By David Cremin
The link below takes you to an interview with the founder and CEO of one of our previous portfolio companies, Ryan Born, from AudioMicro. His interview tells the story of AudioMicro and the twists and turns it took on the path to a successful exit. If you're listening to the recording, you can hear the humorous story of how Ryan met us at about minute 17.
By David Cremin
The wrong answer: “we’re raising money for 18 months of runway.” The other wrong answer: “we’ll hire sales and marketing and engineering…”
Let’s play Jeopardy, what is the question?
The question is: “how much money are you raising and why?” But your answers above aren’t quite what we’re looking for when we ask that question; however, they are the answers I most often receive.
Building companies is not about months. It’s about achievements. Milestones. Completion of major goals. Everyone around the table must understand and believe in some set of goals that, if achieved, will likely raise the perceived value of your company. A next phase. A moment of optionality. That is your company’s inflection point. You’re raising capital to achieve this inflection point!; btw, you should also be raising enough capital to have cash in the bank at that moment, so you have time to think about your options and execute on them. If everyone agrees on the goals, then imagining and executing on the tactics to get there is transparent, and trackable, which keeps everyone on the same page from the top to the bottom of your company. Only then, when your goals and tactics are clear, should you work backwards on the time you need to achieve these important goals, and tactics required to achieve them. It may be 18 months, it may be 6 months. Tailor your capitalization strategy accordingly.
Therefore, when asked the question, how much and why, here’s the sort of answer I wish we received:
When I hear this kind of response from an entrepreneur, I know she is thinking about value creation, and how venture capital relates to it. She is thinking about the inflection point.
At Frontier, we read with interest Jason Calacanis’ recent defense of self-driving cars. [click here to read] Our partnership was also thinking about writing a piece on the subject, but not only did Jason beat us to it, he also framed the argument perfectly, so we opted to mention his piece instead of duplicating efforts. Bottom line, accidents will happen. And this concern, now come true, has catalyzed some of our thinking and exploration in the space in recent months. We believe data and personalization are the key to building the software and infrastructure for accident avoidance. But it turns out that data and personalization also drove us (pun intended) to invest in Driav, which offers an autonomous vehicle risk mitigation strategy for auto manufacturers, auto owners and insurers. If there are going to be accidents, there needs to be a way to assign and spread risk. With unique access to sensor data in cars, Driav does just that. We are excited to collaborate with Driav’s founder, Dan Peate, as he builds a big company promoting safety and productivity for driverless autos.
Learn more about our portfolio company Driav by clicking here.....
Today we turn Partner PoV over to Brett Jurgens, the CEO of one of our portfolio companies, Notion. Check out the new "Insurance of Things" as described by Brett.
The Internet of Things (IoT) is a new concept for most people. The term, and the industry, have gained relevance through wearables like FitBit, and IoT’s presence in the home is slowly starting to become more mainstream (though the concept has been around for decades, especially in the industrial space).
In the last five years, IoT has quickly gained traction among early adopters and is positioned to be an integral part of the homeowner (and renter) experience. Not only are IoT products becoming commonplace, they are smarter, integrating with each other and providing data that’s never been obtainable. Within the insurance industry, this integration will not only make life easier for the homeowner – from catching water leaks before they cause damage to getting an alert should an alarm sound when no one is home – it will change the way providers interact with customers, ultimately reshaping how properties are protected and insured.
This adoption is defining a new IoT – the Insurance of Things.
Current State of the Industry
While insurance providers document information like when a home was built, where it’s located and what the crime rate is in the area for each of their policyholder’s homes, traditionally very little is known about the actual activities happening inside and around the home, and almost never in real time.
An agent might know that a particular policyholder’s house is located in a ZIP code that experiences a high frequency of burglaries, but the agent has no idea if that policyholder leaves his garage door open regularly – something that’s been shown to leave a home especially vulnerable to intruders. This is just one of many examples of where connected devices present an exciting opportunity.
What the Future Holds
The data that IoT solutions capture will alter the home insurance industry, allowing the market to move away from passive insurance and claims processing and into a more active approach focused on avoiding loss altogether.
This transition is already starting to take shape with auto insurance. As more providers implement devices and mobile apps that report driving habits to capture a driver’s level of risk, behaviors and patterns can be analyzed to tailor coverage for each individual customer.
Over time, these types of insights will empower insurers to identify and build new risk models and to anticipate and eventually predict incidents based on people’s habits and other trends. And, just as the auto industry has clearly defined the characteristics of a safe driver, eventually home insurers will have enough data to define what it means to be a “safe homeowner.”
As IoT’s loss reductiions become more definable through mass adoption and more data, it could very well become a requirement to have certain smart home technologies installed in your home to get insurance coverage. A number of new entrants using data from IoT devices and other sources in creative ways are aggressively pushing this agenda, including Lemonade and Hippo.
A final point to consider – IoT products themselves will dramatically reduces losses, and it will be interesting to track consumers’ selection bias over time as adoption rises. In the coming years, it will be interesting to see if homeowners who install IoT devices in their homes have fewer claims despite the devices they install. There is little hard evidence to support this notion today, but over time will this group prove to be more active, thoughtful and generally safer homeowners even before they installed IoT devices?
What Policyholders Think of IoT (and Why Insurance Providers Should Care)
Consumers are buying IoT devices for many reasons, but one motivation in particular is the same reason they buy insurance: peace of mind. For the insurance provider, there’s even more at stake: loyalty.
NTT Data found that 87% of insurance carriers believe the installation of IoT devices in the home will improve customer relationships, and 83% believe IoT devices will open the door for personalization of policy offerings – something that consumers desire.
The same study also found that 64% of surveyed consumers are open to investing in IoT devices, and are even willing to switch carriers if it means they’re eligible to receive policy discounts for installing these devices.
The insurers that figure out how to capitalize on consumer intrigue of IoT devices will have the upper hand in obtaining new clients (and, as mentioned, potentially lower risk clients, as well). Offering smart home technologies will provide insurance companies with the competitive advantage they need to maintain positive engagement with both new and existing policyholders, and will contribute to increased retention.
Where to Start
So, how can insurers leverage these devices to differentiate their offerings, reduce losses, increase customer loyalty and mine user data for greater insight into the safe homeowner?
What other challenges and opportunities lie ahead for the Insurance of Things? I’m excited to see how insurance providers and technology companies will work together to define the safe homeowner and the future of insurance!
By David Cremin (Originally posted July, 2014)
Comic books? Seriously? That’s a good business? Well, yes, and, well, yes! It can be. My Frontier co-founder and awesomely literary partner Scott Lenet grew up reading comics and graphic novels (which are longer comprehensive collections of comic books). He also majored in comparative literature at Princeton, so don’t judge too quickly on what may seem like idle time reading silly comics. BTW, when I say comics, some immediately think of Archie and Superman. But there are a LOT of comic books, which actually tell great stories about compelling characters, not just about superheroes and generic teenagers. Such great stories make valuable intellectual property (“IP”).
We all know IP can come in many forms. Technology companies patent their code or hardware, and this is their IP. Hollywood has IP. Companies like Sony, Fox and Universal own lots of great movie titles, and exploit these titles across media globally. At Frontier, we believe that we should be backing founders with transformative IP. But since we believe IP can include not only technology companies, but also certain types of content, we are open to expertly curated content generation companies, which drive an engine to create valuable content portfolios.
I bet you didn’t know that when you went to see the blood spattering, action-packed movie 300, that you were seeing a movie adapted from a graphic novel? I bet when you enjoyed Angelina Jolie in Wanted, that you were seeing a movie adapted from a graphic novel. How about Walking Dead, on TV? Yup, graphic novel. Blade Runner. Heck, why not Harry Potter or Twilight? A great story is a great story. [Is there a game example?]
At Frontier, we invested in a company called Boom Entertainment, because we were intrigued by their stories, their writers and their artists. We also realized that Boom was having great conversations with the creative folks in Hollywood. The founder had a history in comic book publishing, but also understood the production of movies and television. We liked that the team drove a fiscally sound book publishing business, but that this success provided the company with lots of shots on goal to translate its IP into other, potentially more valuable media. Recently, the company’s first translation from a comic book to a movie, Two Guns, starred Mark Wahlberg and Denzel Washington and was an important creative and financial success.
Another portfolio company, Seismic Games, was founded by video game industry veterans Greg Borrud and Giz Gewirtz. Mobile and virtual reality are driving new gaming experiences, and the founders were busy assembling the best engineering teams to build games on a contract basis. But these teams were nimble, and the company is also building its own games at the same time. Like Boom, the company had a fiscally sound game development business, giving it time to be creative with some of its own innovative IP. If you are at Disneyland, and you choose to check out the Millennium Falcon, the experience was created by Seismic Games.
We’re continuing to seek new companies that have a unique engine for valuable IP creation and long term value like Boom Entertainment and Seismic Games.
