Brian Anderson is a Principal at Nationwide Ventures, a division of insurance and financial services company Nationwide, which seeks to invest in founders and startups that are shaping the future of insurance and financial services. Brian was interviewed by Michael Fiedel, a Managing Director at InsurTech Ohio and Co-Founder at PolicyFly, Inc.
Brian, when evaluating emerging ventures, what are some of the key qualities that your team looks for in the founders?
“It always starts off with the CEO. There's a lot of reasons for that. Doing anything new is really hard, and you need a bearer to make all that happen. That person's going to be in it for the long-term. They're going to bear the brunt of the most pain of anyone on the team. One, they need the ability to articulate the strategy at the highest and lowest level to anyone at any place and any time.
A big piece of that is my number two - raising capital from customers or investors. This is probably in order of importance, which helps keep the lights on and gives you a chance to, number three, build and retain a great team who can then build a great product. A founding team ideally has a balance of execution, technology and strategy. It’s hard to find both in one person who can hold the entirety of strategy and product execution in one role, so ideally, it’s a collaboration between the CTO and CEO. Another dynamic worth mentioning is that being an entrepreneur can be really lonely - having a cofounder can help balance the lows.
The last piece of that is a deep understanding and self-awareness to articulate what is known today and more importantly, what is not known because there is more unclear than obvious at early stages. A great startup is a learning organization. It's a self-healing, self-learning organization, and articulating what is not known can be helpful to get an entire team, investors included, to collaborate on discovering the required knowledge to mature the business.
It's also vital to have a strong direction of what needs to be accomplished before taking growth capital. Those are some of the things I look for in emerging new ventures and amongst founding teams. But as I said before, it's such a constellation of attributes that you can’t say, ‘Hey, I'll always look for these two things - X and Y.’ Inevitably, you're going to run into a world of different people who have wildly different capabilities and mindsets, so by definition, new companies will look different from lots of other businesses. It's really tough to put your finger on, but I think those are probably three really important things from a founder and new venture standpoint."
Are there certain areas of building a successful business and team that you feel like are consistent pitfalls for new ventures?
“I’d split that question in two because there’s a difference between core insurance product / distribution pitfalls and enterprise software pitfalls. They can converge, but I think there's usually a big difference. In a core insurance product, understanding go-to-market or distribution is beyond essential. Most customers don't want to think about insurance, or, if they have, it may not have been a great experience. Selling products in an environment like that is really hard and understanding what is being sold and bought is really critical, especially in a B2C business.
From an enterprise software standpoint, it's very different because you're not selling directly to end consumers. I think the biggest pitfall is not understanding business as usual because change management inside any big organization is really challenging. If you're building a software product, it’s far easier to rip out the current product and replace it with a more detailed, more focused, more consumer centric experience if there's something already in place. In insurtech, there's been a lot of folks who have built new products for new things that never existed before, and in that case, you're not trying to rip out an incumbent solution. You're trying to reorient, reorganize and re-engineer an entire way of doing business. That’s a big market opportunity but one that often takes years of change management.
On the team side, there are some common pitfalls. One is that your friends may be great people, but that doesn't necessarily mean they're compliments to the executive team’s skills and experiences. Forming the right team is quite a challenge. As a founder, you naturally want to start with some preexisting relationship since you feel comfortable and have trust with them, but your friends are not always the people who are going to fill in your gaps. This is where getting a diverse background is really helpful.”
What new responsibilities and focus must founders be prepared for once they've partnered with venture capital?
“I love the question. VC investors are motivated by two things: high growth companies in big or changing markets. If you're not hitting the growth that you promised them, and you don't have good reasons for that, it may not be the end of the world for them, but know that's the reason why they invested in you.
Something that every entrepreneur should think about is expectation and communication management which you have an opportunity to set well before raising capital. When you raise capital, it's your opportunity to build relationships with new folks. You're hiring an entire new network, you're raising money and you're executing on a mission and vision of the future. You should not work with somebody if you have a different vision of the future or you feel like you're going to get misaligned at some point. There's lots of capital in the private markets, and there might be a better fit with someone else.
Staying aligned with investors and building the relationship as you go through diligence is really important. To do this, keep all communication channels open and honest, and never hide the bad news. Have clear goals and objectives that you want to leverage them for. Ask them to help the company and give them a few places where you could really use some assistance.”
What are some of the more exciting ideas that you're seeing founders bringing to the table in insurance?
“I love where commercial insurance NewCos are going right now. Commercial is defined by both admitted and non-admitted markets, and I like software in both those worlds. With the rapid increase in cyber exposure, there's a lot of different elements within commercial being impacted. From supply chains to information sharing, there are so many pieces of cyber that are affecting businesses and moving that market in dramatic ways.
I feel like insurtech 2.0 is commercial and E&S. Those are a couple of areas that I think are really interesting. Another piece of that I'd say is the vertical cloud, and I think we're just seeing the edges of that at this point. If you look at Insuretech Connect, there were launches of multiple new marketplaces. Cloud businesses are able to utilize each other much more dynamically and efficiently than on-premise businesses stuck in aging versions of legacy code. The integration path when you're using a common infrastructure is much easier.
The cloud is where you're starting to see various insurtechs hook their services to each other on common platforms, or one cloud company integrating their data into another cloud company. That’s going to be a massive catalyst for new companies because it enables execution velocity, and that velocity, when you're using a sort of common infrastructure, expands the aperture of what's possible and the speed at which that will occur. I think it’s going to deliver for both the insurtech ecosystem and also incumbents. It's a pretty exciting future, so I see the vertical cloud being a promising place to be.”
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