Just Getting Started
By Spike Lipkin | Published October 20, 2020
Creating a successful new business is hard in any industry, but in insurance it’s an especially daunting challenge. You need a world-class team, a differentiated product, and deeply supportive and patient carrier partners. Even with all of that, you need a healthy serving of luck.
At Newfront, we’ve been incredibly fortunate to have all of those ingredients. And while we’re still a long way off from achieving our ambitions, today is an important milestone. We've spent the last three years focusing on building a strong business, and today we're announcing that we’ve raised more than $100MM to date, most recently at a $500MM valuation. Founders Fund and Meritech Capital are our lead investors. A full list of investors is here.
While our journey is far from over, this has certainly been a time for us to pause and reflect on how far we’ve come. My own story with insurance began early in my career. I was lucky to help build two highly successful companies (Invitation Homes and Opendoor) and in both cases I was tasked with handling our property and casualty insurance. While happy to take care of something as critical as mitigating existential risk, I was stunned by the archaic and confusing process. I filled out mountains of paperwork, waited for weeks, and then received back wildly different options that were nearly impossible to compare. There was no clear dataset to help me understand which carriers to approach, which coverages to seek, or how peer businesses were buying. The process repeated each year, and was even worse when dealing with claims.
As a businessperson, it shocked me that the safety net so crucial to a functioning economy, innovation, and entrepreneurship could be so broken. I dug in and found that I wasn’t alone in feeling the pain. My co-founder Gordon, an MIT grad who built a startup acquired by LinkedIn, had dealt with the pain of buying insurance for his company. For too many business owners, dealing with insurance has become an unpleasant, almost unbearable process. For insurance industry professionals, doing their jobs has become tedious, with the productivity gains made in other industries passing them by, forcing longer hours for lower pay. For industry leaders, attracting high-quality talent to the industry has become an existential challenge. I became obsessed with the idea of modernizing the industry by empowering the people at its core with purpose-built technology.
Gordon and I launched Newfront in 2017, a year in which several startups were attracting huge investments with a goal of eliminating insurance brokers. We were convinced that their approach was dead wrong. We had already spent countless hours with CFOs, GCs, risk managers, and business owners and concluded that skilled insurance brokers are a foundational requirement for high-quality risk mitigation. The problem wasn’t the broker, it was the brokerage. The typical brokerage forced brokers to behave like data collection and paperwork processing machines, preventing them from deepening their skills or providing expert advice. The brokerages had abandoned their brokers. We resolved to do something about that.
But first we needed to learn what had gone wrong. Why had brokerages fallen so far behind the innovation curve? Why was the average net promoter score for brokerages sitting at a dismal 17 (with 100 being the best)? Why weren’t brokers given the tools that they needed? It didn’t take long to learn that many of these changes resulted from the rise of private equity within the industry. Over a dozen years, private equity funds had purchased thousands of brokerages around the United States with an exclusive focus on generating short-term gains for their investors, rather than long term value for clients. These funds, which operate on short investment windows, do not have the time or incentive to make material investments in technology, the client experience, or tools to support brokers.
Our model is different. We have the resources, commitment, and know-how to create the brokerage that is truly built for the 21st century. A brokerage where we build our own technology and software in-house, where innovation is our mantra, and where improving outcomes and experiences for our clients is an obsession. While we’ve learned a great deal over the past three years (and made plenty of mistakes along the way!), our founding thesis hasn’t changed -- that the future of our industry combines experts with technology to better serve clients.
Today we are a team of nearly 200, proudly serving over 5,000 clients across nearly every industry. While we are still only beginning our journey, our book already puts us in the top 100 brokerages in America. And we’re just getting started.
Spike Lipkin is the CEO and Co-founder of Newfront. Prior to Newfront he was one of the first employees at Opendoor, where he helped grow a five-person company into a business currently valued at more than $3 billion. Prior to Opendoor, Spike was an investor at Blackstone, where he served on the startup team that built Invitation Homes into the largest owner of single family real estate in the United States.Connect on LinkedIn