Lessons for fintechs and insurtechs. 

For fintechs that predict rapid growth there is the fact that challenger banks and fintechs are not a new phenomena. They have been around a long time and as with Egg there have been many failures.

Insurtechs are a more recent wave of innovative technologies but even so many of the current crop have been around for ten years or so. Most are struggling to get the critical mass of pragmatic buyers and many can be bamboozled by early successes.

"In early companies, the joy of the first 12 customers is euphoric until you learn that they often have grandiose visions of super software so much bigger than yours that you are just a means to their delusional end. I’ve heard this first group of 12 called the dirty dozen and notions that you’ll likely have to fire half of them over time before their daily demands sink you. This is a pretty negative characterization of a real phenomenon. In reality, we should really love our early adopters, as they take a risk on our fledgling solutions, but we need to realize that we are somewhat at cross purposes. ".

Ken Pulverman in "Chasm Don’t Lie: The Reality of the Chasm Model Applies to All Companies Even in a World of Product-Led Growth" Feb 26th 2021

How many insurtechs have that magic 12 to 20 great logos on their client wall? But just find it so hard to find the critical mass of pragmatic buyers that are the critical success factors to viability.

 “Egg was massively punching above its weight and making the rest of the market sit up and take notice in the UK,” one former employee recalls. “Being part of Egg was like being part of a movement. We really believed we were changing things for the better.”

Nicholas Megaw in FT 22nd March, 2021

How many insurtechs are in that same mould today?

As Pulverman says; "Another phenomenon that pervades early tech are companies that think they have crossed the chasm, but haven’t."

It is not for nothing that Geoffrey Moore made such an impact with "Crossing the Chasm".  Pulverman continues.

"Rather than get punch drunk staring at the revered names on your logo wall, catalogue who is actually buying.

So, if you’re in a cash rich, overgrown B round company with the swagger of a D round or a D round company that secretly knows it hasn’t passed the expectation of the B round, what should you do about it to avoid hitting the bottom of the crevasse? I say get religion. Return to Chasm. Rather than get punch drunk staring at the revered names on your logo wall, catalogue who is actually buying. Get real about what features a large, pragmatic buyer needs to be successful. If you have a thin integration layer, your admin features are weak, or your security is rudimentary, look for cracks in the ground ahead of you. The chasm is coming.

Don’t increase your burn. Don’t blow out your marketing budget. Build for the buyer personas you need to buy your solution to create a long-term impact on the world. "

Megaw sums up.

"Fintechs learned this lesson when the coronavirus pandemic struck last year; new venture capital funding dried up and existing investors pushed a greater focus on cutting costs and finding a route to profitability.   Established high street banks responded to internet banks by ramping up investment in their own online offerings. They have done the same since the launch of the app-based banks, betting that the combination of digital competence and traditional branch and phone networks will give them the edge. How far that argument still stands will be a key factor determining whether modern fintechs can succeed where their predecessors failed."

The same applies to incumbent carriers and brokers when it comes to insurance. They are betting that the combination of digital competence and traditional direct and broker lead distribution will give them the edge. 

Where are you placing your bets? If you are an insurtech can you answer this statement from Pulverman?

 "Another phenomenon that pervades early tech are companies that think they have crossed the chasm, but haven’t. "