Reinventing Small Business Insurance - Interview with Bunker CEO Chad Nitschke
In this interview, Chad Nitschke, CEO of Bunker shares his motivation for reinventing small business insurance and what he learned from raising over $10M in funding. He previously spent 15 years as an executive in the insurance industry but eventually left because he felt frustrated with the lack of change in the industry. He immersed himself in the startup ecosystem and finally decided to launch Bunker, the first contract-related insurance marketplace for contractors and small businesses.
What problem did you set out to solve when founding Bunker? And why do contractors need insurance?
Ultimately, we set out to reinvent small business insurance and quickly learned the catalyst for 90% of small businesses purchasing insurance was a contract. We spent months researching that process from start to finish. What does the contractor or small business need, and who is requiring them to carry insurance? We learned the pain points aren't just for the contractor or small business but also the organization requiring insurance. They have to track compliance at scale, which is complicated.
In many cases the contractors and small businesses aren't solving for an 'insurance' problem, it's more so a 'sign a client agreement' or 'sign a lease' problem, and insurance is the solution. Once we understood the problem we were solving for more clearly, our mission became “remove insurance as a barrier to contracts by embedding it into the process”. This removes friction and improves the process for everyone involved, literally saving hours and days of time for those involved. We also heard contractors were cancelling and then repurchasing insurance based on contracts, and that led to Bunker building better insurance products - launching the first usage-based general and professional liability policy.
Bunker has raised a total of $8 million over 3 funding rounds and you have launched your own VC firm supporting Insurtech companies. Can you tell us more about the funding process for Bunker and what advice would you give to future Insurtech companies looking to raise capital?
We've actually raised just over $10M so far. The fundraising process, in particular, has been a really great learning experience. While I'm really happy with the outcome, there are countless things I'd do differently and mistakes I won't make the next time around. One piece of feedback I wish I had when I started is that it's really helpful to understand the investor psyche. Investors rarely say 'yes' or 'no', the answer is generally somewhere in-between. If you conclude an investor meeting and they say, 'We love what you're doing, definitely keep us posted on how things develop', the translation to this is generally, 'We probably won't invest, but we're also not shutting the door completely - just in case you become the next unicorn'.
Conversely, if you conclude a meeting and there is some sort of next step by the investor (i.e. a meeting, request for information, etc.), then you know there is genuine interest. Founders are better off focusing on spending time converting the latter group into a term sheet vs. the former. I want to be clear, my comments aren't intended to be negative towards investors, they are just optimizing for optionality, which is why they rarely give you a firm 'no'. I only had a few quick negative responses in the beginning. At the time I was upset, but now I look back and I’m grateful, they are just giving you back more time to find the investors that are right for you and what you're building.
How have you managed to scale and expand your company? And how is it different to make insurance focused on contractors compared to other parts of the insurance industry?
One thing we talk about as a company is that we've evolved from 'building a great product' to 'building a great company'. This is important as it relates to scaling and expanding. In the beginning, you really just need to focus on building a great product and finding product/market fit. That's generally 100% of the focus. Once you've done that, then it's important to shift the mindset from 'building a great product' to 'building a great company'. You still need a great product to have a great company, but you also need quite a few other things to work well.
Everything ultimately comes down to execution, and in order to execute effectively, you need a great team. Does everyone understand the mission, and do they tie priorities back to it? Does everyone understand what the company goals are, and how they individually are supposed to contribute to those goals? One other area in particular we focused on as we made that shift is culture. We tend to think of culture in the same way that we think of equity. The sooner you start with a company, the more equity you typically have. The same can be said for culture. Your culture is ultimately created by your team. You as a team member can own or contribute a greater share to that culture if you're employee 25 versus employee 250. It's important to talk about culture, particularly in the early days - when employees can really help shape it. It's both an opportunity and a responsibility. It's harder to shape the culture you want when you have 250 employees vs. 25.
Looking at your LinkedIn profile, you have just launched a VC firm called “Insure.VC”, the first angel fund focused exclusively on insurtech. Can you tell us more about that and how you see the future of Insurtech in terms of Venture Capital?
Living in San Francisco, it's difficult to not get pulled into innovation, or at the very least curiosity to learn more. Shortly after we moved to the city (but before starting Bunker), I started to meet entrepreneurs and others in that ecosystem, in some cases more on a personal level. I'd say at that point it was a push-pull. I was definitely pulled into and curious to learn more about innovation. I would also say I was pushed into having a thirst for that, considering the industry I had operated in (insurance) was desperately lacking positive change, and I was frustrated. Before the broader insurtech movement started I began making small investments in startups from a variety of industries, initially it was more as a means to learn and broaden my network. After I made about 15 investments, I started to connect with some insurtech entrepreneurs. This was back in late 2014/early 2015, and while there wasn't much going on back then, there were some early movers. During that time, I heard several founders complain about the fundraising process, saying VCs didn't understand the industry. I actually believe that has changed quite a bit today, but it was more or less a true statement back in 2015. I saw that as an opportunity, I could form an angel fund with a brand, making investments, but also hopefully adding domain expertise to the startups Insure.VC invested in. I'd like to say we were smart, but part of it just came down to good timing. We launched the fund in early 2015, and later that year the insurtech movement really started to get some tailwind. We've never looked back since and while I'm now 110% focused on being an operator (hence the portfolio on our site not being up to date), I still make investments from time to time when I am fortunate enough to connect with amazing founders.
How do you plan to evolve Bunker in the future? Are you planning to utilize emerging technologies or launch new initiatives?
Our mission is to embed insurance into the contracting process, ultimately removing insurance as a barrier. Today there is this massive network that exists, PDF certificates of insurance being emailed back and forth, billions of data points each year. While it's a terrible way to solve for the 'proof of insurance' problem, it's ultimately an opportunity for Bunker. We're starting with a more acute focus on the on-demand/gig economy space, but already moving into more verticals. We just launched our Live COI, and now we're the only insurtech that offers this, along with a compliance dashboard. If Google's mission is to organize the world's data, ours is to do this for COIs, ultimately making it simple and easy for everyone involved, whether you require insurance or need to show proof of it.
Hear More About Bunker
Chad will be speaking at Insurtech Insights Europe 2019 in March where he will be joined by more than 2,000 insurance entrepreneurs, executives, and investors. He will be speaking about the value of partnerships in insurance. Learn more here.