Why We Backed Newfront Insurance
XYZ is an early stage venture fund focused on enterprise and fintech companies. As such, we’ve developed some ~theorems~ on where we see these verticals going in the future.
It’s not every day you find a tech-forgotten corner within the finance stack. Disruption waves have been washing over the industry for more than two decades and yet, insurance has been largely left untouched. The paradox is that insurance is the very system that enables actors to take the risk to disrupt — it’s the safety net that wasn’t updated before a new generation started leaping across it with their fingers crossed. You could say that in some ways, financial innovation developed backwards. Every domestic business, especially nascent ventures, rely on century old legacy players for coverage and risk mitigation.
This a problem that the co-founders of our portfolio company, Newfront Insurance, came to know intimately as Spike (CEO) helped build two insurance companies (Invitation Homes and Opendoor) and Gordon (CTO) dealt with the pain of buying insurance for his own company (acquired by LinkedIn). Both went through arduous paperwork, frustrating timelines, and asymmetric information. The problem isn’t one way for business owners — insurance industry professionals also experience diminishing marginal returns to their efforts contributing to the over all brain drain from the industry.
Gordon and Spike became obsessed with the opportunity to rebuild an industry so deeply integral to the economy and to innovation. They launched in 2017 and are now the fastest growing insurance brokerage in the country as well as in the top 100 domestic brokerages. Their velocity was and continues to be powered by an original insight driven by primary research with CFOs, GCs, and risk managers — instead of cutting out the middlemen, these brokers should be super-powered by technology and software. Disrupt the brokerage not the broker and enable the skilled individual to go beyond data collection and provide high quality risk mitigation. Undoubtedly, humans are at the center of Newfront’s mission and innovation is their mantra.
We are incredibly proud to be backing a model that is novel. Newfront has built a brokerage powered by in-house software and driven by long-term value for their clients (not the short term gain of investors or other pecuniary players).
They are only just getting started and have raised more than $100M to continue better serving their clients, most recently at a $500MM valuation, with our enthusiastic participation alongside Founders Fund and Meritech Capital.