Why we invested in Jones
We are thrilled to welcome Omri, Michael and the entire Jones team to the Ground Up family. Jones makes insurance compliance instant and effortless in the construction and property management industries. We are also excited to be investing alongside our partners at Hetz Ventures, metaprop, JLL Spark and 500 Startups.
tl;dr We like insurance and real estate as sectors and Jones fits nicely with important trends that we are seeing in those verticals. Jones has developed a superior liability insurance product for contractors and possesses an unfair competitive advantage for distribution.
While we are a sector-agnostic fund, Jones is at the intersection of two sectors that we have spent a lot of time thinking about — insurance and real estate. The reason we like these areas is twofold:
- Insurance and real estate are two of the last mega industries to be disrupted by software and innovation.
- We evaluate every investment opportunity through the lens of whether we can add meaningful value to the business, and real estate and insurance are two verticals where our relationships are both vast and deep. This enables us to quickly validate companies in these spaces during due diligence and to accelerate their go-to-market post-investment.
Jones fits nicely with major trends that we see in insurance and real estate:
- Insurance: The future of insurance is on-demand, unbundled and intelligently underwritten.
- Real Estate: (1) Real estate and construction firms recognize that they must incorporate more software automation to improve operational efficiency and reduce human error. (2) It is incumbent upon a landlord 2.0 to think beyond the physical space that they provide and to create seamless, tech-enabled experiences throughout the tenant lifecycle in order to compete for the best tenants.
Insurance that’s on-demand, unbundled & intelligently underwritten
Enterprise real estate owners, property managers and general contractors will only hire a third-party trade contractor (painter, floorer, carpenter, HVAC technician, landscaper, welder, etc.) who has adequate insurance coverage that complies with the enterprise’s own risk management requirements. For small trade contractors, needing insurance in order to compete for jobs presents a difficult reality: being insured means paying costly insurance premiums even when they are between jobs, which can be days or weeks at a time, and being uninsured means that they are limited in the number and type of contracts that they can win. Even contractors who are good about staying current with their policy sometimes need to scramble for additional coverage if their existing coverage is insufficient to meet the requirements of a particular potential job. All in all, insurance today isn’t designed with the real needs of contractors in mind.
Jones was founded with the vision to provide the first truly customer-centric insurance in the construction and property management industries.
In contrast to today’s offerings, Jones enables contractors to purchase coverage on a per job basis — for just the amount of time it is needed [on-demand], with a policy that they know complies with the specific coverage required for that job (not more, not less) [unbundled], and priced fairly given the proprietary data that Jones has on similar jobs, the customer’s professional history, the worksite, etc. [intelligently underwritten].
Unfair distribution advantage: engaging with the customer when and where it matters most
We meet a lot of insuretech startups, many of which offer interesting, differentiated policies. However, in today’s marketplace, a better policy is not sufficient to win. The key thing that we look for — and what our three insuretech investments have in common — is an unfair advantage when it comes to distribution. Jones is a perfect example of this.
Rather than try to market its insurance to millions of contractors directly, Jones developed a far more efficient go-to-market strategy. Jones designed an elegant software solution to solve a major headache for the enterprises who hire large numbers of contractors.
As I mentioned earlier, risk management best practices dictate that real estate owners, property managers and general contractors make sure that every third party contractor that comes into their project or onto their worksite has proper insurance coverage. Across a large portfolio of projects, which can easily involve thousands of contractors, the manual process of properly managing insurance compliance often results in substantial headache and human error. Moreover, since property managers must also track the contractors hired by their tenants, the current process creates a point of friction with tenants.
To address this, Jones developed a comprehensive enterprise SaaS solution that automates the entire insurance compliance process (see image above), making the compliance process pain-free and far more accurate.
But what does enterprise insurance compliance software have to do with selling insurance policies to contractors?
In addition to automating the compliance workflow, Jones also recognized that a truly a to z compliance solution should not just identify problems but offer integrated solutions. Today, if an enterprise identifies that a contractor it is considering hiring has non-compliant insurance then its only real options are to (1) waive the non-compliance and hire the contractor despite the insurance issue that has been flagged and assume the risk on themselves; (2) notify the contractor that they are non-compliant and wait to see if the contractor is willing and able to resolve the issue; (3) don’t hire the contractor. With Jones, there is a fourth, superior alternative: offer the contractor the ability to purchase compliant coverage with the click of a button.
The ability to offer contractors insurance within the compliance communication flow— when a contractor’s insurance needs are top of mind — is a win-win-win for Jones, the enterprise and for the contractor. With every new enterprise customer of the compliance software, the number of Jones’s touchpoints with contractors (i.e. potential insurance customers) grows exponentially. And while contractors might be first introduced to Jones as a stopgap coverage for a particular job for which they had inadequate coverage, we believe that once exposed to the compelling value proposition of Jones’s policies it will become their preferred, default coverage from that point forward.
The true magic of Jones is that they didn’t just build better insurance, they understood the need to solve problems all along the value-chain and in doing so built two different but highly synergistic products that function as great acquisition tools for one another and that create meaningful value for their respective end-customers.
We look forward to working with them to build a great company.
Ground Up ventures is a seed stage venture capital firm that was founded by Cory Moelis and David Stark. Follow us and reach out on Twitter here.