American Family Ventures exec speaks about how the fund picks startup insurtechs to back

December 26, 2023 6:44 AM

di-amfam-american-family-office-020222 — American Family employees work at the company’s Madison, Wisc., Spark building.

Brittany Clements, managing director at American Family Ventures (AFV), the venture capital investment arm of American Family Insurance, looks for insurtech companies to invest in and support. AFV started in 2010 and now has 29 companies in its portfolio. Clements began her role in April 2022, joining from Allianz, where she spent six years building its venture capital investment business and choosing insurtechs to support. She began her career in accounting, but as she says, was always drawn to entrepreneurship. After starting out at Deloitte, she got into the venture capital business before joining Allianz. Digital Insurance spoke with Clements about the launch of AFV's newest $444 million fund in August, its fourth, and the startups AFV has backed.

What are your criteria for evaluating a potential investment?

Brittany Clements of American Family Ventures — Brittany Clements, managing director at American Family Ventures (AFV).

When I look at companies today, I usually start with what problems they are solving. That translates back to the financials. On the front end, are they helping drive premium growth with retention? On the top line perspective, are they helping with loss ratios and better understanding risk? Are they helping drive operational efficiencies that would ultimately help operating profit? I still stick to my original accounting roots in some of the work that I do today, and definitely like to take an analytical approach.

A lot of companies, when you peel back the layers a little bit, you can draw direct correlations to how they ultimately impact part of the insurance value chain or financial statements. Some of the most exciting companies actually have impact on both sides of the lens, and maybe impact multiple elements.

AFV is really focused on investing in early stage startups, which we define as everything from incubation to early growth. Those lines have blurred over the years. It's a pretty broad spectrum, but it's really all aspects of the insurance value chain and all different lines of insurance as well. We focus on some adjacent areas, like broader enterprise software technologies that are relevant across a number of industries. For example, we recently invested in Entrio, an AI platform for tech stack optimization.

Other things intersect or could have significant impact on the insurance industry, like climate or healthcare. In life insurance, healthcare is obviously really important when it comes to mortality and longevity risks that are the core risks in that side of the equation.

When you arrived at AFV, what were its challenges?

I joined an already established fund. Dan Reed is the founder of the fund and has done a great job leading the ship for the past decade-plus. What drew me to American Family was more the opportunity versus challenges of coming in to fix anything. AFV spans different distribution channels, different product lines, lines of insurance and geographies. It is a really exciting opportunity for me to focus on my expertise in the life sector that's additive to my partners around the table, but also to build some muscle in some of these other areas and play a small role in the transformation of what's happening across the insurance industry today.

What insurance functions have the most potential for an innovative startup insurtech solution?

There's been a shift over the past couple of years. I would speak to partnership and collaboration. In some of the early days of the insurtech category, there was a lot more emphasis on disruption and direct-to-consumer players going out there and competing head to head with incumbents. We've definitely seen a shift more towards organizations playing to their strengths and partnering versus disruption. There's certainly been this swing from D2C-focused businesses more towards a B2B focus.

A lot of that was spurred from this realization that growth isn't necessarily the hard part. Incumbents have a lot of staying power due to scale, risk management expertise and the robust distribution that they have in place. A lot of the startups that we backed and continue to see are now focused more on, instead of outright disruption, how to partner with these incumbents to help them win, to help us win. That's a really smart approach.

Will the partnering approach continue or will waves of disruption return?

It will be interesting to see how everything plays out, but it's the right approach. The insurance industry is massive when you look at annual premium and overall market sizing. The margins mean there's not a ton of room for error. By playing to strengths, whether in distribution or creating operating efficiencies, folks stand to win a lot.

What are your plans for the future of the fund?

I feel very excited about how we're positioned in market today. We have a distributed team of 12 investors located throughout the U.S. And our goal is really to be good at this job. Our goal is to turn over every rock within this category, and make the very best investments that we can to drive strong financial returns. We're pretty well positioned on that front both from the size of our team and the capital we have to deploy into these innovative startups that are operating in this space. Right now, we are really heads down in navigating the market, ultimately building relationships and trying to find some of those great insurance startups that are ultimately going to be winners within the category. So I don't think there's any big groundbreaking shifts or changes. It's execution mode for us right now.