Firemark Ventures, the strategic corporate venture capital (CVC) fund of Australia and New Zealand’s largest general insurer IAG, was conceived with a key purpose – to connect the startup with the corporate and create mutual value. “We don’t just say it, we actually do it,” asserts General Partner Scott Gunther. “We know we don’t have all the answers, but we are identifying, investing and leveraging startups with the best teams, data and technology to transform the future of risk management & insurance by improving the customer experience and our product & service offerings.”
Disrupting to innovate
A mature insurance business with a massive customer base, IAG had legacy processes and systems that were limiting its ability to evolve at pace; it was time to transform. “Significant investment in this area was prioritised to simplify and upgrade our systems and the digital services needed to support our customers,” highlights Gunther.
In addition to its digital transformation agenda, IAG invested to build its venturing capability in order to respond to disruptive trends, provide greater access to data, and embrace the emergence of new technologies. In October 2016, the inaugural $75mn allocation was approved and the IAG Firemark Ventures CVC Fund was born. “Ultimately, you either disrupt yourself or you get disrupted. When it comes to onboarding transformative technologies within enterprises, you either build it, buy it or partner to get it. We’ve learned that investing in startups allows us to innovate rapidly, and at scale, to meet the demands of changing customer behaviours,” identifies Gunther.
CVC Strategy
“Firemark Ventures is not a financial CVC but a strategic one,” notes Gunther. “Yes, it’s important to ensure we are making sound financial decisions, but our primary goal is to ensure our investments have an inherent strategic focus.”
Creating value through digital is a key pillar of IAG’s strategy, he explains. “We’re driving to be ‘digital to the core’ by creating a connected Customer Experience (CX) that seamlessly assists and rewards our customers no matter where they interact with us. This also includes re-architecting our platforms and using intelligent automation to capture that value.”
To date, Firemark has made 32 investments across 17 portfolio companies, including three exits and two IPOs. “Following successful internal trials, we have embedded 13 new technology and data capabilities within IAG backed by commercial agreements with nine portfolio companies each delivering value back into the business,” notes Gunther.
“Each opportunity is assessed against a clearly defined mandate. It not only helps focus on what we invest in, but just as crucially, and perhaps more importantly, what we ‘don’t’ invest in!
“The specific benefits delivered through our venturing activity include access to information rights and specialist resources, trials and experiments of emerging technologies, data sharing arrangements to access unique data assets, market leading pricing and discounts, and the co-design of new capabilities for IAG,” offers Gunther. “Most importantly we ensure the learnings from all our activities are shared and communicated back into the different areas of IAG. We’ve got to be opportunistic about making the right bets. If you can truly appreciate the business problems and opportunities that your core business is experiencing, you’re actually bringing the right services and the right solutions, data and business models to the table.”
Startup mentality
Gunther believes it’s important for Firemark to think and work like a startup to support early stage businesses. “We wear many different hats – the investor, the customer, and the strategic advisor,” he says.
“An old mentor, and the original founder of Firemark Ventures, always taught myself and our Head of Deal Flow, Mike Dovey, and our Head of Investments, Brad Armstrong, about the value of partnering with startups to help them be ‘corporate ready’. Not many startups are successful in traversing, engaging and executing commercial corporate deals. Mike, Brad and the entire Ventures team champion this. They understand our portfolio companies’ growth is intrinsically linked to our success – both strategically as they develop more innovative capabilities, and financially as their valuations increase. We don’t act and operate just like a startup to be successful as a CVC; we also help the different functional areas of IAG to think this way by accessing the tools to transform their business units.”
Committed to growing startups into scaleups, the Ventures team offers Portfolio Management Services including strategic advice, business consultancy, shared services support and lead generation opportunities, along with networking and mentoring to portfolio companies’ leadership teams and boards. This includes product development, B2B/enterprise sales, capital management, strategy refresh, KPI and performance tracking, along with support on people and culture, and executive and leadership team advisory services.
Fund 2
Based on Ventures prior performance, the IAG Board approved an additional $75mn capital allocation in June ‘21. Fund 2 builds on the strategic and financial success of the past five years. “Since the new Fund was established, we’ve already made some key investments in impressive computer vision and imagery and digital ID technologies,” reveals Gunther. “US-based startup Plnar was our first new investment. Plnar is an AI and Computer Vision platform gathering complete 3D measured models of the interior of properties – all generated from smartphone photos and videos. It’s already made a big impact with many insurers across the US market, and we are keen to bring Plnar to Australia and New Zealand to support our customers.”
Excited for the future, Gunther believes that just as Firemark is helping its investments grow from ‘startup to scaleup’ the recently launched Fund 2 is also helping Firemark itself grow and mature. “We have established a new model for determining how and when to exit portfolio companies,” he adds. “To provide more granular value and capture metrics, we have developed a new strategic benefits realisation tracking model.” In pursuit of those strategic benefits Fund 2 included the launch of Firemark’s Early Stage Program (ESP), focusing on Pre-Series A emerging Horizon Three technologies. “Our first ESP investment was made in September,” says Gunther. “It’s an exciting time for CVCs, forward looking deal flow in new technologies and emerging business models is rich with potential.”
Diversity
Underpinning Firemark’s efforts is a diverse and talented team. “There’s no escaping the fact venture capital is a middle-aged and male dominated industry,” reflects Gunther. “Diversity of all types underpins the Collective’s activity. We have recently made three new hires to our CVC – employing our first female VC executive. Rebecca Schot-Guppy, most recently the CEO of FinTech Australia, has joined Ventures as our Head of Portfolio Management. We are adding talent outside of Insurance – our new Executive General Manager of the Firemark Collective, Scott Bishop, is the former Chief Innovation Officer of Z-Energy and is ex-Amazon and Microsoft. We are also thrilled to welcome a new female investment analyst working with us in our Singapore office. The mix of personnel, their specialist skills and broad experiences is important for us to successfully manage the additional fund and the increasing size of our portfolio.”
The rise of the work from home/work from anywhere dynamic, allied to the acceleration of digital adoption during the pandemic, is also supporting Firemark’s diversity push and helping it navigate the war on talent which is seeing digital engineers paid as much as C-suite executives. The Firemark Collective has leaders based in Auckland, Melbourne, Sydney and Singapore. “It’s a big challenge for many startups to attract, retain, and develop the best talent,” adds Gunther. “Widening our recruitment pool beyond Melbourne via remote working has offered the opportunity to reset and think global to attract the best talent because now it doesn’t matter where you’re based.”
Open for Business
Gunther is keen to invest in people and while he believes that face-to-face human interaction is still the most powerful, the rise of virtual engagements can provide incredible benefits. “Despite the pandemic, we’ve been able to bring the entire startup team to the entire Ventures team without barriers or hierarchies. So, while we didn’t get the chance to have the big events or international deal flow sourcing visits, we actually flipped the situation on its head and made this an opportunity to meet with more startups more often than we did before the global lockdowns.”
Staying resilient and open for business, Firemark heads into 2022 embracing the digital connections set to open its deal flow opportunities in Horizon Three technologies from the UK, Europe, Israel, South East Asia and of course, the US. So, what are the key trends Firemark will be focused on? “Data might be the new oil but specifically integrating your first party data with second party data from a partner or an investment is a critical point of difference for banks and insurers,” says Gunther. “It’s something we’re very focused on at IAG and a game changer for insurance with solutions like Arturo. The ability to commercialise new and innovative sources of data is the next big opportunity for Fintechs and Insurtechs.”
Gunther also sees an opportunity to make home purchases as easy as everyday banking by re-imagining the customer journey. “The process of buying a home might start online researching properties – you make an appointment with the real estate agent to attend an open house, you put an offer on the home, you get your finance approved, then you need to get insurance for the home, and then arrange for legal and conveyancing services to help you complete settlement on the property… It’s such a fragmented space. Fintechs and Insurtechs capable of digitising linear and bespoke customer journeys into seamless and simple customer experiences will have the biggest opportunities ahead.”
Firemark’s quest
Aiming to become the world’s leading insurance CVC by 2025, Gunther knows his team will have to continue to grow and evolve at the same pace as the emerging technology, data and business models they invest in. “We’re always challenging ourselves and our startup portfolio companies; reaching for the next level is part of our DNA.”
Gunther outlines three key areas of focus that will ultimately define Firemark Ventures’ success:
1. Great CVCs have longevity in combined strategic and financial success, and while we are pleased with our trajectory, we aim to raise the bar on our performance. Building the Firemark Collective is a springboard for that growth.
2. We are open to and love working with other insurance CVCs from around the world – sharing insights, deal flow and unique business opportunities. We plan to work closer with more insurance CVCs from across the globe in the future.
3. Leveraging the Firemark Labs function, we have begun to co-develop new products and services with our portfolio companies. Their ability to take these to other insurers around the world, opens up new avenues of growth. We will continue to partner with our portfolio companies on new innovations for insurance.
“Leaders are dealers in hope,” concludes Gunther. It’s a Napoleonic mantra that guides this passionate leader intent on inspiring and painting a picture of the future for his team. “Hiring and putting together the best people to create the best team, allowing them to have a depth and breadth of different investment experiences, and then trusting them with the space to grow and be successful. That’s my goal… results will follow.”
