Saturday, September 23, 2023

How fintechs can attract investors, partners and customers in any financing environment

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

John is the co-founder and CEO of cake insurance. He has been responsible for overseeing all aspects of Pie since its inception in May 2017.

The past few years have been quite a rollercoaster for fintech companies, both in the public and private markets. Insurtech in particular has weathered a challenging storm. Basically the second quarter funding levels for insurtech companies in 2022 dropped by 50% compared to the same period in 2021.

Just a few years ago, it seemed like every insurance company was racing against the clock to raise large rounds of funding, achieve unicorn status, go public or be acquired. That’s no surprise, of course — it’s the tech startup playbook we’ve seen time and time again: growing fast with technology and refining the industrial aspects at a later date.

Unfortunately, I consider that playbook outdated, and while it may work for some, it rarely works for those who play in more complex industries, such as insurance. This is where some insurtechs have strayed off course, which is why I believe we’ve seen negative perceptions of our viability take over. It’s important to get the insurance part right and get it right from the start. Those who don’t may not survive.

Build a strong foundation to build technology into.

I started my own insurance business because I was and still am frustrated with the outdated processes that became the status quo. Still, I knew the solution wasn’t patching issues with minimal system tweaks. It had to start with a thorough knowledge of the insurance industry. We had to speak the language and deliver results that investors and reinsurers value by focusing on things like sustainable loss ratios. Only then could we add technology that improves things like customer experience and distribution inefficiencies.

By going back to basics, insurtechs can show how a strong base of industry knowledge can take the industry to new levels. Flashy technology may draw crowds from day one, but at the end of the day, companies rooted in industry knowledge have a better edge than others in the long run.

Running my business has taught me a lot about growing gracefully and staying competitive among other fintechs. There are three key lessons I’ve learned along the way that can be valuable to other companies as they connect with investors and acquire customers and partners.

1. Appraisals have no value.

Avoid the ethos of chasing an appraisal. Appraisals don’t matter to our small business clients or our partner agents. As we’ve seen time and time again, ratings are fleeting and the stats that matter most have nothing to do with whether you’re a unicorn or not.

Don’t be pressured to reveal your worth if you don’t feel comfortable. Not disclosing your worth gives you the breathing space to test and learn. Instead of focusing on appreciation, focus on intentionally hiring and growing at a healthy pace while working to consistently improve your technology, products and customer experience. When asked about valuation, emphasize the fact that your company is growing at a sustainable pace and is focused on building a business for the long term, not chasing short-term valuations.

If you feel like you need to achieve a certain rating by a certain date, ask yourself why? Why is this most important? I can almost guarantee you won’t have a good enough answer.

2. Technology supports metrics that matter.

While data and technology are ingrained in the core of this industry, they are not the only focus. Too often companies lead with technology to improve the user experience, look and feel of a product. That’s great, but does it actually improve your bottom line? Personally, I had to ask myself, “Is technology just improving my business metrics like loss rate, retention rate, and customer acquisition rates?”

Has your company fallen into the technology-first trap? You are not alone and it is never too late to turn. Slow down and take stock of the business outcomes that matter most to you and your customers. Deploy technology in small, meaningful, and intentional ways that progress toward those business outcomes and goals rather than overhauling entire systems. Investing in data and analytics is a good place to start as it helps you get the most out of the information or tools you may already have.

For my business, customer service is essential, so we used technology and advanced analytics to improve pricing and underwriting outcomes. Once we got the hang of this, we used technology to create a modern, digital user experience as well.

3. Growth at any cost is too expensive.

Every company wants to be the market leader in its industry. But if you’re growing too fast to get there and can’t sustain that growth, what’s the point? If your growth is driven by the under-price of your product, it’s not real growth. That is more true in the insurance industry than in any other.

Insurtechs in particular can avoid this trap by taking stock of what works and what doesn’t, then implement a calculated approach and only grow in areas that lead the way to profitability. This way, your offering and value to their customers and partners far outweighs the need to grow quickly.

Building a business is incredibly difficult. Building a company seeking to disrupt an age-old industry and take market share from some of the largest companies in the world? Sounds almost impossible. Yet the future of insurance is already here. There are so many insurtech companies creating real change and adding value to people’s lives around the world. As long as we can collectively remember what matters most, we can create businesses that will stand the test of time. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?


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