It's inherently risky to leave a job, hit friends and family up for cash and found a startup. The overwhelming majority startups fail within their first year — and that's during regular years, not ones where a pandemic has rocked the entire world. There's so many things to think about after you've set up the company, but once you've done all that, what if someone breaks into your office in the middle of the night and steals your brand-new venture-funded laptops?
Insurance probably isn't the first thing that jumps to mind for budding entrepreneurs, and it probably won't come up until there's an issue: an aggrieved co-founder wants to split; an employee slips on a puddle; the database gets hacked — all things that could happen that a company needs coverage for.
"The moment where the insurance conversation takes place is different for each founder," said Sam Hodges, the founder of Vouch, a digital-only insurance company for tech startups. Hodges, who himself is a former investor and co-founder of Funding Circle, said that repeat founders often know to get to it off the bat rather than later in the startup process; they know it's as important as setting up your email or opening a bank account. "First-time founders usually have to be told," he said.
Hodges said most insurers aren't geared toward the operating model of tech startups. "The risks of a restaurant or a retailer are wildly different than a tech company's," Hodges said. Some insurers still rely on paper trails, and a traditional broker might have to come to see your business before writing you a policy.
Hodges' own experience with starting companies led him to realize there was a need for an insurer just for tech. He founded Vouch roughly two years ago, and the company has since expanded its insurance offerings to a total of 22 states, including tech hubs like California and Massachusetts (although not Washington state or New York).
Today, the company is announcing that it's expanding beyond early-stage startups it's served so far to serve companies that have raised series B funding rounds and beyond. It will now insure startups with up to 150 employees that have raised as much as $75 million and have sales volumes of less than $35 million. Essentially, the company is growing to meet the needs of some of its earliest clients as they grow. With this change, Vouch says its services are now available to nearly 80% of U.S. venture-backed startups.
"As a company grows from early stage toward increased maturity, the responsibility to build a risk-averse business increases with more stakeholders involved on all sides," Hodges said in a statement.
Vouch launched its first offerings back in August, taking about a year to set up a system that would work for tech startups. The company now offers nine different types of insurance, including property, liability, cyber coverage and employment practices liability. Vouch's proprietary underwriting platform can build a custom pack of insurance policies for a startup in 10 minutes and have them up and running with the policies in less than a day.
"People are expecting consumer-like experiences in business software more and more," Hodges said, and insurance is no different. Why would a digital-only company that communicates through Slack, manages tasks on Trello and relies on Shopify to sell its products want an insurance system that still requires hard copies mailed on paper? Vouch is partnered with trusted brands in the startup universe, like Silicon Valley Bank and Y Combinator — a far cry from the world of claims adjusters and insurance adjusters. Those two organizations also happen to be great funnels for new clients for Vouch, Hodges said.
Hodges said that COVID-19 so far has had limited impact on Vouch's business, as many of the company's clients are able to work remotely. "Companies are still getting formed in this moment," Hodges said. But new challenges will likely arise as a result of the pandemic. And while some legal issues, especially those surrounding the physical office, are on the back burner for some new startups, others — like those around data security in an all-virtual world — are on the rise.
While the road ahead for many startups is still uncertain, as it is for much of the world, Hodges said he hopes Vouch can continue to evolve as the startup landscape does. "It has always been critical for businesses and technology companies to manage risk responsibly — and arguably now more than ever before," he said.