- The current trends in insurtech venture investing.
- The hot (and not so hot) areas of insurance and insurance technologies.
- Are we in a valuation bubble that might burst?
- Who are the leading sources of capital for insurtech startups?
- What are the macroeconomic issues that could impact the industry and how to mitigate that risk.
Dave Wechsler: (
my name's Dave Wechsler from OMERS Ventures. I'm gonna ask the other panelists to introduce themselves as well. as Nathan mentioned, our moderator, unfortunately had to miss it, so I'm kind of faking it, but this should really be a discussion. We're just gonna chat about trends and venture capital right now, and would welcome comments from you during the chat. So again, my name's Dave Wechsler, OMERS Ventures. OMERS is the Ontario pension plan. we have about $2 billion under management in, the venture side with offices in Toronto, Silicon Valley and London, and I lead insure tech investing for the group next MC
Marie-Christine Razaire: (
Hi and MC there.
Dave Wechsler: (
Good. Yeah.
Marie-Christine Razaire: (
Can you hear me?
Dave Wechsler: (
Can you guys hear? No. Okay. All right. Well then can we help somebody help with the microphone over here? Thanks. Why don't you go? Yeah,
Doug Roth: (
So, Doug Roth, I'm with, CI Ventures, we are essentially the strategic venture capital arm for the state of Connecticut, about a 30 year old, fund, and we invest kind of half life sciences, half tech, and in the tech world, fairly broad in terms of, sectors that we'll invest in, but there are a few sectors, that are kind of important to us and important to Connecticut and insurance inure tech is certainly one of them. and we generally focused seed stage, but we do invest a bit more broadly than that.
Dave Wechsler: (
So great.
Marie-Christine Razaire: (
MC Razaire with Northwestern Mutuals venture arm, basically focusing on, I'd say FinTech, insure tech and then health and wellness as it relates to life insurance. So mainly a lot of seed stage deals these days, but seed through B. and then as it relates Insure tech, anything that relates back to Northwestern, mutuals lines of business.
Dave Wechsler: (
Awesome. So we've got a nice little group, early stage innovation CVC myself, later stage A through C obviously seeing a lot in things in the market. Market's a little crazy, not sure if everybody's watching today. It's another day of, volatility in public markets, but when it comes Insure tech investing, obviously lot's changed over the last few months, some perspectives MC why don't you start? Where do you feel the market is right now? And kind of, what are you paying attention to in terms of, or what are your feelings generally about the investment opportunity inure tech right now?
Marie-Christine Razaire: (
I think the reckonings been coming for a while with the performance of the public companies and also to, especially for a lot of isnure tech investors who have been doing this for a while. Like there's been a maturation across five years of expectations of like what you should be delivering, what your revenue model is like the level of, knowledge has gotten exponentially higher in a few short years. And so I don't think a lot will change that much for insured techs except, valuations, I think in the short term and then maybe a lot more acquisitions, but I could be wrong cuz we were wrong about the pandemic and the influence on the market. So what do I know,
Dave Wechsler: (
Doug?
Doug Roth: (
Yeah. And I think that there's, there's sort of four four things that we think about, when we're trying to look at the market and figure out where it's going, the first is like fund formation funds there are raising capital themselves, right? So what are the LPs doing? second is the venture funds themselves deploying capital into new companies, the venture funds kind of looking at their own, their existing portfolio and how kind of the economic situation might affect that existing portfolio. And then the last would be exits, trying to create liquidity from the portfolio. And, we don't raise funds, we're an evergreen fund but our understanding is LPs are, there's a lot of cash out there. There's a lot of money and they're thinking very long term.
Doug Roth: (
I mean, when they invest in a venture fund, it's a 10 year investment or, or longer. I think a short term economic issue doesn't necessarily move the needle a whole lot on fund formation. And I think we're seeing, funds, raising right now, we've talked to some of the other investors that were here to dig in and, and some of them recently closed new funds. So that, that seems very positive, I think for this audience, the more interesting thing is, are we putting money into new companies? I think, yes. Right. And, I think, the pace may actually Quicken. I mean it's a great opportunity obviously the investor and the entrepreneur are sitting on opposite sides of the table when discussing term, so I will characterize it from an investor perspective that I think terms are getting more reasonable and valuations in particular are, getting back to reality valuation multiples were kind of insane for a while.
Dave Wechsler: (
Yeah. A hundred percent agree. And I think a lot of, I was a entrepreneur during the.com days, and there's just so many similarities, excuse me. And,to me this is when healthy companies are built and successful companies are built this kind of gold rush mentality that we had even six months ago really created, I think a lot of bad patterns in the market. And now I think we're seeing this much more realistic where the goalposts have moved. Yeah. I think, especially for those who have raised already a few rounds, maybe spending probably beyond what they should have been. but I think for early stage, there's still a lot of opportunity. And I think as investors, we want to put capital to work, actually we're dying to put capital to work, and we can actually have realistic conversations now.
Dave Wechsler: (
And I think great companies will always be great companies it's slow right now. There's no debt about it. There's much less deal flow than there was in terms of actually transactions closing. Then there was six months ago and most ones that have closed recently are probably legacy, deals have been in works for a while, but overall we're all looking forward to making investments and just finding the right ones. We're gonna kind of go off script a little bit here. What areas of inure tech are both of you mostly interested in, are there specific areas that you want to deploy capital in?
Marie-Christine Razaire: (
I mean, if I'm being honest, like we have done, D to C life insure tech before, and we've learned a lot from them, We've, we've gotten very, there's not a lot insure tech. We're looking at these days in the sense of what I'm really excited about because so many in the last six months I've met, haven't really given me a compelling answer for the life insurance industry and coming from P and C moving over to life. Like it's a completely different market and a lot more challenging. I think people underestimate how complicated life insurance can be, not only from a product, not only the product itself, but from an education standpoint. So I'm pretty jaded. I think anyone who has actually like a new insurance product or something different, like I'm excited about that and I want to talk to you, but, I've been mainly focusing on FinTech these days in other areas and then opportunities for us as an organization, like when a financial advisor comes in or a company can bring tangible, value add to the experience for our financial advisors. So maybe there's more going on in the PNC space, that you guys can touch upon. I have to say no, unfortunately, so
Doug Roth: (
Well, and as a generalist investor I apply sort of the same lens, to insure tech as I would to many other industry verticals. And so certainly at seed stage, what I'm most focused on is not to be cliche, but the team, it's so important. And, I don't like, sole entrepreneurs. I like entrepreneurial teams, and I like entrepreneurial teams that have worked together before both in good times and bad because if we are sort of entering, a challenging, extended period of time, that's when you see, a management team's true colors, when the going gets tough and can they still be a functional working team? so team is hugely important. We like, teams working on problems. It's not just, we don't throw money just at teams doing anything, but, they need to be trying to solve a very difficult problem, a problem that needs to be solved in that industry.
Doug Roth: (
And we particularly like, business models where, it's a pull, not a push. So the market is looking for a solution you don't have to educate the market that, Dave, you don't know this, but you have this problem and, oh, by the way, I've got a solution for the problem. It's like, two steps selling process. And it's very difficult. Like, I want to invest in a company where they're selling to you, Dave and Dave, have the problem you're actively looking for the solution. And, you might find, the startups that has that solution pull them in as a customer, rather than the startup has to push their way into the target market.
Dave Wechsler: (
But it's interesting because I saw the stats on CB insights, something like 38% of startups fail because they have the wrong product, no product market fit. It blows my mind. Yeah. And I think that we created that problem a lot as venture capitalists, throwing money into things like, oh, just try it, figure it out. If it doesn't work, it's fine.
Marie-Christine Razaire: (
There was so much, I think I did like on the financial wellness sector, like I incorporated all the companies like their value propositions, what their target markets and like, it was very hard to differentiate, like a lot of them, and they were selling into really tough industry. Is there really like employee benefits is a tough space. And now more than ever, I think like both of you mentioned a clear differentiator and then building a culture where your employees are gonna stick around during the tough times is gonna become more important. Like you're gonna have to figure out what makes you different, what makes you special and what you can do to be around not only the next 18 months, but in the next, 18 years, theoretically. So,
Dave Wechsler: (
But as a corporate venture capitalist, you have visibility into where there are problems, right? Like, are people approaching you with the solutions that make sense? Are they, incremental or are they like, transformative?
Marie-Christine Razaire: (
Everyone says they're transformative yeah. I get excited about the little things. I think people underestimate how, like a small, zoom is a perfect example of this. If you describe zoom, it's just video software tool. And it completely changed as someone who was part of a company that was using Skype for business. At the beginning of the pandemic, I can tell you it like changed my life to be on zoom and not have to explain to a gen Z founder what Skype is, so I think just designing like a really pleasant experience is, it's not underestimated, but I think that is transformative, right? Because once you experience that, you can't go back to whatever you did before. And I think just getting people to change their behavior. Like we see it all the time with financial behavior. People can't save, like we're not good at it. And things like that get underestimated all the time of just how hard it is to get us as people to do one little thing. I'm like the perfect example of it in terms of financial behavior, going to the gym, everything else, like if you can get one person or then a million people to all collectively change their behavior in a way that moves things forward. That's very powerful.
Dave Wechsler: (
Yeah. I get anxiety now when my cell phone rings, my behavior's changed so much. I'm used to looking at someone on a screen and in the beginning, the pandemic, it was so awkward, the experience. And now it's like second nature. It's amazing.
Marie-Christine Razaire: (
It's, my grandfather zooms every week with his college classmates and they're like, he's 86. One's 91 if you have a topic you wanna discuss approach me after they're always looking for speakers and it's, they've built a community, and now it's like, just like work. He's like, oh, I'm gonna mute that person. Like the dynamic's always the same. So yeah, it becomes second nature. You just get used to it.
Dave Wechsler: (
Doug, I'm gonna really put you in the spot here. I'm totally off script. Cause our modern is gone. So you invest in team. Yep. And we're talking about, you know, the fact that problems need to be solved and people are, but solutions are changing quickly. Right? The market's changing quickly. What's like the archetype of a team that is exciting to you as someone who's focused on kind of, early stage and kind of purpose based, with your mission and all that. Like, is there an archetype, is there a founder that you look at? You're like, wow, this is a great founding team because they come from the industry, they have tech background. Like what would it be? So,
Doug Roth: (
You know, it's, a good question. And it's, and there's no cookie cutter answer obviously. Yeah. And I, think it a lot of what I think early stage investors have to trust is their gut. And ultimately it gets to a gut feel on the team. A lot of other parts of diligence are a little bit more objective, you can go through a financial model and assess the assumptions you can, size up the market and things like that. But the team, it's very subjective and I struggled during COVID because, I just felt like I couldn't get to know someone on a zoom call. I just had to meet you and, you know, I guess I'm old school, I wanna shake your hand.
Doug Roth: (
What kind of handshake is it? Do you look me in the eye when you shake your hand, I wanna take you out to eat. Like, do you know your way around a place setting? Do you, you know, are you the kind of person that, you know, just orders something off the menu? Or are you like, well, I want this but could you substitute that and put the sauce on the side and cook it in the special way? you know, are you rude to the weight staff? You know, these little things, none of which are deal breakers, but like they, it's just another way of getting inside your head. And how do you think, and how do you, operate obviously during COVID, we didn't have anyone in our offices and we weren't allowed in anyone else's offices, and that's hard because you come to pitch a VC, you're picking, who's gonna come to that meeting.
Doug Roth: (
I wanna go to your office, cuz I wanna meet the people you didn't pick to come to that meeting. I wanna see how you interact with your staff. It could be a staff of five people, but I wanna see is it a collaborative working environment or is it very hierarchical where the CEO kind of directs, her direct reports on how to operate. It's all of these little things to get inside the head of the team and figure out how do they operate and ultimately how comfortable and confident am I that they'll figure it out. Cause whatever they're presenting to me, that's not what the business will be. It's the unknown. Yeah. will they be able to react to it and adapt to it? Yeah. You want someone who's stubborn, but you don't want someone who's obstinate. Right. Who thinks they're the smartest person in the room and they can figure it out. They, they need to listen to the market to your point. you're statistic about how many, ventures fail because they didn't have the right product. Like they need to be listening to the market and, adapting to what they hear.
Dave Wechsler: (
Yeah. I'll opine for a minute. like I did 26 years of startups then did some other stuff actually wound up at hippo. Eventually that's got what got me into InsureTech and now I'm on the other side of the table. And you know, relationships with investors are so important. And the reality is that no entrepreneur was ever right about their idea, this concept of pivoting is so critical when you're an entrepreneur, you you're never right. Like, and the ability to say to your investors, like Hey, I was a little wrong. I was a lot wrong. We need to change. We need to improve and have that relationship so important. Especially in times like this, I think the last two years where money was chasing everything it was kind of easy in a way to be wrong.
Dave Wechsler: (
And now it's hard, but it's just part of starting a startup, especially in a difficult industry, like insurance, where I think there's a lot of hubris. We all come to the market, like we're gonna disrupt, we're gonna change. It's gonna be completely different. And the reality is it's very hard to do anything even incrementally different in insurance. So it takes patience and it takes a good investor group to have the empathy for what's going on and to give the entrepreneur support. so if any of you out there are entrepreneurs, I encourage you to make sure that it's, very much a relationship. I know our portfolio companies for me probably see more of me than they want to see, but I hope it's a collaborative relationship. So you wanna add something?
Marie-Christine Razaire: (
No, I definitely agree with that. And in terms of zoom, like you had to find ways to build the relationship differently. I now text my founders a lot for better or worse and, you know, ask for photos of their dogs. Dogs are like a big, a big one. but I think it brought a certain amount of empathy, right? Like in the sense of I was working out of my closet and it just makes me more real in that sense after, you know, eight hours in. and I definitely had a lot of empathy for founders during the pandemic of trying to connect to investors and meet the right ones and figure out how can they help them for all the reasons like you said of not being able to meet in person. So it's an interesting time.
Doug Roth: (
But I mean, just to follow on your point of, I mean the utmost respect for entrepreneurs they do something I don't have the guts to do. that kind of risk, starting a business that in all likelihood would fail. I mean, the, numbers prove that out, but you do it anyway. And, it's a super lonely job, right. Everyone on the team sort of works for you, right. So they're your subordinates. So it's like that you have to manage that relationship. You have a board, but, generally the board's like your investors and you always want to keep them happy. And so when you have doubt, when you don't know the answer, like where do you go, right. It's really tough position to be in, So one of the things that we've done at CI is to try and create some venues and some opportunities for our founders to develop a network of we'll call it peers, where they can let the defensive shields down and sort of share the problems that they're facing that maybe they don't wanna share with me as an investor or as a board member.
Doug Roth: (
Right before coming here, we had our kind of CEO, event, no content, just, all of our CEOs, in a room and just the opportunity to meet each other. And so with such a diverse portfolio, you could have an Insure Tech founder talking with a therapeutics founder and surprisingly they're facing some of the very similar challenges. And because they're in super non-competitive industries, they're willing to share those with each other. we also created a, like a entrepreneur's book club, we call it overbooked and would bring in a university professor to facilitate the discussion on a book. You know, one book we did was the Netflix founder read Hastings, no rules, rules for a couple hours some food and drink and a really engaging conversation with other entrepreneurs. And it just using the book is an excuse for a discussion. And then they're able to, both during that event talk through some issues that are related loosely to the book, but then also build a network of other entrepreneurs, other founders where they can have discussions that, you know, maybe would be uncomfortable with others.
Dave Wechsler: (
I love that. That's a great idea. So now you were looking at some trends, and a little bit about the industry and you had some stats you wanted to share with us.
Doug Roth: (
Yeah. I don't know how useful they are, but let's so pitch book, for example, you know, 2021 was a banner year for venture investing. Right. I think we all know that something like 14 billion was raised over 600 deals, was over a hundred percent gain from a year over year from the previous year, but Q4 was down. And so is that the beginning of the trend? I don't know. I mean I think we've all said we're going to continue investing but perhaps those mega deals, which probably drove a lot of those numbers, maybe those late stage, multi hundred million dollar deals, maybe we'll see less of them in 2022, I guess that's maybe my thought I think the more interesting thing is exits. So 2021, over 33 billion in exits, like it exceeded the last several years combined.
Doug Roth: (
Wow. Right. but there was a significant slowdown in the second half of 2021, and we have a very close relationship with HSCM ventures and they have the HSCM, public insure tech index. So since they've been keeping that it peaked, February 2021 and it's off 68% since then, so the markets are getting hammered. Yeah. And so I think, from that, I would say exits via IPO or specs are probably not a 2022 or the remainder of 2022. That's probably not, a likely path to, for liquidity for founders. so we'll be relying on the corporates for
Dave Wechsler: (
Sure. Yeah. Do you think M and a is gonna happen this year?
Marie-Christine Razaire: (
I mean, we've always been looking at it opportunistically. I definitely think a lot more. I think there's actually a lot of opportunities for startups more so than there was before that could end up leading to really interesting solutions, so we should expect definitely a lot more corporate M and A but I think where I'll get excited, is this the startup piece actually more than anything else?
Dave Wechsler: (
yeah, any questions in the audience so far? No. Oh yeah. Go for it.
Audience Member 4: (
So I just wanted,
Dave Wechsler: (
I'm good at this though. I can repeat the question, but when you say the team, is it, you mean your own team, right? Oh, of a team. Okay. So skills and capabilities that we would look for in a team, your own team that we would invest in. Sure. Anybody wanna start? I'm happy to start since I'm looking at inure tech I think my original I've been in a couple hard to change industries, and the theory was always bring in outsiders only because you want new ideas. And I do generally believe that, but with insurance, I really like to see someone who gets the ecosystem to some degree all these are tech forward problems. So some technology experience, and then we're a little bit later stage, but generally speaking to Doug's points, people who are smart, people who work well together, respect each other, and actually are passionate about this. The it's the hardest way to make a living is to be an entrepreneur. And there are so many times where in my 26 years of startups where I was using credit cards to pay salaries and the anxiety was through the roof. So you really have to have a stick to it that I think that it's, you have to be kind of weird to be an entrepreneur and be honest with you. Other thoughts? Yeah.
Doug Roth: (
I would just add that, we love acronyms, right? So there's InsureTech, FinTech, PropTech, ad tech on and on and on. So for me, the interesting thing is that it's a combination of two things, right? Ensure insurance and technology. And I think that's really critical. You need both and maybe not necessarily both on in one individual, but certainly need that, I'm big into diversity but maybe in the more traditional sense, like diverse ideas thought process problem solving skills, right. I think and engineer is trained very, very differently than a finance person. And you can have multiple people with diverse educational and work experiences looking at the same problem, and they'll just look at it differently and they'll attack that problem differently. And that's a super important, part of an entrepreneurial team for us is that, you've got both sides of the acronym covered, you know, insurance and technology, but you also have just kind of diverse, experiences on the team.
Marie-Christine Razaire: (
I think both of you summed up really well. I always appreciate too, when founders like really think about their company culture, especially these days, it's so hard to build in this hybrid remote model and like, how do they really create their company culture in a way that allows them to develop these kind of experiences and share thoughts and ideas that will let get them to the next stage. So and then the passion being there of like, why are you doing this, especially with less capital these days. And I think a lot more scrutiny, why are you getting up every day and paying credit cards and salaries? That sounds brutal. Like, why are you doing all of these things to yourself essentially? you know, in the long run, will that keep you going is also important? I think
Dave Wechsler: (
So let's put it back into the investing, climate right now beyond valuations, what are other terms? And we're all, by the way, I think we're very founder friendly investors, all three of us, but what are other terms that you're starting to see in the market that maybe, indicate this kind of hardening a little bit? I mean, yeah, go for it.
Marie-Christine Razaire: (
I mean, not even terms but like due diligence. Yeah. Like we've walked way from a lot of things, because I couldn't even get like anything, like a proof of a legal document and like, nothing, like there was a bit, it was kind of awkward. I was like, well, how do I know you're doing any of this? You know? And it's like, well, just take my word for it. And I'm like well, I can't really do that. And, but, and they're like, well, everyone else is doing that. And I'm like, well, that's okay. I've been in insurance for too long. And I think after ENS property where I was essentially like gambling billions of dollars on natural disasters when a hurricane hits you're, it's no longer a team, it's a you decision on why you underwrote that property. So I take the same approach to investing, which is, if this goes under, can I defend it? Or if all of this was made up, you know, I have someone to answer to. And that's a fortune 90 company. Wow.
Doug Roth: (
Yeah.
Dave Wechsler: (
All made up. Yeah. That's amazing any terms.
Doug Roth: (
And I mean, we haven't seen the more draconian terms coming back in the multiple liquidation preferences are participating preferred or full ratchet and illusion, but I do think that you know, maybe it's more, the leverage is shifting more toward the investors in the company clearly there's, there's downward pressure on valuation. It's, it's really when we invest, it's not a financial, multiple, cause a lot of times there's just either no revenue or, hardly any revenue to try and apply a multiple to you know, we're really just looking for certain boxes to be checked, you know, is the product done? Has the product been used? How complete is the management team? More, business milestones. and I guess we're just expecting to see more, for the same level of investment we were maybe more willing to take a risk that a number of those things would be worked out with our round of financing. And now I think, our expectation is work them out before you get this round of financing. Yeah.
Dave Wechsler: (
A hundred percent agree. Like for us a little bit later stage investing we're certainly setting the goal post out a little further. And to be honest with you, it's still viable. It's still doable. I just think that we we're kind of forced by the market to say like, it's okay, you'll do it with this round, but there are things that you can achieve, especially around products, anything from a licensing to adoption. But I do think that we're starting to see a little bit of the terms come back. Like liquidation preferences are starting to go up a little bit, but nothing draconian, as you said. Right. I think there's still like a real sense of like, Hey, founders are working hard, good companies can get funded. We just need a little bit of downside protection in this really Rocky market. But it's all about delivery, right? Like if you can actually hit what you're trying to do, set an aggressive plan and go after it, you're gonna raise money. And I think there's still a lot of support in the market for it.
Doug Roth: (
Well, in the last time we went through it period like this, I think it was called the series a crunch. Yeah. Right. And companies could get there at seed funding and then there was this abyss. Yeah. And, they couldn't get the series a funding. And so I do think that we're headed there. Right. And I think it just means that you need to accomplish a lot. Right. What you thought you needed to accomplish to be series a ready? Well, think again, you need to have more customers, have more revenue, have more sort of de-risked in the business to get to that kind of series a readiness.
Dave Wechsler: (
Yep. A hundred percent agree did you wanna add something on that?
Marie-Christine Razaire: (
The only piece of that is we invest, we have allocations to female founders and black founders, and what's been interesting is, they've always been in these kind of circumstances throughout all of this. Like, and they're the one's I'm not really worried about because for better or worse, like they've been scrutinized, they've been, de-risked like all of those things, like there's just for the majority of underrepresented founders I meet it's actually a good thing. I think in so many ways that, they've had to figure all this out since day one, because they've never had the excess of millions of millions of dollars just thrown at them and, you know, really high customer acquisition costs. So they're well prepared for this market. It's just telling the story. So, it's just been interesting to me because like speaking to them a year ago versus like, traditional white, white male founders, it was like talking to two different. It was like two different, you know, two different environments completely. So I'm hoping for them that this opportunity in this marketplace will finally give them the attention that they do deserve, you know, in the sense of product market, fit revenue, all of that allows them to stand out more than it did in the past.
Dave Wechsler: (
And why is that? Just because like, I mean, like, are we diverse in this industry in terms of what's happening InsureTech? I don't see a ton of diversity to be honest
Marie-Christine Razaire: (
InsureTech. No. I mean in general insurance isn't diverse at all. Yeah. So we've made very little progress but just across the board, like the stats are still horrible, I think for women in general and across all industries, and it's amazing to see like the questions, I talk to a lot of founders and I do office hours and like they tell me the questions they get behind the scenes at, like, that are racist that are sexist, that like they have to answer instead of talking about their company. And at the same time, like they've done a lot with very little. And so, they're up against insurance obstacles for sure. But I think with everyone, you know being with everyone, looking for all of those things you guys mentioned in terms of this current market and not just having money thrown at them, like I'm hoping, and I'm hopeful that they'll people will finally focus on the fact that they have recurring revenue. They have big contracts, they have everything else versus just saying like, oh, well, you know, we'll wait a bit longer. Who knows? I could be wrong.
Dave Wechsler: (
Other questions in the audience. Yeah, please. Wasn't sure.
Audience Member 4: (
So I'm one of those startups great. We're three years Silicon valley based. we we've pivoted several times, obviously our, we get narrow and narrow every time, so emerging into the insured tech base but our board is very diverse. Some of our founders of very large Silicon valley based companies like Marketo and so forth. We also have people who are 40 years at large insurance companies advised of us, there's a little bit of a debate on, you know, we need paying customers, not beta customers, so pre-revenue scenarios, and we're also getting pushed by around thought leadership in owning our category and defining what that category is. Can you speak a little bit about the importance of owning a category, in a tech space that's in this vertical? Yeah. And real thought leadership comes into play and the importance of that versus the importance of, revenue generating customers. I know they're all equally at some point in time, required, but where do, where does it fit? Do we really need to have paying customers before we get into the market and talk about what we're doing? Or can we go and do thought leadership as well in parallel to our product employment and so forth?
Dave Wechsler: (
Yeah, there's a lot there. I mean, I'll start so I think to be thought leaders in an industry like insurance is really challenging. And you do a lot of missionary work, like when you're so ahead of the curve and say your customers are gonna be carriers and you're doing all this initial missionary work to say, like, this is a problem you don't even know you have or a solution that you don't even know you need. It's, it's challenging and I think that if you can pull it off, it's great, but there's rarely like a category of one, right? Like we generally like to see competition and people who think similarly, because you're all doing that work to educate the industry. So, you may want to kind of like dumb down the innovation and make it very applicable, at least in the basics, very applicable to others, but maybe have some like, you know future position of where you want to be in that thought leadership and nothing validates it more than paying customers, to be honest.
Dave Wechsler: (
I mean, it's hard to land paying customers in, again, in a very large kind of, industry like insurance, and you have to be careful too, because pilots can be the death of startups lots and lots of pilots, but you know, there are certainly influencers in the industry when you win small deals or pilots and they speak on your behalf that provides a lot of momentum, gives a lot of credibility, but ultimately all these things are, things that you need to achieve. The real paying customers who are willing to take risks, change the way that their businesses work, and if you can find ones who want to take risk on a thought leadership position, it's even better, but it's hard at insurance. So, it's a good objective, but it's a lot of work. Any thoughts on that?
Doug Roth: (
No, I mean, I guess I would just say, and it kind of gets back to the comment I made earlier about pushing, pull in the marketplace. Yeah. But a lot of times startups are creating a new market and, that's, that's great if, you know, that there's a market for that new market, right. I mean, there's customers who know that the, they've got that problem, but when, you know, when you create a new market, you are, I think the defacto subject matter expert on it. And, you know, that becomes the thought leadership, but then it's more difficult to, have the market testimonials and reference customers because it's so new. So it is a bit of a challenge do
Dave Wechsler: (
Yep. Like a niche create a niche in the market, a niche
Audience Member 3: (
Silo.
Doug Roth: (
Yeah.
Dave Wechsler: (
So the funnel comment is a silo, like kind a niche market and business intelligence. If you can prove that there's high value there in that niche, it's fantastic. But again, it's missionary work, right? Like you have to do a lot of education. And to me, I mean, actually I think down economies are the right times to do that. If you can show like efficiency, when things are booming, people tend to be distracted with the top line. And I, personally feel like it's a tough time to sell new products in when things are booming. It's sometimes a little bit easier in when things turn, because now you're saying like, I can create operational efficiencies. I can help you streamline your business. I can help you focus on areas that you should be focusing on. I think that's a great story to tell if you can tell it in a really compelling way for that niche.
Dave Wechsler: (
But I would always look to expand as well. Like one of we're looking at, I don't know you guys, but we're starting to look more infrastructure tools and I like adjacent markets, right? Like I love insurance, but it's a slow sales cycle. So if you're now doing very well say in FinTech or banking or something, and you have clients and you're trying to get into insurance, that's compelling to me because it's like, all right, we'll get you there, but it's gonna take you three, four years. So what are you gonna do in the meantime? So I think there's, a lot of value in being focused, but it's also risky, you know, and
Audience Member 4: (
We're a dual market company. So, our primary horizontal is high tech. Yeah. And then with the focus on isnure tech, if you are a product company in high tech, then our product actually works for you, but then we absolutely wanna productize that within the insurance industry. So, yeah. So we're dual, we're dual industry. That's
Dave Wechsler: (
Great.
Audience Member 4: (
Thank you.
Dave Wechsler: (
Other questions.
Audience Member 5: (
Hi, thank you very much for your, talk today. Doug, I think you mentioned that the public InsureTech index was down 68% year to date. So clearly it's been a challenging environment recently, and I'm just wondering, given the volatility and P and C more broadly, reinsurers have been taking large losses, multiline carriers that have always relied on P and C over life, and now having their life business units carry profitability. How much of that? 68% is P and C having a challenging time versus the underlying insure tech. And what's that implication?
Dave Wechsler: (
It's a good question. Like auto right now is in a bad spot. And if you're auto inure tech or auto carrier, you're in, you know, suffering through inflation and high severity and frequency issues. I do think a lot of this is a more kind of broader industry challenge, but I also think that inure techs created some of the problem too, with a little bit too much hype and a little bit too much. And, we created it too by funding that a little bit too much over promising, but this is like traditional, like market transfer, additional like market transformation. It's a hype sell in the beginning. It never delivers where it was supposed to in the short term. And 10 years later, you look back and you say, wow, that was transformational. And you can find key moments that were the transformational moments.
Dave Wechsler: (
Sometime It's the shock of like, all right, we really have to do this differently, like better underwriting versus growth. And other times it's, we've changed everything in the way that we think about the customer, how we engage, how we pay, claims, how we underwrite. And these are things that I think really take years and years and years to propagate and actually to be seen in the market. So, I think of both sides of the equation here, public markets, a as well as inure tech kind of hype, but ultimately I'm more confident than ever. Like, I think we'll be at this conference 10 years from now and nothing will look the same. And it's because of the companies who started and led early and went public and, did the real hard lift. And we're all learning from that. And some will make it some won't, but we'll look back and say, like, that was the beginning of a major transformation, anything.
Doug Roth: (
Yeah, I would just add, it's, an overuse cliche, but there the saying that you certainly with new technologies, but I think it applies to your comment about, startups in general, we tend to overestimate, impact of new technology in the near term and underestimate the impact of technology on the long term. And I think the same is true with startups. Like we hype them up and, and we overestimate their impact on a 200 year old market, like insurance, but in the long term, insure tech is, I'm with you completely bullish and very excited about what's being developed and what those long term implications will be
Dave Wechsler: (
All in the two and a half minutes we have left. What are pieces of advice that you would all give to startups that your meeting today I'm seeing, what it upset your meeting today and see why don't you start us off?
Marie-Christine Razaire: (
I think today, I would say in the near term, definitely look at your roadmap for the next 18 months and figure out and make sure you can last as long as possible. VC's love, dolling out an unsolicited advice. So like, I always kind of struggle with that, like if you put me with the founder, I'll like, I'll just talk for 20 minutes. And then I guess in general too, like really figure out your story. I think, as we mentioned earlier, it has to be compelling more than ever and and tie in profitability or paying customers or recurring revenue. if you're not cutting time or you're not creating money for someone, like you've gotta find a way to tie that in.
Doug Roth: (
Yeah. I would add, it's super obvious and it should apply to all times, but I think it's, certainly applicable to kind of this time, and that's focused on the fundamentals. Yeah. you know, watch your cash, watch your expenses, as MC said, I mean like really, you have a path for the next 12 to 18 months and, again, focus on the fundamentals. Vaporware is not gonna raise capital, in this market and to get to that next inflection point, you're gonna have to show real progress.
Dave Wechsler: (
Yeah. And I'll add on the insure tech side, specifically around MGAs and kind of challengers, you know, I think the market has shown that underwriting advantage is the most important thing. We used to talk about growth, like steal the business away from the incumbents, but I don't think we talk about that really at all anymore. It's much more about building a good book of business and building it profitably, and also focusing on the long game, because again we were all looking for exits and we like fast exits that are big, but I think realistically it takes a long time to build an insure tech and that's either an MGA or infrastructure play because it's a slow moving market. So you have to play a long game. And that long game is with, everything from product roadmap to capital, to how you build your team and I think investors now are much more open to that. It's a smaller group, but we'll have a lot more patience, I think, as the market evolves. So with that, I think we're out of time. Perfect. So we appreciate y'all staying for our panel and if you have any questions, feel free to come up and talk to us. Thank you. Thank you.