Tradeplus24 CHF100m Fintech raise in Switzerland signals Insurance move into SME Lending 

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Note: the deal was done in CHF which is about parity with USD, so you can read that as $100m.

When I first started looking at the Swiss Fintech scene in 2014, my post was called: Zurich Fintech fans look jealously to London (I did point out that while London might have more VC, the Swiss trains and mountains were better).

A lot has changed in that time. A more updated view of a much more vibrant Swiss Fintech scene was captured here two years later:

In the two years between those two posts, four things happened:

  1. Swiss regulators drafted perhaps the most progressive Fintech License anywhere. That took almost everybody surprise. A prediction along these lines would have got only cynical laughter in 2014.
  2. Bitcoin became respectable because it is legal tender and can be bought at any train station and used to pay taxes and other government bills. The legality was known for a long time thanks to the strange history of the WIR (as we reported in March 2015) and that legality led to respectability and both are prerequisites for mainstream adoption.
  3. London suffered Brexit (what soccer fans call an “own goal”) making other places in geographic Europe more attractive.
  4. Some potentially great ventures are starting to emerge from Crypto Valley. Lykke is one to watch in our view – a proven entrepreneur using disruptive technology to execute on an ambitious vision.

A $100m Fintech raise in Switzerland in 2014 would have been inconceivable. In 2017 it is noteworthy as another sign of a rapidly maturing Fintech community in Switzerland.

The Tradeplus24 news has a big number to get our attention. However, it is the innovation behind that number which gets our scrutiny today.

I could only find the Tradeplus24 news on German language sites, so if that is an issue for you, here are the key facts:

– they raised CHF100m debt

– The debt is for lending to Swiss SME (note: they refer to KMU which translates to SME). This makes them a balance sheet lender, like Avant, not a marketplace lender like Lending Club. This means they have assured capital to offer rather than simply matching on a best efforts basis (our take is the latter is the better model long term but that you need balance sheet based lending to get a market going).

– The lender is a boutique investment firm called OceanoOne that connects lenders to what they describe as “sourcing engines” (which is how they categorize Tradeplus24). Lending platforms consistently tell us that the demand from lenders far outstrips the supply of good quality borrowers. Lenders are hungry for high quality debt with a good interest rate. OceanoOne’s proposition is having relationships with the sourcing engines that deliver that high quality debt (what OceanoOne calls “short duration, secured working capital finance”).

– Kessler & Co AG, a Swiss Insurance broker, is listed as a partner

– AIG, the global Insurance carrier that got into trouble in the Global Financial Crisis is also listed as a partner.

It is the role of the last two that is interesting. This is Insurance getting into SME Lending and that could be game-changing.

A Credit Rating for SME?

Classic Supply Chain Finance (see this interview with Orbian for an example) works very well if the buyer is a credit agency rated corporate. That gets something like 150 bp spread over LIBOR.

That is great for an SME who is at the final stage in the supply chain that supplies to a credit agency rated corporate. What about an SME that is further down the supply chain or that only sells to other SMEs?

The rest of the SMEs currently rely on one of two types of solution:

–      Receivables Financing, Factoring, Invoice Discounting. Whatever you call it, the credit rating is based on the seller not the buyer and the APR % compared to Supply Chain Finance is massive.

–      Credit approval based on bank processes. Lots of ventures have made this process more efficient by digitizing it, but it still relies on the data that banks have traditionally asked for such as tax returns and audited financial statements which are at best one input to a credit model. That can work in America and Europe where that data is easily accessible in digital format, but it is not game changing. It is far harder in the Rest of the world.

All of this goes away if SMEs can get a credit rating as easily as a corporate.

In the interview with Dianrong, we see an approach to this problem in China.

The Tradeplus24 approach is different. It brings Insurance into the mix. AsOceanoOne put it “An insurance or equal protection of investment grade quality against credit loss and fraud is in place for all pre-financed receivables. The purchase of the receivables occurs only when a credit insurance or an equal protection is in place and confirmed by the relevant protection provider.”

The role of AIG is critical. We cannot see the details yet, but credit market work with Insurance. Think of the Credit Default Swaps (CDS) that are credited with the Global Financial Crisis and in which AIG played a much criticized role. A cynical knee jerk reaction might be “here we go again, this must end badly”. Our take is that there is nothing wrong per se with securitization or the insurance of securitized debt. Both can lead to more efficiency and lower cost financing. The issue is data transparency and now, nearly 10 years after the GFC, we have had the Big Data revolution and that transparency is now possible. If that makes financing cheaper for millions of SMEs we can all cheer.

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Bernard Lunn is a Fintech thought-leader, investor and deal-maker. 

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Religare is the biggest exit so far in InsurTech and it is from India

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The biggest Insurtech exit to date just happened. The news is public. This is no scoop or insider information; that is not our game at Daily Fintech. Yet despite the story “hiding in plain sight”, it did not receive much mainstream media attention. That is our mission at Daily Fintech – to find the needle of insight that is hiding in the public domain haystack.

In this post we look at the big trends behind this news.

First, a bit of deal background explanation is needed.

A Unicorn valuation funding round makes headlines, but what matters is realized value at exit.

It is no secret that VC money is pouring into InsurTech. As any deal guy knows, getting a big headline valuation (the “PR deal optics”) is easy. We will be getting a lot of InsurTech Unicorn headlines. What follows explains how some of those PR deal optics are constructed. Looking below the PR deal optics to the reality will help see why the Religare story is significant.

As an entrepreneur, if you want that Unicorn headline you simply give away egregious preference terms. Say an entrepreneur wants to sell 20% in that round and the investor really thinks you are worth $100m (keeping to round numbers to keep it simple) and the entrepreneur is asking for a $1 billion Unicorn headline. The investor is willing to put in $20m for a 20% stake. To get to your $1 billion valuation you either need the investor to put in $200m or to accept a 2% stake. Both are showstoppers. If the entrepreneur offers 10% Preferential Equity terms, the headline can say “Hot Venture x raises $yyy at $1 billion valuation from Hot Fund z”. When you look at funding valuation data, you see a lot of deals at exactly $1 billion for this reason. Entrepreneurs need to get the amount invested from $20m to more like $100m for the headline optics. Then the headline is “Hot Venture x raises $100 million at $1 billion valuation from Hot Fund z”. Naïve journalists may extrapolate a 10% stake from that headline. With 10% Preferential Equity terms and an exit in 10 years at $300m, the actual realized value at exit for that investor (keeping it really simple and only assuming one round) is 86%. Run a simple compound interest calculator to see that. That 86% looks bad, but it gets worse if you count the more egregious terms where investors get their $100m back before calculating the compound interest at 10%. If you factor that in, or factor in multiple rounds with a whole preference stack at different dates, you can quickly see how an entrepreneur has to build an incredible amount of value for their founding stake to be worth much and why many entrepreneurs walk away with zip after a headline that makes them look vastly wealthy.

Unless the entrepreneur gets to a really big valuation or does it really quickly. Yes, that is really, really hard to do and happens very rarely.

All of this kind of deal optics fancy dancing stops at exit. Then somebody is paying hard cash and what you read is a real number. That is why we track real exit value (whether by IPO by trade sale). This is when the tide goes out and you can see who has been swimming naked.

My reason for giving that lengthy explanation is to make sense of what is not a sensational story, but which is a big deal in real terms. The Religare exit is not a Unicorn – ho, hum, click away now. Yet it is the biggest exit in InsurTech to date and that is a real story. (If anybody knows of a bigger one please tell us in comments).

If my explanation saves any entrepreneur from 10 years of “blood, sweat, toil and tears” for minimal financial benefit, I am happy.

The News

On 9 April, Religare Enterprises Ltd sold an 80% stake in Religare Health Insurance Co. Ltd (a standalone health insurance company), to a consortium of investors led by True North, a private equity firm. Religare will get about Rs1,040 crore for the deal and the health insurance company is valued at Rs1,300 crore. Religare Health Insurance is owned by Religare Enterprises (80%), Corporation bank (5%), Union Bank of India (5%) and the remaining 10% is by the employees of Religare through employee stock options.

Decrypted. Converting Indian Rupees to a well-known global currency like USD, EUR or Bitcoin is simple. But then you have to deal with Lakhs and Crores. When I negotiated my first deal in India that threw me for a loop momentarily (I had my pricing in GBP and was used to negotiating in USD and had the conversion to INR figured out but when the buyer started talking Lakhs and Crores I was blindsided for a moment). A Lakh is 100,000 and a Crore is 10,000,000. To really confuse non-Indians, a Lakh is written numerically as 1,00,000 and a Crore is written numerically as 10,00,00,000. The USD to INR conversion as I write is 64.47. So (rounding to nearest million) that makes the cash portion of the deal worth USD 161m (Rs1,040 crore) and the realized exit valuation worth USD 202m (Rs1,300). Those calculations throw algo-driven reporting for a loop. I saw this reported as a deal worth $10 billion and knowing that Indians don’t tend to pay bubble value this surprised me. So I dug in and I found that the data was incorrect as reported.

In the future, when Bitcoin is mainstream, we will convert Indian Rupees to Satoshis and Crore Rupees to Bitcoin; but that is another story!

Religare Healthcare is what we categorize as Full Stack HealthInsurTech. They offer Health Insurance policies to consumers.

News link is here.

Why mainstream business media missed the significance of this news

We are now accustomed to looking for mega funding events from China. We also look for mega HealthInsurTech deals from America. We have reported on both. These trends jump out of the data. This was a big exit, but it was from India and so it is not a story unless you are in India, or from India (as my fellow Author Arun is) or into India having done a lot of business there (as I am).

And on top of that you would have to decrypt Lakhs and Crores. In short, the story was ignored outside India.

The Three MegaTrends behind this news

  • First the Rest then the West.
  • Corporate (aka Strategic) Funding is getting more prominent.
  • Innovation capital formation is starting in the Rest

MegaTrend 1. First the Rest then the West.

This is a theme that we have been writing about for years (example post here). For most of the 20th century, technology was limited to the West. Countries in the Rest (formerly known as developing, then emerging, then rapid growth economies) were “tech deserts” until those economies started to open up (first China, then India, then Africa). Then technology adoption started to flow from the West to the Rest; the last decade has been a boom time for Western tech firms selling to the Rest.

Now the flow is reversing as technology adoption starts in the Rest and then goes to the West. For example, look at Xiaomi to see the future of mobile phones and Alibaba for the future of e-commerce or PayTM or M-Pesa for the future of mobile money.

This megatrend is not limited to Fintech, but within Fintech mobile payments and mobile e-commerce is the big disruption and that is happening first in the Rest and then will flow to the West.

Technology adoption flowing from the Rest to the West is one of the big 21st century megatrend stories.

Note that I am referring to technology adoptionWhere something is invented matters a lot less than where and how it is adopted, as Steve Jobs taught us after wandering around Xerox Parc and seeing the first graphical user interface and using that insight to change how we used personal computers. Adoption, whether through network effect or any other customer acquisition technique, has replaced patents as the technology moat and competitive advantage.

Adoption drives value creation and adoption is happening faster in the Rest.

Now look at Healthcare and HealthInsurTech within this context. Where would you prefer to build value:

  • Option 1: a Red Ocean market where there is a lot of entrenched competition (such as America).
  • Option 2: a Blue Ocean market where demand is small compared to established markets but is growing very fast and where there is very little entrenched competition (such as China, India, Africa and the other Rest).

Corporate (aka Strategic) Funding is getting more prominent

This is particularly true in China, where we see massive rounds done by corporate parents. For example, Zhong An (see our post where we describe their upcoming IPO as the Netscape moment for InsurTech). For more, see our Fintech China Week coverage. We are also seeing this trend in Europe where a lot of the InsurTech ventures are being funded by Insurance or Reinsurance companies rather than traditional Financial VC. This is what we have observed as Reinsurance As A Service. The old idea that the Corporate or Strategic investor is always the dumb money at the table that signals a bubble phase, needs to be re-evaluated.

The Religare story shows this. There are no VCs benefiting from this exit.

The Religare Healthcare exit beneficiary, the company that created the value, is called Religare Enterprises Limited (REL). This is a holding company/conglomerate. The mantra in the West for decades was that the holding company/conglomerate model is dead (core competency focus was the mantra). This deal makes one re-evaluate that mantra (as do other deals in China and India). REL got $160m in cash by selling 80% and kept 20% to ride for future upside. That is value creation.

India innovation capital formation

For a long time, Venture Capital fundamentally meant Silicon Valley. Entrepreneurs everywhere else had three lousy options:

  • Move to Silicon Valley where your costs are far higher and you don’t have a network and where you don’t understand the culture that you are selling into.
  • Find the local subsidiary of a Silicon Valley VC fund. Many Silicon Valley VC funds don’t even bother globalizing, because it is too hard and there are plenty of deals at home. The ones that do have a local Fund often lead to long decision cycles that kill a deal – first you convince the local guys, then you fly to Silicon Valley to convince the global Partners.
  • Find a small local VC that has very little expertise and/or only a small fund.

What the Religare story indicates is pretty significant which is the formation of more Innovation Capital locally. REL will have $160m in cash from the deal and a successful formula to follow. One assumes they will be hungry for more. That is one part of the story. The other part of the story is about the True North private equity fund that bought Religare Healthcare. True North, formerly India Value Fund Advisors, is a local Private Equity fund that started in 2000.  You can see their Fund size growth below:

Screen Shot 2017-04-15 at 11.29.04

The history, as per their site is interesting:

“True North came into existence with the power of one crucial decision. Mr. Gary Wendt, then Chairman and CEO of General Electric Capital Corporation (GECC), decided to set up a US$ 2 billion private equity fund with a focus on transforming businesses in a variety of global markets, one of which was India. Impala Partners, a US-based boutique investment and M & A advisory firm founded by former senior GECC executives, was chosen as a global partner for the venture.

The fund was focused on investments in Japan, India, Israel, Poland and Mexico, and sought local partners in each country. In India, Mr. Wendt tied up with Ambit Corporate Finance and subsequently HDFC to form GW Capital with Vishal Nevatia as CEO. Later, Mr. Wendt took up other responsibilities, and though he and Impala remained as investors, the new company developed a strong local identity, and was reborn as TRUE NORTH in 2004. With its new identity in 2016, True North will continue the company’s journey in transforming businesses.”

It will be interesting to track the value creation of Religare Healthcare after the acquisition by True North.

Note: I use the term Innovation Capital rather than Venture Capital because the term VC implies only one business model (2 and 20, LP and GP) and a lot of the action today is in areas such as Corporate funding, ICOs, Family Office Club deals and so on. All these can be called Innovation Capital, but calling them Venture Capital would be confusing.

American investment bank J.P. Morgan acted as the exclusive financial adviser to Religare Enterprises.

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Bernard Lunn is a Fintech thought-leader and deal-maker. 

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Where the VC Funding is going in InsurTech

Highway Signpost Venture Capital

Yesterday we announced our content partnership with Venture Scanner. Today we use their data in our InsurTech post.

We looked at 14 categories within InsurTech to see where the funding is going (numbers are in $ millions).

Category Total Ventures Funded Ventures Total $ % Funded Average $
Health & Travel 321 67 9260 21% 138
Life, Home, P&C 112 26 6870 23% 264
Auto 64 33 6610 52% 200
Data/Intelligence 105 55 2810 52% 51
Employee Benefits 110 30 1200 27% 40
Comparison 105 73 1200 70% 16
Infrastructure & Backend 245 80 1040 33% 13
Commercial 126 20 840 16% 42
Reinsurance 31 5 759 16% 152
Product 29 10 443 34% 44
Consumer Insurance 82 29 385 35% 13
User Acquisition 86 27 342 31% 13
P2P 31 7 86 23% 12
Education/Resources 35 4 53 11% 13
TOTAL 1482 466 31898 31% 68

Takeaways:

  1. Comparison sites look the most fully invested. 70% of comparison site ventures got funded. Our analysis here.
  2. Despite all the hype, very little money has gone into P2P (and out of that $86m, $60m is to Lemonade which no longer positions as P2P).
  3. Only 16% of ventures in Commercial and in Reinsurance get funded. I believe that is because these are functionally complex (and so the supply of ventures is limited and investors lack the knowledge to evaluate them fully).

This data comes from Venture Scanner. You can get the full FinTech Market Report and data at Venture Scanner.

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Bernard Lunn is a Fintech thought-leader and deal-maker. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Cyber Risk Insurance translates Nerd-Speak to Boardroom-Speak

 

Cyber Risks Extra Extra

Why do Banks exist? That is not some deep, philosophical question about the role of money in society. Banks exist to protect your assets from thieves. Because they do a good job of this, they can make a lot of money lending some multiple of what they store in the vaults. The only difference now is that the modern version of Butch Cassidy and the Sundance Kid are getting monitor tans as they cyber-attack the vaults from their computers.

Money is one asset to protect. Data is another. So is data about assets. In the digital age, it is all about data. And data is easy to steal.

All the good things that we write about on Daily Fintech – all that agility/productivity enabled by data and connectivity – also benefit Butch Cassidy and the Sundance Kid.

Cyber Risk is one nerdy subject that gets Board level attention because the risk is so high. Global 2000 companies can lose $ billions from a single hack. The problem is that cyber security is also an intensely complex subject technically.

One reason that so many influential leaders subscribe to Daily Fintech is that we are good at translating Fin to Tech and Tech to Fin. So we are attracted to the challenge of translating Cyber Security Nerd-Speak to Boardroom-Speak. It is one of the toughest translation jobs around. Even with a lot of technical experience, Cyber Security can be daunting. Even with a lot of business experience, understanding how a Global 2000 Board thinks can be daunting. Both are tough on their own. Translating between the two is even tougher, because they could not be further apart.

That translation, though hard, is ultra-critical. The Board has to really understand Cyber Security and they are currently failing at this task. This article on LeadingBoards describes the problem very well

Cyber Security technology = big budgets & bigger risk

The global cybersecurity market reached $75 billion in 2015 and is expected to hit $170 billion in 2020 (source, Forbes).

 

This is one market where the “you never get fired for buying (insert Big Tech vendor)” mantra breaks down. In most other enterprise technology markets, the big vendors tend to win because the Boardroom does not really care who is picked. So the senior IT managers making the decision go for the vendor that is competent enough to do the job and big enough that if it all goes wrong they can say “but all our well-respected peers made the same decision”.

That defence breaks down in Cyber Security because the risk is so high. Nor can a Board simply say “the CISO who made the decision has already been fired”. The Board has to take direct responsibility. Which means the Board has to understand Cyber Security.

How is the Board supposed to understand something as nerdy as Cyber Security?

We take a lot of briefings on cyber security technology, because we know how important it is. Listening to all these super-smart tech guys explaining the latest cyber security teaches us that a) it is hugely complex and b) there is no silver bullet.

We use a simple mental map that translates Cyber Security to the analog world:

  • Perimeter Security is where most money is spent. Think fences, guards, dogs. The fundamental problem is that somebody will always get through. The bad guys also benefit from Moore’s Law and can use SMAC (Social Mobile Analytics Cloud) to collaborate and share (what has been dubbed Crime As A Service). You can be the biggest bank or the biggest government and you still get hacked.
  • Digital ID. Think body part scanners (finger, eye, voice etc) that determine who can get into the building. We have written a lot about Digital ID technology and it is improving at a remarkable pace. The problem is collusion with a trusted inside-person who is part of the crime gang; the person with perfect Digital ID is a criminal.
  • Protect from the inside. This assumes that both Perimeter Security and Digital ID is imperfect. One way to protect from the inside is process controls (for example needing more than one person to send a wire). This also suffers from the collusion problem, but it is better as it is harder for criminals to corrupt the two individuals in a process. Another way is to write code that is secure. The problem is that both better process and better code hit the agility/efficiency problem. Banks have to move fast and efficiently to beat competition AND be secure. One alone is not enough. For example, Banks want to use high level languages and tools that enable rapid time to market even if that means the developers are not thinking much about security.
  • Protect when data leaves the vault. This assumes that all three methods above will fail. The analogy here is marked banknotes used in a kidnap ransom. Again, the bad guys have very sophisticated technology to get rid of these markings, so this is yet another arms race.

If you cannot measure it, you cannot manage it

That is one of the oldest truisms of business. If you listen to the pitches of any Cyber Security vendor, you will hear that they have the solution. The problem – as any reasonable attentive business person can observe – is that even companies with all this smart technology still get hacked. The empirical evidence is that there is no silver bullet.

Insurance has historically worked on statistical models. This works fine – until it no longer works. When something fundamental changes, the models become deeply flawed. We have tracked this as it relates to catastrophes created by climate. The use of data and connectivity by cyber-criminals is analogous. The risk went up in unpredictable ways. It is no longer good enough to rely on historical models. Cyber Risk is like Climate Risk – the historical models do not predict the future accurately enough.

What companies want is something as simple as a cyber security safety rating. Insurance Companies have the right motivation to give an honest rating (unlike credit rating agencies that are paid by the seller). Insurance Companies won’t award a AAA cyber security safety rating to a BBB company, because they will pay in claims for getting it wrong.

That means Insurance Companies need to turn into cyber security experts. A tech vendor may say “we have the secret sauce” to change your rating from BBB to AAA and thus lower your premiums. The Board will say “sure, if you can convince our Insurance Company that this will lower our premiums, we have a deal.”

Startups in this risk metrics space include Cyence, BitSight and Security Scorecard.

Cyber Risk Insurance is a data game and that is a problem

Cyber Risk is one of the fastest growing parts  of the Insurance market, accounting for over $3 billion in premiums.

Banks are in better shape than others. Protecting against thieves has been a core competency for longer.

Cyber Risk Insurance people differentiate between Micro and Macro. The latter is the news-worthy hacking between governments (cue image of the nerdy young Q in recent James Bond movies). Our concern is the more boring Micro Cyber Risk Insurance – exciting enough as this is about whether huge companies can lose $ billions from a single hack. The Micro could become the Macro if a number of Micro hacks led to a crisis of confidence in the financial system akin to September 2008.

Talking to experts in this relatively new field it is hard to get a lot of on the record quotes. That indicates a market that is nascent enough that the solutions are not obvious. To entrepreneurs that signals opportunity.

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Bernard Lunn is a Fintech thought-leader and deal-maker. 

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What yet another InsurTech in Berlin (Element) reveals about Brexit 9 months post the earthquake 

earthquake.jpg

This was not a planned three-parter. The fact that our last 3 InsurTech posts all feature Berlin ventures – WeFox, Simplesurance and now Element – was not planned. It simply turned out that way, because Berlin seems to be where the action is in InsurTech today.

The story about Element and TIA is not just about Berlin. It also reveals how fast an innovation platform is forming in InsurTech. More on that later.

The 1,2,3 story of WeFox, Simplesurance and now Element all being from Berlin did prompt me to look at the state of VC in Berlin and the post Brexit landscape 9 months after the earthquake and the Fintech Capital of the World debate.

9 Months after Brexit

The dust has settled. Article 50 has been triggered. It is time to take stock. Disclosure, I am British but have lived most of my life outside Britain (Asia and America and now Switzerland) and from that global perspective Brexit looks like a mistake. Plenty of good friends and family disagree and this is not a political site, so I will restrict my comments to Fintech.

We have not seen any dramatic game of thrones type drama in Fintech. No single city has grabbed the Fintech capital of the world crown. What we have seen, which could be as bad in the long run is multiple hubs all with a specialty taking parts of London’s business such as:

In the Fin part of FinTech we are also seeing Dublin, Frankfurt and Paris get some trading rooms moving from London. The big driver is the automation of trading. Relocation and regulation is simply background noise. It was reported that Goldman Sachs replaced 600 traders with 200 engineers. This makes it natural for big global banks to consolidate operations back home. When traders go, the back office and tech and all the supporting functions do eventually go as well. So I think German banks will go to Frankfurt, French Banks will go to Paris, American Banks will go to New York and so on.

The one center that might be different is Dublin. The soft factors – language, culture, fun – make Dublin attractive in a way that Frankfurt struggles with (and Paris for all its great charms struggles with if you are not French). A Brit can feel at home in Dublin (this post in the Guardian outlines the issues for bankers considering relocation). What I envisage for Dublin is less corporate relocation and more like Hedge Funds moving from Manhattan to Connecticut. These will be “privileged refugees” who leave a bank in London to to set up shop in Dublin for some new tech enabled “techfin” hedge fund or prop trader venture.

This shows that the post Brexit landscape is becoming decentralized. There is no single hub. Instead we are seeing networks emerge with each node in the network serving key functions. In this emerging reality, corridors become key. These corridors, such as between Zurich and Berlin as illustrated by WeFox, are more important than individual hubs.

Let’s look at the story about Element and TIA to see how it illustrates how the Innovation Capital funnel in Berlin is forming.

The Innovation Capital funnel in Berlin

The story about Element and TIA is by itself not that significant. It caught my eye simply because it was one more Berlin + InsurTech story within weeks and my mantra is:

Once means nothing, twice is coincidence, three times is a trend.

So I went digging to see what could explain this trend. What hypothesis fits the observation?

If you go to Element you see a digital insurance startup saying they are “A new way 
to think about insurance”. The jaded journalist response is that sounds like so many other startups.

The PR announcement is that they have partnered with TIA Technology. This is a well-established Danish company that provides software to insurance companies. TIA falls into what we call Traditional Fintech.  This part of the story illustrates a theme we have covered on Daily Fintech about how Traditional Fintech is transforming to become a platform for Emergent Fintech (i.e for companies like Element).

The Berlin Copenhagen partnership also shows that geographic Europe is more important than bureaucratic Europe or monetary Europe or regulatory Europe.  This geographic Europe has shared culture, timezone and travel connections. The UK is part of geographic Europe. That is simply fact. The timezone and the travel distances are fact not opinion. The culture is more about opinion and point of view and on that front, Brits are divided. If the UK goes isolationist within geographic Europe and breaks the cultural ties, my country will turn a problem into a disaster. I don’t think that will happen.

Culture beats strategy. Culture also beats capital and regulation.

There is a European culture. You may love it or hate it, but it does exist. This European culture coexists with a German culture, a Danish culture, a Swiss culture and so on and has nothing to do with Brussels or the Euro.  I hope it will continue to coexist with a British culture.

However that is only one part of the story. The other part of the story is FinLeap, a Berlin based Fintech accelerator (or “company builder” which is the term that they prefer and which I also think is better).

Jaded journalist response – ho hum, yet another accelerator. Accelerators (or incubators or company builders or venture engineers or whatever label marketing wants to apply) are critical to crossing the chasm from MVP to PMF, but they hardly new.

FinLeap is also a new venture. So it is worth checking to see who is behind FinLeap. Crunchbase tells us that FinLeap closed a EUR21m round in June 2016 (Brexit earthquake month as it happens) from two investors:

  • HitFox Group. This is another Berlin based company builder that is not Fintech specific but which has some good Fintech ventures in its portfolio.  Why one company builder invests in another company builder is the subject to be explored later. What is clear is that Berlin already has a reputation for good execution by company builders, thanks to the pioneering (and occasionally controversial) work of Rocket Internet.

It will be interesting to see how BAFIN reacts ie how quickly Element gets a license. The components of a successful Fintech Hub, which Berlin is clearly becoming, include forward-thing, tech savvy regulation.

Glass half full view of decentralisation for London

There is a glass half view of decentralization for London if you see this within the context of that “mother of all Hubs” known as Silicon Valley. It is a power law graph where all the other Hubs (even big ones like London, New York and Singapore) are simply part of the long tail.

At least that is how it was in the past.

If there is only one crown, only one Fintech Capital of the World, then it belongs to Silicon Valley. Period, end of story. Silicon Valley has more great ventures, more capital and more venture scaling expertise than all the other hubs put together.

However, if the future looks more decentralized, both technically (e.g. Blockchain) and economically (the diffusion of capital and expertise around the world), then the idea of a single dominant hub will fade away.

Alert: in each major transition, Silicon Valley  has been counted out and yet has found the key to unlock value. Proclaiming that “this time is different” is dangerous.

Silicon Valley residents will breathe a sigh of relief – maybe traffic jams on Route 101 will decrease and house prices will come down to earth.

In that decentralised networked world, London will have a more level playing field with Silicon Valley – and with Berlin, Luxembourg, Dublin, Paris, Zurich, Geneva, etc.

Londoners who want to drive value creation for an ecosystem in London need to think about what role to play in this more decentralized, networked world. Hanging onto Fintech Capital of the World dreams maybe as counterproductive as hanging onto Imperial dreams.

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Bernard Lunn is a Fintech thought-leader and deal-maker. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

As this is another InsurTech success story from Germany we again asked Karl Heinz Passler (initiator of InsurTechTalk.com) to translate this article into German .

Ein weiteres InsurTech Startup (Element) tritt 9 Monate nach dem Brexit in der Fintech Stadt Berlin ans Tageslicht

Ursprünglich hatten wir gar keinen Dreiteiler vorgesehen. Unsere drei letzten Artikel handeln jedoch von den Berliner InsurTech Startups – WeFox,  Simplesurance und jetzt Element. Da sich in Berlin derzeit so viel ereignet, hat sich dies so ergeben. In diesem Artikel über Element und TIA geht es nicht nur um Berlin, es geht auch darum, wie sich in Berlin eine Innovationsplattform für InsurTech entwickelt. Später mehr dazu.

Die drei Ereignisse von WeFox über Simplesurance und jetzt Element (alle aus Berlin) habe ich mir zum Anlass genommen, die aktuelle Entwicklung von VC in Berlin näher anzuschauen.  Insbesondere 9 Monate nach dem Brexit und den Debatten über die zukünftige Fintech-Hauptstadt der Welt.

9 Monate nach dem Brexit

Der Staub hat sich gelegt. Der Artikel 50 wurde nun ausgelöst. Es ist Zeit sich die Sache mal genauer anzusehen. Um ehrlich zu sein, ich bin ein Brite. Ich habe allerdings die meiste Zeit meines Lebens außerhalb gelebt (Asien, Amerika und jetzt Schweiz). Aus meiner globalen Perspektive sieht der Brexit allerdings wie ein Fehler aus. Meine Familie und viele meiner Freunde sind anderer Meinung. Da dies kein politischer Blog ist beschränke ich also meine Kommentare auf Fintech.

Wir haben keine dramatischen Szenen wie bei Games of Thrones gesehen. Keine einzelne Stadt hat versucht die Krone für die Fintech-Hauptstadt der Welt zu ergreifen. Was wir allerdings beobachteten und dies könnte langfristig genau so negativ wirken, ist dass sich mehrere Städte als spezialisierte Drehkreuze etablieren und London damit Geschäft wegnehmen, wie z.B.:

– Berlin für InsurTech, was wir heute beschreiben

– Zürich und Zug für Bitcoin sowie Blockchain Crypto Währungen

– Luxemburg für Finanztransaktionen

– Estland für digitale Identität und E-Governance

Im Fin-Teil von FinTech beobachten wir in Dublin, Frankfurt und Paris den Umzug einiger Handelsräume von London weg. Der Haupttreiber ist hierbei allerdings die Handelsautomatisierung. Echte Umzugspläne und Regulierungsanforderungen sind hier eher Hintergrundgeräusche. Es wurde berichtet, dass Goldman Sachs 600 Händler und 200 Techniker ersetzte. Wenn die Wertpapierhändler wegfallen, trifft dies auch das Back-Office und die Techniker sowie alle weiteren unterstützenden Funktionen. D.h. große globale Banken haben es mit der Automatisierung nun einfacher ihre Niederlassungen an ihrem jeweiligen Heimatsort zusammenzuführen. Daher glaube ich, dass deutsche Banken nach Frankfurt gehen werden, französische Banken nach Paris und amerikanische Banken nach New York gehen.

Nur bei einem Finanzzentrum könnte es  anders verlaufen, Dublin. Die weichen Faktoren wie Sprache, Kultur, Unterhaltung machen Dublin auf eine bestimmte Art attraktiv, mit der Frankfurt zu kämpfen hat (und Paris mit all seinem Charme kämpft, solange man kein Franzose ist).

Ein Brite kann sich in Dublin zuhause fühlen (Guardian Artikel). Daher bewerte ich einen Umzug nach Dublin eher wie den Umzug eines Hedge Funds von Manhattan nach Connecticut. Mitarbeiter dort sind dann eher wie “privilegierte Flüchtlinge” zu sehen, die in Dublin eine Niederlassung oder Filiale mit FinTech unterstütztem Fonds- oder Handel eröffnen.

Dies zeigt dass die Post Brexit Landschaft immer dezentraler wird. Es gibt kein einzelnes zentrales Drehkreuz (Hub) mehr. Stattdessen sehen wir Netzwerke entstehen, bei denen bestimmte Knotenpunkte wichtige Schlüsselfunktionen für das gesamte Netzwerk erfüllen.

In dieser nahen Zukunft werden Korridore zum Schlüssel.

Diese Korridore, wie zwischen Zürich und Berlin (Beispiel WeFox) sind wichtiger als einzelne große Knotenpunkte. Schauen wir uns an was bei Element und TIA passiert, sieht so aus als ob in Berlin gerade eine bedeutende Innovationsplattform entsteht.

In Berlin entsteht eine neue Plattform für Innovation und Kapital

Für sich gesehen ist die Sache mit Element und TIA nicht so bedeutsam. Sie fiel mir nur ins Auge, weil sie ein weiteres “Berlin und InsurTech Ereignis ist” und mein Mantra lautet: Einmal ist kein Mal, doppelt ist ein Zufall und drei Mal hintereinander ist ein Trend. Also ging ich der Sache nach um zu sehen welche Hypothese diese Beobachtung bestätigt.

Wenn man sich die Elements Seite anschaut, sehen sie ein Versicherungsunternehmen, dass aussagt “Eine neue Art über Versicherungen zu denken”. Für Journalisten bedeutet dies, bitte Hinten anstellen. Die Pressemeldung beinhaltet die Ankündigung mit TIA zusammenzuarbeiten. TIA ist eine bekannte und etablierte dänische Firma die Software für Versicherungsgesellschaften anbietet bzw. herstellt.

TIA ist in unseren Augen ein traditionelles Fintech. Was das ist haben wir in diesem Artikeln beschrieben: Traditional Fintech is transforming to become a platform for Emergent Fintech (i.e for companies like Element).

Die Zusammenarbeit zwischen Berlin und Kopenhagen zeigt, dass das geografische

Europa enger zusammen sizt als das politische Europa und das Europa aus finanztechnischer Sicht. Dieses geografische Europa teilt sich eine Kultur-, Zeitzone und hat gemeinsame Reiseverbindungen.

Großbritannien ist ein Teil des geografischen Europas; mit fast der gleichen Zeitzone und kurze Reisedistanzen, dies sind Fakten. Die britische Kultur ist jedoch gespalten in die welche Britannien getrennt und in die die Britannien gemeinsam mit den Festland-Europäern sehen wollen.

Aber ich glaube nicht, dass meine Landsleute dieses Problem in eine Katastrophe verwandeln werden. Kultur schlägt Strategie. Kultur schlägt auch Kapital und Politik.

Tatsache ist, es gibt eine gemeinsame europäische Kultur. Sie können es lieben oder hassen, aber diese Kultur existiert gemeinsam mit der deutschen, mit der dänischen, einer schweizer Kultur und so weiter. Und dies hat nichts mit Brüssel oder dem Euro zu tun. Ich hoffe dies wird es auch weiterhin in der britischen Kultur geben.

Das ist aber nur ein Teil der Geschichte. Der andere Teil ist FinLeap. Ein Berliner Fintech Accellerator bzw. Company Builder (was ihre Tätigkeit zutreffender beschreibt). Der normale Journalist denkt sich dabei, ah noch ein Accellerator, stell dich am besten gleich hinten an.

Accelleratoren und Company Builder sind wichtige Akteure die helfen die Kluft zwischen

MVP und PMF zu überbrücken (crossing the chasm). FinLeap ist ein junges Unternehmen. Also schauen wir nach was sich dahinter verbirgt. Crunchbase sagt: FinLeap schloss im Juni 2016 (während des Brexit Monats) eine Finanzierungsrunde über 21 Mio. Euro ab. Zwei Investoren waren an dieser Transaktion beteiligt:

– Hannover Rück, eine der größten Rückversicherungsgesellschaften der Welt. Dies passt zu unserem Artikel ” Reinsurance As A Service”

– HitFox Gruppe. Ein weiterer Berliner Company Builder, der zwar nicht Fintech spezifisch ist, aber einige interessante Fintech Beteiligungen in seinem Portfolio hat. Warum sich ein Company Builder bei einem anderen investiert wird noch aufgezeigt. Klar ist aber, dass Berlin bereits einen guten Ruf im Bereich der Company Builder hat, dank der (gelegentlich auch umstrittenen) Pionierarbeit von Rocket Internet.

Interessant ist, wie schnell die BAFIN reagiert und Element eine BAFIN-Lizenz zum Betrieb eines Versicherungsunternehmens erteilt. Die Erfolgs-Komponenten für einen erfolgreichen Fintech-Standort (Hub), was Berlin eindeutig beabsichtigt, sind vorwärtsdenkende Akteure und technikfreundliche Regulatoren (IHKs und BAFIN).

Bezüglich der Dezentralisierung ist das Glas für London halb voll

Aus der Sicht von London sieht das Glas halb leer aus, wenn man  dies im Kontext der “Mutter aller Hubs” bekannt als Silicon Valley sieht. Es ist ein ganz anderer Hebel, wenn alle anderen Hubs (auch große wie London, New York und Singapur) einfach nur ein Teil des Rattenschwanzes sind. Zumindest war es so in der Vergangenheit. Wenn es nur eine Krone gibt und nur eine Fintech Hauptstadt der Welt, dann gehört diese Silicon Valley. Punkt, Aus, Ende der Geschichte. Silicon Valley hat mehr Unternehmen, Finanzierungskapital und Skalierungspotenzial und Know-how als alle anderen Hubs zusammen. Aber die Zukunft wird dezentraler sein, sowohl aus technischer Sicht (z.B. Blockchain) als auch aus wirtschaftlicher Sicht (durch die Verbreitung und Verfügbarkeit von Kapital und Fachwissen über die ganze Welt). Die Bewohner des Silicon Valley können erleichtert sein, vielleicht gibt es bald weniger Verkehrstau auf der Strecke 101 und die Immobilienpreise könnten sinken. In dieser dezentralisierten und vernetzten Welt wird London eine bessere Chance haben sich  gegen Silicon Valley zu behaupten, ebenso gegen Berlin, Luxemburg, Dublin, Paris, Zürich, Genf usw.

Londoner die hierzu einen Beitrag leisten wollen, sollten darüber nachdenken, welche Rolle sie in dieser dezentralisierte, vernetzten Welt spielen wollen. Träume wie die “Fintech Hauptstadt der Welt” sind wahrscheinlich genauso kontraproduktiv wie der Traum des “Britischen Imperiums”.

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Bernard Lunn is a Fintech thought-leader and deal-maker. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

The $20m Simplesurance funding shows how Berlin is becoming an InsurTech hub

berlin

The news is here ($20m in this round, $33m total funding).

We missed Simplesurance in our roundup of InsurTech by amount of VC funding. Thanks to those who gave us a heads up (they are now in the table).

Back to Simplesurance, the fact that Berlin is doing well in Insurtech is significant, because Insurtech is what VCs want to invest in. Two years ago, when we first started tracking the nascent InsurTech scene (see this post for what we found in March 2015), the action was mainly in London. Today we are seeing action all over the world. Berlin, where Simplesurance hails from, is one of those places that is picking up some of the jewels from London’s crown (after some careless politicians dropped the crown on the floor in June 2016).

In this post we look at why Simplesurance is getting traction and why that traction is happening in Berlin.

Product Insurance at Point Of Sale

Have you ever had a store clerk put on the hard sell for insurance after buying some electronics gear? The reason is simple – the margins on insurance give the store more profit than from selling the product.

So the sales person is given a lot of commission.

There is no human sales person in an e-commerce transaction.

That is where Simplesurance comes in. If you operate an e-commerce service, you can offer insurance at the Point Of Sale via Simplesurance. That is a massive market with a simple value proposition.

That is why a company called Rakuten led this funding round. Rakuten is a global e-commerce company, focused on electronics, headquartered in Japan.

One of the themes we track on Daily Fintech is that “bits don’t stop at category borders that were created in the analog age”. The categories created in the analog age get blurred as digital entrepreneurs solve pain points that cross over these category boundaries. We have chronicled how payments and e-commerce are becoming blurred. The Rakuten funding for Simplesurance shows how insurance and e-commerce are becoming blurred.

Driven by strategic investors

The narrative favored by VCs has been that most strategic investors are at best “the useful idiots” who will overpay on valuations. In that narrative, the best strategic investors morph into financial investors. The oft cited example is Intel Capital.

The Simplesurance funding story reveals that this conventional wisdom could be wrong.

We got this wrong when we saw the Simplesurance round by Allianz.

However by bringing in Rakuten, Simplesurance and Allianz are taking this to the next level.

Any financial VC worth their salt will have companies like Allianz and Rakuten in their rolodex. The normal route was for financial VCs to invest early at a low valuation and then use their rolodex to bring in strategic investors in a later more expensive round.

This Simplesurance round indicates that the Strategic VCs may be getting rid of the middle man. It makes sense that this would happen first in a market such as Germany where financial VCs have not been that strong. It also makes sense that this would happen first in InsurTech as this is a market segment where the incumbents became active very early in the development of the market.

Berlin and InsurTech

Berlin does not have a big network of top tier Financial VCs. There are some exceptions of course, but compared to Silicon Valley, New York and London, Berlin looks second tier when ranked on amount of Venture Capital.

Yet in InsurTech, Berlin has two very active and agile Insurance incumbents.

There is of course Allianz who did the earlier round for Simplesurance.

However, buried in the funding story was the fact that Simplesurance uses Munich Re to actually underwrite the policies. Although Munich Re is based in Munich, about 5 hours by car from Berlin, they share language, culture and regulation with Berlin.

We profiled the Munich Re InsurTech partnerships here.

WeFox, who we profiled last week, is also from Berlin.

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As Simplesurance is another InsurTech success story from Germany we asked Karl Heinz Passler (initiator of InsurTechTalk.com) to translate this article into German (as he did for last week’s story about WeFox).

Die Finanzierung über 20 Millionen US-Dollar in Simplesurance zeigt wie sich Berlin zu einem InsurTech-Hub entwickelt

Die Gesamtfinanzierung von Simplesurance erhöht sich (inkl. der 20 Mio. US-Dollar dieser Finanzierungsrunde) auf insgesamt 33 Mio. US-Dollar. Hier die Schlagzeilen.

In unserer Übersicht der InsurTech Startups mit den höchsten Finanzierungsrunden hatten wir Simplesurance nicht aufgeführt. Danke für den Hinweis, wir haben die Übersicht um Simplesurance ergänzt.

Zurück zu Simplesurance. Der Fakt, dass sich die InsurTech Szene in Berlin gut entwickelt ist wichtig, da sich VCs auf der Suche nach Investments in InsurTech Startups befinden.

Als wir vor zwei Jahren mit der Beobachtung der InsurTech-Szene begannen (siehe diesen Beitrag über das was wir im März 2015 entdeckten), war der Schwerpunkt vor allem London. Heute sehen wir auf der ganzen Welt Aktivitäten. Berlin, woher Simplesurance stammt, ist nun einer jener Orte die den Londonern einige Zacke aus ihrer Krone herausbrechen (nachdem sorglose Politiker die Krone im Juni 2016 aus den Augen ließen). In diesem Beitrag geht es um die Gründe, warum Simplesurance so stark wächst und warum dieses Wachstum ausgerechnet in Berlin stattfindet.

Produktversicherungen direkt am Point-of-Sale

Hatten sie jemals das Erlebnis, das ihnen ein Verkäufer nach dem Kauf von Elektronikartikeln eine Versicherung andrehen wollte? Nun der Grund liegt auf der Hand, die Gewinnmargen der Versicherung sind höher als die des ursprünglich verkauften Elektronik-Produktes. Also erhält der Verkäufer auch eine entsprechend hohe Provision für den Verkauf der Versicherung. Bei einem Online-Verkauf gibt es keine Verkäufer. Das ist der Augenblick an dem Simplesurance auf den Plan kommt.

Wenn Sie einen Online-Shop betreiben, können Sie mit  Simplesurance sehr einfach Versicherung direkt am Point-of-Sale mitverkaufen. Ein riesiger Markt mit einem einfachen Nutzenversprechen, Sicherheit für den Kunden.

Dies ist der Grund, warum ein Unternehmen namens Rakuten diese Finanzierungsrunde anführte. Rakuten ist ein globales E-Commerce-Unternehmen, das sich auf Elektronik spezialisiert hat und seinen Hauptsitz in Japan hat.

Eines der Themen über das wir auf Daily Fintech schreiben ist, dass “Bits und Bytes nicht an den Grenzen von Sortimentskategorien halt machen, die im analogen Zeitalter festgelegt wurden”. Die damals entstandenen Einteilungen fangen nun an zu verschwimmen, da neue Startups Probleme lösen die diese alten Grenzen überwinden. Wir haben in einem Artikel aufgezeigt wie im Bereich der Zahlungen und des E-Commerce die Grenzen verschwimmen.

Das Investment von Rakuten in Simplesurance zeigt anschaulich, wie die Grenzen zwischen Versicherungen und E-Commerce immer mehr verschwimmen.

Getrieben von strategischen Investoren

Eine bekannte Weisheit der VCs besagt, dass die besten strategischen Investoren im besten Fall “die nützlichen Idioten” sind, die sich in ein bereits überbewertetes Investment einkaufen. Demnach entwickeln sich die besten strategischen Investoren zu Finanzinvestoren; das oft zitierte Beispiel ist Intel Capital.

Die Erfolgsgeschichte der Simplesurance sagt uns, dass wir mit dieser Binsenweisheit falsch liegen könnten. Die Finanzierungsrunde der Allinaz in Simplesurance scheinen wir falsch eingeschätzt zu haben. Denn mit dem Einstieg von Rakuten schalten Simplesurance und Allianz in den nächst höheren Gang rauf.

Jeder VC der sein Geld wert ist, pflegt Kontakte in Unternehmen wie Allianz und Rakuten. Bisher war die normale Vorgehensweise der VCs frühzeitig bei einer niedrigen Bewertung zu investieren um dann die Kontakte zu nutzen strategische Investoren in spätere teurere Runden reinzuholen. Das Beispiel der Simplesurance Finanzierungsrunden zeigt auf, dass die die Dienste des Mittelsmanns anscheinend nicht mehr gebraucht werden.

Dass dies zuerst in einem Markt wie Deutschland passiert, liegt auf der Hand, dort VCs weniger stark vertreten sind als üblich. Es ist ebenfalls nachvollziehbar, dass dies zuerst im Bereich von InsurTech geschieht, da etablierte Versicherer bereits sehr früh in diesem Markt aktiv wurden.

Berlin und InsurTech

Berlin bietet kein großes Netzwerk von erstklassigen Finanziers und VCs. Natürlich gibt es einige Ausnahmen. Aber wenn es um das Volumen von Venture Capital geht ist Berlin im Vergleich zu Silicon Valley, New York und London weit abgeschlagen.

Jedoch bietet Berlin InsurTech Startups zwei sehr aktive und agile Versicherungsunternehmen. Zum einen die Allianz, die die frühere Finanzierungsrunde mit Simplesurance durchgeführt hat. Wenn man dann noch etwas tiefer gräbt sieht man, dass Simplesurance die Münchener Rück als Rückversicherer nutzt. Zwar sind die Büros der Münchener Rück in München (ca. 5 Stunden Autofahrt von Berlin nach München), dennoch scheint dies nur ein Katzensprung.

In diesem Artikel haben wir die Münchener Rück mit ihren InsurTech Partnerschaften profiliert.

Über WeFox, die ihren Sitz auch in Berlin haben, hatten wir bereits letzte Woche berichtet.

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Simplesurance ist eine weitere InsurTech Erfolgsgeschichte aus Deutschland. Daher hat uns Karl Heinz Passler (Initiator von InsurTechTalk.com) bei der Übersetzung dieses Artikels ins Deutsche geholfen.

 

 

 

The WeFox #insurtech story is about augmenting rather than replacing agents

Insurance-Agent

When we did our roundup of the top InsurTech ventures by money raised, we missed WeFox (fka FinanceFox) and their $28m Series A in September 2016 (the news as reported in Techcrunch is here).

This week we dig more into the WeFox story. When a venture raises a big round from some smart VCs, they are probably doing something right. You don’t get $28m for a story, they must have serious traction.

Our research reveals that one bit of conventional wisdom about InsurTech maybe wrong. It also tells us more about the reality of the European venture scene.

Conventional wisdom says Insurance Agents are fading.

In one sense this is literal. The average age of an insurance agent or broker has steadily increased from 37 years in 1983 and is now 59. They will be retiring soon, are not digital native, built their business pre digital and see no reason to change now. In this post Amy Radin, outlined the pain very well when she wrote:

“The Agents have a poor survival rate: only 15% of agents who start on the independent agent career path are still in the game four years later. Base salary is negligible and it’s an “eat what you kill” business. This is a tough, impractical career path for most, and has become less attractive over time.”

So who would want to build a business catering to those dinosaurs? That is what WeFox is doing. They are clearly getting traction, so maybe conventional wisdom is wrong.

Conventional wisdom says replace agents with a digital system. That might be as simple as a comparison engine – which is doing well in emerging markets where first time insurance buyers need a lot of help- or as complex as a Robo Agent.

There are two reasons – other than WeFox traction – to indicate that conventional wisdom may be wrong:

  • A lot of the momentum in AI is in human augmentation, rather than in human replacement. When the stakes are high human augmementation is often more sensible – think driver assistance rather than driver replacement or doctor assistance rather than doctor replacement. This may also be true with insurance agents.
  • “Relationships are the one thing you cannot commoditize” (quote from Wikinomics). You want your agent empowered to offer better, faster, cheaper service. An App can simply leave you doing the hard work – and you might also like your agent.

What WeFox tells us about the European venture scene

WeFox is a Swiss company, founded in 2014. But they are based in Berlin (as per their Crunchbase profile. That is not even all in the European Union.

This trend to multi-location startups (which we first wrote about here) is one sign of closer integration within Europe. Moving from Zurich to Berlin may soon be no more remarkable than a venture moving from Kansas to New York. Culture and language ties will beat the simple mechanics of regulation.

This shows that the post Brexit landscape is becoming decentralized. There is no single hub. Instead we are seeing networks emerge with each node in the network serving key functions. In this emerging reality, corridors become key. These corridors such as between Zurich and Berlin as illustrated by WeFox, are more important than individual hubs.

Switzerland and Germany share a language (as does Austria). The WeFox site is all in German. At this time there seems to be no desire to sell to English speakers. My German is not good enough to write my posts in German, but was happy to have Google Translate do the job. Even better was that  Karlheinz Passler (founder of InsurTechTalk.com), offered to do the job properly and translate this article properly. Danke Karl. Check out what Karl is doing at InsurTechTalk.com.


BEI DER WEFOX #INSURTECH STORY GEHT ES DARUM VERSICHERUNGSVERMITTLER ZU UNTERSTÜTZEN, NICHT ZU ERSETZEN

Als wir unsere Übersicht der InsurTech Startups mit den höchsten Finanzierungsrunden erstellten, haben wir WeFox (ehemals FinanceFox) mit seiner im September 2016 durchgeführten 28 Millionen US-Dollar Series A Finanzierung vergessen (Techcrunch berichtete darüber).
In dieser Woche schauen wir uns die WeFox Story mal genauer an. Wenn ein Startup eine so große Finanzierung von mehreren etablierten VCs erhält, wissen die Investoren wahrscheinlich genauestens was sie tun. Für eine reine Luftnummer erhält WeFox keine 28 Millionen US-Dollar. Die müssen schon was ernsthaftes vorzuweisen haben.
Unsere Untersuchungen zeigt auf, dass unsere bisherige Einschätzung bzgl. InsurTech falsch sein könnte. Die Ergebnisse zeigen uns interessante Einblicke in die Praxis der europäischen Finanzierungsszene.
Die allgemeine Meinung ist, dass Versicherungsvermittler an Bedeutung verlieren werden

Ein Argument für diese These ist offensichtlich. Das durchschnittliche Alter der Versicherungsvertreter und Makler hat sich kontinuierlich von 37 im Jahr 1983 auf nun 59 Jahren erhöht. Da diese Vermittler nicht digital affin sind und bald in den Ruhestand gehen, haben sie auch keine Veranlassung ihre Agenturen zu digitalisieren. Im folgenden Beitrag von Amy Radin skizziert sie diese Probleme folgender maßen:
“Vermittler haben eine geringe wirtschaftliche Überlebenschance: Lediglich 15% der Vermittler, die diesen Karriereweg beginnen, sind vier Jahre später noch mit dabei. Die Basiseinnahmen sind so gering, dass es gerade zu Beginn der Tätigkeit darauf ankommt Abschluss-Provisionen zu erzielen, um das eigene Überleben zu sichern. Dies ist für die meisten ein zu harter und wenig attraktiver Karriereweg, der in den letzten Jahren weiter an Attraktivität verloren hat.”
Welcher Investor will diese Dinosaurier am Leben erhalten? Nun, WeFox tut es. Sie scheinen erstzunehmende Ergebnisse vorweisen zu können. Anscheinend liegen wir mit (unserer) allgemeinen Einschätzung bzgl. #Insurtech falsch.
Die langläufige Meinung ist, dass klassische Vermittler durch digitale Prozesse und Systeme ersetzt werden. Das kann zum Beispiel mit einem relativ einfachem Vergleichsportal – was in Wachstumsmärkten gut funktioniert, wo Erstkäufer noch relativ viel Hilfe benötigen – oder mit Hilfe von deutlich komplexeren Robo-Advisors umgesetzt werden.
Jedoch gibt es zwei Gründe – anders als bei der WeFox Traktion – die aufzeigen, dass die herkömmliche Einschätzung falsch sein könnte:
Eine Schwerpunkt im Bereich der künstlichen Intelligenz (AI) liegt in der intelligenten Unterstützung von Menschen, statt diese zu ersetzen. Wenn es um wirklich wichtige Dinge geht ist die Unterstützung der handelnden Personen sinnvoller. Wir denken dabe an Fahrerassistenz-Systeme als an Fahrerlose Systeme oder die Unterstützung von Ärzten, statt deren Ersatz. Dies kann durchaus auch für Versicherungsvermittler gelten.
“Soziale Beziehungen kann man nicht programmieren” (Zitat von Wikinomics). Sie möchten, dass Ihr Versicherungsvertreter und Makler dazu im Stande ist einen besseren, schnelleren und preiswerteren Service anzubieten? Eine entsprechende App kann ihn dazu befähigen diese anspruchsvollen Aufgaben besser durchzuführen.
Was WeFox über die europäische Venture-Szene verrät

WeFox ist ein schweizer Unternehmen das 2014 gegründet wurde. Mittlerweile ist es in Berlin ansässig (gemäß ihrem Crunchbase-Profil; Anm: Schweiz ist nicht einmal Mitglied der Europäischen Union.)
Der Trend, dass Startups mehrere Niederlassungen nutzen (was wir hier geschrieben haben) zeigt den hohen Grad der europäischen Integration auf. Ein Umzug von Zürich nach Berlin ist für ein Startup bald nicht bemerkenswerter als von Kansas nach New York. Die starke kulturelle und sprachliche Verbundenheit überwindet somit die Hürden der nationalen Regulierungen.
Schweiz und Deutschland haben eine gemeinsame Sprache (wie auch Österreich). Die WeFox-Seite ist zur Zeit ausschließlich auf Deutsch. Aktuell scheint es kein Wunsch zu sein im englischen Sprachraum zu vermitteln.
Dies zeigt uns deutlich auf, dass die Post-Brexit-Landschaft in Europa dezentraler wird. Es gibt keine zentralen Drehkreuze mehr. Stattdessen sehen wir zunehmend Netzwerke mit Knotenpunkten die wichtige Funktionen für das gesamte Netz übernehmen. In dieser neuen Welt nehmen Korridore eine Schlüsselrolle ein. Diese Korridore wie z.B. zwischen Zürich und Berlin (Aufgezeigt durch WeFox) sind wichtiger als bisherige Drehkreuze.
Da mein Deutsch ist nicht gut genug ist, um meine Beiträge auf Deutsch zu schreiben, habe ich Karl Heinz Passler (Initiator von InsurTechTalk.com) gebeten diesen Artikel für mich zu übersetzen.

 

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