Rev1, Midwest VC firm, CEO Tom Walker talks insurtech

Q&A: Rev1, Midwest VC firm, CEO Tom Walker talks insurtech

September 6, 2022 6:36 AM

Tom Walker, Rev1 Ventures CEO, president and founder, talks with Digital Insurance about his venture capital firm, which is based in Columbus, Ohio. Walker explains how the VC works with insurtechs and what he sees ahead for the industry.

What does Rev1 look for in a startup?

We are a startup studio which means we combine strategic services as well as investment capital to help startups build really strong roots in a foundation to becoming high-growth companies.

We are a hybrid model. Our service approach is actually a nonprofit that is supported by 60 industry partners to help these entrepreneurs really take a customer-first focus around the market. We bring a lot of resources to the table to help these entrepreneurs.

We target industries in a very strategic way. We are based in the Midwest. We're in Columbus, Ohio, which over the last few years, has been rated as one of the top cities for scaling startups. And really our mission is around aligning innovators and early-stage entrepreneurs with large corporate needs.

We've built a little over $100 million under management since 2014 and we've become known as one of the most active investors in the Midwest over the last probably seven years.

What's it like being based in the Midwest, was that a conscious choice?

We believe the Midwest is the next hotbed for startup activity and investment activity. The Midwest is growing. Columbus itself is a city that is growing significantly, not contracting.

We believe hubs like Columbus are going to experience a lot of entrepreneurial growth over the next decade. It's a great place to have a high quality of life. It's also fairly easy to get to. So, you know, from the Midwest with the new sort of flexible work environment, I think you can also grow your talent base all over the country, you know? It's easy for them to get here and all of those things. So we believe we're in a growth market. We certainly see it with the number of people moving to our region.

We're pretty bullish on that question.

What kind of startup support does the VC offer?

In our startup studio, we have the capital piece and that's where most funds start, but with us, it really starts with the strategic services. So we believe in the customer first.

We have an accelerator program, it's kind of like a traditional accelerator program. We call them learning labs where we teach entrepreneurs how to go out to the market, survey customers and build their product and their business model around what those needs are. We have a talent program where we help entrepreneurs build out their management team and identify the kinds of talent that they need.

In that program, we actually take a diversity and inclusion approach. Our portfolio has a very high percentage of diverse founding teams. I think we're north of 60% at this point. So that's a big part of what we do. We help them access customers through our corporate network. We help introduce, oftentimes, pilot stage companies to large corporations to help them test in that environment. And then, we also have a facility where we house companies to help them start up and grow in the early stages. And then attached to that are early-stage capital resources.

Can you outline some of the programs, particularly the insurtech fund?

Our goal is to close a capital gap here in the region, we have partnerships with the large research institutions in our region. One is the Ohio State University, and The Research Institute at Nationwide Children's Hospital. So, just to use that as an example, we have a life science fund really targeted to life sciences and therapeutics, things of that nature in that industry. We do similar things with SaaS-related companies.

We have an insurtech fund, State Auto Labs, that we created with State Automobile Mutual Insurance Company. That allowed us to begin focusing on operational strategies that entrepreneurs were pursuing that could positively impact the insurance industry.

Our strategic approach is to take very targeted industries and build an investment thesis around those that can help entrepreneurs connect with industry early on and help them grow their companies.

State Auto is a hundred-year-old company, very established in the industry. Their senior leadership was driving internal cultural changes to affect change within their organization and we came together to work on just a piece of that, which was, how can we connect an established company with the disruptions that were being created by entrepreneurs around the country and that was the pure impetus of it.

Fast forward several years, we've helped build a portfolio of companies that are around the country that have developed operational strategies or products or services that have helped State Auto and a host of other insurance companies.

One that's been in the news most recently is a company called FlyReel. They were recently acquired by LexisNexis. They're one of the first companies that allow insurance to see the inside of a home when rating a policy. So basically, you're looking for new home insurance and typically you have an agent or someone that would come out to your house. What FlyReel provides is that doesn't have to happen. The homeowner, using an app, can go into the closet where the hot water heater is, or the HVAC or anything like that, that the insurance company wants to know about. They take images that can be uploaded within the insurance company's policy program and insurers can assess them.

It's a very innovative strategic product that can be implemented within an established company. That's kind of the interesting thing about insurtech. A lot of them aren't necessarily insurance companies, but they're really impacting the insurance industry itself.

What do you see ahead for insurtech?

The insurtech industry has really grown in the last decade and there have been record amounts of investment dollars, both from corporate ventures and private ventures.

M&A and consolidation have really been growing the last five years, I think you're definitely going to see more of that as the investment side of our economy sort of softens right now. But, I think there's been such growth in these companies and they've been growing their market share. There's going to be more and more interest from LexisNexis-type companies that play in those markets that can see an opportunity to grow those opportunities.

Predicting the future is always hard to do. I feel like there's going to be a lot of consolidation. There's just been a lot of investment in this market. There has also been growth in both the private venture market, as well as the corporate venture market, all focused on insurtechs. And so with all of those companies that have been created in the last decade I feel like those that have some market traction are going to find exit opportunities. That's what we're looking out for over the next two to five years. In addition, you're seeing a lot of, sort of repeat entrepreneurial ideas.

I think you go into softer markets, like we're going into now, those repeat ideas are going to have a harder time finding capital and moving forward. All that means is those entrepreneurs that understand the industry and have built products with a customer mindset, solving real problems that are within the large insurance companies, I think are going to really stand out.

The noise in the system I think will be cleared out and those that have real solutions are going to continue to grow and get support from the investment industry.