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from A Round to Apple Inc.
March 19, 2017

Insuring the Future

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Market Snapshot

Indices Week YTD

The first written insurance policy appeared in 1750 B.C. in ancient Babylonia on an obelisk recording the famous Code of Hammurabi. Debtors that offered lenders an extra sum did not have to repay their loans if an unforeseen catastrophe struck — think death, disability, fire, or flooding.

Fast forward nearly two millennia to 1666, when the Great Fire of London nearly destroyed the city, incinerating over 13,000 homes and displacing 100,000 people. In the charred aftermath, an entrepreneurial physician and property investor named Nicholas Barbon conceived of an ingenious model to mitigate the risk of property damages to individuals from future fires — and perhaps make a little money in the process.

Individuals would pay a “premium” into a common fund — later called “The Insurance Office” — which would use the pooled resources to cover the cost of fire damage. While it held some cash, Barbon’s Insurance Office made real estate investments to grow the value of the fund. It also employed a private fire brigade to protect its members and and property investments.

Early insurance contract from “The Insurance Office,” the first insurance company founded in 1680 (U.K.)

Barbon’s enterprise was short-lived — sometimes the early bird gets the turd — but the Sun Fire Office, founded just after Barbon’s venture in 1710, still stands today. After a series of mergers, it is now known as Royal & Sun Alliance, or RSA Insurance Group, Britain’s largest insurance company.


Global insurance premiums surpassed an estimated $4.6 trillion in 2016, with the United States representing over $1.4 trillion of that figure. While it has grown in scale and sophistication, the core model and consumer experience has evolved very little since the time of Nicholas Barbon.

The traditional insurance industry is comprised of three main segments: brokers (distributors), which interact with clients; insurers, which perform operational tasks like underwriting and claims processing, and reinsurers, which insure the insurers.


Source: GSV Asset Management, Business Insider

The industry has been especially slow to modernize due to historically high barriers to entry — from regulatory burdens to product complexity. Insurance companies are personnel heavy, employing over two million people using legacy systems built around physical documents.

But consumers are increasingly seeking ease of use, transparent pricing, and on-demand services in all aspects of their lives— values that are contrary to the basic premise of insurance, which is to deny claims to make money. But entrepreneurs are rising to the challenge. CB Insights estimates that funding for for insurance technology companies rose from $870 million in 2014 to $2.7 billion in 2015, with Zenefits and Zhong An Insurance accounting for $1.4 billion on their own. VC activity “cooled off” to $1.7 billion in 2016.


Source: CB Insights

In 2016, notable financings included health insurance platforms Oscar Health and Clover Health, which raised $400 million and $160 million rounds respectively. Auto insurance company Metromile raised $153 million.

Today, a substantial majority of the deals in insurance tech are early stage, with over half of venture financings made in the Seed or Series A rounds. Accordingly, exits to date have been relatively few an far between.


Source: CB Insights, Crunchbase, GSV Asset Management
Number of Deals Made in H1’16

Source: CB Insights, Crunchbase, GSV Asset Management

Increasingly, global technology leaders such as Alphabet (Google), Alibaba and Baidu have demonstrated a growing interest in insurance technology, partnering with both emerging startups and industry behemoths alike to embed their platforms across various services.

Alphabet’s Google Ventures (GV), for example, recently invested in Sequoia-backed Lemonade, a technology enabled property and casualty insurance company with transparent, fixed pricing and streamlined customer service. It has also backed benefits and insurance management startups Gusto and Collective Health. Google Capital has invested approximately $33 million into the data-driven health insurance platform, Clover Health.


Source: CB Insights, Crunchbase, GSV Asset Management

Chinese behemoth Alibaba invested in ZhongAn Insurance, China’s first exclusively online product insurance company. Its affiliate, Ant Financial, is the company’s largest shareholder. ZhongAn Insurance generates the bulk of its revenue through a return-delivery insurance product for buyers on, Alibaba’s online marketplace.

Global insurer Allianz recently partnered with Chinese Internet search giant Baidu and investment group Hillhouse Capital to establish a digital insurance company in China. This joint venture will digitize travel, e-commerce, and internet finance insurance in the short term, targeting verticals such as healthcare, lifestyle, and automobiles in the future.


The obvious area for innovation, with the fewest barriers to entry, has been replacing the individual brokers with transparent, efficient marketplaces that apply the design principles of successful e-commerce platforms. Companies like CoverHound, Cover, FinanceFox, PolicyBazaar, and PolicyGenius have all gained strong traction and blue chip backing.

But we are also seeing innovation in specific segments of the insurance industry , which is both disrupting the stalwart incumbents and creating services where there used to be none.


To say that Americans don’t like health insurance companies would be more than a mild understatement. A 2015 survey by the American Consumer Satisfaction Index that asked consumers to rank their satisfaction with companies across 43 industries found that health insurers placed in the bottom five — ahead of only Internet service providers, cable companies, the U.S. Postal Service and fixed-line telephone services. Even banks received higher marks.

Companies like Clover Health, which reportedly raising $120 million at a $1+ billion valuation, are changing the paradigm by using data and mobile technology to reduce costs, improve outcomes, and deliver a superior customer experience. Backed by Sequoia and First Round Capital, Clover’s initial goal is upend the Medicare health insurance market, which is dominated by sprawling incumbents like UnitedHealth and Cigna, which have a combined market value over $150 billion.

Pioneers: Clover Health
Kris Gale, Co-Founder, Clover Health (Right) Interviewed by Phineas Barnes, Partner, First Round Capital (Left) at the 2015 GSV Pioneer Summit

Source: GSV Asset Management

To do this, Clover collects a range of patient data like lab test results, radiology results, and routine checkup absenteeism to get an overall profile of a person’s health and risk profile. It then uses software models to automatically identify issues — like patients not regularly taking a prescription — and intervenes early with nurse practitioners and social workers that are equipped for home visits.

As Clover co-founder Kris Gale observed in an interview with TechCrunch, “If we know something is on a 30-day refill and we haven’t seen a claim in 35 days, we know they aren’t taking it regularly. We can reach out and intervene. This is info that’s available to us because we’re the payer… The doctor doesn’t know if they’re getting that filled unless they’re asking them regularly. That’s part of the data advantage.”

The net result is lower costs for both Clover and its customers, not to mention better health outcomes. In 2015, for example, seniors using Clover Health had 50% fewer hospital admissions and 34% fewer hospital readmissions than the average group of Medicare patients in the New Jersey areas it serves.

Smart Services: Insurance + Health Benefits

Source: CB Insights, CrunchBase, GSV Asset Management

Next generation insurance providers include Oscar, Zoom+, and Beam Dental. In February 2016, Oscar, completed a $400 million financing led by Fidelity Investments, which valued the company at $2.7 billion. Last year Oscar secured a key hire, naming Alan Warren — a former Alphabet executive overseeing the Google Docs and Google Drive product lines — as its Chief Technology Officer.

A second key segment of related companies is purely focused on the buying, selling and management of health insurance. These include Zenefits, Collective Health, Stride Health, GetInsured, SimplyInsured, Gravie, and Picwell.

Across the Pacific in Singapore, CXA, which raised $25 million in February from EDBI and Facebook co-founder Eduardo Saverin’s B Capital Group, is pushing the corporate value proposition a step further. CXA enables employees to select a mix of insurance and wellness benefits that align to their needs and preferences. Rather than offering one-size-fits-all insurance plans, CXA aggregates a wide range of providers on its platform — from insurers to gyms and yoga studios.

Automobile Insurance

We all know that like a good neighbor, State Farm is there and that we can save 15% on our car insurance in 15 minutes through GEICO. Combined, State Farm and GEICO wrote nearly $60 billion worth of auto insurance in 2015.

However, KPMG estimates that the automobile industry has the potential to shrink 60% within the next 25 years, as vehicles get safer and result in fewer car accidents and fatalities. The rise of on-demand car services such as Lyft and the adoption of autonomous vehicles will also reduce the need for auto insurance as we buy fewer cars. (Disclosure: GSV owns shares in Lyft)


Source: Lyft

In a survey done by Goldman Sachs, only 15% of millennials — the largest generation in U.S. history — feel that is it extremely important to own a car. In fact, people aged 75+ have surpassed 18-24 year olds in annual car purchases. And the number of young people with a driver’s license has steadily decreased. In 1983, 92% of 20- to 24-year-olds had driver’s licenses. Today it is just 77%. Look younger, and the shift is even more pronounced. In 1983, 46% of 16-year-olds had licenses. Today it is 24%.

A related dynamic is the “megatrend” of urbanization. Today, the United Nations estimates that four billion people, or 54% of the World’s population, live in cities. In the next 15 years, the Economist projects that urbanization will increase average city density by 30%. By 2050, the ranks of urban dwellers will swell by 2.5 billion to nearly two-thirds of global population.

This means that in the future, when people do own cars, they probably be underutilized. But today, auto insurance companies offer plans that care comparatively expensive for low-milage drivers on a per mile basis. It is estimated that 65% of drivers overpay to subsidize high mileage drivers.

As consumer habits change, new auto insurance companies are emerging to address rapidly evolving consumer habits. Metromile, for example, is delivering pay-per-mile auto insurance. It tracks the vehicle usage though Metromile Pulse, a product that plugs into the diagnostic port of a vehicle to track the number of miles driven, displaying real-time updates through a mobile app. Drivers are billed per-mile and low-mileage customers can save $500 on average annually.

Real-Time Per Mile Auto Insurance Tracking

Source: Metromile

The Metromile Pulse app is a snapshot of how next generation insurance companies designed for digital natives are creating competitive advantages. Pricing is transparent and consumers can track what they’re spending as they spend it. They can also monitor their car’s health and keep track of where it’s parked. Metromile is insurance, and then some. The company has raised over $200 million from investors such as NEA, Index Ventures, and First Round, as well as insurance giants such as Canada’s Intact Financial and China Pacific Insurance. Metromile is currently available for drivers in California, Illinois, New Jersey, Oregon, Pennsylvania, Virginia, and Washington and will be expanding to other states with their recent financing.


Source: CB Insights, CrunchBase, GSV Asset Management

Auto insurance startups are increasingly partnering with ride-sharing and self-driving car companies to provide new forms of coverage.

Metromile, for example partnered with Uber in 2015 to provide an insurance coverage for drivers when they are not carrying a passenger. Root offers discounts to Tesla drivers who use Tesla’s Autopilot technology based off of Federal data that demonstrates that Tesla’s technology results in lower crash rates. Expect to see more partnerships between ride sharing and pay-as-you-go insurance platforms as both platforms evolve.

Personal Insurance

We are seeing a proliferation of various consumer insurance products and platforms that a mobile-centric experience with transparent pricing and on-demand characteristics. 

Founded in 2012, Trov, for example, enables consumers to buy insurance for specific products and possessions. Users can items products ranging from instruments to smartphones and surfboards. All they need to do is input the “make and model” into the Trov platform. It then gathers the data necessary to generate a quote to insure the product. Users can then turn protection “on” and “off” whenever they choose through a single swipe on Trov’s mobile app.


Source: TheNextWeb

Since its launch, Trov has insured over $10 billion worth of goods and the platform has over 1 million items added. It partners with large insurance companies — Suncorp in Australia and Axa in the UK — to provide coverage, sharing the premiums. Trov gets the underwriting infrastructure, and the insurance companies get a new channel to access customers and put their balance sheets to work.

Trov has raised $46 million and currently operates only in the U.K. and Australia. The company plans to expand to the United States in 2017, followed by Europe and Asia.


Source: CB Insights, CrunchBase, GSV Asset Management

What’s Next

Partnerships + M&A

Moving forward, insurance startups will continue to partner with established providers to provide a regulatory halo for their services. But as newcomers establish their own brands, they will seek to create their own regulated vehicles to cut out the middleman. We’re beginning to see this dynamic play out with companies like Metromile.

Metromile, which raised its Series D in September 2016, plans to use some of its $192 million round to acquire an insurance carrier called Mosaic Insurance. Mosaic Insurance will handle the underwriting of the insurance policies itself to streamline the process of providing insurance to drivers.


We also expect to see a proliferation of new insurance models. Peer-to-peer insurance models, using a sharing economy approach, invites users to form small groups of policyholders who will pay into a pool to use for small claims.

Sequoia backed Lemonade for example, is charging a fixed fee to customers that join insurance “pools.” If the pool is unable to pay for the claims of its members, then Lemonade will pay the excess from reinsurance and capital reserves. If the pool is “profitable”, funds are donated to a social cause members care about. In this model, there’s no incentive to withhold payouts.


Source: CB Insights, CrunchBase, GSV Asset Management

Peer-to-peer insurance models have gone global as well. Berlin-based Friendsurance allows small groups of users to pool together into one car insurance policy. At the end of each year, policy holders using the platform receive a cash-back bonus if they did not file a claim.

IoT + Drones

With the proliferation of Internet-of-Things (IoT) devices, insurance companies are able to have an additional pulse check on insured items. For example, home insurance companies are encouraging consumers to use connected devices to keep their properties safe. American Family Insurance (AFI) partnered with IoT startup Ring, which creates a video home security doorbell, to improve home safety.

Additionally, connected wearables like the Apple Watch or Fitbit give insurers the ability to monitor health activity in real time, offering discounts for a healthy lifestyle. John Hancock was one of the first to use wearable devices to track customers and incentivized them to stay fit by giving away free Fitbits and by offering entertainment and travel rewards.

A growing group of the large insurance companies is turning to drones to help conduct inspections for underwriting and claims adjusting. Farmer’s CIO Ron Guerrier recently remarked that his company is evaluating how it can use drones to inspect brush clean-up in areas prone to wildfire. Allstate is similarly testing the use of drones to help with property claims after natural disasters such as hurricanes.

The testing and research of drones by insurers is evidenced by the boom of FAA drone exemptions — allowances to use drones in various settings — that were granted to insurers in 2015, including AIG, Liberty Mutual, Allstate, and State Farm.

Major Insurers Are Beginning to Adopt Drones
Recent FAA Drone Exemptions by Insurers

Source: CB Insights, FAA


While the future of Bitcoin is uncertain — it could be the Facebook or the MySpace of so-called “cryptocurrencies” — the underlying technology powering it, “Blockchain,” is here to stay. Effectively a decentralized, open-source public ledger for the exchange of information, blockchain has the potential to transform any industry that relies on middlemen and “honest brokers” for critical functions — from finance to supply chain management to academic credentialing and healthcare.

Healthcare institutions suffer from an endemic inability to securely and efficiently share information, despite the profound opportunity to benefit consumers. A central challenge has been the absence of a shared communication network that both meets the needs of all parties without compromising patient information security. The net result has been a tangled network of redundant, error-prone records.

Blockchain technology has the potential to enable better data collaboration between providers, patients, and insurance companies, which would translate into higher probabilities of accurate diagnoses, increased likelihood of effective treatments, and reduced costs for all parties.

Gem, for example, recently launched the Gem Health Network in partnership with Philips. It’s an Ethereum-enabled blockchain network streamlining data movement and integration from patient records, wellness apps, insurance claims management, clinical and trials.

In 2016, the government of Estonia announced that it would begin securing over a million healthcare records using blockchain in partnership with Guardtime and Oracle. It was the first national health system to adopt the technology.


by Luben Pampoulov

Drive Safely!

As everyone is hustling to develop self-driving cars, some entrepreneurs are successfully adding technology that’s a predecessor to autonomous driving. One such example is the application of augmented reality when driving.

Consider today’s standard procedure for setting up driving instructions — you get in your car, you open Google Maps/Waze, and you type your destination address. Most people drive and look at their phone to follow the map, and some listen to the apps voice. Every Lyft or Uber driver does that… (Disclosure: GSV holds shares in Lyft)

But now there is a new technology that projects all the information directly on the front shield.

WayRay, a Lausanne/Switzerland-based startup, is the maker of Navion — a high-tech device that attaches in-front of the steering wheel and projects all the information as augmented reality.

As you look on the road, you also see your speed, the driving instructions, potential parking spots, etc. It’s almost like projecting your iPhone on the front shield, and making sure your eyes focus on the road.

Source: WayRay

The Navion system is voice and gestures controlled, and will soon have a full infotainment mode. The upcoming version will have integrated functions such as messaging, email, social media, etc. — all controlled by voice and gestures. This new version is expected to sell later this year.

Last week, WayRay received a strong “vote of confidence” with an $18 million investment from Alibaba. As part of the deal, WayRay will also partner with Banma Technologies, a JV between Alibaba and SAIC, to create an AR navigation system for Banma’s upcoming car.

In the corporate World, Lausanne, Switzerland is famous for Biotech Pharma companies, and for Nestle. But WayRay is the first local disruptive tech startup that is showing some strong potential.

Meanwhile, the autonomous driving industry got another strong boost last week with Intel acquiring Mobileye for $15.3 billion — the same market cap that Mobileye had at its all-time high in August 2015. The Israeli company was one of the pioneers for the development of vision systems for self-driving cars. MBLY went public in August 2014 and was one of the high-flying IPOs at the time.

The acquisition values Mobileye at 43x price-to-sales (on a 12-months trailing basis) and at 59x P/E on a 2017 basis. In the most recent quarter, Mobileye reported +46% revenue growth and +47% EPS growth. Expected EPS growth this and next year is +40% and +50%, respectively.

Mobileye’s customers include the majority of all well-known car brands. Actually, one of its big customers until September 2016 was Tesla; Mobileye provided the hardware for Tesla’s semi-autonomous system, Autopilot.

Clearly, Intel is betting big on the self-driving space and is sending strong signs it wants to own the whole stack. The current competitive landscape includes a large group of big brand partnerships:

  • Nvidia has partnerships with Mercedes-Benz and Audi, and also announced partnerships with Bosch and PACCAR (a major truck manufacturer) last week
  • Alphabet’s Waymo has a partnership with Honda
  • GM, which acquired Cruise Automation, has a strategic investment and partnership with Lyft to test self-driving cars on Lyft’s platform
  • Uber has a partnership with Volvo and is testing self-driving cars on its platform; Uber also acquired self-driving truck technology provider Otto for $680 million last year
  • Ford invested $1 billion in Argo AI and is developing its own self-driving car
  • Apple invested $1 billion in China’s ride-sharing leader Didi, and the two companies are exploring ways to build self-driving cars
  • Toyota made a $1 billion investment to spin-off its self-driving division Toyota Research Institute (TRI)

Despite all the hype and large investments, there is still a long way to go. Today, self-driving cars can drive on simple and easy streets, or on highways. But when it comes to complex urban traffic, things are still far from good. Recently leaked documents about Uber’s self-driving progress show concerns. Most notably, the number of miles per bad experience is decreasing, meaning that bad experiences are happening more frequently then in the past.

Source: Re/code

We expect to see continued increase in investment activity and in new partnerships. The self-driving space is heating up, and all the big players are shifting increasingly more resources in that direction. 

Pioneer Notes

by Li Jiang

Rule of 10: How Fast Does Your Startup Need to Grow?

When I went to visit my friend in SOMA last week, he told me that his startup had recently moved to a new office. I remember the first time I visited, the company had a few desks in a shared space with other startups.

Imagine my surprise when I walked off the elevator to see an entire floor of a building filled with employees busy going about their day. The place was bustling with activity like a grand bazaar.

When we talked more, he told me that his company had been growing 25% a quarter for the past 24 quarters and I thought to myself was “that’s pretty solid”.

Then 2 seconds later I realized that A) the company hasn’t even been around for 24 quarters and B) what he actually said was that they were growing 25% a month for the past 24 months.

I couldn’t believe my ears. I blurbed out loud, “that’s ‘holy f—’ growth.”

You hear the phrase “killing it” everywhere in Silicon Valley — at coffee shops, on the Caltrain, and even on your digital feeds.

Translation for anyone outside of the Silicon Valley verbiage bubble, it’s a statement meant to convey how well a startup is doing and how quickly they are growing users, revenue, and/or employees.

But like most sayings in Silicon Valley, this one is overused and meaningless (read: annoying) because there’s really no generally accepted definition of what “killing it” means. What it really means is a state when a startup has found its product-market fit and is in a period of hyper growth.

Rule of 10

I define hyper growth using the Rule of 10. A startup is in hyper growth if it is:

My definition of a specific addressable market is a bottom-up analysis of the specific type of users / customers who would use the product multiplied by how much revenue you can generate per user / customer. The specific addressable market is not some gigantic number you found in an IDC or Gartner report that talks about how big the entire industry is.

Here’s the full chart of what these growth rates would imply on an annual basis:

While not every company is optimizing for growth at all times, the Rule of 10 is a good framework for thinking about any company that’s in commercialization. And startups can’t grow at the same rate forever so stage is important to understand. An seed stage startup growing at 100% a year is solid but not justification enough for a big party but Facebook today growing at 100% a year (hypothetically) would be eye popping. To be really interesting for venture capitalists who shoot for outlier outcomes, a company has to be in the ballpark of the Rule of 10 rate.

If you are an early stage company and growing at 5–7% a week, that’s still very impressive so use the Rule of 10 as a good guide but not a black and white line.

My friend’s company has been growing 25% a month for 24 months. Even if (hypothetically) the first month the company had $5,000 of revenue, it would now be on a $10.2 million run rate. That’s the power of compounding growth. Grow another 6 months, $38.8 million run rate and grow at 25% for another 12 months from today and the company will be on a $147.9 million run rate. Yeah, that’s why it’s on a “holy fuck” growth trajectory.

Hyper growth requires significant work on building a great product that people love but once you reach this threshold, all manners of options in accessing capital and further growth are at your fingertips.

If you hit the Rule of 10, instead of trying to figure out how you are going to raise money, you’ll be busier trying to dodge the money that investors will be throwing at your startup.

If your startup fits the Rule of 10, my email is Li [at] gsvam [dot] com. Wink wink.

Market Update

Week ending March 19, 2017

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