VC Roundtable: Has COVID-19 changed how insurtechs should measure success?

January 21, 2021 12:10 PM

We asked our VC panelists six questions. The fourth: How has Covid impacted, if it has, the way you measure success or ROI of a company you invest in?

Go back to our VC roundtable homepage, with bios for participants and more.

Erik Ross, Nationwide

The pandemic hasn’t changed our success metrics or our ROI targets, but it has prompted deeper diligence and focus in some areas. All investors are prudently asking covid-related questions right now because there are almost always positive and negative updates to an early-stage business when a large externality like a global pandemic happens. In insurance, many lines of coverage have seen fewer claims activity in the past year (fewer elective surgeries, fewer miles driven) but depending on the insurtech’s business model and whether they are taking a risk, this could be advantageous or detrimental. Buying behavior for many companies and consumers has also changed since the pandemic started and we are certainly evaluating how well startups have adjusted to this new sales reality. The ultimate metric for a startup is still survival.

Eric Emmons, MassMutual Ventures

Eric Emmons, MassMutual Ventures

Covid has not changed how MMV measures success. We are a financial returns-oriented venture fund, so the fundmental metrics by which we measure our firm’s performance – ROI and IRR delivered on the capital we manage - have not changed during Covid.

We entered the pandemic with a portfolio of companies that delivered to their own customers a strong financial payback on investment and low cost of ownership, and this focus on customer value sustained them throughout Covid. I think that we will find that the startups providing offerings with indeterminate or soft value propositions – often called “nice-to-have” offerings – took a more significant hit during the pandemic.

Martha Notaras, Brewer Lane

COVID hasn't changed how we measure success at all. Startups have leaned in to the challenge. We don't think any insurtech wants to use COVID as an excuse.

Ryan Helon, Rev1 Ventures

Measuring success, especially in a COVID environment, still hinges on delivering value to customers. Whether enabling operational efficiencies, creating new distribution channels, or improving customer satisfaction and retention, the value proposition needs to be clearly defined and delivered. Early in the pandemic we were focused on effective work from home, closing, implementing, and retaining customers, and delivering value to customers. Many companies adapted fast and did a great job putting employee health and safety first, while figuring out ways to hire and onboard new team members successfully in a virtual environment. The table stakes definition of success became figuring out how to survive through the pandemic, so a lot of businesses reset expectations, revised budgets, and reconfigured plans to find ways to grow while conserving capital.

Sam Evans, EOS

For many of our companies there has been no change. For a small number the crisis has lost them some time, but given the relatively long hold periods associated with early-stage investing, this is not expect to have a material impact.

Ben Bergsma, Munich Re Ventures

Richard Morgenstein

Our measure of success hasn’t changed. At Munich Re Ventures, we always felt that there would be a multitude of insurtech startups valued at $1 billion or higher. And while we strive to maximize returns with our investments by funding these companies, we really focus on investing in best-in-class founders who are working on the most compelling ideas.

Kyle Beatty, American Family Ventures

Harrison Steg

Our measurements of success for a startup haven't changed. We invest on the basis of the fundamental advantages that a startup has and their ability to successfully sell that solution to their target market. Covid did create a general market environment that resulted in greater capital going into existing startups to increase their runway out of caution, which was followed by an increase in capital being invested by limited partners into venture funds. This dynamic shifted the supply/demand in the venture market and has led to some volatility in investment rounds in the second half of 2020.