- Technori’s Scott Kitun spoke with Travis Hedge, co-founder of Vouch, which provides business insurance for startups
- Most repeat founders get commercial insurance when a company is formed, but zero first-time founders get business insurance that early on. One major reason why it’s neglected by new entrepreneurs is because it’s hard to do
- Vouch offers coverage in four critical scenarios: company formation, the addition of an investor to your board, requirement in a customer contract and by a landlord
Insurance is one of the less sexy parts of running a company — and that’s especially true when working with the legacy companies that are far removed from the startup way.
Newer business models often don’t neatly fit into traditional insurers’ outdated categories. Sometimes plans need to be patch worked and even then — coverage can still be spotty — which could spell disaster down the road.
That’s where Vouch saw an opportunity. The company offers business insurance designed for startups.
“The industry doesn’t understand these early-stage startups, particularly when they’re innovating in more traditional or new categories,” says Travis Hedge, co-founder and VP of Business Development of Vouch.
“They have five categories to classify technology companies, and one of them is still CD manufacturing. So that’s one of the big opportunities for us: to craft these coverages in a way that
actually makes sense for early-stage startups.”
Travis previously worked in VC at SVB Capital, which included a partnership with car insurance company Root Insurance. That experience helped him see the gaps in business insurance and why current models don’t work for new types of companies. He started thinking about modernizing the insurance industry in 2016, and since then, Vouch has grown, with offices in San Francisco and Chicago — and job openings in both locations.
Travis joined the podcast to share insights from his journey, why business insurance is rife for disruption — and where the industry is going in the future.
Interview highlights — Travis Hedges from Vouch
When tech startups need business insurance
Our aspiration is to be the de facto insurance carrier for the technology industry. We have a long way to go to get there. It starts with what we’re doing today, which is serving seed and Series A-stage companies with the commercial insurance they need in less than 10 minutes, and it’s active within 24 hours.
That’s 10 different lines of coverage that you need in four different scenarios: at company formation, when an investor joins your board and it’s required, when a customer requires it in a contract and when your landlord requires it.
It’s critical you have this as you grow, but what’s also important is that you have the right thing at the right time. That’s where we’ve redesigned how you buy it, what you buy and the coverage itself, so entrepreneurs can focus on building their business.
Business insurance cost for a startup
One of the more interesting things we learned early on was that 65 percent of repeat or experienced entrepreneurs get commercial insurance at company formation, because they’ve seen that bad things can happen to good companies. Zero percent of first-time founders get it out of the gate, for a number of reasons, one of which is because it is so painful today.
We’ve lived this firsthand, twice. When we first set out, it was three of us in a WeWork, and we needed to get our core property and general liability insurance. I’m filling out the application, it’s like 60 questions, and they’re asking me: what year was your roof replaced? When were the fire sprinklers replaced? And I’m like, we have three laptops. I don’t know when my WeWork was roofed, sorry. We got this through one of the digital brokers, and ended up having to pay the carrier directly. We had to cut them a physical check, which they never got: it was a disaster — for a $500 insurance policy.
Fast forward a few weeks: In order to get our license in California, we had to get what’s called errors and omissions insurance. To be a licensed insurance producer, you have to have this protection in case you make a mistake with your clients. We got declined by all 15 carriers because we didn’t have revenue. In order to get the license, we needed the insurance, and in order to get the insurance, we needed revenue, but to get revenue, we needed the license.
None of that makes sense.
That’s one of the big opportunities for us: to craft these coverages in a way that actually makes sense for early-stage startups.
Building insurance products that reflect the business environment in 2020 and beyond
With each cycle, each boom and bust, you see these huge emerging risks, and then you see insurance products come about to help smooth over the impact those risks have. We’re at this unique moment in time where a lot of people are talking about cyber risk, but you’re six times more likely to get sued by an employee than you are to have a cyber event.
Four of the five largest cyber events over the last two years were driven by internal people-related failures, not some failure in a technology infrastructure. Even in this moment of accelerating change and increasing technology, people are still at the heart of every business. A lot of what we’re doing is helping the people in these businesses be more effective.
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