Matthew Jones is a managing director at Anthemis, a London-based venture capital firm focused on insurance and risk related technologies. Matthew shares Anthemis’ thesis-driven insurtech investment approach, and the things that excite him the most in the first call with founders. He also explains why it’s difficult to uncover opportunities in insurance if the team lacks someone with a deep understanding of the industry.
Matthew Jones is a managing director at Anthemis, a London-based venture capital firm focused on insurance and risk related technologies. Matthew shares Anthemis’ thesis-driven insurtech investment approach, and the things that excite him the most in the first call with founders. He also shares authentic stories showing why it’s difficult to uncover impactful opportunities if the team lacks someone with a deep understanding of the industry.
Highlights:
[3:20] Why many venture capital investors would look at you as if you had two heads when you mentioned insurance in 2014.
[8:45] Two kids in a garage writing software can disrupt a traditional industry. However, to build a successful insurtech company, you need to have someone who deeply understands the industry.
[12:05] Although due diligence for tech startups is tricky, it’s the unpredictability of opportunities in the space that makes early-stage investing exciting.
[20:42] Optimizing for investors who are super quick may not be the right thing to do for the company’s long-term growth needs.
[00:00:00] Matthew Jones: I didn't realize when I started in venture, I thought it was a lot about PowerPoints and spreadsheets and that kind of stuff. And sure, that's there and you need those skills, you need to be able to read a legal document, but it's a lot more about people and personalities and egos to a certain extent, and the softer stuff than I ever, ever realized.
[00:00:27] Gopi Rangan: You are listening to The Sure Shot Entrepreneur, - a podcast for founders with ambitious ideas. Venture capital investors, and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision. Welcome to The Sure Shot Entrepreneur. My guest today is Matt Jones. Matt is a managing director at Anthemis. He focuses on investments in insurance and risk-related technologies.
[00:01:06] Matt, welcome to The Sure Shot Entrepreneur.
[00:01:09] Matthew Jones: Thank you for having me.
[00:01:10] Gopi Rangan: Let's start with your career. You started your career in insurance. Not a very sexy industry to go to for most people. Tell us a little more about yourself starting with your career.
[00:01:22] Matthew Jones: It's absolutely true. It's not the sexiest but I've never regretted it.
[00:01:26] When I was leaving university, I was not sure what I wanted to do. I'd done a couple of internships. I did one at a fund of funds, hedge fund. I did one at an investment bank in London and had mixed experiences. There were parts of both of them that I really liked and really enjoy. I was getting to the end of my time in formal education and thinking, what on earth am I going to do next?
[00:01:50] And I still don't know to this day how I knew, but I knew what a reinsurer was and what a reinsurer did, their role in the industry. I remember it was a Friday afternoon, the last day of the last week of the last month, the company was accepting applications, the company being Swiss Re.
[00:02:07] And I threw an application in at the very last minute, really not expecting anything to come of it. After a long interview process, sent me to Switzerland and assessment center and so on, ended up starting my career at Swiss Re in London. And have loved it ever since. So it was like everyone else. I fell into insurance, but like everyone else I've stuck around and very much enjoyed it.
[00:02:32] Gopi Rangan: From the world of insurance, how did you fall into venture capital? Or was that a strategy that you picked and you targeted venture capital as your next move? I didn't.
[00:02:42] Matthew Jones: I was lucky. One of the best roles that I had at Swiss Re, I was working on the strategy plan for establishing a B2B2C life insurance company in the U. S. But as part of the strategy process, my colleague, my boss at the time, Elizabeth, she said, having previously worked in venture capital, "we have to go and see what's happening in technology in Silicon Valley. We need to know what's coming up." That was 2014.
[00:03:07] Now, back in 2014, I can tell you there was very little that was happening. At that time, Oscar was just about up and running, if not, maybe around that time, the guys at Surefy and a couple of others. And when we spent a week in the valley and in the city meeting with people and I was hooked. The vibe, the feeling that I got speaking to entrepreneurs, speaking to other investors, I knew that this was something that I absolutely had to come and do at some point. So I, good corporate citizen, put it to the back of my mind and and I tried to get on with my job but it was always there in the background. Fast forward a few years later, having spent a lot of time in the insurance technology community in London and beginning to establish an understanding of what was happening in the space.
[00:03:54] Fast forwarding to about 2016, I got a call from Anthemis and Anthemis at the time was setting up a new fund that was focused on the very, very broad topic of insurance and risk management with other FinTech themes as well. I always make this joke that what Anthemis was looking for was someone that had been in insurance for just about long enough to know how it pieced together, but hadn't quite gone native yet. And I managed to twist their arm into thinking that was me. I was the person they should take a gamble on. I know they had some excellent candidates from venture and so on, but I managed to convince them that what they really needed was someone that had been sitting in a reinsurer for the last few years.
[00:04:31] Nearly four and a half years later, here I am. So I was very lucky. It wasn't some grand strategy, but I was definitely influenced by those first few visits to the Valley and seeing the innovation that was happening firsthand.
[00:04:44] Gopi Rangan: Yeah, 2014 is when I started focusing on the insurance sector, and I bet my career on the insurtech sector, and that's a little later than that.
[00:04:55] Towards the end of the year is when Sequoia invested in Lemonade. That was the moment when many other VCs started looking at the insurtech sector. A lot of things have changed since then.
[00:05:05] Matthew Jones: Do you remember speaking to other investors at the time and mentioning insurance and they look at you as if you've got two heads like this old industry.
[00:05:14] And I know now we look at it and we think old industry, enormous industry. What a great opportunity! But at the time, people thought we were crazy trying to bring technology into insurance.
[00:05:24] Gopi Rangan: That's right. I did spend a lot of time in 2015/16/17, and I would walk into many of these large VC firms and I would spend an hour, two hours, help them with due diligence on an InsurTech deal they were looking at, and I would give them my opinion.
[00:05:39] At the end of it, one of two things would happen. Either they would get scared and say, "This is riddled with regulations, and I don't want to touch this part of the world", or they would be so arrogant to say, "Well, we have disrupted the hotel industry, we've disrupted many other industries, we will disrupt insurance, and we will just fund two kids in a garage writing software, and they will build a website that will rival the large incumbents that are already thriving in the insurance industry."
[00:06:08] I thought that was also a mistake. That's actually when I decided to start my own fund. I decided that, you know, the world needs a seed-stage venture fund that actually understands and has a respect for regulations, but also is bold enough to say, "I will support an entrepreneur who has a different point of view."
[00:06:24] Matthew Jones: That's great. I do agree. You and your fund absolutely are vital to the development of tech in this space. Yeah, very similar experiences in those first few conversations.
[00:06:34] Gopi Rangan: What do you focus on for your investments? What stage do you invest? What sectors do you invest? I understand you focus on insurance, but are there specific themes within insurance that you're excited about?
[00:06:44] Matthew Jones: The way that I have recently started describing our investment thesis is it's a little bit like a dartboard. And in the middle of the dartboard, the bullseye, you've got the traditional insurtech investments in companies that we all know and see in the headlines. They will include things like brokers, MGAs, data and underwriting businesses, core systems technology, and full stack propositions around the world.
[00:07:08] Around the edge of the bullseye, we've got these adjacent industries that we've identified as being of relevance and interest to the insurance industry. And more to the point, we believe that the technology that is being developed in that particular industry is going to intersect with the insurance industry at some point.
[00:07:28] Examples of those include things like energy, agriculture, climate, logistics, prop tech, health, those kinds of themes. And so in addition to investing in new and novel ways of underwriting auto insurance or distributing life insurance, we also invest in companies that when you first look at them, you think, "huh, what's that got to do with insurance?"
[00:07:49] And in many ways, the connection is actually around risk. It's about understanding risk. It's about being able to figure out the development of a risk or over a period of time. It's not always about selling and insurance policy. We have quite a broad take on what we like and what we'll invest in.
[00:08:08] Gopi Rangan: I know you and I have geeked out on a lot of these topics. We've shared many startups between the two of us, and we've also co invested. I'm curious to understand what you look for in these startups. What questions do you ask the founders in the first meeting and what excites you?
[00:08:23] Matthew Jones: Absolutely. If you're in the insurance industry, what I need to see is that there is someone on the team that understands the insurance industry.
[00:08:31] This goes back to what you were saying a few minutes ago about the people that you were talking to that were looking at insurance opportunities a few years ago. I really don't believe that you can build a successful insurance business if you're just a couple of grads in a garage somewhere and hoping for the best. You need to have someone around the business that really understands the insurance industry.
[00:08:51] That doesn't mean that you necessarily need to become an insurance company, but if you're developing technology in the industry, you've got to have someone around that really gets it. The other thing that we often see in insurance is you have to really be solving a problem. In too many cases, we see folks building businesses where they think they've identified a problem in the insurance industry, but they haven't, and they're starting with the solution. They're starting with technology and then looking for somewhere to apply the technology. Sometimes that works, but the sales cycles in the insurance industry are just too long, usually, to make that strategy work. Some people really prioritize this over other things, some people don't.
[00:09:31] The third thing for me is I really have to gel with a founder. We have to be able to get along and we either share a view of the industry and where things are going, we enjoy our conversations together, but there's got to be a connection. We have to click. So I would say those are the three things that, that really come to my mind, as well as the usual check boxes around product/market fit, and so on.
[00:09:52] Gopi Rangan: I see that you're very methodical in your approach and you look for specific things in these conversations. Can you give an example of a startup and talk about what happened in the first few meetings? At what point did you say, well, I really want to invest in this company?
[00:10:07] Matthew Jones: A lot of investors won't always say this, but when you know that you want to make an investment in a company, you can often tell at the end of the first meeting.
[00:10:17] And I have this feeling with the company that you and I have invested in together, Gopi, a company called Joshin. Joshin is a care marketplace that focuses on people that have got disabilities, people that need specialized care. The two founders of this business, Melissa and Melanie, you could tell in that first call the passion that they had for the problem that they were solving. And the in-depth understanding they had of the place that they were operating in was just phenomenal.
[00:10:47] I remember at the end of that first call, I put the phone down and I immediately started putting our processes into action. I knew these were two people that I wanted to back. These were two people that I wanted to invest in. Is it different for you? I generally feel like after the first meeting, I have a good idea as to whether it's something that will move forward.
[00:11:06] Gopi Rangan: First meetings are critical. I make a lot of my decisions in the first meeting as well.
[00:11:11] What happens after the first meeting? Are there some steps that you take where you convince your colleagues? What can entrepreneurs do to simplify that process for you?
[00:11:20] Matthew Jones: That's a great question. The first thing that we would usually do after that first meeting is try to fix up a chance to meet with other members of the team.
[00:11:28] Within each fund, whether it's at Anthemis or anywhere else, generally speaking, there are a handful of people that will work on any specific opportunity. In my case, my colleagues, Ruth, Kate and Sophie, Luis, Kyle, Georgia, we're a team that all works together. Depending on the stage of the opportunity, we will get everyone on the phone to meet the rest of the team.
[00:11:49] And that's a really good sense check because you might feel this as well, Gopi. You can get carried away after that first meeting. You can get really excited about an opportunity. These guys will come in and will ask really smart questions. "What about this? What about this? Have you thought about this?"
[00:12:05] After that second call, those challenges fall back to me or whoever's championing an opportunity, and I'll go away and start digging into them. Sometimes they are really good in obvious challenges like the market size, for example, or what are the other opportunities and lines that this company will go into?
[00:12:23] Sometimes it's things like unit economics or something kind of far more long term, a threat in the long term or something more strategic. The collective brainpower of my colleagues, who are amazing, is incredibly valuable. Once we've got a rounded picture of the opportunity, and it can be as simple as a SWOT (Strengths, Weaknesses, Opportunities, Threats) we then move into a slightly more formal process where we'll start meeting with customers, users, reinsurance partners, all these stakeholders around the business.
[00:12:52] And then I would say the momentum really builds from there and the excitement as well. It should do. The excitement should flow from there and it should get more and more. If you're building excitement and the excitement is increasing from call to call, that's a really good sign. If it starts decreasing call to call, it's probably not going to go anywhere.
[00:13:09] Gopi Rangan: Yeah, the investigation part, the due diligence. It's tricky. Sizing a market of an opportunity where the market is not available today and what it could be in the future is not very clear. Joshin is a very good example. I'm a huge fan of what Melanie and Melissa are building. I believe their market is going to be way bigger than what we have recognized so far.
[00:13:30] It's really hard to do a proper study and understand where this company could be. It's only getting better with every month and every year. So it is quite challenging to make a decision based on limited data.
[00:13:43] Matthew Jones: It is. And I wrote a blog last week, one of our companies, Flock, announced that they had raised a series A. And I did a post about why we invested in the company again.
[00:13:54] I went back to our first investment committee paper back in 2018 and had a look why we made that investment. Flock started in the drone insurance space and has since moved into commercial fleet. But at the time when we made the investment, we knew that they were going to move into other spaces. We tried to size the drone insurance market, but quite where it would go next and when they would go next wasn't entirely clear to us.
[00:14:18] And I was honest in the article about it. But the journey that these companies go on and the opportunities that come up in front of them so often just can't be predicted ahead of time. That is, in many ways, what makes what we do exciting. Yes, I think so.
[00:14:32] Gopi Rangan: So when do you like to meet entrepreneurs in their fundraising journey?
[00:14:36] Let's say a startup is raising two or three million dollars seed round of funding. Do you want to meet the founders when they are just beginning to think about it and their story is not fully baked and their slide decks have typos? Or do you want to meet when they are now beginning the process and they're going to launch into a fundraising roadshow for the next three months and you want to be one of the first few investors?
[00:14:59] Or do you prefer if they come to you after they identify maybe a few investors who have come, given verbal commitments, and now they're looking for a lead or a larger investor and the story is now ready, they have rehearsed and the pitch is perfect?
[00:15:13] Matthew Jones: I always want to be the first call. I love the opportunity to spend time with the founders that we eventually back and talk through the ideas that they've got, why they're doing it, where the pitfalls might be.
[00:15:28] And look, I know there are going to be people that are listening and say, "Hey, You didn't do that with me." Unfortunately, I can't do it every time, but we have examples in our portfolio where we've had early conversations. It was a little bit too early. We've provided a bit of feedback on what we need to see, and then the team comes back to us.
[00:15:44] So we have an investment in a company called Onsite IQ, and these guys do 360 degree monitoring of construction sites. When we first met the team, CEO Ardalan and I really got along and we had a reasonably kind of short DD process. At the end of it said, look, we need to see a little bit more traction here and here.
[00:16:04] Three months later, four months later, he came back and he said, "all that stuff that you told me that I needed to do, I did it." And he had. Everything that we'd expressed concern about, he'd de risked, and he'd gone away and spent time on. And so when he came back, it was an easier case for me to make to my colleagues that we should make that investment.
[00:16:21] Although my colleague Ruth still jokes to this day, "I can't believe you were so honest and so clear with your feedback of what you needed to do", but I do try to be honest where I can about where the hiccups might be and the things that might need to change slightly in order to get us on board.
[00:16:36] Gopi Rangan: What tips would you like to give to entrepreneurs before they meet an investor?
[00:16:41] What can they do to prepare?
[00:16:43] Matthew Jones: First of all, and this sounds so obvious, know your idea or business. If you're so early as to just be an idea, really make sure that you've thought it through. We often meet with people and they've just maybe been noodling on something for a few weeks, or they haven't done the necessary depth of research to be able to defend the case in certain ways. Certainly have a really good understanding of what you're doing.
[00:17:09] The second thing I would say is, to the extent that you can, try to take a look at the companies that the investor that you're talking to has invested in before. Try to have a sense of what they like and what they've invested in. We always write about the investments that we've made and make that public.
[00:17:26] There's an opportunity to see why we did that, the things that appealed to us. Nowadays on the internet, there's a lot of information out there about the kinds of things that we like and why we make certain decisions that can help entrepreneurs become familiar with our thinking, including listening to this.
[00:17:42] And I'm very grateful for the invitation.
[00:17:44] Gopi Rangan: Yeah, this conversations are very helpful for entrepreneurs. Thanks a lot for sharing real-life stories. You're giving authentic examples of companies like Flock and OnsiteIQ. Did they follow the steps that you mentioned, like preparing ahead of time, being very familiar with that idea and communicating that effectively?
[00:18:02] What did they say? What did they do in the first few meetings that got you so excited that your colleagues were impressed?
[00:18:08] Matthew Jones: In all three of the cases that I've mentioned, Joshin, Flock, and OnsiteIQ, the teams brought to the conversation a unique insight that they had identified or they had derived from previous work, whether it was in academia or whether it was in industry. They brought an insight that we as investors would not have otherwise been able to get to and that we think other entrepreneurs or other people that might be looking at a space would also struggle to get to.
[00:18:35] In each of these three cases, I can remember in those first few meetings that the depth of understanding of the industry that they were going after and why the solution that they were developing was the right answer was, they were incredible, all of them, and they got such a mastery of the subject. There was no question that we could ask them that they didn't have an answer to. That's not to say that saying "I don't know" is a bad thing because it's not. And I would always tell entrepreneurs, if you don't know the answer, don't make it up. Just be honest if you don't know. But demonstrating that mastery of their subject in all of these cases and beyond these into the rest of the portfolio is always one of those first few things that you notice.
[00:19:15] Gopi Rangan: Yeah, "I don't know" is actually a sign of integrity that they're not making up answers and they're genuinely not aware of what the answer is. Sometimes nobody knows the answer, so it's okay for them to not know either.
[00:19:27] Matthew Jones: Yeah, sometimes we'll both go and figure it out together as a way of building the relationship before an investment is made.
[00:19:34] Gopi Rangan: It's been about four or five years since you started in the venture capital industry. How have things changed in the industry?
[00:19:41] Matthew Jones: The speed with which deals are getting done now has increased enormously. We don't really allow ourselves to get bounced into a very fast process. If a process is moving so quickly, such that we're not able to get comfort on key questions that we're asking ourselves or asking of the team, we will back out and we'll say, "thanks, but no thanks." That is probably the biggest change that I've noticed. Previously, processes would take a few weeks. Now, the most ludicrous example I can remember was it was a deal that was pretty much wrapped up in about three days. So it was no surprise that we said no to that one.
[00:20:19] I recognize that things are changing and things are moving fast, and that's not to say that we don't move fast for anyone that was wondering. But we aren't going to compromise on asking questions of the businesses that we're backing. We have an obligation to our investors, who are a wide range of insurance companies, banks, family offices, people that have entrusted their money to us. We have an obligation to look after that and make sure they get a return. So we try to be pragmatic in the market, but we also try to preserve the integrity around our approach. What about you, Gopi? What have you noticed?
[00:20:53] Gopi Rangan: Yes, speed is definitely different compared to what it was a few years ago.
[00:20:57] Some of that is good for the entrepreneurs, so they have more power. The scales are tipping more towards the entrepreneur, which is good. Sometimes entrepreneurs favor investors who are quick to make decisions and speed is not always positive. Some investors do less due diligence or they form, less conviction, and they are able to make a faster decision to get in.
[00:21:18] Optimizing for those investors may not be the right thing to do for the company for the longterm. The best investors for an entrepreneur are investors who form very strong convictions and they are durable. They stay with the company for the longterm and those investors sometimes take an extra minute, extra day, and it's good to wait for them and get those investors on board instead of just optimizing for whoever's willing to write the check sooner.
[00:21:43] I see that is a challenge and I have also missed out on a few opportunities. My heart goes out to those entrepreneurs because I feel like, "Oh, you had such a beautiful idea. This could go somewhere, but I'm not really sure now that you have investors on board and they just gave you money and I'm not really sure if they will be able to support you." If they bail out, especially very large funds investing at pre-seed stage, it's a huge problem for me. It has happened in my own portfolio. They don't invest in the next round. And that's a negative sign, becomes a huge problem for the founders to raise investments from other people when existing investors do not invest.
[00:22:18] Matthew Jones: One of the things that we do as part of the process, we will always try to introduce at least a couple of founders from our portfolio to the company that we're talking to about making an investment. We do that because we think it's important for the new and the prospective portfolio company founder to really have a better sense of who we are as people.
[00:22:38] How do we react to things? What's important to us? What do we value? What about those times when we disagreed on something or fallen out; how do we deal with those? Thanks. It's really important for founders to do their own DD on people to just get a sense of whether this is someone that they want to work with for the foreseeable future.
[00:22:56] I know people joke about it, but the average VC investment is longer than the average marriage. So think of it like a marriage.
[00:23:02] Gopi Rangan: It is actually true. It's beyond just that startup. Most founder/VC relationships last longer than that startup. And when the founder comes back for the next startup, those VCs usually come back and invest in the founder again.
[00:23:15] It's a long lasting relationship. So spending the extra few due diligence calls to talk to other founders, doing research on the investor is a worthwhile investment on their side before they sign the papers. I'm curious to ask you, can you give an example of a company that didn't really perform the way you expected and how you managed the relationship?
[00:23:40] Matthew Jones: Yeah, every investor has got examples of companies that haven't worked out in their portfolio. In my opinion, there's a little bit too much of brushing it under the carpet and not really talking about it. Everyone's quick to tweet about amazing news and stuff. There are examples in our portfolio where you have to deliver a very tough message to a CEO about the availability of follow on funding or why you disagree about a certain strategic decision.
[00:24:06] And they're rare, and I can count the true disagreements on one hand easily over nearly five years. The philosophy that I've always tried to follow, first of all, is always to be as honest as possible, as soon as possible, about why I got to a different place, or why there was a disagreement on something.
[00:24:26] I always try to share that in a very transparent way, so as to be clear that it's not something that's personal, there is data behind the decision. Ultimately, what you have to do is remember that we are still on the same team. We still have an investment in a company, and we still need to get to a place where there's a good outcome for both sides.
[00:24:46] And again, coming back to references when that founder or that team takes a bit of time off or, or goes to get another job somewhere, and then comes back to being an entrepreneur later, my colleague Ruth has a phrase 'you meet everyone twice'. And it's true. There's no need to burn bridges. The important thing is to be as constructive as possible, as honest as possible, and generally, nine and a half times out of ten, you can get to a good place. But just remembering that, yeah, you're on the same team. Everyone wants a great outcome. I didn't realize when I started in venture, I thought it was a lot about PowerPoints and spreadsheets and that kind of stuff.
[00:25:20] And sure, that's there and you need those skills. You need to be able to read a legal document and model around, but it's a lot more about people and personalities and egos to a certain extent and the softer stuff than I ever, ever realized. That's been a really difficult, but rewarding learning curve for me as an investor, getting my head around that and what that means and learning accordingly.
[00:25:46] But I definitely didn't expect it when I started a few years ago.
[00:25:49] Gopi Rangan: That's very thoughtful of you to share that insight and the lessons that you've learned through your career. It is a humbling experience. When we watch entrepreneurs go through high highs and low lows. And sometimes we're helpless, we are not able to support them. We have to wait. Time is a good healer and hopefully things will return to a better place for everybody. I just wait and watch and I really haven't mastered the art of how to support entrepreneurs during difficult times. I'm still learning.
[00:26:18] Matthew Jones: Yeah, same here. Being an entrepreneur is really hard and I have so much respect for anyone that decides that this is the path for them.
[00:26:27] And we at Anthemis will always do our very best to support people, but you know, you don't always get it right. That's for sure.
[00:26:34] Gopi Rangan: So I want to switch to the last part of our conversation and ask you about your community involvement. Is there a non profit organization you are passionate about? Which one?
[00:26:45] Matthew Jones: It's less of a non profit organization and more of a topic, and that is political engagement and involvement, especially young people. It's a pretty similar situation over in the U. S., but here in the U. K. and in vast parts of Europe, we still have a situation where in general elections, the participation level of young people in those elections is pretty small.
[00:27:10] We have to do more to improve that engagement and involvement. If we don't, we all suffer. We have to do better at explaining why it's important to be involved in democracy and so on. That is a cause that is very important to me. I'd love to see more progress on that. That's for sure.
[00:27:26] Gopi Rangan: All right. This is fantastic.
[00:27:28] Thank you so much for spending time and sharing authentic stories, real-life examples of startups that you have invested in. I look forward to sharing your nuggets of wisdom with the world.
[00:27:37] Matthew Jones: Thank you very much for having me again.
[00:27:42] Gopi Rangan: Thank you for listening to The Sure Shot Entrepreneur. I hope you enjoyed listening to real-life stories about early believers supporting ambitious entrepreneurs.
[00:27:50] Please subscribe to the podcast and post a review. Your comments will help other entrepreneurs find this podcast. I look forward to catching you at the next episode.