Andre Symes from Genasys Tech takes alook at the benefits of lean thinking;
Kurt Cobain said that “Smells Like Teen Spirit” was made up of contradictory ideas and that it was just making fun of the thought of having a revolution. But then again, he frequently changed his explanation of the song and rarely gave specifics about the meaning. Whatever your own opinion of what it was all about, it went on to be Nirvana’s biggest hit and widely acclaimed as one of the greatest songs of all time. Sadly the band was never really comfortable with the attention it brought them – it wasn’t expected to be a hit, they weren’t ready for the scale-up or for the grunge sound to cross into the mainstream.
The same can’t be said for the vast majority of insurtech businesses – they start-up with the very intention of scaling-up. They’ve identified the gap in the market they can fill whether through a product, service or technology, they raise capital and they’re ready to go from zero to a million. And given the fact that global insurtech funding has reached new heights, there’s a lot of willing capital out there for start-ups to tap into.
According to Willis Towers Watson, insurtechs raised $7.4 billion in the first half of 2021. While a major driver of this astounding figure were 15 mega-rounds of funding by predominantly late-stage players seeking expansion, so the likes of wefox and Bought By Many, the early and mid-stage funding pipeline remained healthy.
LEAN THINKING MEANS YOU FOCUS ON THE MUST-DO STUFF
While I know that any fundraising exercise is never easy, the amount of capital out there willing and able to invest in the insurtech space is certainly oiling the engine – but it didn’t used to be.
Looking back at the early days of Genasys, we had no budget to roll-out at scale. We were the classic lean, bootstrapped start-up that had to use our own money and manage our business growth from the operating cash flow available. We had no choice but to build, measure and learn at every stage of our development. It took dedication, single-mindedness about our direction of travel, self-discipline and perseverance.
It also taught us the importance of not being too quick to scale up – rather the importance of being prepared to scale back and invest in each new iteration of our platform no matter how small to ensure the budget available was not only used wisely, but that each iteration would deliver greater benefit to our clients. Everything had to add value. We had to have a laser-like focus on what we were doing, learn from what went wrong, be agile and be capital efficient in order to be able to scale-up.
Would we have had that same focus had the capital been readily available to fund us to the tunes of several million, allowing us to go straight into build and scale mode as many of today’s insurtech start-ups can? When the money is readily available, it is perhaps all too easy to lose your focus and end up somewhere completely different to where you originally intended and with a less than desirable outcome.
FAILING IS OK, JUST DON’T BET THE FARM ON IT
Don’t get me wrong, I’m not knocking the current state of affairs. We should all be encouraged by the fact that VCs, private equity funds and well-established industry players are looking at the insurtech space as one worth investing in – it means that the much needed change in the insurance industry is accelerating and that our customers will be having vastly improved products and experiences over the coming years.
But I think it’s interesting to see that these same investors are themselves hiring people who cut their teeth in a bootstrapped business environment. It’s because these people are good at making the most out of the resources they have available to them and use those resources wisely. It’s also because these people aren’t afraid to fail. They know that failure doesn’t have to be a bad outcome as long as you take a measured learning from the experience and that you haven’t thrown away a ton of cash in doing so.
While it’s likely that the investment community and insurance industry will continue to invest in the ever increasing number of insurtech start-ups for some, it’s also likely that they’re going to want to make sure that their assets apply that lean agile start-up spirit to ensure the success of their investment.