Welcome to another episode of Category Visionaries — the show that explores GTM stories from tech's most innovative B2B founders. In today's episode, we're speaking with Cole Riccardi, CEO & Founder of Authentic, an insurance technology company that has raised $16 Million in funding.
Here are the most interesting points from our conversation:
- Authentic’s Captive Insurance Model: Cole introduces Authentic’s unique offering in the insurance market - a captive insurance platform that enables entities like franchisors and vertical software companies to create their own insurance programs.
- Simplifying Captive Insurance: Cole explains captive insurance in simple terms, making the concept accessible and highlighting Authentic’s role in simplifying the process for small business networks.
- The Genesis of Authentic: The inspiration behind Authentic stemmed from Cole’s background in financial services and a personal connection to the insurance industry, spotting a niche for a more efficient insurance offering.
- Early Challenges and Customer Feedback: Discussing the initial phase of building Authentic, Cole talks about the importance of market research, conversations with potential partners, and the positive feedback that helped refine the product.
- Marketing Philosophy and Target Customer: Cole shares Authentic’s strategy of focusing on service excellence to stimulate word-of-mouth within niche markets and discusses the importance of accurately identifying their Ideal Customer Profile (ICP).
- Navigating Regulatory Challenges: Cole touches on the regulatory landscape for captive insurance, detailing Authentic’s strategic approach to navigating these challenges and securing a competitive edge in the insurance technology space.
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[MUSIC] >> Welcome to Category Visionaries, the show dedicated to exploring exciting visions for the future from the founders or in the front lines building it. In each episode, we'll speak with a visionary founder who's building a new category or reimagining an existing one. We'll learn about the problem they solve, how their technology works, and unpack their vision for the future. I'm your host, Brett Stapper, CEO of Frontlines Media. Now, let's dive right into today's episode. [MUSIC] >> Hey everyone and thanks for listening to another episode of Category Visionaries. Today, we're speaking with Cole Riccardi, CEO and founder of Authentic, an insurance technology company that's raised $16 million in funding. Cole, what's going on? >> Thanks so much for having me, Brett. Very excited to be here. >> No problem. Super excited for this conversation. I'd love to just begin with talking about what you're building, so let's dive right in. >> What are you building at Authentic? >> Yes. Authentic is building a captive insurance platform, which means something to about one of every 10 people I talk to. What a captive insurance platform is, is we go to anyone that touches a group of small businesses, and that would be a franchise or it could be a vertical software company, it can be an association, and we actually allow them to start their own insurance program. An example would be Wendy's. Instead of Wendy's restaurant buying insurance through state farm or liberty mutual, Wendy's can start Wendy's insurance leveraging Authentic's infrastructure, or in the vertical software world, somebody like a mind body can offer mind body insurance to their 60,000 gyms alongside their core software and payment offerings, and so we're really enabling folks with existing distribution to add insurance as another product, and the way we're delivering it in the form of a captive gives them superior economics to a lot of the other options they have. >> Let's imagine you're sitting around thanksgiving with your grandma, and she says, Cole, what is captive insurance? How would you define it in simple grandma terms? >> Yes, I've been doing a lot of this over the last two years. Captive insurance started 30 or 40 years ago where really big companies didn't want to pay third party insurance carriers, so an example would be like Walmart didn't want to spend 200 million dollars in premium to Chub, so instead they started Walmart insurance company to essentially self-insure themselves, and so in setting all of that up, it saves Walmart a lot of money, but it's a real challenge. They need to go through regulatory approval and find reinsurance and figure out how to do all the insurance pricing. So there's a lot of ugliness in setting up these captives, and that's what authentic extracts away, and so we deliver this kind of captive as a service model today to anyone in the small business space. So it's about as close as you can get to starting your own insurance company, but it's all hosted by authentic, if that makes sense. >> So it's like captive insurance in a box? >> That's right, exactly right. >> How did you discover this problem? What were you doing before that led to you to say, "Okay, I'm going to go out and build a captive insurance in a box platform." Take us back to like before authentic, and what was going on in your world then? >> Yeah, it's really two tracks that led me to captive in a box platform. I was fortunate enough to spend six years an investment firm called Aquiline, which focuses on financial services investing, and we had a number of vertical software companies that sold software and payment services to small businesses, and we were trying to figure out how to offer an insurance product to these small businesses, and so we could partner with other carriers and sell leads, we could use a consultant and try and build some type of brokerage program. But really when I laid out the options, having our own captive model was the most impactful and gave us the most control over the product and the experience. And the way I came up with a captive model, actually I have a family member in the insurance base, and he actually had formed a captive insurance program for horse farms in the Northeast. So the example there is instead of horse farm buying insurance through Liberty Mutual or State Farm, they could join the captive program of their fellow horse farms, and essentially join an insurance pool of their peers. And they could get much better rates, they get the money back at the end of the year if there's leftover profits. And so I had some exposure to captives through family, and then I was in this very unique seat at an investment firm that was trying to figure out how to crack this embedded insurance code. And that's sort of when captive came as the aha moment for embedded insurance. What were those early days like then? So something started in, I think it was 2022, what were those like once like? It was late 2022, I was wandering in the desert as I like to refer to those first few months. I had the idea high level, I had enough conviction where I wanted to go out and build it on my own. And then I think one of the most challenging parts of being an entrepreneur is when your inbox is zero and you don't have meetings and nobody probably wants to talk to you. But you just need to kind of keep wandering in the direction that you believe is the right path. And so the first three to four months, it was really about talking to as many potential partners as humanly possible, trying to gather all of the potential customer feedback that I could potentially garner. And what that meant in practice was talking to as many franchise orders, talking to as many vertical software companies, talking to a ton of associations. All of these folks where I could essentially just pitch them on, hey, if you guys had a platform or some type of infrastructure, would you start your own captive insurance program and offer insurance to your small business customers or small business members? And the feedback I got continued to be overwhelmingly positive and which with each of those conversations, you learn one new thing every time, which compounds after your hundredth conversation and all of a sudden you're pitching something that's a little bit more of a real product. So I would say that was the first kind of three or four months alongside of building the team. We were very fortunate. The folks at Slow Ventures took an early debt on me a couple months after I had decided to make the leap into entrepreneurship. And so they really funded my idea and believed in what I sort of saw as the future of insurance distribution. And here we are now with active customers and a team of 12 across New York and Dayton, Ohio. What do you think Slow Ventures saw in you? I was really passionate about this idea. I still obviously am. It's sort of obvious to me, maybe more people in my demographic, that I would rather buy insurance through a trusted channel that I already interact with as opposed to some insurance brand that I haven't worked with or maybe they've been around for a while, which gave them value to some folks. But if I'm a gym and I use mind body for scheduling and payments and lending, I'd rather get my insurance there as opposed to googling around for gym insurance and then calling into some call center at a large insurance carrier. So I think the idea is, or this is just obviously where the puck is going. And I think they candidly just saw my conviction level in it and the fact that I had been in this space for six or seven years. And so I think that's what really prompted them to write the check. Take us back to the first paying customer. How'd you land that? All of those meetings I took to gather potential feedback. As I said, the reception was very positive. You never know if someone's actually going to be a customer until you put a piece of paper in front of them and ask them to sign it. But as you can imagine, once we had a working prototype, immediately went back to the folks I had one or several meetings with and said, hey, you know that captive platform you were so excited about in theory. Well, now it's here and I'd love for you to sign a contract. So I had so many meetings where not everybody's that was excited about it said yes, but I was very pleased with the amount that we're willing to move forward and take a chance on a startup. And I think that's a credit to the idea. How would you define or describe your marketing philosophy today? Great question. My marketing philosophy as CEO is, insurance is a relatively small space and sure tech, I should say, and a lot of these different channels that we're pitching, they all talk. So all of the vertical software folks were pitching talk, all of the franchise doors talk, all of the association's talk. And so if we just do such an incredible job with a small subset of customers and our product is really that great and creating that much value, that channel will hear about it. And that's proven to be the case over the last couple of weeks or months. We're only five months into launching our product. So it's still pretty new. And you are talking to the enterprise sales team at this point, but we're really excited to see kind of the word of mouth that's been happening within these channels for the value that we're creating for folks. Is it clear who the ICP is yet or is that still being figured out? We're narrowing it down. I think our ICP, we're still narrowing it down. I think that's one of the challenges with a big idea that's applicable to a lot of different folks. I mean, generally speaking, I do believe in the medium to longer term insurance will be purchased through affinity groups, not traditional carriers. And all of these affinity groups will have their own captive program powered by authentic. So how do we walk that back to the near term? We've identified these three channels that I keep sort of touching on. So franchise doors, starting franchise or insurance programs, vertical software companies adding insurance as another offering to their bundle, and then associations offering another value ad service to their members. Because we're not seeing a ton of competition and we've been fortunate to have a great group of backers and a great team, we are shooting up market. So we are talking to, I would say, the largest kind of leading edge vertical software companies. I would say the mighty middle and above in the franchise space. And then some very large associations in the small business space. This show is brought to you by Frontlines Media, podcast production studio that helps B2B founders launch, manage, and grow their own podcast. Now, if you're a founder, you may be thinking, I don't have time to host a podcast. I've got a company to build. Well, that's exactly what we built our service to do. You show up and host and we handle literally everything else. To set up a call to discuss launching your own podcast, visit frontlines.io/podcast. Now, back to today's episode. You mentioned you are the enterprise sales team, which is, of course, very common at early stage startups. One thing that I've seen a lot of founders struggle with is when they transition out of founder led sales and also just knowing when to transition out. What are you thinking about? Or what's your thinking there? Are you planning on trying to transition out in the next three months, six months? Or are you going to grind at this for another year or two before you really build that sales team out? I think one of the exciting components of our business is we don't need 500 customers to build a billion-dollar company. We need maybe 20 to 60 of the right customers. If you look at our pipeline and who we're chatting with right now, you can draw a straight line or do the bottoms-up analysis to building something really big. I just hired an incredible head of GoToMarket who's leading partner or customer activation. I think that's a really big component of our sales process. I'm not sure we'll be a team with 20 account executives pounding down the door. We actually are starting to build a little bit more of a self-service model for folks that aren't really large vertical software companies. They can still come to our website, look at our docs and start their own captive in a self-service way. That's something we're really excited about. I do imagine graduating from head of sales in the next probably six to 12 months though. What about from a regulatory perspective? Is this just a regulatory headache for you or what does that look like? I think we've created a lot of regulatory IP. We've spent a lot of time with the regulators and our state of domicile. We've spent a lot of time with some incredible lawyers to really work within the existing captive structure but make it scalable. I do think we've created quite a bit of legal IP. There's a great legal to our business. Anyone who wants to go through that pain, I truly wish them the best. That's really a big part of our pitch. You just give away a small sliver of the economics to authentic versus going and domiciling your own captive insurance company yourself. What does the competitive landscape then look like? Is it these old school captive insurance companies that are more services-based that set it up? Is it lawyers? What is the status quo if someone wants to do this? There's a couple of different buckets. Folks who want to set up their own captive can engage a captive services group at a large broker. That broker can do a lot of the legal and filing work but then you'd still be required to go find reinsurance, capitalize your insurance carrier, figure out all of the underwriting, figure out the distribution, the front-end platform. Captive services groups are one sliver of what we do. We do see folks explore conversations with them if they are inclined to try and build it themselves. I think we've successfully convinced everyone that we've pitched that it's not a path they want to go down. There's some other folks that offer more embedded insurance in the form of an embedded agency. Selling a traditional carrier's product through a software company and they're the bridge between these two parties, almost like an integration layer between end customers and a traditional carrier. I think a lot of those folks seem to be playing in travel and some of these more smaller-dollar transactional parts of insurance whereas we're focused on the small business space as opposed to some of those lines of business. In terms of a turnkey captive platform and who we're pitching, we're really not seeing anybody in some form of like RFP process. Some people do consider if it's worth building themselves and then they tend to circle back to us pretty quickly. We're depressingly already posted or done with Q1 for 2024, the year is flying by. What are the top 2024 priorities look like and as you think about those priorities like, what's keeping up at night? We're at a point where we've built a product, we've got an amazing core team. 2024 is the year of scale. How do we add to the machine that we've already built and make sure it's running as efficiently or more efficiently than it is today? That's everything from sales to ops to engineering. I am broadly speaking incredibly excited about the scalability of our platform. We are able to service folks that are really quite large from a technology and operational standpoint. That's a credit to what our team has built. But folks are asking us for new products or can we service different end markets? We see a lot of poll into other products and we'll start to execute against that product roadmap that should expand our addressable market outside of just the small business space. Now, you recently closed your series A, your total funding is 16 million. What have you learned about fundraising throughout this journey? Fundraising. I think everyone has a different strategy to fundraising. I have told our team over the last nine months that the work we do right now is for fundraising because if you build a great business and are able to tell a great story, then you will be able to raise money. And so if you're able to go into fundraising meetings and show an awesome product and awesome traction, that will make it a successful fundraising process. Whereas I think a lot of folks will spend a lot of time on strategy around the fundraising process itself. But I really think what matters is the nine, 12, however many months preparing for that fund. It's the actual work. It's the actual company building. And then it's the CEO's responsibility to make sure everyone can see all of the accomplishments and all of the traction in that month or a couple months of fundraising. What about advice for insurance technology founder? So let's imagine that a founder comes to you and they say, Cole, I want to build in the insurance tech space. Based on everything that you've learned, this doesn't have to just be about fundraising. It's about anything related to go to market. What would be the number one piece of advice that you'd give them? I think everyone is a little bit bearish on insurance technology right now. I think everyone was very hot on it in 2019 and 2018. I think the pendulum will continue to swing back and forth. I try and drown out some of the high level more VC noise around the given category and just continue to build something that is a great business model and resilient through good markets or bad. I actually, when I was starting the company, everyone said, wow, it's a really tough time to go get started. First of all, I think we've kind of just returned to normal times. I don't think it was that difficult of times. But at the same time, I would rather build in a hard time and see if my business works then than build in a time where there's a little bit more funny money around that can keep you afloat if your business maybe isn't so great or the economics are upside down. If you're building in a harder time, you find that out way faster. I think every founder, there's an opportunity cost to their time and their life. I'd love to find that out sooner than later. I would actually want to forge ahead in what is known as more of a hard time. Final question for you. Let's zoom out three to five years into the future. What's the big picture vision here? The big picture vision, I touched on it a little bit before, but insurance used to transact with a broker, a carrier, and a reinsure. In the future, it will transact through some type of affinity group that has a captive, that has capital and reinsurance behind that captive. I think there's a huge opportunity for us to open up the capital markets to more insurance yield as an asset class. That's something we don't talk a lot about, but we're very excited to do medium and longer term and just really kind of fundamentally changing the value chain of insurance. I think if you ask a lot of folks where the puck is going that are deep in the space, they do see distribution shifting. I think we want to be on the leading edge kind of creating that shift in distribution. Over time, it won't just be for small business. It'll be for your home and auto insurance or your renter's insurance. It makes sense to purchase these products through other platforms as opposed to traditional brands. I wouldn't say I fully understand captive insurance, but I definitely walked away from this interview understanding it a little bit better. I think anyone listening in is going to feel the same. This has been awesome. It's been a lot of fun. We've learned a lot. Before we wrap up here, if there's anyone listening in that wants to fall along with you, wants to get in touch about setting up captive insurance in the box, where do they go? They can go to our website and reach out authenticinsurance.com or my email is coal@authenticinest.com. Cool. Thanks so much. Appreciate it. Thanks so much, Brad. This episode of Category Visionaries is brought to you by Frontlines Media, Silicon Valley's leading podcast production studio. If you're a B2B founder looking for help launching and growing your own podcast, visit frontlines.io/podcast. And for the latest episode, search for Category Visionaries on your podcast platform of choice. Thanks for listening and we'll catch you on the next episode. (upbeat music)
