the insights on what carriers want and need and also what our customers need. We sit in a unique opportunity to help these insurtechs navigate to their full potential.