While we don’t have any external shareholders, I think it is good practice to write an annual letter. Since we are just past the one year anniversary of last year’s launch announcement, I thought it would be a good opportunity to review the year and talk about our plans going forward.
Maybe it seems odd to write an annual letter for a company that hasn’t launched a product yet, but one of our core goals is transparency so I think it is worthwhile to discuss what we’ve figured out so far and what we’re still working on.
However, I ended up writing way, way too much for a normal post here, so I’ve decided to take this in a slightly different direction. What you’ll find below are abbreviated versions of each topic and I direct you to www.joininformed.com to get the full length version. That way you don’t give up 1/2 (1/4? 1/8??) of the way through wondering where the end is.
Funding Is Officially Open
Before I get to the substance, I have another important update as well. Fundraising for our seed round is now open. We will be raising up to $5M, but our initial target is around half of that.
Why did we wait until now? Simply because we weren’t at the point yet where the business required a ramp in spending. There was no point raising money just to brag about it. We are now at the point where we are ready to accelerate things and we need outside funds to do that.
Who can invest? Well, if you are reading this post, then you are likely eligible to participate. Our preference is to have investors that are knowledgeable about the space and understand why our approach makes more sense than some of the others that have been tried.
That means we welcome everyone from individuals to angels to investment firms to insurance companies. I’d rather brag about the quality of people backing us then the size of the check we receive.
If you would like to know more, please go to www.joininformed.com or email invest@joininformed.com.
The Year In Review
I broke the agenda into four topics:
1) Our Core Values – what do we want to be known for, what problem are we trying to solve, and how do we help?
2) Our Business Model – how is our structure different from other personal lines startups and why will that make us more profitable?
3) What We’ve Done and What’s Next – this is a progress update as well as some of the goals we have for the next year.
4) What We Are and What We’re Not – if you want to know what makes us different from other Insuretechs and how we’re going to avoid their mistakes, you’ll want to read this section.
So without further ado, let’s jump into the details.
Who We Are: Our Core Values
There are a lot of things that make Informed different from your average insurance company and I’ll review a number of them below, but there is one that I think is more important than the others and that’s where I’d like to begin.
Our purpose is to help homeowners get the insurance coverage that best suits them at the best price. We are agnostic about who sells them that insurance or what carrier provides it. We believe if we are able to demonstrate to people that we can help them, then we will find a way to create a profitable business around that.
We also believe that if we can build a brand around trust and transparency that consumers will want to buy from us and the “how do we make money” question will answer itself.
I know this may sound very foreign to insurance professionals who are used to trying to convince a customer to buy what they have on their shelf or what their corporate office allows them to sell, but that’s the insurance industry’s problem. Why make it the customer’s one too?
If you have to ask yourself “would I make the same recommendation if I were advising my mother”, then you are inherently conflicted as an agent.
We have a very simple decision tree when faced with the choice between doing what is short term expedient for us and doing what the customer would want us to do. We always pick the latter. That way, there is no conflict of interest.
It’s a very simple principle, but often simple principles are surprisingly effective and they make your value proposition easy to understand.
Solving Information Asymmetry
An obvious question may be, why doesn’t the insurance industry focus on what’s best for the customer today?
That’s a great question and the answer revolves around the basic problem of information asymmetry. In other words, the seller (i.e. your agent) knows much more than the buyer (i.e. the homeowner). This creates several problems.
First, the buyer tends to be skeptical that the agent is doing right by them and they often lack the confidence to make a good decision. When customers gets confused or overwhelmed, they tend to look for simple tools to make a decision. This is why they fall back on price, even though price is a terrible indicator of whether that policy is appropriate for the buyer.
Second, the agent knows that most customers are apprehensive about buying insurance and don’t know the right questions to ask. When faced with a choice between going the extra mile to explain the policy to the client or taking the easy way out and showing them the cheapest option, most agents will opt for the latter.
And it’s hard to blame them. After all, low price correlates with higher close rates. It also takes less time to sell and the commission is the same whether you spend a little or lot of time with the client.
Thus, while most startups focus on how to make the sales process go even faster, Informed is focused on making it work better. We are determined to reduce information asymmetry through tools that make it easier to understand where you may have coverage gaps or be buying coverage you don’t need.
*** To read the rest of this section and how we plan to help homeowners, please click here to continue. ***
How We Do It: Our Business Model
Now that we’ve established the why we created Informed, let’s address the how. How do we build a business around this approach to helping homeowners?
It’s actually fairly simple. We looked outside insurance and towards other industries. While I’ll refrain from dropping names, surely you can think of online businesses that give away free information and then sell a premium option. That’s what we’re going to do.
The nice thing is there is a fairly obvious “premium” option. While the content library will provide broad based insights that will help most people, we will also offer the ability to give individuals personalized advice.
This means acting as an independent agent. So our initial revenue stream will be operating a personal lines IA. This will be direct to consumer with leads generated through visitors for the free content in addition to a targeted advertising strategy.
The Agency Advantage
How will our agency be different from a more traditional agency? I don’t want to give away the whole playbook here, but I’ll share a few thoughts.
First, what are the objectives for the agency? We want to be able to solve that information asymmetry and give customers a more appropriate solution…without it taking an inordinate amount of time…and without it costing too much. You can imagine this is where the technology part of our solution will feature prominently.
We also want to change the agent’s role. Rather than spending their time with you asking a bunch of default questions and running you through a rater (i.e. very low value add), our agents will be able to focus more on providing personalized advice (high value add). Thus, our agents can spend the same time with a client but provide a much more useful and relevant outcome.
If you can’t envision how that works yet, think about buying a car and how it works now versus twenty years ago. Buying insurance is still like the days when you used to have to spend a weekend going from dealer to dealer asking about the different models and what their features and benefits were.
Now, you look all of that up online and narrow your choices upfront. Then, you go to the dealer, take your test drive, ask your few remaining questions, and you’re ready to buy.
That’s how we envision buying insurance. The agent can skip all the upfront tedious work because we’ve made it easy for you to understand what you want upfront. The agent’s role is to clarify anything you didn’t understand or needed more help with rather than be a data entry person.
Target Customer
We are looking to appeal to a more thoughtful customer who values the protection their insurance provides and wants to be sure they are getting the right solution. We believe this type of customer is not well served by the current marketplace unless they are among the lucky few who have found a really good agent.
*** To read the rest of this section including how we think about unit economics and branding, please click here to continue. ***
Where We Are: What’s Accomplished and What’s To Come
So how do we take all these plans and turn it into a company that meets its objectives? Let’s review what we’ve accomplished so far and what’s next in the queue.
What’s Done
A year ago, when I first revealed Informed, it was technically just me at the helm. Not long afterwards, Jim Farmer came aboard as co-founder and COO, so that was a big change adding operational experience to complement my broader strategic perspective.
A lot of our early work went into defining the strategy we’ve outlined above. For example, initially we thought we would be more product focused, but as we evaluated the customer proposition more thoroughly, it became clear that our first goal is to get people the right advice which meant starting with distribution. While we will leave the door open for product down the road, that’s not our immediate focus.
We also decided to emphasize content generation before opening the agency. There were two main reasons for this.
First, the practical one was we could do it quicker and without outside help. Second, we view the content as a key part of building the brand so it was important to establish some credibility there and explain how we would be different.
This resulted in the getinformed.info site which is a combination of written advice with quantitative analysis where we deconstructed rate filings to show how policies are priced and how buyers can leverage that information to their advantage.
*** To read the rest of this section about what else we’ve been working on and what is next in the queue, please click here to continue. ***
What We Are and What We’re Not
I’d like to finish up by reviewing philosophically how we differ from the prior generation of Insuretech startups. I think the best way we can do that is with a little compare and contrast exercise.
What We Are: Customer Obsessed
Surely you’ve heard a lot of BS from insurance companies bragging about being customer centric. Let me be clear: making it easier for someone to buy the wrong insurance is not customer centric.
When I say we are consumed with doing what is right for the customer, I’m putting a stake in the ground. We are building our entire brand around being a trusted source for homeowners. If we mess with that by doing short sighted things to hit some near term metric, we risk losing the brand. I won’t do that. I can’t do that.
What We’re Not: Top Line Obsessed
One of the biggest failures of early insuretechs was their narrow focus on adding customers without regard to the cost, quality, or potential profitability of those customers. As I hopefully made clear above, our core metrics are based on customer experience and how they influence retention.
What We’re Not: Lighting Cash on Fire
We respect investor money. Even if they tell us not to worry about cash burn, we will worry about it anyway. Even if they tell us we can fool the market with adjusted gross active users who never seek a quote, we will still focus on turning a profit. We love growth, but what we love more is recurring growth and high margins.
To that point, we believe one of our key differentiators is the limited amount of capital we will need before we are cash flow positive. I won’t that put out for public consumption yet, but can speak to interested investors about it. As a hint though, I would say we think our total capital need is less than some other companies’ recent rounds.
*** To read the rest of this section contrasting our approach to others, please click here to continue. ***
Final Thoughts
Hopefully, you now have a better sense of what we’re trying to accomplish and how we are differentiated from competitors in the market. As important as all the tangible items is our mindset. We’re not going to cut corners or take shortcuts. We won’t lower our standards to get a slightly better valuation at the next round.
If that turns some people off, that’s OK. If that makes our journey a little harder, so be it.
We’re not looking for instant gratification. If we do this the right way, there will be plenty of gratification down the road.
We are building this for what it’s going to be in ten years (or more), not two. We won’t be satisfied until when people hear Informed they immediately associate it with a premium experience and know that’s where you go when you need help with your insurance.
Again, if you’re interested in investing, either individually or on behalf of your firm, please reach out at invest@joininformed.com.