PART 1: How We Got Here
How many of you said, "I want to work in insurance!" when someone asked you what you wanted to be when you grew up? Personally, I was planning on either playing shortstop for the Yankees or being a garbage man (I was a weird kid), but here I am....an insurance entrepreneur.
Today, we announced the close of our seed round and Boost Insurance is off to the races.
Boost is a B2B insurtech development platform built to solve three critical issues faced by entrepreneurs in the insurance industry — (i) the glacial go-to-market pace for new products, (ii) the integration and data flow issues experienced between high tech startups and low-tech insurance companies, and (iii) the cultural disconnect between incumbents and upstarts.
I'll talk more about what Boost is a little later, but first let me explain why I'm doing this instead of playing shortstop for the Yankees (or collecting garbage)...
Boost was born while I was leading insurtech venture investing at IA Capital Group, a top fintech/insurtech-focused firm. I spent the vast majority of my career at IA. It's a pretty cool place where I not only got to speak with some of the smartest fintech/insurtech entrepreneurs on a daily basis and invest in some awesome startups, but I was encouraged to explore projects that fell outside the traditional direct investment activity.
From time to time, the firm would formulate a specific investment thesis, but could not find a startup that was addressing the need. We would then explore the opportunity further to see if it made sense to build and incubate an operating business around our thesis. IA has done this successfully multiple times in the past with a Bermuda-based life and annuity reinsurer in the late 90s, a Texas-based P&C insurance carrier called Homeowners of America in the mid-2000s, and a SMB lending business called Credibility Capital in 2014.
About two years ago, IA had an idea for its next play in insurance. We wanted to start an MGA to sell a brand-new insurance product in the student loan market. It was (and still is) a good idea. There is a huge market for it. It would provide a legitimate social good and it would be profitable. We did a ton of work on it, spent money on third party stamps of approval (actuaries, lawyers, and bears – oh my), and had the perfect TPA to partner with (an existing IA portfolio company) — things were looking good. Then we hit the road to find insurance paper and capital to let us test the product.
My colleagues at IA — specifically, Andy Lerner and Rick Viton — have been in the re/insurance and insurtech industry in some capacity for more than 25 years. Andy has been managing partner at IA for 20 years and has invested in two dozen companies in the insurance industry. Rick was the lead investment banker at some of the world’s largest banks advising the likes of AIG, MetLife, and Prudential on global transactions. The firm collectively has a huge network in the industry and has an excellent track record of picking winners. Should be a no brainer for an insurer, right? Wrong. It was miserable. Here's how a typical conversation would go:
Insurer: "How much can you sell?"
Us: "Well, based on our market research our projections show..."
Insurer: "But what will your losses be?"
Us: "Well, we compiled data from [Insert Source] and our models show loss ratios of x%"
Insurer: "Do you have any historical data to validate those ratios?"
Us: "No, the product doesn't exist yet so we haven't sold any policies..."
Insurer: "Oh, well why don't you come back after you sell some policies and have some more data"
This headache was happening in parallel with our day-to-day venture capital activity. I was talking to entrepreneurs in the insurtech industry every day and they were all experiencing the same thing. It was way worse for the entrepreneurs who didn't have the insurance network that IA has.
According to CB Insights, the average go-to-market timeline for an insurtech startup with an MGA business model was 24 months — 18 of which is spent finding paper/capacity from an insurance carrier. Honestly, this may be a low estimate. It could take many years and a lot of startups simply die on the vine.
The lucky few who can endure the go-to-market marathon with an insurance company are rewarded with the task of integrating with archaic technology systems. First, you get to wait in their backlog for a few months — which isn't the worst thing in the world since it will give you the time you need to read the hundreds of pages of documentation. Eventually, after many months (or even years depending on the product) and a multitude of conversations with their implementation team, you will have successfully integrated with the carrier — left with a system that measures response time in seconds and is as reliable as the NYC transit system.
We're basically slapping apps on top of Windows 95.
We spent a full year before we finally found a promising lead for a reinsurer-through-a-front arrangement, but at that point we were so annoyed by the process and had already identified a bigger problem (and opportunity) — that's when Boost was born.
With the close of our seed round, Boost is officially an independent operating company. It took a long time to put together the investor syndicate, but I was extremely picky about who Boost should partner with. I could not be happier with how it came together.
Norwest has an endless track record of helping startups disrupt big markets (Lending Club, anyone?).
Greycroft's fintech portfolio (Venmo and Braintree to name a few) would give any VC portfolio envy.
State National basically invented the fronting business — the OG "platform" in insurance.
Nephila is a goliath in the "alternative" insurance capital industry and has quietly helped dozens of insurtech startups get off the ground.
And, of course, Boost would not exist without the support of IA Capital over the last year or so. Special thanks to Andy Lerner and Rick Viton for being driving forces behind taking Boost from an idea to a real company (and for dealing with my craziness for the past 8 years). I'm looking forward to pushing the ball forward and fixing this problem we identified together.
If you want to read more about what we're building, check out PART II: What is Boost?