The NFX Podcast

Hippo: From Idea to SPAC with CEO Assaf Wand & Pete Flint

Episode Summary

Insurtech is also a space that has become increasingly crowded and more high-profile in recent years. Hippo Insurance uses technology to help homeowners maintain their properties, creating a new standard of care and protection for homeowners. Hippo announced its intention to go public via SPAC in early March of this year that will now give Hippo a valuation of $5B, making it one of the largest insurtechs in the US. Co-Founder & CEO Assaf Wand sits down with NFX Partner Pete Flint to share his Founder story, product mindset, strategy behind the SPAC, and personal frameworks for taking Hippo from idea to IPO.

Episode Transcription

Pete Flint:

So Assaf, great to have you on the NFX Podcast today. I was thinking back, we first met in 2015, I think it was a lunch we had. And I think Hippo was pre-product. I was fortunate enough to be a teed investor back then. And I sort of reminiscent purposes for this conversation, I pulled back your old deck and it's amazing to see the journey and your observations about the industry back then and how much of it has gone through. I guess, maybe if you could quickly describe where Hippo is today and then, I think most importantly, as you thought about the business back then, what did you see the others did not that created this opportunity?

Assaf Wand:

Yes. Let's dive in. Firstly, so grateful to be in here and very happy to have you as an early investor. I think we were a lot earlier than a free product, it was a presentation. Actually recently sent the presentation, I mean like a couple of months ago, to the exec team. And in many ways it was actually shocking how much it was the same hypothesis and the same kind of what we wanted to build. It's what we built. There was different components that are now haven't materialized as much, but it was about changing and evolving home insurance, building something, building a direct channel.

Assaf Wand:

It was a lot more focused on millennials. I think it was about those new people that are coming into the acquiring of a home. We've realized since then, that it's a way border solution that it's not just catering to a specific demographic. It's actually catering to a way broader demographic. And I think all the time it keeps on evolving. Now our vision at Hippo is we call it protecting the joy of home ownership. So we're moving vertically into home ownership, helping customers better take care of their home. But it's fairly much the same problem and issues that we found back then are still resonating now.

Pete Flint:

I guess, I mean, insurance is not a new industry obviously has been around for centuries. And I guess as you... Going back to the original spark of the idea, what was it you felt that was missing? What was it you felt that you could do better than anyone else?

Assaf Wand:

So I was a consultant with McKinsey in New York and did some projects for financial institutions and insurance companies. And one of the things that is really, really interesting if you're a consultant, is that you're opening the kimono of the potential customers and you're seeing what's going on and I felt it's all broken. It's ridiculous. You couldn't implement anything, you couldn't do anything. So the entire thought of Hippo was a bit trivial event. I was somewhat worried. So I spent a lot of time and we're probably going to talk about it later on coming up with some of the idea, but the gist of the idea came from the fact that the average age of an agent, when I looked at it in 2015, was 58. It's north of 61. Now there are less than half of the agents that used to be 10 years ago.

Assaf Wand:

So they're just retiring. 87% of new agents to the profession are leaving the profession within less than three years. And I thought, think about it, it's like social security. It was not enough people coming in and a lot of people are leaving. So that was the first realization. And then I said, "Okay, let's look at it more in depth." And what I saw is that if no more newcomers are coming to the profession, if no new

agents are joining and the way that the new agents used to build their business is by selling you simple lines in insurance, auto, home, alive, SMB. There needs to be a change, and the change is it's going to be direct. It's not a really massive realization because this is what happened in auto.

Assaf Wand:

The only two carriers that are getting market share in the US are Geico and Progressive, and we thought fine, let's build a Geico for home insurance. And it felt a bit of a trivial. That's not a crazy aha moment. It's like, "Okay, fine." It's a good logic explanation, but there's not a lot of insight in. It is like, I'm sure everybody's know that. If I'm an insurance company, if I'm Liberty and Allstate and State Farm, duh, it's like a trivial moment. So most of the time I spent was actually less on the finding, but more on the trying to figure out what am I missing? Why aren't they doing it. So it was a slightly different introspection.

Pete Flint:

I guess it's like the idea seems so obvious that you wondered why it didn't exist. I guess it's you never underestimate the ability or lack of ability for a big company to innovate and evolve. And is that what you see? In just the incumbents are just like fairly stuck in their ways, in terms of the processes and products that they're offering?

Assaf Wand:

Yeah. It was basically like there were two hurdles on why it hasn't been done. One is from the incumbents and the other one, why haven't I seen 15 different companies or entrepreneurs that are pursuing such fast opportunity. Home insurances, $104 billion market now going at 5% a year, would keep on going for forever, so I thought you're going to see dozens of these companies popping in that stuff. So from the incumbent side, the most interesting industry I've ever seen in my life because I have never seen such a severe channel conflict and innovator's dilemma in any other industry. This is an industry that for 150 years built one channel, and that channel was an agent. But whoa, these agents are 60 now. So what can they do? So if you are a CEO of an insurance company and someone comes and said, "Pete, I want to start a direct insurance company and yeah, it might cannibalize a business but we have to do it."

Assaf Wand:

And what would happen is you're going to say, "Fine, go for it." But you have a $10 billion book of business that is basically sitting with agents and you need to start building something that cannibalize. All of the agents going to say, "Whoa, Pete, what are you doing? This is not the deal that we sign up with. You're supposed to take your marketing dollars and direct to us, not to go and compete with us, not to go to liberty.com and all of that, otherwise we're moving, we're leaving to another company. We're taking our business with us." And no CEO wants to make the decision of a $10 billion versus a billion dollar. And hence, they're all frozen. So that's one. The second thing these guys, they've not set up a technology company, it's a insurance company.

Assaf Wand:

And because of that, there's no CTO. There's no product that builds a product. There's no engineers it's being used by... Guidewire is the backend and someone else is doing the billing and Accenture is doing the implementation. It's not set up in the way that you look as a technology set up hence they're dependent on a third party on the systems, on implementing, on making changes and making product decisions which becomes even more burdensome. And the last thing they have a current book, so if you

state you have, I don't know, $11 billion book of business in home. And the regulation is such that if you want to change something, it requires you to file those 50 department of insurance. You need to file in every state. And if you file something, then you now in the renewal need to actually attribute it to all of the people in that state that are getting renewal.

Assaf Wand:

So if you're doing an amazing job, it means that for 75% of your current business, you're probably going to be cheaper, so let's say, well it's 10% cheaper, and everybody's going to be, "It's awesome, but I just lost $750 million in premium." And for the other 25% which are more expensive, I might capture more revenue, but some of them is going to say, "Whoa, let me check my other options because it's too expensive." So now by you are telling the entire book, you might lose a billion and a half, $2 billion in business. So nobody wants to do it. So there are structural inefficiencies that basically prevent incumbent to compete. And they did it to themselves because for the last 100 years they put all of these barriers of lobbying and regulation and all of that, and now they can compete.

Pete Flint:

So true. And I guess the other piece we didn't mention that was just the data side of things. The insurance is fundamentally a data-driven business in terms of the underwriting, but the data infrastructure in these companies is probably, built for a prior era where they suddenly didn't have the right data or look at it in the right way. Is that something that you've experienced as well?

Assaf Wand:

Yeah. But the interesting thing is, so I actually looked at starting this business in 2007, and I briefly looked at it and I put it on the shelf. And the reason that they put it on the shelf, because I thought one, I can't build the backend. I'm not going to go to Accenture and I'm not going to go to Guidewire. It's going to take me four years and $300 million to build it. And the second thing was lack of data. How can you compete with fill in the blank, who has 5 million customers while you don't have anybody? And the third one, I wasn't certain that people would be willing to bet on a newcomer, new brand in insurance, which has to do with trust. And then when I really looked at it in 2015, I figured, wow, we can actually build everything on AWS on either microservices and do the payment with Stripe and do the chat with Intercom.

Assaf Wand:

And we can go through a list of 500 amazing companies that basically co-opt, and I can build it to whatever scale I want in way faster manner and not have legacy and more of that. So the technology is done. Data is exactly as you said, Pete, we're in an era of abundance of data. I don't just have the five or 10 million customers. I have 130 million households. You we're in Trulia and Zillow have any transaction that happened in the last whatever, 25 years, it's all documented. It's all there. Just go to Zillow and type an address. You have so much data on every home, from taxes to size, two bedroom, two pictures of inside the house, every transaction that happened. We live in a world of an abundance of data. And these are regulated industries that actually have all of this data at their fingertips. And so you have an advantage because I'm not looking at the book, I'm looking at what's going on with all of the 130 million households.

Assaf Wand:

And the last component is, there's a point of realization that every other aspect of your life is basically moved to a newcomer, especially on the financial side. Your bank account is with X and your student loans into it so far and you're managing your money with WellFund, and you're trading with orbital. Insurance is just one more thing in this world and there's a higher level of the ability to trust a new brand or a lower barrier to trust a brand that this coming in. So all of these three things came and I thought, wow, the barriers are low, well, the competition can't really react, let's launch something.

Pete Flint:

Amazing. And then six years later you are taking it public. So what an incredible story. And maybe if we think back to the beginning and when I first met you, certainly you had some exposure to the insurance industry, but I don't know if you would profess yourself as an insider or an expert in that. What was the learning process that you went through just to become smart about this complicated traditional regulated industry?

Assaf Wand:

I'm a very methodolical learner. There's simple good things in consulting, but one important thing is that you build the confidence that small people can learn a new industry really, really fast. You have a project in Media and then you have a project in Telco, and then you have a project in Fama. And within a span of two months, I can have a very intelligent discussion with the CEO of the corporation has been doing it for 30 years. So you got the confidence that you can actually learn something. I was very far from being an insider. I've done some projects with McKinsey and my dad was in insurance, but unless it was by me riding in the back seat that I learned some insurance, I don't think there was too much in that. It was the fact that there is so much information out there, go to YouTube, go and talk to people.

Assaf Wand:

I went and talked to all of the McKinsey partners that I know and went and talked to them and said, "Fine, if you would have started a business now in insurance, what do you would have done knowing what you know now?" And then the second question, if you were a CEO of an insurance company, what are the three biggest pain points for them? And it was about digitization. It was of millennial. It was about direct and stuff like that. So it gave me confidence, and then I just read and read. I did the licenses to be an agent, and then I did more licenses and then I read more. And then I went to some conferences I read, read, read until I got to a certain point that I felt I have a good enough conviction on what I'm doing, and I learned a lot.

Assaf Wand:

I always tell my team that there was zero chance I would have started a business now, knowing what I know now. Not bad, not to know that there's a lot of power in naivety. I actually think that it is one of the biggest superstrength of entrepreneurs. So I had enough information to get to enough conviction and not too much information and know-how that it would scare the shit out of me. And I think one of the interesting things is in general, to really disrupt and change an industry, you need to come from the outside. I don't think Uber would have started ever from the taxi drivers association, and Airbnb from the hotel management and almost any other like big business, you need to come up fresh. Otherwise, you find yourself but the common denominator and you need to work on somewhat close to the envelope at the beginning. And I think you need to come up with a fresh mindset of looking at all of these things, looking at the customer differently and not this is how everybody else is doing stuff.

I totally agree. It's these ideas that a collision or outsiders, is there any frameworks or tactics that you've seen other people use or you use yourself just to help in that idea formation, or just getting up to speed to validate whether this is an idea that might be disruptive or build a compelling business.

Assaf Wand:

It's a great question. I don't have a format. I'll tell you my story. So I sold my previous company and I thought I have another one in me and I want to do something bigger. I felt like I sold it too early. It didn't materialize where it wanted to be. It wasn't the mother of all exits and stuff like that. And I thought I have in me one more. I didn't have an idea. And so I had to go through an ideation thing and my ventures are usually coming from different areas. Let's say you have a world of 100% of ventures that are being started. My guess is 90% of them are split evenly between either of the main expertise, we have cyber companies. You are not going to pop by someone, Pete and Assaf are sitting and they're like, "Let's do a cyber company and this..." It's just never going to happen.

Assaf Wand:

You need to have domain expertise, networking, I don't know, optics. There's a bunch of stuff that requires a certain domain expertise to actually build. And then you add the other stuff which is more of a need-based, or I was talking to people and I was shocking that you don't have this, or I was browsing the web and I couldn't find... And I'm sure that we can talk about your two companies and you will have a massive realization of something that came... Both of them are not deep domain expertise, but are need-based. And none of them were my ventures. And then you have the last 10%, which I would say also probably evenly split and I'm just making up the numbers. Half of it from, there's a Stanford professor who has an amazing technology, but no product.

Assaf Wand:

So we need to productize and figure out if there's something utilization for the stuff. And then the last thing, which is purely research-driven. So I sit down and I read for three months, tons of stuff, not insurance. I basically said this that I'm going to read and I'm going to try and find four outliers, and I actually ranked them. So the first one, my previous company was a hardware company that built a brand of products for baby boomers. So I know how to product size a product, come up with a hardware. I know how to manufacturer, how to distribute, how to ship. I know all of that stuff. I have scars on my back for here to the moon for more of this stuff. So I thought that's the easy one. So I started looking at what can I do to utilize my experience and just come up with something different. And the top contender for this silo was, I'm going to build an haircare product for Latinx. That was what came up from the research.

Pete Flint:
Say it again. What kind of product?

Assaf Wand:

Haircare like stuff for the hair for people, for Latino. I thought there was a gap in the market. There's an interesting thing. This was the time where direct to consumer brands were valued at 20x. What same brands... This is Honest company. This is Harry's. This is Dollar Shave Club and Casper. And they're all valued at X and they're cutting like the middle man. And I thought maybe I can do a subscription and all

of that couldn't get too excited, but that was the top thing. Second silo was, can I take some components for my past expertise and answer a need that I have? And what I came up with was under the title of disrupting logistics. Try to ship something from China, it's a freaking mess.

Assaf Wand:

Try to find a manufacturer, it's not easy. Try to cover custom, try to ship. And I thought there's a lot of stuff that can basically be done in there. I usually find like a number that really, really nags me. The number that I found there was that 73% of the trucks are coming back empty. And I thought, that's crazy. Maybe there's a new bill for trucking. And I do think there's a lot of interesting things to be done in that stuff. There's actually several really, really interesting companies that popped in that space, but I couldn't get myself excited that this is what I wake up in the morning every day, this is what I'm thinking. If I'm going to bed at night, this is what I'm doing. When I'm taking a shower, I'm only thinking logistics. I couldn't get myself excited about that.

Assaf Wand:

So that was the second one. Then I reserved the third one. Is there ana area in the market that I think is super exciting and just I find attractive. And in that point of time, the one that I found as a domain was different utilization of shared resource. So think about WeWork. Think about Teespring. I have a classmate of mine from University of Chicago that after Anheuser and Busch were bought by InBev, they had to sell some of the breweries and he bought a couple of the breweries, and now he probably manufacture 50% of the craft breweries because people needs a place. If all food comes with an order, you can't scale it up from 50 gallons to 5,000 gallons. So you need something. And that's what he does. So I started looking at it. The idea that I came back with was to do a rework of professional kitchens. This was also the time when Blue Apron will go in and all of these guys and they couldn't scale because they didn't have kitchens. And the last one was insurance, which I brought back from my back pocket from 2007.

Pete Flint:

Sure there's a bunch of startup founders listening and they're like, "Oh, we need to build those businesses." And some of them being built, which is the fascinating thing. So you came up with the idea and you had this direct to consumer, data-driven, millennial approach, and you're not an insurance expert, but you became a quick study and quick learner about it. I imagine you had to hire a team of industry veterans that knew this industry much better than you. How did you convince them that they should join you as opposed to stick with perhaps their comfortable jobs at many of these incumbents?

Assaf Wand:

The hardest job ever. The hardest, and especially there's not another insurance talent in California, so you had to pull them from Forever. By the way as a side note, I do think that the way that you actually compensate for the lack of expertise is by overpaying, but for a good reason, for consultants, because the people that I'm going to bring in initially are probably not on the caliber to do the things that I want. I know how to attract top engineering talent, but the people that I'm going to bring initially on the insurance side are probably not going to be very strong because I can pay them a lot in an industry that pays them quite a bit.

Assaf Wand:

They're going to ask us, what does this guy want? It's like, it's crazy. It's too risky. People that work in the insurance industry are risk-averse by structure. That's why they're working in insurance, trying to change that. So the way to compensate that is, for instance, if you need an actuary, there is always the McKinsey of actuaries. There's a company called Milliman and you overpaid them, but they meet up and the also... you take marks because you don't write the insurance product by yourself, you don't live in a silo. You need an insurance company to underwrite. You need a re-insurance to take the risk. So you need to persuade a lot of people down the line.

Assaf Wand:

And just by saying it's Assaf and Joe, and Joe was an ex, that's not gonna fly. So sometimes you need to have... And we're using Sidley as the lawyers, because Dale the lawyers are overstate and stuff like that. You need to take points from other and you over pay for that, but that's just to get off the ground. Finding the initial first people is always hard by the way, it's not easier, although it's somewhat easier now, but it's still very, very hard because you're trying to find people that are understanding of what you do and not trying to pull you of this is how we've been doing it for 30 years.

Pete Flint:

You just battled against their judgment until you pulled them over. Was that the approach? And I imagine that some of the consultants, they wouldn't want to touch a no name startup with a limited capital.

Assaf Wand:

Yeah. So more mercenaries. Well, your first employees are missionaries and you always want to have a certain thing of missionaries versus mercenaries, but this consultant are all mercenaries and as long as you pay them, they're fine. You can pull some of that. I was also very, very fortunate that one of my first employees was my partner now, Rick McCathron, Hippo's president. He was basically number two or three person in medical insurance and did some start-ups and came to the realization that something can be done, and it was just a very opportune time that I met him. Every once in a while, start-up that was super risky but there was several moments that you hire specific people, you have a partnership or something like binary moments. So this is one of the important binary moments that we had when Rick McCathron joined us.

Pete Flint:

And then so you had the team and then obviously insurance is a regulated industry. Was this more difficult than you expected?

Assaf Wand:

In some ways, yes. In some ways, not. So I learned to appreciate the regulated industries. I think this is a place of arbitrage. Let me be specific. I think, you're funding amazing companies as an investor and every time an entrepreneur comes and they're saying, "Pete, it's going to take us seven months and one and a half million dollars to build this capability." And then it's actually going to be 11 months and two and a half million dollars. And you have your own flexibility on the numbers, but that's what always happens. And it's never the same. And there's a technical issue. And there's a leap flow that we need to do, or there's always something. Regulatory component is actually measurable risk.

Assaf Wand:

It's like, I can go to who is the best lawyer in the US for whatever, insurance regulation, and you can find five of these then there's ranking because everything in the US you have ranking. And you can just do a nice search on the web on the top five [inaudible 00:20:56] you're going to get the list and you go and you schedule a meeting with all of them and say, "Fine. I want a file in California." Basically a filing for home insurance. And they're going to ask you, "Do you have a carrier to do that?" And you're like either yes or no. And do you have reinsurers? Yes or no? Let's say I tick mark. And you say, "How much time it's going to take?" And they say, "Yeah, on average it's six months. It can be up to eight months and it's going to cost you $173,249. I was like, "Okay, fine." Now I have it plugging in... Fine and put 215,000.

Assaf Wand:

It doesn't really matter, but it's very specific because this is all these guys are doing. It's a certain process that they know how to run. There's not a lot of risks behind that. It's actually quite de-risking the business. It's just that it even negates competition in many ways, because it's not that Pete and Eric, are sitting over coffee and you're like, "We should start something dude and [inaudible 00:21:45] let's start an insurance company." And five seconds later, you're going to call Joe, and Joe is going to say, "Oh, you're freaking nuts, Pete. We know what it means. There's compliance, there's regulation, the re- insurance. Why do you need to get into that?" And that would kill it in the bud. And that's a massive benefit.

Pete Flint:

Yeah. Do you think as a second-time entrepreneur, this was a level of risk that you're comfortable with? And then maybe boarding that, what did you, I guess as you were thinking about boarding hippo, what did you apply to the business that you learned from your experience as an entrepreneur?

Assaf Wand:

Yeah. I do think it's a race that you are a lot more honest with yourself as a second-time entrepreneur on the risks and the payment. Entrepreneurship is really, really interesting because for the outside world, you have like a wooven minister that you need to do... Everything is amazing. It's good, and it's like we're crushing it. And then on the inside, you need to be really, really honest with your board, with your partners, with everybody like, "This doesn't work, let's analyze why. Let's fix it and what's going on." And you constantly need to live in this two-phase thing. As a second-time entrepreneur, you become more honest with yourself about these discussions. So I can quantify better these risks and have the right discussion and dissect basically what's the execution hurdles that are needed in a way more clean and succinct way, and that was beneficial.

Assaf Wand:

Second thing is I swore to myself that if I'm starting a business, I'm starting it on the biggest time I can actually in an industry, I'm not educating anymore, I built the business that I needed to educate people that there is a need for such a product. And then it's such an uphill battle. If you succeed, it's massive. I'm not saying... Then you have a really, really good position. But insurance, as I said, it's $105 billion market just on insurance. I don't need to be... It's not a winner-take-all. Let me have 1% of the market. That's not a bad outcome. It's a billion and a half dollars in premiums. So I don't need to explain. It's mandatory. You need to have it. So it's a very different discussion. So I wanted to find something like that. As I said, my previous company was a hardware.

Assaf Wand:

I swore I'm never going to do hardware again. I'm not doing shipping. I'm not doing tooling. I'm not doing manufacturing and quality. Plus I hate businesses that every time it's a one-off purchase, I was like, "I'm going to do a business that's going to be as repeated purchase as possible." The lifetime of a home insurance policy is usually eight to nine years, so once you have a customer and you do one with them, they last with you for eight to 10 years. That's an awesome business to have. So this company is the fix-up for all of the shit that I had in the past. It's a big market. And then I also changed culture. When I started the business, I had two kids. I was in a different position. I wanted to be an involved parent. I have a wife who is way smarter and more accomplished than me, who actually let me start another business when I was entering my 40s. Because she could have said, "What the hell are you doing?"

Assaf Wand:

Like I just said, we have a mortgage, we have everything, but no, she was very supportive, and let me do that. And I wanted to build a culture in a company that is actually celebrating that. So Hippo is a family- oriented place. Most of the people that we have are older, we are based in Palo Alto, not in San Francisco. Family comes first in the fact that if your kid have a recital, you're obligated to go to the recital. Don't make choices for the business. But on the flip side, we hire people that are slightly more senior and more mature. And we trust them to make their own choices. I don't need to manage Pete. I'm like, "Pete, this your to-do. This is your KPI." You'll figure it out your time and your own assignments, there was a maturity of myself as well, in starting the business.

Pete Flint:

Fascinating. And do you think that the nature of the industry, it leans itself to that? I mean, obviously there's the bias towards execution over like, I guess it's disrupting an existing market versus creating a new market. Do you think the coat that you created is aligned with the problem you're trying to solve? And the team you hired was that part of the thinking process or was it more just personal, what you wanted to do it at that time?

Assaf Wand:

I wish I was that strategic and thoughtful and beggars can't be choosers. So at the beginning, it's not that I pick and choose whoever I want and start. No, it's not. Every once in a while I did the strategy and I was like, "Listen, I need to try and get Pete Flint because he was co-founder of Trulia that has to do with real estate. And he would help us potentially with Zillow and stuff like that." Fine. You have a fluke that your strategy and execution works, but many times, especially early on, you just hire the strongest people you can find that are willing to bet on you and work for pennies and you can't... Now let me also find that that person who has a great technology, or great product person is also aligned with the age. it's not that strategic.

Pete Flint:
Yeah. It just works out that way. You marshal whatever resources you can grab.

Assaf Wand:

And you're thankful for that. Then you have different currencies at different time of the company. The first currency that you do, which schools up a lot of this stuff later on is titled. You take a person who was maybe, maybe now can be an engineering manager and he is all of a sudden your VP of engineering, because he bet on you and stuff. And then later in growth you need to fix all of these titles, but you compensate them better. And there's all kinds of other things that moving.

Pete Flint:

So let's continue to just talk a little bit about entrepreneurial culture. I know you've talked about speed versus strategy. And what does that mean to you, as you think about rapidly scaling this organization, building world-class multi-billion dollar company? How do you think about the core cultural tenets that enable you to do that?

Assaf Wand:

I've sailed for five years and they use early air force and with a captain. And there's some components that I learned from it. And I think some of them are the tenets for the business. I think I'll give you the main ones. So the main one for me is you see what you do, you do what you say. I think it's the most simple thing. If I told you I'm doing something that I'm doing it. It's very simple, but you're accountable for that. And you have a sense of ownership and you need to deliver on that. And I take it with a hundred percent certainty that if Pete told me that he was doing something, then it's done. I don't want to micromanage. I don't want to check on you. I think if you find the right people and you instill that level of confidence that they have responsibility and ownership and you can accomplish a ton of stuff.

Assaf Wand:

So that's a core tenet of the company. I would say, let me think of a couple of others that I think... I grew up in a company in a unit that the motto was, who dares wins. And I think that you need to take calculated bets and it's important, but you need to embrace it and embrace faults and embrace when you're making a mistake. And how you've really, really prevailed that if someone comes and ask me a question, it's always going to come back with an answer. And I'm always going to say, "Okay, do it, but let's have a gating factor." What if it doesn't work? Or what's the hypothesis. We know that we're actually on the right track, but I always would feel that people move and not get too much into analysis paralysis, which drives me nuts. And I think that stops so many cooperations from actually acting.

Assaf Wand:

I'm trying to think of what else, the civil components that matters to me. But I think this is an unborn full action is a very important thing for me, just sitting down and strategizing and strategizing and strategizing doesn't help. I might try to just go and test and then come back with some answer and I trust you. So if Pete worked for Sophos, say "Pete, what do you think?" You were way closer, so you have higher weight on the decision and you're way closer to the point. Present me the hypothesis, and then I'm going to ask you, "What's your level of conviction on this idea?" And if you say, listen, I think it's around 70, 80%, go and do it. And let's have a discussion in two weeks when we know more.

Pete Flint:

And the last 12 months have been incredible year for you, but also very challenging year for employees and business-building. If you reflect over the last year, you've been on this rocket ship growth, but you've had to navigate COVID and working from home and everything else that comes with that. Is there anything that as you look back, things that you did or you had to do that were particularly helpful to you as you scaled during that period,

Assaf Wand:

I think there's a tendency to think that it's because of the company or stuff that we did, that we are in a certain position. I think that it's actually more macro. Startups are more set up and wired for the change that happened. For us it wasn't a big deal to work remotely. It wasn't. Incumbents, it was an issue. So we were wired in a certain way. Onboarding people remotely was not very complicated. Interviewing them over Zoom was something that we were doing from before. The shift of digitization happened in the world and we were benefactors of that. The company is growing like crazy hence the currency that we have, which is equity is worth more and more, is beneficial for the company. So we have less attrition and it's easier for us to hire people. it's easy for me to say, listen, we did this and we did that.

Assaf Wand:

And that's what actually entails and then brought us to where we are. The company was performing and executing, but we have macro trends that were very beneficial for us. And that also enabled us to grow because we were set up for that, attract the right level of talent, retain them, taking care of them. What I learned is that more communication is important. People always... When I listened to podcasts every time it was like, "Oh, when do we go from X people to two X and half of the people in the company has joined in the last year, and that's a measurement of growth." And what we have now is, to add to that, it's not that we go... Half of the people joining the last year and also none of them stepped a day in the office or seen another person from Hippo in the last year. It's crazy. It's like, you take something and then you add layers and layers on top of it.

Pete Flint:

Yeah. It is crazy. I'm visualizing when you talk about those sort of the incumbent, I'm visualizing a cargo ship stuck in the Suez Canal. It's like you're the speed boat, and you're able to move around it. When a dislocation happens, the comers just get stuck. And that's just the inherent advantage of start-ups. There are able to move fast. There are able to execute on the opportunity.

Assaf Wand:

That's what I think is going on now. So I haven't thought about it this way, but I'm thinking about it now that you're saying it. And we've seen the last year as a crazy year for start-ups on scale. And a lot of it is... Every person that worked a day in an incumbent, know how slow they are and they're moving super slow. Now take exactly, as they say, now they're stuck in the Suez Canal on the side and you have an abundance of fuel for all of these newcomers. So they just sail pass and keep on going. So the last year has been such a massive growth because the incumbent industry has been stagnate a lot more and the other guys have a lot more. So it's just way faster than it used to be even before.

Pete Flint:

I'm curious, you think this is going to accelerate like opportunity and versus incumbents, or do you think they're going to fight their way back?

Assaf Wand:

Some of them will. Some of them not. It's not a winner-take-all. I do think that the pace of innovation which just going to keep on increasing, with the move to the cloud, with external tools. Some of the more interesting companies in the world today are actually off for it's work days. It's Gusto. It's dissecting the enterprise to give newcomers the ability. You have Carta, was like, "Really? That's what you're doing managing?" Yes, because it's a field that you needed to deal with, and now someone else is outsourcing. So you can actually focus more on the stuff that you need to focus and have a lot less of an enterprise and a lot more of a focused approach to what you do with tools, with digitization, with customers that are expecting a different experience. The pace is just going to increase.

Assaf Wand:

It's not going to decrease. And it's a very, very difficult thing to change the state of mind of incumbents. Now, one of my favorite book is Only the Paranoid Survive. In it, it's the story of Intel was trying to disrupt itself. Amongst a lot of the things that's being told in the book is that problem that you have is that the people in the top are the people that constantly made the right choices on the previous business. So who's on the top is the people that constantly made the right choices and the right thing and their DNA and their entire thing is wired to a certain thing. But now you need someone to make the opposite choices that are counter to what brought them to be the CMO, and the CEO, and the CFO of the company. So that's what's going on in incumbents now. Now you're trying to ask the CEO of a company that is a $30 billion business to make choices that are counter to his DNA, it's just not going to happen.

Pete Flint:

So how do you avoid that happening to you? How do you put the cultural tenacy you don't become the incumbent that someone else will disrupt?

Assaf Wand:

I think it all starts and boils down to decision-making. So we believe that the company is a meritocracy of an idea. We have all kinds of things like strong opinions, loosely held. I think at any decision point, I don't have disproportion amount of weight. The decision has to do with domain expertise multiplied by conviction. And you try to have people that are independent thinkers that are okay to challenge. Hence why it's not the people that are the most senior who makes the decision, it's the people that actually have the highest weight for the decision and the highest conviction who's going to win.

Pete Flint:

Yeah. And that creates a culture of start-ups within start-ups, which hopefully can help you avoid that disruption.

Assaf Wand:

What will we train into, yes, and the second that you start building something, it becomes legacy. There just some stuff that I'll just structured, there's the atrophy of the organization, but if you're proactive to think about it, if you brainstorm people, if you talk about it in the management, if you, you know what, every once in a while acquire another start-up, not just for capabilities but actually full an infusion of a new DNA. And you think about it in this way, then you stand the chance of you becoming incumbents.

Pete Flint:

Yeah. So maybe shifting gears a little bit, you announced just recently that you are going to go public via SPAC and I'm sure all the audience have heard of SPACs by this point, but maybe if you could just share a little bit about the rationale behind that and tell us what's going on in terms of what Hippo is doing.

Assaf Wand:

Sure. We put a lot of thought into that. Oh God. We started being bombarded by different SPACs, I would say meet last year. And in the beginning we nudged them all out because we thought it's the bottom feeders of Wall Street. I don't know how else to describe it. That was the perception in the market. And then it happened similar things that basically made us think about it differently. The first one, we became a bit jaded by Wall Street and what I mean by that is a lot of close friends of ours IPO went public Wall Street presented, this is the price, this is the stock. And then stock went up 80% at day one, and they're all looking at themselves and everybody's like, "Oh, that's awesome." But the CFO is saying, "Damn, I just left hundreds of millions of dollars on the table."

Assaf Wand:

That's ridiculous that wasn't... And who are the main customers for Wall Street, is it Hippo or is it Wellington? Is it TiVo pies or is it company X? So that was the first thing. The second thing, which was, why is it so good to be 25 times oversubscribed? Well that looks like a very weird thing for us and the component that had to do with, I need an analyst to present my basically forecast instead of me talking to the investors and tell them what I see as my five-year forecast. There was just something in the process didn't really gel with us well enough. So that was one. And then on the other side, some of our current investors and people that I think the world of, and I think 12 professionals on the field started setting up their own SPACs.

Assaf Wand:

So Ribbit Capital which I think are amongst the best fintech investors around and Micky and Nick are amazing. I was like, "Whoa, where did this came from? Why did you set up a fund as SPAC." And Dragonia as well, which is also an investor. And Jared and Mark are best-of-breed. So I could have a discussion with people that I trust to get another point of view and the mindset, so that help us educate. So we were looking at it and we became a lot more. Okay. That's actually interesting. I do think that there are some components that they put too much weight on the benefit of a SPAC versus an IPO, which in hindsight, doing the process now, I think it was a disproportionate amount of weight and I can get to that in a minute. So firstly, we went to study this instrument.

Assaf Wand:

We were going to do an IPO. We were about prepping an S-1 to do a confidential S-1 filing. So the company would have been public. Let me split it into two things. I think before any of that coming, before anybody considered a SPAC, you should ask yourself two questions before. The first question is the company ready to be a public company. People always miss out on that because you're running a company and all of a sudden SPAC reach you. And I go, fine, wow, well, we can be a public company and raise $400 million. That's amazing. But you never stopped to say, do you have the right processes in place? Can you forecast, I don't know, eight quarters into the future and beat-and-raise your numbers? How well you've been doing recently on the beat-and-raise with your board.

Assaf Wand:

Do you have a GC that can be a GC of a public company? Do you have audited financial documents for the last two years as a public company? Do you have a CSO in the company? Because you're going to be attacked like crazy by cyber. Do you have a CFO that can actually do it? There's just a bunch of questions that you should really ask yourself. And people forgot, and we know quite a few people that signed with a SPAC and now are like, "Oh God, we need to [inaudible 00:37:46]." They're like, "Where did this come for." So I think that's the first question. Second question is, is it the right thing for the company to be a public company? I don't know if every company is the right thing for them to be a public company, or in the right timing. We thought for insurance, it's awesome, because we're in a game of trust.

Assaf Wand:

We're going to get a lot of credibility. It's good for our partnership. It's good for a lot of stuff. It matters if Pete is calling my call center and selling you and ask, "Who are you guys exactly?" And one of my agents going to say, "Oh, and we are listed on X, Y, and Z." There's something which resonates very differently. So you need one, is the company ready to be public? B, is the right thing for the company to be public company? Once you tick mark these two things, which people always forget, then I have fiduciary duty in front of my board to present to them that there's not just one way to go public. There's actually three, we can do a standard IPO, we can do a SPAC or we can do direct distinct. And each one has a bit of a pros and cons, but it's my job to present the options to my board.

Assaf Wand:

At that point of time, we were like, "Okay, fine. We're ready? We want to do it. Let's figure it out." And we said that there was something in the dichotomy of being a public company, which you are in warm and fuzzy place of private company, and then one millisecond later, you're a public company and people can trade in and out of your shells and everything is out there and like, whoa, I want to have something which... Can I have someone who's somewhat help me mitigate that transition. And we came across Reid and Mark and as a person who lives in Palo Alto, the optionality to work with Reid and Mark is... I'll be the dumbest person in the world to resist that optionality.

Assaf Wand:

It is Reid Hoffman and Mark Pincus who build a couple of successful companies and thinking about that and came to the realization that they want to do a SPAC. They call it being VC on scale to help a company and specific ventures that they think are in the reinvention in transition mode to build the next franchise of their industry, to stay there for a long time to align, to join the board, to basically help this company go, was a full alignment and the meeting of the mind. And that's why we decided to go with them. And then, so that's on that. Sorry, I'm talking too much on this, but I want to talk about the framework that we did for SPAC which I think is something we should [inaudible 00:39:56].

Pete Flint: Please.

Assaf Wand:

So after we talked to civil, we put a framework on SPACs and we called it... There were three components. The first one was price. By the way, it wasn't about maximizing price. It was, what do we think is a fair price for the company to go public that is going to be rightful our shareholders, right for the pipe investor? If it is going to be too high, no pipe investor want to do it. How can we make sure that some growth left in the market that investors are coming in, are still going to do well? I don't want to go public, and then stocks down 20%, it's not something that we wanted. So we put something that we thought that's the fair price for the company. And the board was fully aligned, was more of a gating component rather than a maximization algo.

Assaf Wand:

Second thing was certainty. So because in SPAC, one of the things that is beneficial is you get certainty on the price because I signed on the merger agreement and whatever it was, February, and that's going to be the price when we de-SPAC three, four months down the line, as opposed to when you're doing an IPO, which you would like, you're prepping everything, and then you have 10 days that you need or whatever it is that you're doing your own show. And if the window is open, the window is not open. And then you come up with a price. So I want to make sure that if I'm taking advantage of the certainty, I actually get the certainty. And the certainty you get by several components. There's a couple of paragraphs about minimum financing requirement and stuff like that.

Assaf Wand:

But the main one was the reputational risk of our partner because Reid and Mark has more to lose by scope of this transaction than Assaf, because they built a bigger reputation for themselves and they have more. And I wanted something that basically aligns that way. I wanted someone that we call it industrial strength of a SPAC. I didn't want off SPAC, I wanted someone who SPACed before was going to have a family of SPACs later on, who's going to have a reputation risk on continuation in doing that, and know how a relationship with investors, a relationship with the street can bring us a lot more value. So we call it industrial strength, and that adds to the certainty of the transaction. And the third one was alignment. We wanted people that are aligned with us and not using it as a transaction.

Assaf Wand:

And that has to do with the terms that you have, which is the pro mode, how they're earning it, the time that they have until they're basically making... So we're locked for a certain time. And they're locked for a certain time. A board seat investment in the pipe and not just in the SPAC. There was a bunch of things. And then we had this meeting of the mind that evaluation is what we wanted. We loved the partners. We are very certain of this thing, and we look at it as a partnership, as opposed to a transaction, which is awesome and there being an alignment, we said, fine. I think it's the most preferential way to go public if we can. And that's what we did.

Pete Flint:

Yeah, that's such a terrific story and context. Now I remember taking Trulia public in 2012 and it seemed at the time the kind of expensive process, but you look at where it is today and it's incredibly antiquated and painful and expensive and almost feels like Wall Street. And the banks really created this opportunity themselves. When you see this friction in a market, it's like water, something will flow around it to find a more efficient route. And then we'll see what happens with SPACs, but it feels like they had to stay. And I couldn't agree more that Reid and Mark, are just exceptional entrepreneurs.

Pete Flint:

That the opportunity to have them in your camp, as opposed to purely financially motivated folks, it's such a unique opportunity to curacy. Just finally, I'd love to touch on a couple of things. So one is just, what's in store for Hippo going forward? And then two, I'd love to future gaze for a bit. Again, reminiscing back to our first conversation when you were starting Hippo, a component of it was smart homes. There was this proliferation of data that's happening. I'm curious as you think about homes of the future, what do you see trends happening in smart homes? And as you think about where we live in the next 10 years, what does that look like from your perspective?

Assaf Wand:

Sure. Let me take the first part of it first. So I think 2020 was a very interesting year. It's the year that our homes became a lot more fundamental to our lives. It's your office, it's your school, it's your gym, it's your restaurant. It's a lot more than just what was the home before and because of that, the relationship and now what you're see in the second half of the year and continuing now is the amount of transaction and people are either renovating their home or moving homes and stuff like that, which is crazy. So I think our relationship with our home has actually evolved and will keep on evolving. However, there is a certain disconnect because before you're buying a home, you have this romantic vision of,

"Oh, I'm going to be a homeowner. I'm going to buy this beautiful house and it's going to a joy." And you envision having your kids go there and your girl go down the stairs for prom and you're crying and your kids...

Assaf Wand:

Hitting your little finger into that and, throwing flour at each other, you have all of these visions and then you're moving in and like, damn, the plumbing doesn't work, and this doesn't work. And I have a problem in the backyard with this and the tree... There's this disconnect. Our views and our vision is protecting the joy of home ownership. And our view is not just to be the insurance company, but to help our customers live better in their home. Smart home is one component, but there's also, we bought a company that is Hippo Home Care. It's our tele-maintenance. Every one of our customers can call the call center and we're gonna help you, install a shelf, vet a contractor, or whatever it is. I think there's a deeper partnership to do with homeowners, home appliance, warranties, potentially in the process of home buying and inspection and assessment and all of that loveliness that you're very familiar from your Trulia days. And I think there's a lot of ways to basically partner with our customers a lot more and help them basically live life to what they want to live.

Assaf Wand:

And we're going to take care of the crap in the home maintenance and taking care of the home. So our direction is that, and I think we're in an interesting inflection point where customers are looking for a different experience. And this is just the beginning of new franchises in this industry, which is such a vast industry. So that's for Hippo, I'm very, very optimistic. The business is doing very, very well. We're growing really, really nicely. We're attracting amazing team members and partners. And this is honestly just the beginning. My partner always say that we're not even picking up the low-hanging fruit. We're still picking up fruits from the floor and walking around and eating watermelons. We're far from extending ourselves. So that's that. Now smart home is a really interesting thing. I want to bring two points. One, one of the realization that we have is when I explain what Hippo is for people, what I'm basically saying is that incumbents has spent the last 100 years building a flawed experience.

Assaf Wand:

And it's flawed because it's hard to purchase. When you look at the coverage, you'll see that you're covered for obsolete things like fur coats and pewter bowls and china and silverware, morcelain and crafts, but they're not modern stuff. And then when you have a claim, is an horrendous experience. And by the way, in between this bad claim, onboarding and horrible claim experience, you have zero meaningful touch point with your insurance partner. They're actually measured on having no meaningful touch point. It's an industry that don't even call you a customer, they call you a policy holder, because the customer used to be the agent. And this is what the industry is. And then when am going to ask people, what are you insured with? The answer is usually, it's Allstate, no, State Farm, no Farmers because you don't know.

And they are all the same product because if I'm going to ask you, "Okay, fine. What's the difference between Farmers and Allstate?" It's the same product. You know the brands because they're spending a billion dollars in quarterback one and quarterback two, but you don't know the thing. So we built a company that make it a lot easier to purchase and agnostic, and omni-channel. You can buy via an agent. You can buy on hippo.com. You can buy via our partners, et cetera. The coverage is a lot more modern and takes care of you. So instead of the fur coats and pewter bowls, we are focused on your home office and electronics, installers, and camping equipment and things like that that you care about. When you have a claim, we have a claim concierge that instead of the minus 49 net promoter score for the industry is 60.

Assaf Wand:

It's one person dealing with you start to finish, mitigating the risk and taking care of you. And now let's double click on the last point, which is the touchpoint with Pete as a customer of Hippo. And for us, we wanted to create something which shifts an adversarial relationship which insurance has now into a partnership. And we thought the way to build this partnership, basically that the best claim experience is avoiding a claim from happening in the first place. And the way that we do it, is we call it proactive insurance is we keep on using the data to basically look at your home on an ongoing basis, and flag it if it changes. Smart home device is at the core of this offering. We offer every one of our customers, a smart home kit that has several smart sensors, motion sensors, leak detectors, smoke and fire alarm detectors, all of that stuff.

Assaf Wand:

And then we have the Hippo Home Care which I talked about, which is helping you take care of your home. So I think the world is going to move a lot more into partnership and smart home is going to be at the center of that. Now, if I really, really brainstorm what did can be in five, 10, 20 years, I actually think there is a good chance it's not going to be an insurance anymore. What I mean is you're not going to buy insurance. What you're going to buy is $450 a month, you're going to buy a smart home kit that takes care of everything in the house. And by the way, it also includes insurance as opposed to the other way around. And I think there's a good chance with connected device and more data that coming in that you can have these offerings that are coming in, as opposed to an insurance that offer that.

Pete Flint:

Yeah. It's creating an entirely new product. Can't help, but think of the auto industry where I saw some statistic the other day that people, they choose the electronics and the car over the engine or the look of the car, which was just staggering compared to where we were 10, 15 years ago. And it wouldn't surprise me if the same thing happened in a home as well.

Assaf Wand:

I agree. By the way what you said, that's exactly the number one feel of Detroit versus Silicon Valley. The last thing they want that it's going to be an OEM platform, and it's all going to be about the electronics and that stuff, which is something that Silicon Valley is good at. And all of a sudden the entire industry of car manufacturing is going to change.

Pete Flint:

Maybe the same thing for the home industry or the construction industry. Well, Assaf on that note, that was just an incredible conversation. Thank you for joining us today. Loved every minute. And thanks again for joining and also for lending me part of your journey. It has been an amazing six years. And many, many years of success going forward.

Assaf Wand:

No, thank you. Greatly appreciated you betting on me early on. I'd never take it lightly. I think the first investor was in New Orleans Saints, and these are the people that they invest in you when you'd have nothing. So thanks for the vote of confidence and the amazing things that you keep on doing with NFX.

Pete Flint: Thanks Assaf.

Assaf Wand: Thank you.