Victor Gutwein is the founder and managing director of M25, a Midwest-focused VC firm targeting early-stage tech companies. Over the past few years, Victor has invested in over 50 startups in 10 Midwest states. Here, Victor writes every month to share his thoughts from his travels and experiences working with founders, VCs and others in the region.
Earlier this month, Techstars announced the launch of an insurance-focused accelerator based in North Carolina’s research triangle, in partnership with MetLife. I’m really excited for this program, as I’m not only confident in the Managing Director (a friend of mine), but I also think it is primetime for insurtech to drastically improve this massive, outdated industry. However, I also saw this as a huge missed opportunity for the Midwest tech ecosystem.
Our region has already poached Techstars programs for other industries with clear comparative advantages – Mobility in Detroit, both Food & Ag and Retail in Minneapolis. And we have a host of other quality, non-Techstars accelerators based off our strengths: the Brandery for B2C in Cincinnati, SixThirty for Fintech, Yield Lab for Agtech and Stadia for Sports tech all in St. Louis, ElmSpring for Real Estate tech in Chicago, Seamless for IoT in Grand Rapids and Fintech71 for Fintech in Columbus.
Admittedly one reason we may have missed out on the Techstars Insurtech Accelerator is that we already have a strong non-Techstars accelerator in this space – the Global Insurance Accelerator based in Des Moines. This program has had annual cohorts since 2015 and is backed by 15 insurance companies – including giants like Allstate and Principal. The cohorts are truly global and seemed to have produced successful graduates, though it’s a bit too early to tell.
But it still feels weird that North Carolina snagged this Techstars accelerator when I think about the dominance of the Midwest insurance industry on a national scale. While NYC and Hartford (the latter being a declining former “Insurance Capital of the World” – losing ground to Des Moines and other Midwest cities) still host many US headquarters, a plurality of this enormous industry is based in the Midwest. Let’s list off a few of these giants:
- State Farm – Bloomington, IL
- Allstate – Chicago, IL
- Berkshire Hathaway – Omaha, NE
- Progressive – Cleveland, OH
- Nationwide – Columbus, OH
- CNA – Chicago, IL
- American Family – Madison, WI
- Allianz US – Minneapolis, MN
- Principal – Des Moines, IA
- Northwestern Mutual – Milwaukee, WI
- United Health – Minneapolis, MN
- Anthem – Indianapolis, IN
- Humana – Louisville, KY
- HCSC – Chicago, IL
I could go on but I think the picture is clear – the Midwest does insurance. Many of these behemoths have poured money through indirect and direct VC investments, innovation departments and more. Many have supported innovation in the industry they sell to (e.g. BCBS Illinois backs MATTER, MunichRE backs Techstars Mobility.) Some have launched corporate VCs (e.g. Assurity Ventures launched in 2017). Most actively seek to partner with and support early-stage startups, both to get a leg up on changing trends and to encourage their stereotypically complacent, comfortable work culture to think outside the actuarial tables. Yet others will be actively resistant or just too slow and ultimately have their lunch eaten.
The fact is that the scale of the market – and size of the prize – is enormous. For the average American, after housing, insurance (including healthcare) rivals spending on both food and transportation. Big markets that haven’t yet adopted technology are magnets for VC dollars, and we’ve seen a flurry of funding rounds recently for innovation in all categories – Kin for home insurance, Clearcover and Root Insurance for auto, Datacubes for business, HealthJoy for health and Upsie for consumer warranties.
The Midwest will have an edge when it comes to starting and scaling insurtech companies, with superiority in industry talent, access to more partners, and low operating costs to ride out long sales cycles.
This edge will help generate the next iteration of innovation in the industry, continuing the growing trend towards the insurance concentrating in the Midwest. While we won’t have the valuable Techstars network spurring this along, that won’t make or break our region’s chance of success in an industry this massive and complex. We may have missed out on this one, but North Carolina probably needed it more anyway 😜