Insurtech startups founded or co-founded by women use creative capital-raising and networking strategies to overcome the gender funding gap and earn a seat at the table.
- Kate Smith
- January 2020
SEAT AT THE TABLE: (From left to right.) Jennifer Byrne of Quesnay, Kate Terry of Surround Insurance and Carey Anne Nadeau of ODN said diversity among founders benefits the insurance technology sector.
Photo by Kim Bjorheim
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Kate Terry isn't afraid to pick up the phone and ask for help.
She'll ask for time. She'll ask for advice. She'll ask for introductions. She'll even ask for money.
The co-founder of Surround Insurance —a startup whose products are geared for consumers who rent, share, borrow and freelance—isn't shy. She can't afford to be.
“Entrepreneurship is all about execution,” Terry, a former senior executive at Liberty Mutual, said. “The only way to execute when you're in a space where you don't actually have a lot of resources is to ask people for things. Constantly.”
The odds are stacked against all startups. But for female-founded ones, the uphill battle is even steeper. Particularly when it comes to funding.
Though McKinsey research shows a direct correlation between gender diversity and increased profitability—companies in the top quartile for gender diversity on their executive teams are 21% more likely to outperform—women-led startups don't receive the same level of financial backing as male-led ones.
Only 2.2% of venture capital funding went to female-founded businesses in 2018, according to PitchBook. And when women do receive funding, they receive more than $1 million less, on average, than their male counterparts.
The Boston Consulting Group studied five years' worth of startup investment data and found investments in companies founded or co-founded by women averaged $935,000. That's less than half of the $2.1 million invested in companies founded by male entrepreneurs.
One reason for the disparity, experts say, is the lack of female venture capitalists. According to media and information firm Axios, only 9% of decision-makers at U.S. venture capital firms are women.
“There's a tendency for venture capital firms to invest in things that they know and people that they relate to,” said Jennifer Byrne, co-founder of innovation consulting firm Quesnay. “So it's not surprising that women-led insurtechs and startups overall have struggled to raise funds.”
The gender funding gap not only affects the way women raise capital (hint: they get creative), but experts say it also affects the types of businesses they start. And it's not the only issue female founders in insurtech must overcome. From a shortage of mentors to unintentional bias, women entrepreneurs face additional obstacles in getting their companies off the ground and getting a seat at the table.
But the female founders interviewed by Best's Review—a group that also included Jennifer Fitzgerald of Policygenius, Clara Shih of Hearsay Systems, and Carey Anne Nadeau of ODN—were uninterested in using that as an excuse.
Nor do they need to, as it hasn't hindered their success. Fitzgerald and Shih are on InsurTech News' list of the Top 50 insurtech influencers, at No. 7 and No. 28 respectively. Nadeau sits on the advisory board for Women in Insurance Leadership. And Byrne founded one of the most anticipated events at the InsureTech Connect conference—the annual Female Founders in Insurtech competition, in which Terry's company was a finalist in 2019.
While they prefer to focus on their business ideas rather than their gender, they agreed to share their experiences and opinions on gender diversity in insurance with Best's Review.
You can’t do business as usual because it’s no longer business as usual. You need people coming from different perspectives to challenge conventional wisdom.
Creativity and Profitability
Funding is an issue for every startup, regardless of gender. “No one just hands you a stack of money,” said Hearsay's Shih, who has raised capital from venture capitalists Sequoia and New Enterprise Associates.
But with a funding gap that puts them at a disadvantage, women entrepreneurs have found alternative ways to raise capital.
“What we see through our Female Founders Program,” Quesnay's Byrne said, “is that women are super innovative in the way that they find capital.”
Rather than rely on venture capital dollars, Byrne said female founders use crowd-funding, angel investors, friends and family, and industry executives as sources of capital.
“Despite the 2.2% number, they're still finding capital to build their businesses,” she said.
Both Nadeau of ODN and Terry of Surround say retired insurance executives have been among their biggest supporters.
“As startup founders, it's our responsibility to meet investors where they're at and understand how to penetrate what is still very much an old boys' club,” said Nadeau, whose company provides risk ratings for roads. “One strategy we've used to try to broach that, to try to pierce the veil, is to contact people who have retired recently from the industry. They have time. They have expertise. And they have a network, so they're willing to get to know female founders in a way that's deeper, more involved.
“They spend more time with us, and in that way, we're able to grow our network into insurance carriers, into our customers, with that validated old boys' club seal at times. We're figuring out ways to work within the system to still be a female-founded business, and also be successful.”
Terry said Surround has raised more than $1 million from retired insurance executives.
“They've got the time and energy to understand what we're doing and the interest in supporting a mixed-gender founding team, which we are,” said Terry, who co-founded Surround with fellow Liberty Mutual alum Jay Grayson.
Nadeau says female founders have to get creative and be crafty about how they spend money and deploy capital. That, she said, makes them a good bet.
“Women-owned businesses do a lot more with less, so they're able to turn a profit faster,” she said. “They're more lucrative businesses in the long run.”
The statistics back her up. According to BCG, companies founded or co-founded by women perform better financially, generating 10% more revenue over a five-year period than male-founded businesses. They also generate 78 cents for every dollar of funding, compared to 31 cents generated by male-founded startups.
“I think as we see more of these statistics come out, we'll see more money flowing toward women-led startups,” Byrne said.
Profitability is one surefire way for female founders to quickly build trust and earn a spot at the table.
“The insurance industry is a relationship-driven industry,” Nadeau said. “I think of myself as the girlfriend that the favorite son has brought home to dinner. It's going to take time for the family to accept me at the table and keep inviting me back. But profitability is one measure that really builds trust very quickly.
“When I can demonstrate real value proposition to a carrier, they're inviting me more to the table to have that conversation.”
When we were starting out, we reached out to more successful and established founders for advice and help. Several were very generous with their time. So I always want to pay it forward.
Diversity and Inclusion
Insurance is not known for its diverse leadership. Despite accounting for more than half of the insurance workforce, women comprise only 18% of the C-suite, according to McKinsey. The insurtech space feels even more male-dominated, Terry said.
“I was an SVP at a Fortune 100 insurer before this and spent a number of years in that position,” she said. “There were very few women. But I was shocked, when I moved over to the insurtech side, at the fact that there were even fewer women.”
That makes it difficult to find mentors, and it also makes for a tight-knit community.
One of the most highly respected and highly visible women in insurtech, Fitzgerald regularly makes time to help others along in their journey.
“I get a lot of [mentoring] requests from earlier-stage founders, both in the U.S. and abroad,” said Fitzgerald, who founded Policygenius in 2013 with her McKinsey colleague Francois de Lame. “I've gone to InsureTech Connect every year and typically spent some time meeting with earlier-stage people.
“When we were starting out, we reached out to more successful and established founders for advice and help. Several were very generous with their time. So I always want to pay it forward and be as helpful to others as people were with us.”
Shih feels the same. A member of Starbucks' board of directors and Finovate's 2019 Fintech Woman of the Year, Shih does some angel investing and advises earlier-stage companies.
“There is certainly a camaraderie among female founders,” said Shih, a Stanford graduate who worked at Google and Salesforce before founding Hearsay, a digital marketing platform for financial services, in 2009. “It's been nice to pay it forward and help those coming after me.”
Quesnay's Byrne said having more mentors—including male mentors—is important for growth.
“From what we've studied, 48% of women entrepreneurs cite the lack of mentorship as one of the main hurdles in their lack of ability to scale and grow,” she said.
Since Quesnay started the Female Founders program, Byrne said male executives have often asked whether they can participate as mentors.
“We say 'absolutely!'” she said. “We need more coaches and mentors and sponsors who are male to support women founders, entrepreneurs, or staff members, because at this stage there aren't enough of them.
“I think that's required for us to move forward. It can't just be women helping women. It has to be inclusion as much as diversity.”
Female founders say male executives, in large part, have been very supportive.
“I can think of several large insurance company CEOs who have become mentors, sponsors and friends, and helped me through this journey,” Shih said. “I credit the awareness and dialogue, over the last five years in particular, around diversity and inclusion. I feel fortunate to work with leaders who live that every day.”
That's not to say discrimination doesn't exist. But in Shih's experience, it's been the exception rather than the rule.
“My co-founder is a man, so I got to see how he was treated versus me,” she said. “Same company, same pitch. So that was a good A/B test.
“We've definitely had some pitches where the investors would just look at him, even though I was the CEO. They would greet him and assume I was his assistant or chief of staff. There's a lot of unconscious bias. That was the minority of the time, though.
“I am fortunate that I haven't really felt discriminated against since having started Hearsay 10 years ago. If anything, I feel like I've gotten great support, engagement and camaraderie from both men and women.”
Inclusion and diversity are more important than ever, experts say, because of how rapidly the world is evolving, both demographically and technologically.
“The people we're serving are diverse,” Shih said. “If you want to be customer-centric, you need to have leaders and founders and boards that represent the population you're trying to serve.
“Also, having diverse backgrounds results in diverse opinions and healthy dissension and debate,” she added. “You can't do business as usual because it's no longer business as usual. You need people coming from different perspectives to challenge conventional wisdom.”
Ultimately, that's good business.
“An economic and social system that suppresses the ideas and the drive of more than half the population—because it's not just women, it's people of color as well—and doesn't allow their ideas to rise to the top, is not a meritocracy,” Terry said. “It's not getting the best ideas out there, and it's not delivering the best economic results or social results.
“It's not just about doing what's right. It's also about doing what's economically right. We'll all be better off if we can appreciate and incorporate the contributions of everyone.”
Words of Wisdom: Advice from Female Founders
Find your advisers, find your sponsor, find your mentor, whether you're in a large corporation or an entrepreneur, because they will be your sounding board, they will give you ideas and feedback that I think ultimately will help you grow and build your confidence.
I was very fortunate to have male mentors in my corporate life. That helped me grow and learn, and, really, have a seat at the table. I was always invited to every executive meeting. Though I felt uncomfortable, my coach, my sponsor, had no hesitance, and told me I'm stronger and better.
I think I would say to my younger self, don't hesitate. You're just as prepared. Go to the meeting, and share your knowledge and your expertise. Don't shy away from it.
Just Say No
What I would say to founders is, it's easy to find things to do. The challenge is deciding what not to do. One of the tough moments for Hearsay was when we tried to be too many things. What will make or break a lot of companies is having that clarity of purpose and that very crisp and narrow focus, which means saying no to a lot of things. Which is hard to do.
You never want to say no, but you have to. Look at our decision three years in to walk away from all of our noninsurance, nonfinancial services customers and offer to give them their money back. That was really hard to do, but we wouldn't be able to do what we do—drive transformation at Fortune 500 companies—if we hadn't made that decision.
Get Priorities in Order
Be ruthless about your time and what you're prioritizing. Especially in the early days, when everything is hitting your plate and everything seems urgent (and very few things are). The important things early on are: building your product and your offering and getting it in the hands of customers, and as many customers as possible, as soon as you can. After that, the next most important thing, assuming you're building a product that meets the needs of customers, is hiring the best people you can and getting the people part of it right.
Everything else is second order compared to those things—building the right product for your customers, getting it into the hands of as many customers as you can as soon as you can, and then getting the people right.
Ask … and Ask Again
You have to ask for things, and you have to ask again and again and again. Ninety-nine percent of the time, you're going to get told no. You just have to get over that.
Find a different way of asking, and find a different person to ask. Let it slide off your back when someone says no. Being able to hear no and persevere is the key to success in this arena.
If you don't actually ask anybody for money, nobody will show up with a check. But if you ask people who have money enough times, somebody will eventually write you a check. That day is like the biggest victory you've ever had in your life, regardless of how small the check is.
Take a Swing
I thought I had to be good at golf to go on the golf course. No, I just need to know how to drive a golf cart and have a beer on the course. It's more of a social opportunity than it is a competition or it is about discussing a specific business deal.
I would encourage female founders to … just show up. You might look ridiculous. You might whiff. It turns out, most other people are going to be whiffing and looking ridiculous right along with you.
Just go out there and take a swing.
Carey Anne Nadeau
is managing editor of Best’s Review
. She can be reached at firstname.lastname@example.org