Many service companies, like insurance agencies, law firms and accounting firms, dream of working with the next big technology company. But the work required to land the next Google or Facebook starts early for insurance agents. 

In the latest Cheatham Chats, I spoke with agent Travis Holt about the current state of technology companies and how he began working with the industry. Holt is the Co-Founder and Managing Partner of Brush Creek Partners, an insurance agency recently acquired by Baldwin Risk Partners. During the conversation, three trends emerged (plus a bonus insight from me): 

It’s a tough time to work with startups 

The technology market has cooled off from the highs it reached in 2021. This chart shows the stock performance of the big five technology companies (“FAANG”), which includes a dip in 2022 (subscription req.): 

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Holt works with many venture capital and private equity firms, along with technology companies. And while he was quick to mention that financing rounds are still occurring, the current overall economic trends will create difficulties for many companies that were anticipating a financing round. For any agent working with technology companies, it's important to evaluate new risks that emerge when capital markets shift. For example, many technology companies are accepting “down rounds” (financing based on lower valuations) and laying off employees. These circumstances can lead to insurance claims and lawsuits against directors and officers, or by terminated employees against the company. 

Insurance is not important until it is 

When a startup first launches, it may not need insurance; an idea being incubated does not necessarily create insurable risk. But Holt was quick to point out that an idea can quickly transform into a company and unexpected risks will evolve rapidly. Agents should proactively work to identify these risks. 

According to Holt, “(a) lot of the work with early stage technology companies is about helping them minimize cost and meet contractual requirements. . . These businesses evolve and move so rapidly that you can’t just wait until somebody’s insurance renewal to have the discussion on an annual basis around what they need.” 

Holt described one scenario where a technology company signed an enterprise contract and then approached him to get insurance required by the contractual terms. Holt had to explain to the company that the price of the insurance would exceed the value of the contract. If agents and technology companies work together early, they can manage contractual terms that impact insurance. 

Agents can win big with startups 

As I interviewed Holt, I was struck by how some agents can win big if they focus on the technology sector for years. Holt’s journey is an example of the natural progression that occurs if you start working with technology companies. This is how I see the progression of representing technology companies: 

Startup → Funded Company → IPO or Acquisition → Private Equity and Venture Capital Portfolios 

I’ll use my previous company, RiskGenius, as an example. First, it was an idea, then we created a company. Years later, we received financial support from venture capitalists. Eventually we were acquired by another company; by the end, we had many venture capital firms involved in our transaction. For the service professional working alongside a technology company, each of these events is an opportunity to start working larger opportunities. For example, Holt began working with startups and now works with billion dollar private equity firms. 

Technology Companies Expect You To Use Technology 

Finally, I would be remiss if I didn’t mention that technology companies expect their insurance agents to use technology for quoting and binding insurance. I can still recall the day that an insurance agent handed me a printed out ACORD form and asked me to fill it out with no guidance. Not only did I not know how to report on EBITDA (we were a tech company!), but I couldn’t believe I was completing a paper application. 

The forward-thinking agent will use technology, like a Bold Penguin Terminal, to quote and bind commercial insurance. Better yet, many technology companies will want to start the quoting process themselves before engaging with an agent to understand options. With Bold Penguin Storefront Pro, agents can direct these technology companies to a central quoting platform. 

If you have any questions about this webinar, the topics discussed, or these products, please reach out.