American Family Ventures’ Evolution
At American Family Ventures, we seek to emulate the pioneering mindset of the entrepreneurs we back.
With the final close of AFV Fund III, we’re exploring a new frontier of our own. We’ve stepped outside of corporate venture capital to bring carriers, brokers, and other insurance players alongside us.
Looking at our path from our 2013 launch to now, our story has been one of constant evolution: of learning, shaping, and refining AFV. Some of our changes have been a product of our own lessons. Some of them we borrowed from the best practices of other firms. All of it contributes to the American Family Ventures of today.
Chapter 1: Exclusivity
Looking back at our first venture deal in 2010, I’m struck by how corporate our early mindset was.
We had started investing with an eye toward capturing strategic value from our portfolio. Strategic value was going to justify our existence faster than financial returns, so we focused on startups that could help the core business.
This showed up in our approach to deals. We bogged down our first deal with enough exclusive rights and terms for American Family Insurance that eventually, and in hindsight predictably, the startup shifted to non-insurance solutions.
Why wouldn’t they? We took an entire industry off the table. And we did it so that other carriers couldn’t share in our success.
Chapter 2: Broader Benefit
In fairly short order, we reoriented towards mutual benefit. Not only were we not going to exclude competitive venture capital groups from deals, we were going to seek them out. More partners means more thought and expertise to help our startup partners succeed.
We also revised the goals we had when AFV wrote our first check. We sought financial returns and strategic options in equal measure. Sometimes you hit both, as we did with Ring, one of our first large exits. Sometimes you settle for one of the two results. And yes, often you get neither.
Chapter 3: Prioritization of Financial Returns
As our venture practice grew, so did the community of Insurtech investors. Though we had started years before the 2015 start of the Insurtech boom, our head start was only valuable if we could use it to distinguish ourselves in a crowded market.
Our experience led us to examine the interplay between strategic options and financial returns. Our conclusion was that the pursuit of distinguished financial returns is best accomplished by focusing on investment spaces where your knowledge and network can provide an advantage.
This was a key insight for us: pursuing advantaged returns through thematic investing will generate strategic options as a byproduct. Target strong financial returns, invest in spaces you know well, and strategic options will follow. When you’re canvassing a market, as we do Insurtech and related spaces, you build a network of relationships with smart, forward-thinking people. Strategic value emerges naturally from these relationships.
This was precisely the insight we needed to move confidently into Fund III.
Chapter 4: Pursuit of Excellence
Now in 2020, we’re joined by a syndicate of Fund III Limited Partners in our pursuit of the standard of excellence in venture capital: superior financial returns.
We launched Fund III to expand the demand side of our network, as all of our new Limited Partners are seeking innovation in the insurance industry. We also seek to benefit from our investors’ expertise as we explore new frontiers of the insurance industry.
Each of our LPs is now part of the program we call the AFV Platform. Our Platform is a structured approach that generates high levels of connection — between fellow investors, between portfolio companies, between LP and portfolio partner, even (and often) between an LP and a startup that wasn’t a match for investment but has value to offer.
All of this connection helps startups succeed, it helps carriers find solutions, it generates value for our circle of connected partners, and it’s a natural output of our approach to deal flow. That’s how we operate in 2020, with a view that Insurtech is far from a zero-sum game.
Fund III surrounds AFV with Limited Partners who are like-minded in our goals and diverse in our expertise. We understand the priorities of today’s carrier as well as the imperative they face to transform. And for nearly a decade, we’ve put in the hours to understand what startups need to succeed and what their role is in the future of insurance.
A lot has changed about our practice since we started, but even more has changed in the insurance innovation ecosystem. We think there’s much more transformation to come, and we look forward to being a part of it all.
We’d love to hear your thoughts on what’s next.
Dan Reed is Managing Director of American Family Ventures. Get in touch with us on Linkedin or Twitter.
Disclaimer: The information published, and the opinions expressed are provided for informational purposes only. This document does not constitute an offer, solicitation, or recommendation to sell or an offer to buy any securities, investment products, or investment advisory services. Information provided reflects American Family Ventures’ views as of a particular time. Such views are subject to change at any point and American Family Ventures shall not be obligated to provide notice of any change.
