I'm Kristen O'Brien, Managing Editor at NFX, and this is the NFX podcast. So it's up. Great to have you on the NFX Podcasts today. You know, 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, you know, I sort of reminiscent purposes for this conversation.
I pulled back your old deck and, you know, it's sort of amazing to see the journey and your kind of observations about the industry back then and how much of it's gone through. I guess, you know, maybe if you could sort of quickly describe where HIPAA is today. And then, you know, I think most Morgan, as you thought about the business back then, what did you see that others did not that created this opportunity? Yes. Let's dive in.
Firstly, I'm so grateful to be in a 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. I 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's different components that are not having materialized as much, but, you know, it was about changing and, evolving home insurance, building something, building a channel. 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 realized since then it's a way border solution that it's not just catering to specific demographic. It's actually catering to a way border demographic.
And I think over time, it keeps on evolving it. Now our vision at EPO is we call it protecting the joy of homeownership. So we're moving vertically into homeownership, helping customers better take care of their home. But it's very much the same kind of problem and issues that we found back then. Still resonating now. Mhmm. I guess, I mean, insurance is not a new industry, obviously, has been around for centuries.
And I guess as you, you know, going back to the original kind of 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? So, you know, I was a consultant with McKinsey in New Morgan, 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 kind of opening the kimono of the potential customers, and you're seeing what's going on. And I felt 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 gonna talk about it later on coming up with some of the ideal, 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. The less than half the agents that used to be 10 years ago. So, you know, they're just retiring 87 percent of new agents to the profession are leaving the profession within less than 3 years. And I thought about it. It's like social security.
There's not enough people coming in, and a lot of people are leaving. So that was the first kind of 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 new agents used to build their business is by selling you simple lines and insurance, Autohomelive 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. 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 moments. Like, okay. Fine. It's a good logical kind of explanation, but there's not a lot of insight in it. It's like I'm sure everybody's kind of know that.
If I'm a an insurance company, if I'm Liberty and Allstate and State Farm, kind of 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 kind of introspection. I guess it's sort of like the idea seems so obvious that you wondered why it didn't exist.
I guess it's sort of you Beller underestimate the ability or lack of ability for big company to innovate and evolve. And is that what you're seeing? Does the incumbents are just, like, fairly stuck in their ways in terms of the processes and products that they're offering? Yeah. So, basically, like, there were 2 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 Insurance is a $104,000,000,000 market now growing at 5% a year. Would keep on going for forever. So I thought you're going to see dozens of these come, you know, popping in that stuff. So from the incumbent side, the most interest thing industry I've ever seen in my life because I have never seen such a severe channel conflict and innovators dilemma in any other industry. This is an industry that for 150 years, built 1 channel, and that channel was an agent.
But, woah, 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 wanna start a direct insurance company. And, yeah, it might cannibalize, business, but we have to do it. And what would happen is they Pete gonna say, fine. Go for it. But you have a $10,000,000,000 book of business that is basically sitting with agents and you would need to start building something that cannibalize. All of the agents gonna say, woah.
Woah. Woah. 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. You'll suppose otherwise we'll we'll move in. We're leaving to another company. We're taking our business with and no CEO wants to make the decision over $10,000,000,000 versus a $1,000,000,000. Enhance, they're all frozen. So that's one.
The second thing, these guys, they're not set up a technology company. A insurance company. 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 them. Guidewire is the back end. Someone else is doing the Beller, and Accenture is doing the implementation.
It's not set up in the way that you look as a technology company Pete Hence, they're dependent on a third party on their systems on implementing on making changes and making product decisions, which becomes even more, for the sum. And the last thing, they have a current book. So if you or state, you have, I don't know, $11,000,000,000 book of business in home, and the regulation is such that if you wanna change some, 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 attributed to all of the people in that geography in that, you know, state that are getting a renewal. So if you're doing an amazing job, it means that for 75% of your current business, probably gonna be cheaper. So let's say with a 10% cheaper, and everybody's gonna be, it's awesome, but I just lost $750,000,000 in premium.
And for the other 25%, which are more expensive, I might capture more revenue, but some of them was gonna say, woah. Woah. Woah. Woah. Let me check my, you know, other options because it's too expensive. So now by you, I'm telling the entire book you might lose a $1,500,000,000 to $1,000,000,000 in business, so nobody wants to do it. So there are structural inefficiencies that basically prevent incumbent to Pete.
And they did it to themselves because for the last 100 years, they put all of these barriers of, you know, lobbying and regulation and all of that, and now they can Pete. So true. And I guess the other piece we didn't mention there 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, you know, built for a prior era where they certainly didn't have kind of the right kind of data or look at it in the right way. Is that something that you've experienced as well? Yeah. But the the interesting so I actually looked at stuff in this business in 20 2007. And I briefly looked at it and I put it on the shelf.
And the reason that I put it on the shelf, because I thought, 1, I can't build the back end. I'm not gonna go to Accenture, and I'm not gonna go to Guidewire. I mean, it's gonna take me 4 years and $300,000,000 to build it. And the second thing was lack of data. How can you compete with fill in the blank who has 5,000,000 customers. Well, you don't have anybody.
And the third one, I wasn't certain that people would be willing to bet on a new kind of new brand in insurance, which has to do with trust. And then when I relooked 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.
And, you know, we can go through a list of 500 amazing companies to basically opt and I can build it to whatever scale I want in a way faster manner and not have legacy and move that so the technology is done. Data is exactly as you said, Pete, in an era of abundance of data. I don't just have the 5 or 10,000,000 customers. I have 130,000,000 households. You were in Twilio and Zillow have, the 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, you know, from taxes to size to bedroom, to pictures of inside the house, every transaction that we're in a world of an abundance of data, and these are regulated industries that actually have all of this data, the, and it's, so you have an advantage because I'm not looking at the book. I'm looking going on with all of the 130,000,000 households.
And the last component is, does 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 it with so far and your managing your money with Wealth Morgan and your trading with insurance. It's 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 the brand that is coming in, which so all of these free things James. And I thought, wow, I think it's the barriers are lower. The competition can't really react. Let's launch something. Amazing. And then whatever it's 6 years later, you're a techy public. So It's quite an incredible story.
And maybe, you know, if we think back to the beginning and when I first met you, you know, certainly you had some exposure to the insurance in the but I don't know if you would sort of profess yourself as an insider or an expert in that. What was the learning process that you went through just to kind of become smart about this complicated traditional regulated industry? I'm a very, methodical learner.
There's several good things in consulting, but one important thing is that you build the confidence that smart people can learn a new industry really, really fast. You have a project in media, and then you have a project Beller, and then you have a project in Falmouth. We didn't spend of 2 months. I can have a very intelligent discussion with the CEO of a corporation who's been doing it for 30 years. So you get the confidence can actually learn something. It was very far from being an insider.
You know, I've done some projects with McKinsey, and my dad was an insurance, but unless it was by me riding in the back Pete 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. 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 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 3 biggest pain points for them. And it was about digitization. It was a millennia. It was about direct and stuff like that. So it kind of gave me confidence. And then I just red and red. 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 I learned a lot. 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 Pete actually think one of the biggest super strengths of entrepreneurs.
So, you know, 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 kind of need to come from the outside. Don't think Uber would have started Beller from the taxi driver's association and Airbnb from the, you know, hotel management and almost any other, like, big business, you need to come up fresh.
Otherwise, you find yourself with the common denominator, and you need to work on somewhat at 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 that these sort of ideas that are collision or outsiders.
Is there any sort of 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 a idea that might be disruptive or build a compelling business? You know, it's a good question. I don't have a 12 month. I'll tell you my story. So I sold my previous company, and I thought, I have another one in me, and I wanna do something bigger. I kind of felt like I sold it too early.
It didn't materialize where it wanted to be. It wasn't the mother of all sits 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 to an ideation thing. And my ventures usually coming from different areas. Let's say you have a world of, 100% of the ventures are being started. My guess is 90% of them are split evenly between ideal domain expertise, you know, you have, cyber companies.
They're not going to pop by someone, you know, Pete a sitting and like, let's do a cyber company in this. It's just never gonna happen. You need to have domain expertise, networking, I don't know, optics. There's a bunch of stuff that requires a certain domain for these 2 actually build. And then you have the other stuff, which is more of a need based. So I was talking to people and I was shocking that you don't have this. I was browsing the web and I couldn't Flint.
And I'm sure that, you know, we can talk about your 2 companies and you would have, like, a massive realization of something that came Both of them are not deep domain expertise, but are kind of need based. And none of them were my ventures. And then you have the last 10%, which I would say of also probably evenly split, and I'm just making up the numbers.
Half of it form, you know, does a Stanford professor who has an amazing technology, but no product 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 3 months tons of stuff, not insurance. I basically said this, and I'm gonna read, and I'm gonna try and find full kind of outlier. And I actually rank them.
So the first one, my previous company was a hardware company that Beller 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 refacture, how to, distribute, how to ship. I know all of that stuff. I have scars on my back from Pete to the moon, from all of the stuff. So I thought that's the easy one. 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 kind of silo was I'm gonna build a an Air kill product for Latinx. That was what came up from the research. Say it again. What kind of product? Air kill. Like, stuff for the air Pete people for Latino. I thought there is a gap in the market. There's an interesting thing. This was the time where, direct to consumer brands will value that 20x, what, same brands were. You know, this is honest company.
This is Harry's. This is, Beller Shave Club and Casper, and they'll value that X in the cutting, like, the middle Morgan, and I thought maybe I can do a subscription and all of that. Couldn't get too excited, but that was the top thing. 2nd 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 logistics. Try to ship something from China. It's a freaking mess. 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 nugs me. The number that I found there was that 73% of the trucks are coming back empty. And how that crazy. Maybe there's an Uber 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 pop in that space, but I didn'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. I'm taking a shower, I'm only thinking logistics. I couldn't get myself excited about that. So that was the second one.
Then I reserved the third one is the something is the, like, an 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 Arnold and Bush were bought by, InBev, they had to sell some of the breweries.
And he bought a couple of the breweries, and now we probably manufacture 50 send off the craft Beller because people needs a place. If all food comes with an order, you can't scale it up from 50 gallons to 5000 gallons. So you need something that's what it 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 kind of bought back on my back pocket from 2007. Sure. There's a purchase start up founder's listening. 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 sort of direct to consumer data driven, millennial approach, like, and you're not an insurance but you became like a quick study and quick learner about it.
I imagine you had to hire a team of, you know, industry veterans that kind of knew this since industry much better than you. How did you convince them that they should join you as opposed to stick with their, perhaps, their comfortable jobs at many of these incumbents? Oh, the hardest job ever. The hardest. And especially there's not a lot of insurance talent in California. So you had to pull them from forever.
By the way, as a side Pete, 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 that I'm gonna bring in initially, probably not on the Beller to do the things that I want. I know how to attract top engineering Flint. But the people that I'm gonna bring initially on the insurance side are probably not gonna be very strong because I can pay them a lot in an industry that pays them quite a bit.
They're gonna ask us, what does this guy want? It's like, it's crazy. It's too risky. There are also people that work in the insurance industry, risk averse by structure. That's why they're working 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 Actuary.
There's a company called Milliman, and you overpay them, but they speed up And they also you tick 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 reinsurer to take the you need to persuade a lot of people down the line. And just by saying it's Asaf and Joe, and Joe was an ex, that's not gonna fly.
So sometimes you need to have and we're using, you know, Sydney as the lawyers because they're the lawyers of World State and stuff like that. You need to take points from other and you overpay for that. But that's just to get off the ground. Finding the initial first people is always out.
By the way, it's not Currier, although it's somewhat easier now, but still very, very hard because you're trying to find people that, understanding of what you do and not trying to pull you, oh, this is how we've been doing it for 30 years. You just battled against their kind of judgment until you kind of pulled them over without the approach. I imagine that some of the consultants, they wouldn't wanna touch a no name starter with a limiting capital? Yeah. So more, mercenaries.
Your first employees, missionaries. And you always wanna have a certain thing of missionaries versus Beller but it's consulting for our 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 Mcathernows, he was president, who was, you know, basically number 2 or 3 person in medical insurance and did some startup 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, I started to be super skip, but there are several moments that you hire specific people. You have a partnership or something that are kind of like binary moments. So this is one of the important binary moments that we had when and joined us. And then so you had the team and then, you know, obviously, insurances are regulated industry. Was this more difficult than you expected? In some ways, yes, in some ways not.
So I learned to appreciate regulated industries. I think this is a place of arbitrage. Let me be specific. I think, you know, you're funding amazing companies as an And every time an entrepreneur comes and they're saying, Pete, it's going to take us 7 months and $1,500,000 to build this capability. And then it actually gonna be 11 months and $2,500,000. And you have your own flexibility on the numbers, but that's what always happens.
And it's never the James, and there is a technical issue there's a leap through that we need to do, or there's always something. Regulatory component is actually measurable risk. It's like, you know, I can go to who's the best lawyer in the US for whatever regulation, insurance regulation, and you can find 5 of these in those ranking because everything in the US, you are ranking. You can just do a nice search on the web on the top 5 to the top, and you're gonna get the Flint.
And you go and you schedule a meeting with all of them, and he said, fine. I want it 5 in California. You know, basically a filing for home insurance. And they're gonna ask you, do you have a Currier to do that? And you work either yes or no? And do you have a reinsurer's yes or no? Let's say I mark. And you say, how much time it's gonna take? And this is, yeah, on average, it's 6 months. It can be up to 8 months, then it's gonna cost you a $173,000, $249. I say, okay.
Fine. Now I have a plug in in Flint and put 215,000. 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 rank. There's not a lot of risk behind that. It's actually quite derisking the business.
It's just that it even negates competition in many ways because it's not that Pete and Eric are sitting over, you know, coffee and you're like, we should start something, dude, and, dah, dah, dah, let's start an insurance company. And 5 second later, you're gonna call Joe and Joe is gonna say, oh, you're freaking in that speed. We know what it means. There's compliance, there's regulation, there's reinsurance. Why do you need to get into that?
That would kill it in the butt, and that's a massive benefit. Yeah. Do you think as a second time entrepreneur, this was a sort of level of risk that you're comfortable with. And then maybe boarding that, what did you, I guess, as you as you were thinking about building HIPAA, what did you, I apply to the business that you learned from your experience? Is that a high entrepreneur?
Yeah. I do think it's a kind of risk that you we were a lot more honest with yourself as a second time entrepreneur on the risks in the payment. In entrepreneurship, it's really, really interesting because for the outside world, you have, like, a proven kind of minister that you need to everything is amazing. It's doing it's going. It's like we're crushing it. And then on the inside, you need to be really, really honest with your board, 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 leave in this 2 phase kind of thing. As a second time in De Panu, you become more honest with yourself about these discussions. So I can quantify better these kind of risks and have the right discussion and dissect basically what's the execution hurdles that are needed in a way Morgan clean and succinct way. And that was beneficial. Second thing is swold to myself the team. I'm starting a business.
I'm starting it on the biggest time I can actually in an industry. I'm not educating anymore. Like, I built a 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 you have a really, really good position. But insurance, as I said, it's a $105,000,000,000 market just on home insurance. I don't need to be it's not a winner take all. Pete me have 1% of the market. That's not a bad outcome.
It's a $1,500,000,000 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. I swore I'm never gonna do a hardware again. I'm not doing shipping. I'm not doing tooling. I'm doing don't doing manufacturing and quality.
Plus, I hate businesses that every time it's a one off purchase, was like, I'm gonna do a business that's gonna be as repeated purchase as possible. The lifetime of, home insurance policy is usually 8 to 9 years. Once you have a customer and you do well with them, they last with you for 8 to 10 years. That's an awesome business to have. So this company is the fix up for all of the shit that, you know, that I had in the past. It's a big Morgan. And then I also changed culture.
When I started the business, I had 2 kids. I was in a different position. I wanted to be an evolved parent. I have a wife who's way smarter and more accomplished than me who actually let me start another business when I was entering my forties. She could have said, Pete the hell are you doing? Like, listen, we have a Morgan, we have it in, but, no, she was very supportive and, 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 recited, you're kind of obligated to go to the recited. 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 is your KPI you figure out your time and you want assignments. There was a maturity of myself as well in starting the business. Fascinating. And do you think that the nature of the industry has sort of leaned itself to that. I mean, obviously, there's the bias towards execution over kind of, like, you know, I guess, sort of disrupting it in an existing market versus creating a new market.
Do you think the culture 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 at at that time? Many times, especially early on, and you just hire the strongest people you can find that they're willing to bet on you and work for Fenny's. And, again, now let me also find that that person was a great technology. Product person is also aligned with the age.
You know, it's not that strategic. Yep. It just works out that way. You marshal whatever resources you can wrap. And you're thankful for that. I mean, you have different currencies at different time of the company. The first currency that you do, which screws up a lot of the stuff later on is titles. You take a person who was maybe, maybe now can be an engineering manager and he's all of a sudden your VP of engineering because he bet on you and his stuff.
And then, you know, later in you need to fix all of these titles, but you compensate them Beller. And there's all kind of other things that's moving. So let's continue to just talk a little bit about entrepreneurial culture. I know you've talked about like, speed versus strategy. And what does that mean to you? And as you think about, you know, rapidly scaling this organization building a class multi $1,000,000,000 company.
How do you think about the core cultural tenants to enable you to do that? I sell for 5 bills in the Israeli, of course, and with a captain. And, you know, there's some components that I learned from it. And I think some of them are the tenants for the business. I think I'll give you the main ones. The main one for me is you say what you do, you do what you say. I think it's the most simple thing. If I told you I'm doing something, then 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 100% certainty that if Pete told me that he's doing something, then it's done. Wanna micromanage. I don't wanna check on you. I think if you find the right people and you instill that level of confidence that, you know, they have responsibility and ownership, and you can accomplish a ton of stuff. So that's the core tenant of the company.
I would say, let me think of a couple of others that I think, you know, I, I go up in a company. In a unit, the motto was Odell's wins, and I think that you need to take calculated Pete, and it's important, but you need to embrace it and embrace also embrace when you're making a mistake. And, but are you really, really prefer that if someone comes and asks me a question, it's always gonna come back with an answer. And I always gonna say, okay, do it. But let's have a gating factor.
What if it doesn't Morgan? Or what's the hypothesis? We know that we're actually on the right track, but I always prefer that people move and not get too much into an as paralysis, which tries me nuts. And I think it stops so many corporations from actually acting. I'm trying to think what else several components that matters to me. But I think this is like, and I'm born for 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, you know, if Pete worked for us, Pete, what do you think? You will weigh closer. So you have higher weight on the decision and you're way closer to the Flint. Presenting media hypothesis, and then I'm gonna ask you, what's your level of conviction of this idea? And if you say this, and I think it's 70, 80%, go into it.
And let's have a discussion in 2 weeks when we have them, we know more. And, you know, the last 12 months have been incredible year for you, but also a challenging year for employees and business building. If you reflect over the last year, you've been on this sort of rocket ship growth, but you've had to navigate COVID and work from home and everything else that comes with that.
Is there anything that, you know, as you look back, things that you did, or you had to do that were particularly helpful to you as you've scaled during that period? 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 Pete, you know, wild 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 happen in the world, and we will benefit those 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, then it's easier for us to hire Pete.
It's easy for me to say, listen, we did this, and we did that. And that's what actually entails and importance to where we are. I think the, you know, the company was performing and executing, but we have macro trends that were very beneficial for us. And that also enable us to grow because we will set up for track the right level of talent, retain them, taking care of them. What I learned is that more communication is important.
You know, people always, when I listen to podcasts every time, they're like, oh, when we grew from x people to 2 x and half of the people in the company has joined in the last and that's a measurement of growth. And what we have now is to add to that, it's not that we who, you know, half of the people joined in the last year. And also, none of them stepped a day in the office all seen another person from Hippo in the last year. It's crazy.
It's like, we take something, and then you add layers and layers on top of it. Yeah. It is crazy. I'm sort of visualizing when you talk about sort of the incumbent and visualizing a cargo ship stuck in the Suez Canal is like you're the speedboat 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 startups Beller to move faster, able to execute on the opportunity. 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 saying it. And, you know, we've seen the last year as a crazy year for startups on scale. And a lot of it is you know, every person in the work that Dane and incumbent know how slow they are and, you know, they're moving super slow. Now take exactly, as you say, now they're stuck in the Suites canal on the side and you have an abundance of fuel for all of these newcomers. So they just surpass and keep on growing.
So the last year has been such a massive growth because the incumbent industry has been stagnate a lot Morgan the other guys. I have a lot more. So it's just way faster than it used to be even before. I'm curious. You think this is gonna accelerate? This opportunity and versus incumbents, or do you think they're gonna invite their way back? You know, some of them will, some of them not. It's not that we don't take all.
I do think that the pace of innovation, we're just gonna keep on increasing with the move to the cloud, with external tools, some of the more interesting companies in the world today are actually offer its walk days, it's Gusto. It's giving you, 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 kind of approach to what you do with tools, with digitization, with customer that are expecting a different experience, the pace is just gonna increase. It's not gonna decrease, and it's a very, very difficult thing to change the state of mind of incumbents. Now one of my favorite book is, you know, only the paranoid survive.
In it, you know, it's the story of intel who's 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, the people that constantly made the right choices on the previous business. So who's on the top 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's running, you know, it's a $30,000,000,000 business to make choices that are counter to his DNA. It's just not gonna happen. So how do you avoid that happening to you?
How do you put the co tenants that you don't become the incumbent that someone else would disrupt? I think it all starts and boils down to decision making. 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 disproportionate 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 gonna win. Yep. And that creates a culture of startups within startups, which hopefully can help you avoid that disruption. Would we train into, yes, The second that you start building something, it becomes legacy.
The second that you are, there's some stuff that I'll just structure. There's the entropy of the Morgan, but if you proactive to think about it. If you bring strong people, if you talk about it in the management, if you, you know what? Everyone's in a while, acquire another startup not just for capabilities, but actually for an infusion of a new DNA and you think about it in this way, then you stand the chance for you becoming incumbent. Yep. So maybe shifting gears a little bit.
You announced just recently that you are gonna go public virus back. And, you know, I'm sure all the audience have heard of specs by this Flint, but maybe if you could just share a little bit of us the rationale behind that and kinda tell us what's going on in terms of what HIPPO is doing. Sure. We've got a lot of thought into that. It was, oh, god. We started being bombarded by different specs, I would say, mid last deal.
The beginning, we kind of, like, nudge them all out because we thought it's the bottom fields of Wall Street. I don't know how else to kind of describe it. That was the perception in the market. And then it happened several 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, you know, 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 1. And they're all looking at himself, and everybody's like, oh, that's awesome. But the CFO is saying, damn, I just left 100 of 1,000,000 on the table. That's ridiculous. That wasn't, you know, in who are the main customers for Wall Street? Is it HIPPO or is it Wellington? It's a T low price, or is it, you know, company x? So that was the first thing. The second thing which was, why is it so good to be 25 times oversubscribe.
Well, that's so it looks like a very weird thing for us and the component that have to do with I need an analyst to present my basic forecast instead of me talking to the investors and it Beller them what I see as my 5 year kind of forecast. It 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 our top professionals on the field started setting up their own specs. So rabies capital, which I think I'll amongst the best team tech investors around and Mickey and Nick are amazing. I was like, woah, where did this came from? Why did you set up the fund? Is that in Dragonil as well, which is also our investor know, injeted and Mark, you know, best of breed.
So I could have a discussion with people that I trust to get another kind of point of view and the mindset So that helped us educate. So we were looking at it, and we became a lot Morgan. Okay. That's actually interesting. I do think that there are some components that they put too much weight on the benefit of a spec versus an IPO, which in hindsight doing the process now. I think it was a disproportionate amount of and I can get to that in a minute.
So firstly, we went to study this instrument. We were going to do an Pete. We were about, you know, prepping an S1 to do a confidential S1 Flint. We would you know, the company would have been public. Let me split it into 2 things. I think before any of that coming, before anybody consider us back, you should ask yourself two questions before. The first question, the company ready to be a public company?
We will always miss out on that because you're running a company and all of a sudden, a stack reach you and they go, fine. Wow. Well, we can be a public company. Raise $400,000,000. That's amazing. But you never stop to say, do you have the right processes in place? Can you forecast, I don't know, eight quarters into the future and Pete raised 0 Beller? Are you been doing recently on the beaten raise with your board? Do you have a GC that can be a GC of a public company?
Do you have audited financial documents for the last 2 years as a the company. Do you have a CSO in the company? Because you're gonna be attacked like crazy by Beller. Do you have a a CFO that can actually do it? There's just a bunch of question that you should already ask yourself. And people kind of forgot. And we know quite a few people that signed with us back, and now we're like, oh, god. We need to do everything. They're like, will this thing form? So I think that's the first question.
2nd question is, is it the right thing for the company to be a public company? I don't know if 3 companies the right thing for them to be a public company or in the right timing, we thought for insurance, it's awesome because within a game of trust, we're gonna Pete, a lot of credibility. It's good for our partnership. It's good for a lot stuff. It matters if Pete is calling my call center and Beller, you would ask, who are you guys exactly?
And one of my agents gonna say, oh, and we're, listed on y and z. Like, it just does something which resonates very differently. So you need 1, is the company ready to be public B is the right thing the company to be a public company. Once you take mark these 2 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 3. You can do a standard IPO.
We can do a stack or we can do direct testing. And each one has a bit of a pause and cons, but it's my job to present the options to my board. At that point of time, we're like, okay. Fine. We're ready. We wanna do let's figure it out. And we said that there was something in the dichotomy of being a public company, which, you know, in the warm and fuzzy place of private company. And then one minute second later, you're a public company, and people can trade in and out of your Beller.
And everything is out there. And, like, woah, I wanna have something which Can I have someone who somewhat helped me mitigate that transition? And we came across, you know, read and mark, and there's a person who lives in Palo Alto. The optionality to work with, treat and mark with, I'll be the dumbest person in the world to resist that optionality.
It's a read off man in Mark Pincas who built a couple of successful companies and thinking about that and came to the realization that they want to do a spat. They call it being VC on scale to help a company and specific ventures that they think are in the reinvention and 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 grow, was a full alignment in the meeting of the mind, And, you know, that's why we decided to go with them. And then, so that's on that. So I'm talking too much on this, but I wanna talk about the framework that we did full stack. Which I think is something you should think of. Please. So after we talk to Civil, we put a framework on specs and we call it there were 3 components. 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 gonna be right for our shareholders, right for the pipe investor. Is it gonna be too high? No pipe investor wanted to how can we make sure that some growth left in the market that investors are coming in are still gonna do well? I don't wanna go public and then, you know, stock 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. It was more of a gating component rather than a maximization algorithm. 2nd thing was certainty. So because in spec, one of the things is beneficial is you get certainty on the price because I signed on the merger agreement and, whatever it was, February.
And that's gonna be the price when we dispatch 3, 4 month down the line as opposed to when you're doing an IPO, which you're like, you know, you're prepping everything. And then you have 10 days that you need or whatever it is that you're doing your road show, and if the window is open, the window is not open, and then you come up with a price. So I wanna 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. But the main one was the reputational risk of our partner. Because Reid and Mark has more to lose by a scoop of this transaction than Asaf, because they built the bigger reputation for themselves, and they have more I wanted something that basically aligns that way. I wanted someone that we call it the industrial strength of a spec. I didn't want off spec.
I wanted someone who's backed before, who's gonna have a family of specs later on, who's gonna have the reputational risk on continuation and doing that and know how a relationship with investors, a relationship with the street, and 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, and that has to do with the terms that you have which is, you know, the promote, how they're earning it, the time that they have, until they're basically making. So, you know, we're locked for a certain time, and they're locked a certain time, a Beller seed investment in the pipe and not just in the spec. It does a bunch of things, and then we had this meeting of the mind that the valuation is what we wanted.
We love the partners. Are very certain of this thing, and we look at it as a partnership as opposed to a transaction, which is awesome. And there'll be an alignment. We said Flint. I think it's the most preferential way to go public if we can, and that's what we did. Yeah. That's such a terrific story and context. Now I remember taking truly a public in 2012.
And, you know, it's either the time, the kind of expected process, but you look at where it is today and it's sort of credibly antiquated and painful and expensive. And, you know, almost feels like Wall Street and the banks kind of really created this opportunity themselves. Like, you know, 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, you know, we'll see what happens with specs, but it's still said they're here to stay, and I couldn't agree more that, you know, read a market just exceptional entrepreneurs that the opportunity to have them in your camp as opposed to purely financially motivated folk it's such a unique opportunity, the accuracy you. Just finally, I'd love to kind of touch on a couple of things. So one is just what's in store for Hippo. Going forward. And then 2, I'd love to future guys for a bit.
I, again, reminiscing back to our first conversation when you were starting Hippo, a component of it was smart home. There was this sort of proliferation of data that's happening. I'm curious as you think about homes of the future, like, what do you see trends happening in smart homes and as you think about where we live in the next 10 years, like, what does that look like from your perspective? Sure. Let me take the first part of it first. So I think 2020 was a very interesting year.
It's a 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, you know, what you're seeing 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 it would 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 gonna be a homeowner.
I'm gonna buy this beautiful house, and it's gonna be a joy and you envision, you know, having your kids grow there and your girl go down the stairs for, you know, a poem and you were carrying and your kids, you know, hitting your little finger into that and, you know, throwing flour at each other. You have all of these visions, and then you're moving in. I'm like, damn.
Plumbing doesn't work, and this doesn't work, and I have a problem in the backyard of this, and the tree, like, yeah, you know, and there's like this disconnect. Our view and our vision is protecting the joy of homeownership. 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 Homecare. It's our tele maintenance.
Every one of our customers can call the call center, and we're gonna help you you know, install a shelf, Pete a contractor, or whatever it is. I think there is a deeper partnership to do with homeowners, home appliance warranties, potential, in the process of home buying and inspection and assessments and all of that loveliness that you're very familiar from your Twilio days.
And I think there's a lot of waste to basically partner with our customers a lot more and help them basically live life to what they wanna live, and we're gonna take care of the crap in the home maintenance and taking care of the home. So are there is that, and I think within 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 all.
He'd want very, very optimistic. The business is doing very, very Beller, growing really, really nicely. We'll attract 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 fruits. We're still picking up fruits from the floor and walking around and eating watermelons. You know, we'll file form, like, extending ourselves. So that's that. Now smart home is a really interesting thing. I wanna bring 2 points.
1, one of the realizations that we have is when I explain what EPO is for people, what I'm basically saying is that incumbents have spent the last 100 years building a flawed experience. And it's flawed because it's hard to purchase. When you look at a coverage, you'll see that you're covered for obsolete things like Fercuits and putables in China and silverb, Muslims, and crisps, but, you're not Morgan stuff. And then when you have a claim, it's an horrendous kind of experience.
And by the way, in between this bad claim, you know, onboarding and a horrible claim experience, you have 0 meaningful touch Flint with your insurance Pete. Actually measured on having no meaningful touch Flint. It's an industry that don't even call you a customer. They call you a policy order because the customer used to be the agent. And this is what the industry is. And then when I'm I'm gonna ask Pete, who are you insured with? The answer is usually, it's all state.
No. State Farm. No. Farm Mills, because you don't know And they're all the same product because if I'm gonna ask you, okay. Fine. What's the difference between farmers and all the states? It's the same product. You know the brands because they're spending a $1,000,000,000 portal back 1 and Morgan back 2, but you don't know the thing. So we build a company that make it a lot easier to purchase and agnostic and omnichannel. You can buy VINH You can buy on input.com.
You can buy via, you know, our partners, etcetera. The coverage is a lot more modern and takes care of you instead of the Firdcuts and Pete boards, 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 Pete Promoter Score for the industry is 60, it compress in dealing with your start to finish, mitigating the race can taking care of you.
And now let's double click on the last point, which is the touch Flint with Pete is a customer of people. And for us, we wanted to create something which shifts in adversarial relationship with insurance as now into a partner 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 of insurance is we keep on using the data to basically look at your home on an ongoing basis and flag changes. Smartphone device is at the core of this offering. We offer every one of our customers a smart home key that has several smart sensors, motion sensors, leak detectors, smoke and fire alarm detectors, all of that kind of stuff. And then we have the EPO Homecare, which I talked about, which is helping you take of your home.
So I think the world is gonna move a lot more into partnership and smart home is gonna be at the center of that. Now if I Really, really brainstorm what it can be in, like, 5, 10, 20 years. I actually think there is a good chance it's not gonna be an insurance anymore. What I mean is you're not gonna buy insurance. What you're gonna buy is for $150 a month. You're gonna buy a smart home kit that takes scale 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 kind of offerings that's coming in as opposed to an insurance that offer that. Yeah. It's, creating entirely new product.
I can't help but think of the auto industry where I saw some statistic the other day that Pete, they choose the electronics in the car, over the engine or the look of the car, which was just like, you know, staggering compared to, you know, where we were sort of 10, 15 days ago, and it wouldn't surprise me if the same thing happened in our home as well. I agree. By the way, what you said, that's exactly the number one field. Of the toys versus Silicon Valley.
The last thing they want, that's gonna be an OEM platform, and it's all gonna be about electronics and that kind of stuff, which is something that Silicon Valley is good at, and all of a sudden, the entire industry of car manufacturing is gonna change. Maybe the same thing for the home industry. Or the construction industry. Beller, asaf, 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 being Philinomy part of your journey. It's been an amazing 6 years of many, many years of success going forward. Now, thank you. Greatly appreciated you betting on me early on. I've never take it lightly. I think the first investor was in your Saints, and these are the people that they invest in you when you have nothing. So thanks for for the vote of confidence and the amazing thing that you keep on doing with NFX. You've been listening to the NFX podcast.
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