An Ecosystem of Value at AFV

Inside American Family Ventures, we discuss value in several contexts: creating value for the fund, providing value to the Limited Partners that joined us in Fund III, and bringing value to startups. These value streams are far from independent from one another. They weave together to form a large part of AFV’s cohesive strategy — a strategy that relies on four beliefs:

1. Most Insurtech startups and insurance carriers collaborate sooner or later.

Nearly every Insurtech startup depends upon “traditional” carriers in one way or another. Some sell directly into divisions of insurance companies. Others need support from insurers to gain the licenses, forms, and capacity to underwrite insurance. Many fuel their growth with funding from debt providers and VC firms, some of whom are a part of the insurance ecosystem.

In addition, insurance companies have an imperative to locate and onboard new technologies that will enable profitable growth. Almost every insurer is dedicating substantial resources to achieve a mix of expense reduction, loss reduction, and advantages for premium growth. Many startups hold the key to unlocking these results.

2. AFV has the right kind of toolkit to help.

Despite this attraction from both sides, discovering how to match up and create value together can be difficult and slow. At AFV, we play a highly active role in reducing that friction.

Since our launch in 2013, AFV’s aim has been to become acquainted with every startup that has the potential to create meaningful operational value for an insurer. As Katelyn Johnson wrote about, this stretches us beyond Insurtech to relevant adjacencies. Our network and our subject matter expertise combine to make AFV a preferred connector for carriers and startups alike. We make the introduction, we help set expectations and translate, and we observe results through both perspectives.

With the recent launch of AFV Fund III, we have now scaled our platform to a cross-section of the insurance industry. We are fortunate to work deeply with Limited Partners that represent over $25 billion in annual premium and over $100 billion in assets. These carriers range in geographic focus from a single US state to national coverage. They represent property, casualty, life, and annuity lines of business. Some are channels of distribution for Insurtechs, and others still are sources of operating capital.

I am personally excited about this new position for our fund — with our set of relationships across the industry, we are in position to support the market’s digital transformation.

3. Insights from partnerships make us better investors.

Dan Reed previously wrote about our pursuit of superior financial returns. Serving as a value-add connector between insurance carriers and startups may seem a world apart from that goal, but in actuality the depth of our engagement amplifies financial returns.

Making value-add connections begins with a deep understanding of the unique needs and opportunities individual insurance companies have that are operationally viable. It also requires understanding the tangible current value proposition of startups, as well as the founders’ ability to execute and adapt their product roadmap. This includes startups that will be direct competitors to carriers and those with disruptive business models that may displace significant parts of the established insurance ecosystem.

The compounding insights we’ve gained by repeating this process dozens of times has directly informed investment theses that anchor many of our fund’s investment decisions. The engagement process also has refined our understanding of what it takes for a variety of Insurtech startups to be attractive to a strategic acquirer.

Merging unique, contextualized market insights with our deep internal subject matter expertise is core to what differentiates our fund — and it elevates our game.

4. These partnerships are part of a virtuous cycle.

The AFV-startup and AFV-LP relationships are part of a positive feedback loop:

• Deepening our expertise through our insurance industry LP syndicate…
• …delivers unique insights complementary to our internal subject matter expertise…
• …which yields better deal evaluation…
• …which positions us to generate stronger financial results…
• …which attracts more startups and insurance industry representatives to work with our fund…
• …which deepens our expertise further.

In other words, in a mature loop, we all benefit in ways that include, surround, and exceed the capital we invest.

When thinking about these four beliefs, a term that resonates with me is symbiosis: a system of close relationships that, in the right environment, generates benefits and advantages for all parties. These beliefs are instrumental to our environment at AFV. They are core to our team culture, and are something we demand from each other in both our words and our actions.

If that strikes a chord with you, get a hold of us. Our ecosystem is continually growing.

Kyle Beatty is Principal at American Family Ventures. Get in touch with him on Linkedin or Twitter.

Previously: Dan Reed on AFV’s Evolution, Katelyn Johnson on AFV’s Investment Focus

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.