Electronic Chat with Eugenio Gonzalez, Plug and Play
Laura Mazzuca Toops | January 11, 2021
Electronic Chat with Eugenio Gonzalez, investor and co-founder at VC Office, Plug and Play Ventures (PNP)
Eugenio Gonzalez is an early-stage venture capital investor at Plug and Play Ventures, which is focused on the areas of insurtech, fintech, AI, cybersecurity, and enterprise software.
Gonzalez joined PNP Ventures from Carey, the largest law firm in Chile, where he led investments and M&A transactions across banks and financial institutions. At Carey, Eugenio was centrally involved in the acquisition of a U.S.-based bank by a Chilean bank and established major technology and strategic partnership relationships. Eugenio started his career at Philippi, in Corporate Law. He has an MBA from MIT Sloan, where he collaborated with Boston-based VCs Accomplice and MassVentures, and a JD from Universidad de Chile. When Eugenio is not spending time in the Bay Area, he is mentoring entrepreneurs back in Boston through his initiative VC Office Hours.
Please tell us a little about your involvement with Plug and Play.
I am the principal within PNP’s ventures team, where I oversee insurtech ventures that deal with sourcing, vetting, and investing in startups in the insurtech ecosystem. I manage a team of investors across several different offices in China, Japan, Singapore, and Silicon Valley.
Investment in the insurtech sector during 2020 has defied COVID, a recession, and political upheaval. Why is this the case?
It is true that insurtech investment hasn’t flagged in spite of COVID. 2020 has been an interesting year because at the beginning, nobody saw COVID coming, and things quickly changed into something that everyone was worried about. By early Q2, we really saw a downtrend in the market, specifically a difference between where we are now and where we were at the beginning of the year and how much liquidity has changed. Because there was such a quick downturn in the market, suddenly investors were really concerned about not having enough funds and not being able to make capital calls. It’s the denominator effect, where limited partners within an investing base are over-allocated in venture capital and can’t keep committing money with VCs. Then in April you had the $2.3 trillion Federal Reserve intervention and the market began doing pretty well. Then you had insurtechs like Root, Lemonade, Select Quote and others doing IPOs, so now you can see more liquidity in the market and an increase in the amount of investment.
Even now we keep seeing deals and investments, which seems like a disconnect between the reality of COVID. It’s hard to pinpoint why – there was a lot of “dry powder” at the beginning of COVID, with investments having to do somewhere, so that’s one aspect of it. But that doesn’t explain frothiness and validation we’re seeing now. In my opinion, it has more to do with the sentiment of booming market, more of bull market, compared to the beginning of year when everyone was talking about a recession. The reality is that a third of Americans can’t make rent, but startups are raising incredible valuations. This has more to do with people believing we are in a booming market. A recent example of Metromile doing a reverse merger with SPAC and taking Metromile public, which gives a lot of confidence to investors because of the demand for insurtech products.
There a real disconnect in the auto market, where insurers are giving back premiums and there’s no surge in demand because fewer people are driving due to COVID. So, it’s interesting to see new startups coming around trying to focus on consumer rewards and different way to help insurers retain existing customers, who now have more time to shop online for better rates. It’s not an ideal scenario for insurers. However, loss ratios are probably going to get better if you’re not having as many claims but on the other hand, fraud actually goes up when there’s a recession, so that’s another downside for insurers.
What role has insurtech played during COVID and in an anticipated business recovery now that there’s a vaccine?
When you look at the market, everything that relates to health and supply chain is actually booming. One area that most people don’t pay enough attention to with insurtech is that most large companies went remote and were not prepared. More startups are focused on delivering to large insurers to make their workforces remote.
What’s really interesting is if you look at the shelter-in-place mandates and how the inability to visit customers is affecting agents and insurers, you need to develop certain tools to make sure they can get to where to where the customer is.
So insurtechs are focused on using smartphones as a way to leverage risk assessment. Using cell phone imagery for home and auto claims has gotten a lot of interest from our corporate partners, and tools to enable them to sell life insurance, even without in-person doctor visits. One of most successful startups is a company called Kit.com, which is at the intersection of at-home medical care or testing and technology to avoid fraud. The tool enables life insurers to keep selling insurance products with a lot less friction to their customers.
Would you say the life insurance market is seeing a resurgence due to COVID concerns?
Obviously there is an ongoing concern with people looking at the number of deaths from COVID, and being more aware of the fact that you might get a virus that will kill you, so you want to prepare everything. Certainly, insurtechs like Ladder that sell life insurance digitally are getting a lot of traction due to the pandemic.
What insurtech companies do you see as standouts during the pandemic?
At beginning of year most insurers focused on reducing costs and everything to do with automation. One portfolio company called Ushur has gotten traction from insurance partners because it helps you make sure you’re auditing for the fact that everything is digital. The fight for distribution is only going to increase as channels have gone from real life to digital. Lots of insurers didn’t have the capabilities to sell insurance digitally, and now they need to update their legacy infrastructure to build out digital capacity, so a lot of what we were seeing at the beginning of the year had to do with automation and cost cutting.
Now, one of most successful companies is Tractable, which enables policyholders to take phone pictures of an asset so the insurer can do damage and risk assessment remotely. Interestingly, a company Attestiv is also getting attention because they deal with detecting fake images. This service ties in with the increase in fraudulent phone pictures and deep fakes. The company can verify the integrity of images as a self-service or as automated fraud protection to reduce fraud.
Where do you think insurtech investment will go from here?
It’s only going to increase. Insurtech as a word didn’t exist four years ago and now it’s increased exponentially as a segment of the insurance market. But when you compare fintech with insurtech assets under management by insurance companies, there’s a disconnect with how much investment is going into insurtech. The next few years will see even more growth.
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