Assaf Wand is the CEO and co-founder of insurtech startup Hippo which offers intuitive and proactive home insurance by taking a smarter, tech-driven approach. The company has raised over $100 million from Lennar Corporation, GGV Capital, Felicis Ventures, Comcast Ventures, Munich Re Ventures, Aquiline Technology Growth, Abstract Ventures, Sinai Ventures, Fifth Wall and Propel Venture Partners. Prior to Hippo Assaf founded Foris Telecom and Sabi (acquired by Urbio Inc.).
In this episode you will learn:
- Strategies to raise financing
- The process of recruiting the key team members
- Scaling hyper-growth companies
- How to find big ideas in big markets
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello, everyone, and welcome to the DealMakers show. I’m excited about the guest that we have today because we’re going to be talking a lot about regulated markets. So, without further ado, Assaf Wand, from Hippo, Welcome aboard.
Assaf Wand: Thanks for having me, Alejandro.
Alejandro: Originally, from Israel. We were talking about the battle of accents here because I’m also from Spain. So, how was life growing up in Israel, the startup nation?
Assaf Wand: It’s awesome. I’m a proud Israeli. I can’t get rid of this accent no matter what I’m doing. I’m at the age where my kids are giving me trouble about my accent, which is a problem. But it’s good, and I think regulated industries are probably the best fit for Israeli entrepreneurs because we are very skeptic to regulation. We’re not very good in following orders, and we think that every law is potentially meant to be broken. So, regulated industries are a perfect fit for Israelis.
Alejandro: Got it. I see that you have in terms of background, you did a little bit of law. Is that right?
Assaf Wand: Yeah. Amongst the stuff that I did, I actually also have a law degree.
Alejandro: I also have a law degree, so I understand what it means to be a recovering lawyer in one way or another.
Assaf Wand: Lucky for me, I was never a lawyer which was a very Jewishy, motherly kind of thing that my mom was like, “How can you have a law degree, and not finish, and graduate, and be a lawyer.” So, I graduated, but I didn’t finish my internship because I went into entrepreneurship at that point of time.
Alejandro: Got it. Why don’t we talk about how you started; how you got the entrepreneurial bug because I understand that right after school, your first job was as an account manager. Right? At Tamir Fishman, but then right after that, you went into Intel Capital to become an investment associate. Was that before you started as a founder, or after?
Assaf Wand: This is like a lengthy kind of thing, which is always make [02:17]. I started working as a trader, basically, in an Israeli investment bank. I started working as a trader, trading at night U.S. securities, while studying in the day. So, in Israel, what happened is we all do the military, and because of that we’re doing undergrad when we’re slightly older. I was a captain in the Air Force, so when I started my undergrad, I was 24. My parents said, “If you want to live in Tel Aviv by yourself, we’re not paying for it, just work.” That basically forced me to find work. I didn’t want to just be a waiter, so I was able to finagle myself into working as like a junior trader, trading at night and working in the day. These were the heydays of the internet bubble, 1998, ’99, and stuff like that. A bunch of us in the bank thought that we could actually offer something that wasn’t offered, and we found was very time-consuming. Basically, think of it as an e-trade full-employee stock option enabling employees to trade their stock options just like you trade your stocks. Up until then, it was a very manual process. You had to go to the CFO. You had to sign, “Alejandro, you have these amounts of shares. This is the Stripe price. This is a vesting period and all that. Then you need to call the investment bank. Fax something.” You had two options. It was very manual and really, really painful. We thought why can’t we manage without a base and enable the employees to actually exercise like everybody else does on eTrade and online. So, we left the bank. We started this company.
Alejandro: What was the name?
Assaf Wand: A very creative name. It used to be called [04:12], which used to stand for Wand [04:15]. It wasn’t a startup. It was like a service company. Because of that, it wasn’t funded. It was a service business that we offered this service to different public companies. It was a really interesting time. We set up the company. The company was doing really, really well, and then the market collapsed. When the market collapsed, we basically weren’t making any money. So, I started thinking of what we could do with that. The solution that I came up with: let’s offer basically hedging because I’m managing Alejandro’s pool and I know that you’re going to have a round that’s going to be released in October 2019, and I know your Stripe prices, and I know the Stock price. So, basically, offering you insurance on your options that are going to be invested. Now, you can’t tell an employee that you’re going to offer them an option on the option because you’re never going to finish that. So, you basically tell them, you frame it as an insurance, and that’s what we did. At the end of the thing, we were acquired by one of the U.S. banks. Then I went into Intel Capital.
Alejandro: Okay. Really cool. How big was the company when you did the acquisition?
Assaf Wand: Oh, timing. We were like four founders and then six more people. It wasn’t like a ventured-backed kind of thing.
Alejandro: Got it. So, was it like a big shock to go to the other side of the table?
Assaf Wand: We didn’t even go to the other side of the table. It was like within a very, very short time span there were like four acquisitions that negated our position. What I mean is that I think [05:57] was bought by J. P. Morgan or by Chase, and then Chase was bought by J. P. Morgan, who basically started this whole consolidation going when you think about it like that.
Alejandro: Yeah. I understand. During your time in Intel, did you make any investments that were interesting? Did you identify certain patterns from founders that help you identify what a successful founder looks like?
Assaf Wand: Yeah, I wish I could take credit for something like that. A) I was a junior member of the team. Because of that, you have several ways to actually go, and my belief in growing in the venture capital as a junior person was to find all of the non-successful industries that nobody wants to take and drill into them. So, my analysis is as a person in Intel Capital at that point of time was—it’s not my analysis. This is actually more the funds analysis was that there are several instigators for you to change a computer. One of them was batteries. At that point of time, it was just about the transition between desktop to laptops. So, I think, still at that point of time more than 50% of the computers that were acquired were desktops, so they were shifting into laptops. Centrino was the chip that Intel came up with. The biggest pain in laptops was that the battery would last for an hour and a half. So, we were looking, and I was looking, because nobody wants to take that position, into different battery technologies.
Assaf Wand: That was one thing, and the second instigator where they were looking which was actually a lot closer to was video games. If you recall when you grow up, every once and every year or so there’s a new video game that requires a stronger hardware, and you nag your dad, “I really need a new computer.” This was an instigator for why we actually need to change the computer. So, this was two significant instigators. There was also a new operating system every time Windows came up with a new thing, you kind of need to replace your computer. There were several other steps, but nobody wanted to take batteries, and nobody wanted to take video games, and that’s how I started my career in Intel Capital focusing the batteries’ technologies and focused into video games.
Alejandro: Then why did you make the switch to McKinsey?
Assaf Wand: The switch to McKinsey was slightly different. At that point of time, I was around 29 years old; basically, was heads-down, from the military, working like crazy throughout Intel Capital. I wanted a break. I wanted to diversify myself. I wanted to broaden my horizons, and I decided I wanted to go to business school. I was fortunate enough to go to the University of Chicago. Then decided after that where I wanted to work, and I went to McKinsey. I always have this discussion, and I love McKinsey, and I think it’s one of the places that basically contributed a lot to my career. I have an amazing network. I love every person I work with over there, and they professionalized me significantly, but I’m probably one of the worst consultants you can find, which I think is very counter to—I don’t think a very strong entrepreneur can be a very strong consultant. I think there’s something which is the complete opposite. Entrepreneurs have a bug that they just want to fix something and jump right in it, and the solution doesn’t need to be 100% done. Consultants are about consulting and basically handing over the solution to someone else. It needs to be 150% right, and they understand the politics and organization. So, it’s a very different thing. I took the McKinsey job. I usually say it from all of the other reasons. I wanted to live in New York. I needed someone to take care of the Visa. I wanted a company which is strong in international, and I can potentially go back to Israel. I was single at that point of time, so I thought, “Oh, that’s going to be cool. I can take an assignment in Israel and maybe find a woman.” It was all of these kinds of discussions rather than where my passion lies, what I wanted to do, and things like that. Then probably all of the above are the reasons why my career in McKinsey wasn’t that glorious.
Alejandro: I’ve met so many founders that are coming from McKinsey, and many, many of them have been so widely successful. Why is that the case?
Assaf Wand: I think the company is amazing as reported. I think it’s an amazing training ground. The company is very supportive of the people that left the company as well. Then there is another component which is I think is very much [11:01]. Think about a McKinsey study. You take a random person. You take an assistant who doesn’t have a freaking clue about the industry, and within a span of a month, I have a strong enough grasp to talk with a CEO of an insurance company, the CEO of an investment bank, with a CEO of a retail company or a biotech company. It basically gives you the confidence that smart people can learn any new industry in a very fast way and be competent. That’s one. The second thing, it demystified for you how the companies are working. When you’re coming from the outside, you think this company is amazing. It’s unbreakable. Everything is done in a very professional way. There’s no lack of—there are no issues. Then you’re looking, you have an inside view of the company, and you’re like “That’s working. That’s working. This is like this.” You get a very realistic view, which is to demystify the company for you and basically give you the confidence that you can take over whatever, and you do it in a very structured and organized way. So, I think that McKinsey is a perfect ground to launch entrepreneurs, and it’s usually the people that realize that McKinsey as a company is not a divide task for them to move forward. The company’s an amazing [12:26], a crazy amount of talent, very supportive, and you learn a lot from it.
Alejandro: And they did launch again as an entrepreneur, so what was this next experience like?
Assaf Wand: Next experience, I went back to Israel, and co-started two companies. So, one company that we started built the largest multi-tenant tower business in India. So, we built a cellular tower business where we owned 11,000 towers, [12:59] 60′ towers, kind of like American towers [13:03] in the U.S. We looked at different business models in Telco, and we found that this is a business model that we really, really like. It’s relatively [high-traffic 13:15], but the returns are really, really good if you do it properly. This was the age of brick. So, we analyzed mostly into Brazil, Russia, India, and China. We thought that it’s not a valid business for China. Brazil had this business going on before. Russia was too much [13:38] I’m told, and you couldn’t do too much stuff because of several of the providers. We saw that India is really an interesting marketplace for that. So, that’s where we launched. That was the first one. Finally, we launched another company. We went around the world and bought a 2.5 gig spectrum which is the spectrum, but at that point of time was mobile wireless Y-Max shifted later to [14:02]. The idea was actually not to build a voice carrier, but to build a Point-to-Multipoint wireless IP, basically internet providers in a lot of emerging markets where you don’t really have good internet reception. This was the time where the world cap happened in South Africa, and there were a lot of fiber that goes under the ocean that basically enabled you to get a performance which is not satellite-related. We went and bought the spectrum in quite a few markets which I think was Mozambique, Uganda, Tanzania, [14:43 – 14:47], a lot of these places. The thought was to launch this wireless IP provider. We started launching it in Mozambique and Uganda. We were in a middle of a massive funding round because we needed a lot of money for [15:00]. Then 2008 happened in the middle of this funding round. We had to narrow down everything and just focus on the several operations that we had running.
Alejandro: What ended up being the outcome?
Assaf Wand: We did smaller acquisitions of the local kind of companies. It wasn’t a big exit. The other company, the Telco company in India is very much alive and kicking. My guess, 1,500 employees now. Really, really solid, positive business, and it’s going. What personally happened to me was that I found my wife was way smarter and accomplished and aggressive than me. She decided she wanted to do a Masters. So, I find myself in Boston while she was pursuing her Masters. You realize that the more singular you are in a company, the less likely you are to be able to work remotely. It works if you’re an engineer. It doesn’t really work if you’re the Chief Business Officer and stuff like that because you need to have the chat with the CFO and the CEO. It just doesn’t work, so I pulled out of the Foris company. I still has my shares and moved to Boston, and was wondering whether I wanted to be a VC again and stuff like that, but actually started a completely different business.
Alejandro: And it was Sabi. Right?
Assaf Wand: It was Sabi.
Alejandro: Then why did you decide to go with Sabi and what was the process of incubating the idea behind Sabi?
Assaf Wand: Sure. If I take a step back just to look at my view on entrepreneurship, then I think there are different ways to start the venture. I think Option 1 to start the venture, which my guess is around 45% of the ventures that are getting started is the win expertise. It’s everything which is more deep fit. I’m a chip designer, and I thought there’s a better way to design a chip. I’m a cyber guy. I’m an even enterprise software to some extent. But basically, anything that had to do with optics, storage, anything that has to do with that, it’s not that Alejandro and Assaf are brainstorming on a Saturday night, like, “I actually think there’s a way better storage solution. We should do it as a…” It just doesn’t work like that. It’s a [17:24] thing, and this was how most of the ventures used to be started in like the ’90s and stuff like that. Then came the shift to more consumer and different kind of ventures, which the other 45% which is usually need-based. Alejandro and Assaf are sitting on a Saturday night, and like, “I can’t believe there’s no way to do it. I was browsing the web, and I figure I can’t buy. Why?” and stuff like that. This is how most of the consumer business started. This is like together, roughly speaking, and it’s not backed by anything other than random assumptions that I have. That’s like 90%. Then you have the extra 10% which I actually think are coming from 1) basically [racial-driven 18:09] things. So, I have the technology came from university, came from a spin-out from a company, or whatever. There’s a technology that now we need to find an order for it or a market for it. So, that’s one. For the other one, which is that’s how sadly or lucky, I know I’m usually starting my ventures. It’s pure research-based. So, I usually don’t have something that ticks me so much. I just sit down, and I research, and I research, and I research until I’ve found several domains that I find interesting. I zoom in on them, and I’m trying to find something that really excites me in them. So Sabi basically came to be from that. The premise of the company was that the average age of—let me phrase it differently, that the world is maturing, and people that are maturing are a very different generation than the generation before. It’s Baby Boomers, and people between the age of 50 have 91% of the network, and 67% of the consumption, and 61% of the net income, but only 5% of the market and budget eventually catering to them. If you think of market in budget that caters to them, it derives into two things: 90% of it is looking at you as a customer and saying that everything is bad. So, call it [19:31]. You don’t have friends; you have bladder issues or whatever, it’s everything about negative and will make you good. The rest of the 10% of this 5% kind of focus is the complete opposite, which is luxury because who has the money to buy a Chanel? Who has the money to buy a Ferrari? Who has the money to buy 1st-class tickets? It’s only people that are 60 and above. You market it as a woman that is 25, but a personalized Ferrari, you look at the demographics of the people that buys it, it’s 60+ people. It’s not 25-year-old people. Basically, this is what I saw, but I actually thought that this dichotomy between the age of the individuals and the brands versus the spending is completely detached. It brought me to my understanding that I think there’s a place to build a brand for Baby Boomers that is focused on Baby Boomers as the customers and treat them in a certain way, and not treating the caregivers or the kids that are supposed to buy them the products, and addressing them in a very honest kind of level of discussion on what their needs are, and how you solve it. This was basically Sabi. Sabi is a Japanese term on the beauty in aging, and it’s about the fact that having patina and passing of time creates the beauty and generates something with more character rather than something new.
Alejandro: It’s a beautiful name.
Assaf Wand: A five-year oak hardwood floor is nicer than a new one because that shows the characteristics of it. That was the reason for the name of the company. We started launching lines of products that are more focused towards the Baby Boomers line of [21:34], the line of canes, walkers, [21:37]. Think about how grabbers are in your house. Everything looks very geriatric. Every once in a while, one of us is getting a room in a hotel which is the handicapped room, and it makes you feel really, really bad. The thought was, “Why can’t we design something which is a lot more economically nice, pleasing with the material, with the utility, with the look and feel which doesn’t have shame. Can we negate shame from these products? I teamed up with some of the best designers in the world. We teamed up with the [22:10 – 22:14], with different of the biggest designers in the world, and each one of them did a line of products for us. We sold it online, and we sold it via different chains, and after around five to six years, I sold the company. It wasn’t a massive exit.
Alejandro: Why did you sell?
Assaf Wand: Because it was six years of my life. I thought the alternative basically the [22:41] have a significant cost on myself to running this company. I stopped believing that I could build a really, really big company out of that. So, I think once you’ve realized that the eternity cost for yourself are high, and you get a decent offer, then I thought it was the right time to actually do that.
Alejandro: Was this a process that you generated, or was it inbound?
Assaf Wand: It was inbound. We used to get several inbounds, and I kept on pushing them away, but when this one happened, it came at the right time for me. It was good enough of an offer that I thought it was interesting enough. They were flexible enough to actually avoid giving me a retention which I had to negotiate quite significantly because I—
Alejandro: Vesting and resting. It’s a painful process. I hear you.
Assaf Wand: Exactly. So, it was a good opportunity, and that’s when I sold Sabi.
Alejandro: How big was Sabi at the time of the transaction?
Assaf Wand: It had something in the region of 10, 11, 12-million dollars in sales. It was basically profitable. We raised just a tad of money at the beginning, and the company was comfortable after a year and a half. So, it was always running from its own profitability, and there’s no bigger curse for an entrepreneur to build a company that they close to break-even at last, and we—is underfunded. It’s just a massive curse. You can’t do any big moves, which is really, really problematic.
Alejandro: Like you were saying, was this also funded or was there any VC investment in it?
Assaf Wand: No, not VCs. Some angels, and friends and family, and stuff like that. Then self-funded. Yes.
Alejandro: Got it. And the terms were disclosed of the transaction? Are those public?
Assaf Wand: No, no. It wasn’t public. It was private. Actually, not material enough, sadly for the acquirer.
Alejandro: Got it. I hear you. Let’s talk about your latest rodeo. Let’s talk about Hippo Insurance. How does Hippo Insurance come to life? Share with us that incubation process.
Assaf Wand: First thing, you see there’s a clearly near line from working in the trading, doing VC, starting a telecom business, starting products for the aging population, and move to insurance. It’s like a clear line, of course, that was due to be my next business.
Assaf Wand: There are several characteristics of that which is actually what I’m thinking now, very much attributed to that. So, think about a lot of the lessons that I learned from the [25:27]. I wanted a business that has ongoing revenue. When you’re doing a hardware company, every year you start from zero. Then you need to sell your product. I wanted something that has a base and has a low churn, and actually keeps on paying, and insurance is perfect product for that. Not that that’s how I came to insurance. I’m just giving you like maybe in my psyche how I came to it, what I was looking for. The second thing is, I was actively looking for a really, really big market because I think you work the same amount of hours if you’re going to do nicer things or if you’re going to build [26:09]. You have infinite number of hours in a day, and as an entrepreneur, you’re passionate, and you’re going to work the same amount of time. So, you might as well find something which is big. I’m Israeli, so I told you that regulated industries do not scare me. My dad used to work in insurance for all his life, so probably that was in the back of my mind as I broke into this industry as well.
Alejandro: From Sabi, if you had to name the biggest takeaway, just one, what would that be?
Assaf Wand: Don’t ever do hardware?
Alejandro: Okay, okay. Well, that’s fair enough, and why?
Assaf Wand: It’s such a hard work to do hardware. It’s magical because you actually see people using a product that you came up with. However, the cycle is long. Then you are tooling, and fulfillment, and shipping, and just when you’re hitting your stride, then you realize there’s the crazy stuff that Apple is launching the new iPhone, and they bought all of the distribution and all of the shipping containers out of China or whatever, and now you’re stuck with a crazy amount of inventory that we need to send to Target, but you can’t send because it costs you. There are all of these things because it’s a physical product which I am not wishing anybody.
Alejandro: So, it sounds like too many things up in the air. It makes sense. How did you meet Eyal, your co-founder at Hippo?
Assaf Wand: So, I basically sat down for several good months and came up with what is able. One of the clear revelations I had was that I needed to find a co-founder. Sabi was solo founder.
Alejandro: Why? Why did you realize that you needed a co-founder? What were you looking for in that person that you needed?
Assaf Wand: I looked at someone who was a very strong independent thinker, but had a flexibility of mind. So, he would be opinionated and non-collated opinionated than me, so I was looking for a very smart technologist. But someone who was going to still be flexible enough. I wanted someone I could get along with which was important because this is like getting a founder—in some ways, it is more than getting into a wedding because you can’t really have a breakup. The chance is if you have breakup, you’re probably going to kill the company, and it just doesn’t work. You need someone that compliments you and you trust. On the flip-side, it doesn’t need to be your best friend. It needs to be someone you really appreciate. Then I have another realization. I have a belief that if you want to find someone for a role, go and talk to the strongest people in the world that you know. If you want to find a CTO, I have a very limited network of CTOs. Go and interview the best CTOs that I know in the world, and ask them who do they think is really, really strong. Who’s potentially available and stuff like that because they have a calibration and they know who’s available and who’s good. So, that’s basically what I did. I made the list of the top ten CTOs I know and went and talked to them. Three of them said there is this guy, Eyal, that you have to meet. He’s one of the strongest, and he’s not going to be available for a long time, and stuff like that. The second thing is I didn’t want to be a sole founder anymore. It’s a crazy thing.
Assaf Wand: It’s a crazy thing because then you have a limited amount of time, and you can’t do everything. But, that’s actually the smaller and more trivial stuff. I think it’s psychologically you need another person. Entrepreneurship is where you have amazing days and crappy days. You go and meet an investor, and he says it’s the best thing he’s ever seen, and on the same day, you can see someone that says it’s the dumbest thing he’s ever seen. Those [30:13] doing that because of A, B, and C. If you’re by yourself, you are absorbing all of this by yourself. But if you have a co-founder, then you have someone to mitigate it as long as you found the right co-founder who doesn’t escalate you but is actually relaxing to you. This is what I found in Eyal. He’s a very calm individual. He’s a very thoughtful person. He’s a very strong independent thinker and is one of the best technologists we have in the world now.
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Alejandro: That’s really cool. I agree with you. I remember I’ve had with previous experiences building businesses, one day maybe in the morning it was like I thought I was on top of the world, and then in the evening, I thought that the company was going to go down the toilet. So, I understand the feeling. Let’s talk about pulling the trigger on this. Then you get together with Eyal. There’s a match. Then you start brainstorming on the concept. Then at what point something clicks, and you guys are like, “This makes sense. Let’s do this.” Walk us through how that day looked like.
Assaf Wand: I’m actually going to take a step because there’s a couple of other—on like partnering with a co-founder.
Alejandro: Go for it.
Assaf Wand: One of the key things that I learned is we basically did a honeymoon period for like a month or two. In this honeymoon period, because the idea basically came for me, and I had this thing. I had an affinity to it. But we wanted to know that we could actually work together. So, we took a lot of walks together. We went for a night out several times, like overnight, and I think the important stuff to actually measure and work on with a potential co-founder that you don’t know forever because you’ve worked in a company together is to work on all of the other stuff. What I mean is not to see that we both think exactly the same about the distribution stuff that you have in the business, but to actually see that it will align with “What is the next [32:13] scenario? 50 million dollars? 500 million dollars? 5 billion dollars? Because if we’re misaligned on that, and let’s say I think I’m going to build a company for 5 billion dollars, but my co-founder thinks that 60 million dollars is an amazing offer to sell the company, I’m telling you it’s going to create a lot more clashes and misalignment than the business of stuff. What is a lifestyle that you actually see? Let’s say he calls all through the night and he comes to the office at noon, but I have two kids, and I’m coming at 8:00 am to the office. Is it going to be a conflict? How is the tech thing is going to hire and going to be starting the day at like 11:00 AM, and then the business people are going to start at 8:00 AM. That’s going to create clashes and not going to be aligned. How do you view family? How do you view work-life balance? How do you view compensation for people? There are a lot of these things that are a lot more material to have a fit between the founders. Then he sees my distribution is direct, and I see it as like an independent [33:15]. That’s a business thing that we’re going to align, and we’re going to have responsibilities to solve it. But the other stuff of the personal aspects, and the culture, and the feel, and the priorities, and the values of the company, that’s where a company’s going to be broken, and that’s where we spend most of the time.
Alejandro: Got it. I’m glad that you actually touched on this on setting up expectations because, in many instances, people go at it for the wrong reasons or with the wrong agenda. That’s actually something one of my previous businesses was CoFoundersLab, and we actually were matching co-founders. We matched over 600,000 teams. One of the main reasons why companies fail is because of issues between co-founders, and the main reason why that happens is because people go at it for the wrong reasons and because there’s no alignment from the beginning. So, I’m glad that you touched on that. So then, you have the alignment with Eyal, and you guys know that this is going to work. What’s next?
Assaf Wand: It’s an interesting business in short like in FinTech because you can’t have an [34:30] because it’s regulated business, and you know that if you put anything to the market to a consumer, I need to have reinsurance. I need to have filing, and I need to have claims, and I need to—there’s just so much stuff because you’re basically building an insurance company from scratch. So, you need to do a relatively big round. You need to find an investor that is an independent thinker, and then understand that this is what’s FinTech, and he’s willing to bet on you, not in a way like, “Oh, let’s do a smaller round of $400,000 as a safe, and then [35:01] sometime.” You need someone who’s willing to bet slightly more. We have to go for a Seed Round which was I think like 3.5 million dollars. I’m not saying massive, but not tiny as well. You can’t build too much stuff, so you need to bring yourself to a very high-level of conviction and know everything that you can do on the market. So, that’s where we spent a lot of the time. We basically framed like different plans and different things like that and started finetuning the belief of what the business is going to be. But fundraising was basically what we were doing. With some businesses, we locked ourselves in a room and came up with an MVP and started showing some traction. This is not that case. We were on the fundraising trail relatively early.
Alejandro: Got it, and we’re going to talk about the fundraising, but the business model ended up being home insurance. Is that right? Or what was the business model so that listeners really get it?
Assaf Wand: In Hippo Insurance, what we basically do is we’re modernizing home insurance. Home insurance is something that is basically stuck in the ’50s, and it’s stuck in the ’50s in several things. 1) If you’re ever going to open your home insurance documents, which you’re probably not going to do, you’re going to realize that you’re covered for stuff like fur coats, computer boards, china, silverware, mausoleums, and crypts, and gold bullions. But your home office is not covered, and electronics are capped at $2,000. If you have camping equipment, and ski equipment, and bicycles, and stuff like that, they’re usually capped, or they’re below the deductible and all kind of stuff like that. So, we thought, that’s a problem one. 2) 99% of the home insurance is being sold by agents. The average age of an agent is 60. You have to spend an average of 35 minutes on the phone with him, and then need to wait several days for them to come back after the underwriting is done and give you the concrete quote which in 40% of the time actually going to be changed. A lot of people in today’s world don’t want to spend that much time with an agent which many times they’re going to try and say, “Alejandro, let me come to your house at 8:00 PM in the night because they’re going to try and find as a hook to also sell you on life insurance and other products, and there is a lack of clarity in all of that. So, we thought that there is a way to modernize, enable you to go online or mobile and get a quote in less than 60 seconds, find the policy in 4 minutes, but if you want to talk to an agent, we have a massive agency. We enable you to buy however you want. The product that we have is a lot more modern. It covers you for the right stuff. We analyze where the problems are lying with the insurance product, and we see that the problem is usually not that you’re not going to get paid from the insurance company, is the fact that Alejandro thought he’s covered for something that he’s actually not covered for it. So, you had to drain the backyard that leaked with the sewage, and you’re calling your agent, and he said, “No, [38:05]. Alejandro, this is the service line.” And you’re like, “What in the world is that?” He says, “That’s what connects the [38:11] to your home, and it’s actually not covered.” There are a bunch of these things. There’s water coming from the sewage. That’s not covered. That’s [38:19] backup. You have an explosion of the [38:21]. That’s not covered. You have—I can give you a list of 30 of these things, and we thought that the problem is that people don’t know what they have inside their insurance. The coverage is not really connected to what people are actually covered for.
Alejandro: So then, why did you guys raise financing so quickly?
Assaf Wand: Because people realize it’s a 100-billion-dollar market. It’s difficult to do it, but the team that we have it’s strong and can potentially do it, and it’s an interesting fit. Now, when we were doing the Seed Round, it wasn’t the world of insurance which now it’s for insurance, and it’s a cruel world, and it’s a hot field in the VC world investments. When we were doing it, it wasn’t, and it was very difficult. It’s actually more interesting because all of this stuff, all of the points that we’ve raised or that were raised against us is a problem turned into the positive thing. People said, “It’s highly regulatory. You know what it is. You need to register it. You need to find a re-insurer.” There was a bunch of stuff. “You need to build a complete [39:32] system. You need a call center.” And we said, “Yes, we know all of that, but all of solving the problem and barrier to entry for other people.” Basically, the second one we were finished doing all of that, and it flipped to the later funding. Everybody said, “Oh. So, you have all of the regulatory environments set up. You have the [39:53]. You have the reinsurance contract. You have these, these. You have your own claim center.” All of these became massive motes which basically elevated the evaluation and the appropriateness of the company.
Alejandro: How much capital have you guys raised to date?
Assaf Wand: We raised 190 million dollars up until now. We finished our C Round, around October. That was a 70-million-dollar round.
Alejandro: Really cool. I see there DGV, Felicis, Comcast, Horizon, Sinai Ventures, I know these guys; good people—Fifth Wall and Propel Venture Partners. Look, you’re a foreigner just like myself as well, and you’ve got to build your network. Also, when I came here, I had no idea who to go to and how to do it. How did you get in front of these people, and how did you close it?
Assaf Wand: I’m good at clawing my way into meetings that I need to come into.
Alejandro: Any lessons learned there perhaps that you can share for people that are in the same shoes that you are in?
Assaf Wand: I think VCs is the people business, and I think networking is the very overly-used word. I think the real networking is about depth rather than fret. It’s about finding people that you like and staying in touch with them. You bring them value, and they bring you value as well. I have a lot of investors that I pitched a company early on, and it didn’t go with the investment, but I appreciate their way of thinking. They were honest, and we stayed in touch. A lot of them are good friends of mine now. A lot of the leads that we’re getting later on are from them. So, it’s people that basically didn’t invest in me in, let’s say the Seed or the A Round. It’s not their fault that they didn’t do the B and C Rounds, but they’re a really strong lead gen for me to basically contact people that are doing B and C Rounds, and saying something like, “You should meet our staff. We messed up, and we didn’t invest in the company early on, but I really should take a look at it.” It’s a very strong endorsement when it comes from the right people.
Alejandro: Yeah. I hear you What, for example, operating in an industry—insurance is really heavily regulated. What would you say is the biggest challenge that really you have to deal with?
Assaf Wand: The challenge with insurance is that there’s no one challenge. Now, the challenges are not that high, but there are 50 of them. I think that’s where the problem—so, it’s not a technology thing whether I can do something—I’m not reinventing insurance from scratch. I’m not saying that everybody’s name that’s Alejandro and has a Spanish accent, I’m going to give them a 25% discount. It’s not that I’m reinventing the entire thing, but I’m improving every component to basically do a better call center, a better underwriting, a better experience, a better in everything. Some of them are 10% better. Some of them are 3X better. For me, the number one thing that enables you to do any [43:08] is realignment on the customer. I think the industry forgot who the customers are. For 100 years, the customers were basically agents, and they need to appease the agents and give them tools and give them the right kind of term, and they forgot that the actual customer is the end customer which is the person actually buying the insurance, which an insurance that you’re on, it doesn’t even call it a customer. It’s called a policyholder. I think that’s a f*** process. We brought back the focus on what does Alejandro need as a customer? How can we help give you the product that you need to have? Our making sure that you’re insured for what you should be insured for? What other services can I give you? We’re helping customers with a lot of more active services. We send someone to clean your gutters once a year. Check your air filters. Make sure that your plumbing system is intact. We send you key duplicates. We’ll send a an IoT device catered to water leaks and stuff like that. It’s about enhancing the relationship we offer the customers while bringing you significant value.
Alejandro: And during this process of redeveloping and embracing the customer experience, and doing that customer development side which is critical, and obviously, you guys take it seriously, has there been in your journey as an entrepreneur like a breakthrough moment that you’re like, “Yes. I’ve got to take care of the customers, and here’s how I need to be doing it.”
Assaf Wand: No, no. We started with the customer as the focus. There was never a breakthrough moment. It about: the customer is the focus, and let’s see what we can do. Now, there were different thought processes that kept on moving. In the beginning, when we were brainstorming, we said, “Let’s not sell Alejandro insurance at all. Let’s sell you a complete package of IoT device, and by the way, let’s throw in insurance as a side folder. We were trying to play with that kind of thought processes, and then we realized that regulation and all kinds of stuff come into the mix, and cost, and then the world of hardware comes into place, well data. But the process and the thought was from the get-go, the current experience that you have is crappy, and we can change this entire thing and do it better in a more cost-efficient way, and take care of our customers in a way better aspect. Our NPS score is 80. Our call center is being measured on NPS first. Everything that we’re doing is customer-centric, and how do we take care of our customer and bring them more value?
Alejandro: How big is Hippo Insurance today?
Assaf Wand: Hippo has just north of 100 employees. We have two offices. We have an Austin office, which I think is about 60 people, and then we have a Mountain View office which is around 45ish, it might have moved by hiring a couple of people in the last week or so. We are covering 16 states in the U.S. which is north of 50% of the U.S. coverage-wise of population. Company still grows at the crazy pace of like 15 to 20% month on month. That’s basically it. We have tens of thousands of customers and growing really, really fast, and loving it.
Alejandro: Really cool. What does the future, that world where the vision of Hippo is completely realized? What does that world look like?
Assaf Wand: We usually have a saying that we start with world domination, and then we go from there.
Alejandro: I love it.
Assaf Wand: The idea is this. Home insurance with all of its flavor like condo insurance and investment properties and stuff like that, and renters is something in the region of 100-million-dollar market, and it closed at 45%. We are tiny. We haven’t even started scratching the surface. I think we can be a top five insurance provider in the U.S., and until we are going to reach close to these things, that’s what we’re going to focus on, on home insurance and being the best home insurance company in the world. We have a long way to go to get there, but we are very certain that we have the right blueprint on how to get there.
Alejandro: Really cool. Someone like you, Assaf, you’ve been around the block, you’ve been on every single side of the table. I mean, every single side of the world too. It’s unbelievable, your experience. There’s one question that I always ask the guests that I have on the show, and that is, knowing what you know now if you could go back to the past and give yourself one piece of advice to your younger self before launching a business, what would that be and why?
Assaf Wand: I think what I basically said. If you’re working on solving a problem, solve the biggest problem you can. There’s no use to sit down and think of incremental small things. If you’re committing your life to something, which what entrepreneurship is, commit it to something big.
Alejandro: I love it. So, Assaf, what is the best way for folks that are listening to reach out and say hi?
Assaf Wand: I have my email. It’s [email protected] We believe in karma. We believe in helping wherever we can at any given point. I think this is one of the things that makes Silicon Valley, Silicon Valley that people are approachable and will help you, and it’s not [48:54] kind of environment, so feel free to reach out to me.
Alejandro: I love it. Paying it forward. Assaf, thank you so much for being on the DealMakers show today. Really appreciate it.
Assaf Wand: Thanks for having me, Alejandro. Thanks so much.
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