“The whole idea of RiskOps is to align portfolio strategy with actually underwriting accounts, which doesn't sound like a wild idea, but it represents a huge change in how P&C insurance has been done.” – Will Ross, Co-Founder & CEO, Federato
On this episode of the Funders & Founders podcast, Will Ross, Co-Founder & CEO of Federato joins host Jared Klee to talk about the company’s RiskOps platform for Property & Casualty and Specialty insurance underwriting. Will and Jared discuss how he and co-founder William Steenbergen rapidly turned an idea sketched on a sheet of paper into an industry-first solution used in production by an enviable and growing client list of top-tier insurance carriers, MGAs, and new market entrants.
Hear how the Federato team rapidly developed deep domain expertise through over 1,200 hours of interviews with underwriters and insurance leaders, what it means to be underwriter and human-centric, and how Federato’s RiskOps platform helps insurers mitigate risk exposures at both the individual account and portfolio level.
Ross explains how data-driven improvements in underwriting performance and productivity are essential for the insurance industry to face complex emerging risks like climate-related natural catastrophes, cyber security, and social inflation head on.
Jared and Ross also discuss how the ability to demonstrate strong portfolio management and systematic controls allows carriers and MGAs to maximize their return of reinsurance and gain an advantage at the negotiating table with reinsurers.
While many insurers look to AI and machine learning to automate away manual tasks, Ross argues that automation is not the endgame; it’s only the beginning. The real value of AI and ML is in empowering underwriters – humans – to make better risk selection and portfolio management decisions that lead to better business outcomes.
To tune in to the full conversation, click play below, or catch the episode wherever you listen to your podcasts – Spotify, Apple Podcasts, YouTube, or wherever you listen to your podcasts. You can also read the full transcript below.
Jared Klee: Hey Will, welcome to Funders & Founders.
Will Ross: Thanks for having me, Jared. How are you doing, man?
Jared Klee: I'm good. I'm really excited for this one. You're creating with Federato, really category-defining solutions for insurance, and I thought that'd be a really good place to start the conversation. You use this term ‘RiskOps’ to describe the business. What you're doing. It's not a term I've heard before. It's not what I'm familiar with. Maybe we start there. What is RiskOps?
Will Ross: Yeah. So, for folks who haven't heard of the company, we operate in the Property & Casualty insurance market. And so, if you think about insurance, it is the risk business. That's where the risk term comes from.
But something that was really fascinating to myself and my co-founder – we can talk a little bit about how we got into this mess in a second – was, as we dug into this industry, we realized that this whole idea of risk, which is the business they're in, is really a function within these organizations that exists very much in a silo, whereas operations, that's the day to day, that's the underwriting, that's the selecting the risk.
And so, there's this sort of dichotomy of risk selection and portfolio management that exists in insurance today. And so the idea of RiskOps was, basically, we were looking at all these social problems. We were looking at things like the increase in natural catastrophes because of climate change, we were looking at securing cyber risk – something you know a little bit about. We were looking at things like social inflation in the context of the opioid epidemic.
And as you look at these big social problems, you wonder, why are insurance companies struggling with them? The answer we found inevitably is that this risk selection process and this portfolio management process were entirely separate from each other. And so the whole idea of RiskOps is to kind of align this portfolio strategy piece with actually underwriting accounts, which doesn't sound like a wild idea, but I think really represents a huge change in how property and casualty insurance has been done. And it shows just how, in some ways, far behind the industry is.
Jared Klee: How on earth did you and your co-founder come up with this hypothesis?Cuz as far as I know, this is not your background. This is not your co-founder's background. And you're now real deep in a domain. How did you come up with this?
Will Ross: We're kind of risk guys in the sense that we're statistics guys. You and I met in the early days of the IBM Watson group. We've both been working on AI for the past decade, right, of this wave. And then my co-founder was studying computational mathematical engineering at Stanford, focusing on a set of techniques called reinforcement learning. And what reinforcement learning is, really, is the bleeding edge of portfolio management and risk management.
And you can use it for all sorts of things, by the way, like it's what's used in a lot of autonomous vehicles. Turns out you're managing the risk of crashing into other cars or people in that setting. But I was doing a dual degree at Stanford as well, and I was studying climate and atmospheric modeling and my co-founder and I started doing some research together, actually on the topic of wildfires.
So I did my graduate research on wildfire spread modeling. And so, bumping up against all the big fires that were happening – this is 2019, 2020, 2021 in Northern California. At the time, there was that famous day with these dark orange skies. This is the early days of the company when all this was happening.
And we started interacting with these insurance companies a little bit, right? Because they were very curious about our research and what we were doing. And we had started the company almost thinking, “Hey, maybe we just build a better fire model and sell it to these companies.” That's something we've seen other startups do. But something my co-founder, whose name happens to be William, and I both have in common is we actually want to figure out what's actually wrong.
And then we solve that regardless of what we want to do as we dug into this problem. That's when, holy crap, this risk selection thing, this portfolio management thing are completely separate. And we saw examples of insurance companies where the data said, “Here's what you should do.” The fire model, the predecessor of what we were working on at the time, said, “Here's what you should do.”
And what the company was actually doing was on a volatility basis, on a risk basis, like 3x different, and that's not a made up number. That's a real number we discovered. We showed a CEO, and he was like, “I could put my business under, over this,” and this is not an inexperienced individual. So we stumbled into the problem that way, and just continued to dig at like, kind of the pursuit of the truths: who has this problem, how are we going to solve it? And what's been really gratifying, of course, is to actually start to believe that you're solving it, right? As customers go live on the platform and you do see that change being affected.
Jared Klee: So I want to come back to this ‘cuz you just hit on a couple of frankly remarkable things: the discovery path you went on to understand the problem, the fact that you were doing this while you were doing your MBA, I want to put a pin in that. We're going to come back to it.
If I were a customer, what's the elevator pitch for Federato?
Will Ross: It's really pretty simple. You've been investing a lot of money in data. Has that been panning out for you? No. Because you're struggling, you have almost this limiting reactant or reagent in getting these data-driven insights into the hands of people who are making decisions on the front lines.
Underwriters decide whether a risk is in the portfolio or not. Once it's in, it's in. We can talk about claims and whether or not they get paid. We avoid that because we don't think it's part of the industry we want to be involved in, but we're very interested in how risk gets selected. And so what we do is we take all these amazing innovations that are happening on the data side of the industry, and we actually operationalize them.
And we do that by creating an amazing underwriter experience that does that in a very sort of native and fluid way.
Jared Klee: So how did this user discovery happen? You've spoken eloquently about this elsewhere. You, again, have no background in the space now, really an expert in this narrow problem. Take me through that journey, the techniques, the tools, the path. How did you develop such deep expertise in a narrow domain problem?
Will Ross: These are trite and overblown terms that are frankly, horribly used by our industry, but the truth is it's the core of what design really is about. And people talk about design thinking and that design thinking is not about building better PowerPoint decks, which is what I think a lot of the large industry consultancies might have you believe. Design is at its core about people and understanding their problems.
The phrase I like to use is: Businesses don't have problems, people do. That's actually one of our core values at Federato, to give you an idea of how much we believe that. And I can remember in the early days of the company, sitting down with some very senior chief underwriting officers and folks like that and they'd say: "I have this business problem, which was the symptom of that risk selection in portfolio management not coming together." And where we would challenge them. And these guys, I mean, these are like big ties, senior execs. This is slightly pre-pandemic at the time. And they were not used to being challenged in front of their employees. We found that if you were able to sort of push them, it’s okay.
Who has that problem? What I always say is, if you can't identify the person who's going to use your software as a profile on LinkedIn, like that person has to exist and thousands of them, or hundreds of thousands of them have to exist, which is where you start to get your market opportunity. Right? You don't have a product. And the amount of products I've seen launched that don't have, like, a user whose problem you actually solve.
And my belief is the business problem, and talking to end buyers about why they'll buy that all follows. If you start with a person and you just solve the problem for them, and you have half a wit about it, you’re going to stumble onto a huge market opportunity almost every time. So that's how we went about it. We just talked to underwriters. It wasn't that complex.
Jared Klee: So, just take me through the mechanics of this for somebody else who is perhaps starting a company right now. How did you get access to underwriters? Like a chief underwriting officer, the big tie person? How did you get access?
Will Ross: It turns out people want to talk about themselves. Right? Especially these little industries, these corners where SaaS products can still be built. Look, don't get me wrong. You leverage your personal connections. You play the game. But to be honest, I had no personal connections into the insurance industry.
My co-founder likes to call this – he's Dutch – a Dutch version of blowing sunshine up your... rear end. He likes to call it shoving feathers into their rear end. It's a lot of that, right? At the end of the day, this was cold LinkedIn outreach. I was sitting in a tiny little room, our original office.I can see it almost out my window here.
And just a lot of really hard, not glorified work. And I can tell you, even now, like getting your team members to do that work can be hard, but it's that work that actually yields the results. People talk about defensive moats, especially with machine learning products. Oh, you need to collect all the data so no one can catch you. The best defensive mode in the world is to understand the problem infinitely better than anyone else. Someone can go try and rip off your features, build a ‘me too’ product, but they'll always be missing some subtle thing that actually makes the product work. And you'll only get those things by just doing the hard work.
There's no ifs, ands, or buts about it. Like you need to surround yourself with startup leaders, people who actually know what they're talking about and have done this before, who are going to beat you up once a week or once every other. And say, why the heck haven't you talked to anyone? You're spinning your wheels, and if you are driven enough, and you care about the problem enough, and you surround yourself with those people, then it's just about asking questions, trying to ask non-biased questions, which is a skill in and of itself.
And then listening to what they actually say. Not trying to get them to tell you what you want to hear, listening to what they actually say and sitting and living it. We had the privilege of doing that over a 12 -18-month period. And so we believe we understand this problem, 10x better than anyone else out there. And that's really what we're building a company on the back of still today.
Jared Klee: So take me through the next step in that journey. So you're having these conversations. You're still a student at this time, I believe. How do you start?
Yeah, we made that a little ambiguous at the time. I think my LinkedIn still doesn't have the dates I was in school and it never did. And CEO, co-founder, not actually sure that I was to our benefit, by the way. I think a lot of people will talk to you if you're a student, depending on what you're starting for me, not a lot of folks in the insurance industry from Stanford, just not a big theater. So, it wasn't as helpful.
Jared Klee: Take me through the next step of that journey. You're creating wire frames, actual product. How do you then start iterating to the thing where beyond just conversation, you're starting to get proof points around. Hey, we've got an idea. The core of it is RiskOps. And it's actually perhaps starting to be something that someone would buy, could create value, want.
Will Ross: You're starting with that user interviewing process. It’s very much, “Tell me about what it is you do.” I'm just trying to learn the parlance about what you do and you're listening for things that, like, maybe just don't quite make intuitive sense to you. And if you have that sort of founder/market fit. Like we did that, you know, something about risk. And so you're hearing things and you go. “That doesn't really align with the math that I know fundamentally makes your business tick.”
One of the classic ones for us was that underwriters will always say. “I run my own business. I think about my portfolio risk as my own business.” So that little piece of business has to fit into the broader portfolio. And what's best for your little book of business is changing constantly and dynamically while every other underwriter is doing their underwriting. That was the core and the thesis. But hearing that. And they would say it proudly, like they didn't think anything was wrong with this.
And this is something that underwriters are still being told, and insurers, because it makes sense. It motivates them. If they feel they own their book business, they're going to work hard, but you're listening and you're hearing that. So then you hear that and you start to say, “What's a really simple example of this?” Something like natural catastrophe. And we went, “What if we could give them just like a map view of all the risks written near the risk they wrote, because if you think about natural catastrophe risks, wildfires burn through physical areas, And so if you're thinking about writing an account and your portfolio has hundreds and hundreds of things already there, that may be a less good account, everything else equal, than one that's pretty far away from everything else.
And that's the problem we're solving in a very high, complex mathematical dimensionality, but it's really that simple. And so we literally took a piece of paper like this and sketched out with pen and paper. Like we had no designers on staff, none of it. Sketched out on pencil and paper something that kind of looked like an application screen with a little map view in it. And we wrote a little thing and we said, "If we showed you this, would that be helpful?" And even though they say, well, I own my book and I don't think about others, but once you showed it to 'em, yeah, that would be helpful. Actually, my company's been trying to do something like X and oh X, now you draw a new one.
Right? And I was getting up at 5:00 AM. This was the summer between our first and second years of graduate school. I was getting up at 5:00 AM and I am not an artist. I think, you know that, but like sketching these things out on pencil paper, taking pictures with my cell phone, dropping 'em to my laptop, and then doing Zoom prototype demos. Like Figma, you don't need Figma to figure out if you're going down the right path. The truth is, for most founders, learning Figma well enough that it's going to do the job you want it to do versus just sketching something out is valuable. And by the way, sketching freehand, it allows you to be incredibly creative.
Like you have an idea, you just erase the thing and draw it. Whereas Figma it's like, oh, I gotta move the layer, separate 'em out. And so eventually you move to higher fidelity, right? You moved to grayscale. You move to color, you're evolving the ideas. And eventually what you want to do is you want to ask some really fundamental questions with people, actually using your software.
You stop showing them the software, telling them the story and getting feedback, but you actually turn it over to them and say, what are you seeing? Tell me what you're seeing. Does this make sense to you? And they'll say what's missing, et cetera. And then you get to the final, which is, we always used to say, “Can you underwrite La Cañada high school?” Which happens to be the high school right next to mine in La Cañada, California, which we used as a demo account because we happen to have an end user who exclusively did secondary education as an underwriter. And so we knew a lot about that space. We would go to underwriters and we would actually get on Zoom and then we would send them a login and they would share screen back to us.
And we'd say, underwrite La Cañada high school. And until they could underwrite La Cañada high school, we knew we didn't have a product that could do the underwriting job. And then of course, what we were doing, which the underwriters may or may not have fully understood, was thinking about how this was going to be a part of that bigger portfolio management system.
So, it's a process. It's something I think that can be learned. But also if people just follow their basic intuition about this stuff, and don't have any ego about what they're showing people. It's just incredible, the feedback you can get and what you can learn. And this is how I learned to design products early in my career.
This is how we did this company. I think it works. I think it works probably 70% of the time. There are other approaches. This is the counterculture way compared to the lean startup, which is all about talking to buyers. But yeah, I think it's a bit of a false dichotomy. I think they're both getting at the same thing, which is to pursue the truth, right?
Whether it's design, whether it's lean startup, you're pursuing the truth. And if you don't have the integrity and the drive to figure out what the truth actually is, there’s a good chance your startup's not going to do as well as you think.
Jared Klee: Doing the user discovery, understanding the problem, starting to get the prototype out. Again, still students. At some point you gotta put hands on keyboard, start writing code, actually create an application around this. You started raising funding while you were students. You've now raised a much bigger round. Now take me through that funder journey cuz it's, I think yours is a particularly interesting insight, especially given both where you started and the macro environment that you're raising in right now.
Will Ross: We're very fortunate to have closed the 15 million Series A with Emergence Capital, which we're announcing for around when I think this podcast will be published. The journey there was not nearly that glamorous and the numbers were not nearly that big. We're talking $5,000 here, $25,000 there. We were very fortunate.
We were at a university that obviously has incredible access to funding, an incredible entrepreneurial ecosystem. Very thankful for small programs like Stanford StartX that gave us each a $5,000 student in residence check. We weren't paying ourselves with that, I assure you, but it was $5,000 we could put towards some things.
We were very interested in the climate side of things and we managed to get a $40K grant from the TomKat Foundation. Tom Steyer, actually. Yeah. Folks probably know him as a presidential candidate in the last election cycle on the Democratic side, but Tom and Katherine Steyer have a fund focused on climate initiatives that we were able to get a non-dilutive grant through.
And in the early days, it was just about that non-dilutive, really small amounts of funding that allowed us to do really basic things. Our user interviews. Yeah, we paid a lot of 'em a hundred dollars in the form of an Amazon gift card for an hour of their time. Really hard to do thatif you don't just have $5,000 of money, that doesn't feel like it's coming from your personal bank account. But hey, the truth is we may have had $45,000 around that time. We had maybe $35,000 by the time we went out and did the next thing, we just cut pre-seed. So like, we didn't really spend that money.
We actually, you know what, probably spent less than that. We probably spent about $3,000. By the time we got our pre-seed, there may have been more available to us, but we were just so focused on that user journey that what we were doing was so simplistic. Like we were using our school Zoom accounts and we were doing cold reach outs on LinkedIn.
I think we splurged for LinkedIn Sales Navigator or Premium or something like that –might have gone into that $3000. And then, you know, we were paying hundred dollar Amazon gift cards. Like those were our expenses.
Jared Klee: Livin' large over there.
Will Ross: We didn't even have a Figma license. So eventually we were very fortunate to know the folks at Pear VC. Pear is an incredible venture capital firm, very well known for their early investment in DoorDash, which was a student-founded company out of Stanford as well.
And they believe wholeheartedly in student founders. And so in our first year of graduate school, when we still had a year and a half left to get through our programs, in my case, like a year and three quarters, cuz I was doing two degrees, we had to basically just apply to a competition. We won that competition.
I think winning the competition got us a $25K uncapped SAFE or something like that. And then they were kind enough to invite us to their accelerator, which got us, I think, another $150,000. Later that summer, one of their LPs was willing to make a direct investment into us for about $150,000. But coming outta that first year into that first summer, we had roughly $300K in the bank. Bby the way, we still hadn't spent any of it.
Maybe by the end of that summer, we'd spent $35,000, something like that. We'd hired a couple of design contractors by then to help us work with the Figma stuff. Old friends. Like, I don't really recommend doing the contractor route, but we had old friends who were willing to just help us out and were willing to roll up their sleeves.
And so that worked well. We actually brought on our first employee, someone straight outta school. This was mid-pandemic at the time. He was willing to work for not a lot at the time and he’s continued to grow with us. And then, eventually, what we did was we were coming into our second year of graduate school.
We were coming out of this accelerator program with Pear VC and we realized that it's hard to say we had product market fit. Of course, because we didn't know that the market was going to accept us, that we knew how to actually get it in the hands of people, because we didn't have a product. We still, at that time – Jared, I mean, this is a solid 12 months in – had not written more than a couple hundred lines of code. We'd put a couple of small things together to do some things that are hard to test in Figma, but we went out and we pitched this accelerator. We were super upfront. We said, we're not dropping outta school. Which, you know, of the 70 or so conversations we had to have to raise that little $2 million seed round, probably wiped 50 of them off the table from the get go, or maybe a little less, maybe 40.
It's not easy to raise as a student. Eventually, we were able to find an incredible partner and who we found was Varun Gupta and Ray Tonsing at Caffeinated Capital. These were two individuals who just know enterprise SaaS. They know risk really well. They both were very involved in Affirm in the early days. Ray was one of Max Levchin's early backers. Varun was actually one of the early data scientists at Affirm and had studied a lot of the same areas of risks that we had and they backed us early on. That really is when we started to build the product.
That's when we started to look like a startup. We were hiring people. We had millions in the bank. We started having real expenses. And then the reality is between then and your first sale, you're still talking another nine, 12 months to build a really big, robust enterprise product. But we managed to do that, managed to land some super big early customers. We have those customers now live in production.
A lot of that will be in the fundraising announcement. People can go check it out. But we were able to, I think, hit a pretty solid product market fit. We're far from riding the total growth wave at this point, I think it's pretty obvious. We have something unique to the market and Emergence was kind enough to see that. Emergence has a great history of industry-vertical SaaS.
They backed Veeva very early on. This famous industry-vertical SaaS company. I think they saw a lot of parallels to Veeva in this, a lot of parallels to service Maxs in this, a lot of parallels to just things that had made them successful historically. And we leaned in with them in a really big way. It's like I said, super happy.
We're now sitting on a $15 million Series A, a nice healthy Series A, especially given the market cycle right now. And we're taking advantage of the fact that it's actually countercyclical for our large P&C insurance clients. Right. And so it's actually a great time to be us. We're well capitalized. We've got a great product. We've got an amazing team. And, in some ways, it's really just about executing against that right now and easier said than done, but it's been fun.
Jared Klee: I want to talk about two aspects of the business, both with the raise, the size of clients. First I want to come back to talking about the user. We talked about the user discovery piece of this and the challenge I want to get deeper on, “What is life now, if I'm using Federato?” I know you've described it as underwriting-centric. So I want to hit that. On the back of that, Will, I want to come back around to the sales aspect of this cuz everything you're describing is category-defining.
Selling, learning how to sell. There's no playbook when you're category-defining. So that's an entirely different aspect, a totally different challenge the business is taking on. That's fundamentally different from many other startups who have at least more established channels, more established buyers, they know what they're looking for.
So why don't we start with that underwriting-centric vision? What does it mean for an underwriter who's using Federato today? What is life like now?
Will Ross: Yeah. So how has life changed is probably the way I'd put it and using Federato is the difference between having 50 applications you have to go to and three, right. I don't want to say we're the one, right? People still use email. It's about bringing information together. It's about being portfolio aware in a way that is very natural to you. So instead of, at the end of the month, maybe having my little side Excel spreadsheet, where I try and track how I'm actually doing, and then realize I'm horribly behind on my own performance, which is in theory, at least not everywhere, aligned to portfolio.
That's there. And then lastly, it's, it's a lot less sifting for what is actually the right thing to do here. So underwriters are in theory, following the corporate guidance of their organization. And I've written about this at length. The reality is if you give the same risk to a group of underwriters at a company, what they would assess, whether or not to even write that business, at what price to write that business, what exclusions to include on that business, it would vary massively.
And in theory, that's not the goal, right. And how this actually manifests for these underwriters,. especially the young junior ones who haven't been doing it very long, is a lot of uncertainty in front of the brokers they're interacting with. The broker says, “Why can't you write this here? And they don't even know the answer.”
So in some ways it's just about empowering them. They feel much more confident in what they're doing. And that what they're doing is right. It's easier to do what they're doing. And they have some confidence that they're doing right by the business, which if you talk to people in the insurance industry, they usually are in it for the right reasons.
They usually are in it because they believe insurance is a very fundamental service that is provided to society. And we see this at a very macro scale in the economy. It's super important from a GDP per capita growth perspective, the availability of insurance and GDP per capita growth on a global scale are almost perfectly correlated.
And if people are in this for the right reasons, and if you can make them feel that they're doing the right thing, don't we all just want to feel like that? I think it's kind of that simple.
If we raise that up to the company level, you're talking about the portfolio optimization. Yeah. What's the value that, say, the chief underwriting officer, the chief insurance officer is getting out of the underwriters using this solution day to day?
Yeah. And so this is the whole user versus chooser dynamic. And this is where if there's one risk you're taking on in the design framework versus the lean startup framework, the lean startup framework, you're very focused on the choosers. And in the sort of design framework, you're very focused on the users.
And my point of view is both matter, right? I really believe that great workflowy type SaaS products have to start with the user, cuz someone's gonna use it, but you have to have a mind to like, “What does the chooser sen care about?” And that goes back to those very early theses of why we wanted to get into this space, right? People were struggling with, really, the three big ones we hear consistently – climate change, cyber and what the industry calls social inflation, which is these big verdicts that come down for things like the opioid crisis with Oxycontin and things like that. As we thought about how to present this to choosers: they want to gravitate towards what they've always bought software for, which is operational efficiency.
People think technology equals automation. One of the difficulties of our product is we take an enormous amount of work off the plate. If you think about what I just said about the user, it's preventing them from going to all sorts of systems. We're removing these crazy processes where they're rekeying things into an Excel spreadsheet, then sending it via email. There are just so many things that are quote unquote automated away, but there's this much bigger, higher order problem that we're solving for these insurance companies. And in this case, I like to think of it as like our user for this part of the product is actually the end buyer. It's the chief underwriting officer.
And so where we've really leaned in is the reinsurance conversation. If you think about who is holding the bag for all the things that are happening in climate, cyber and social inflation right now, it's the reinsurers. Insurance companies aren't stupid. They buy insurance too. That's called reinsurance.
Reinsurers are raising rates left, right, and center on the insurers, which is why our rates are all going up because reinsurers pay the vast majority of especially natural catastrophe claims in the context of climate. And so what we say to chief underwriting officers is look, reinsurance is a conversation, it's a negotiation.
Let's say your rates are gonna go up 17% year over year on this book of business with similar treaty terms to the prior year, you're going to sit down and literally have a negotiation with the reinsurer. You're going to say to that reinsurer: well, I'm putting in place all these controls around how my exposure, remember those neighborhoods with lots of properties, how my exposure's going to be monitored, et cetera.
Guess what? All of your competitors are gonna give them the same load of crap and the reinsurer is gonna go: all of you said this last year, none of you did it. And so I'm raising rates on all of you. What we have found, and this has happened multiple times at this point, is our customers, whether they're small MGAs or huge carriers, go to these reinsurers and say: this is what I'm gonna do, let me show you. And this is awesome. Our customers are showing reinsurers our software, literally showing it. This is what's going to make me hit my target because a big part of what we do is we make them hit the target t pointing to.
The credits they've gotten at that one meeting, that chief underwriting officer, a single meeting with that reinsurer has paid for our product several times over, and these are big numbers, what they're paying for reinsurance, right? And so you think about a couple million for a software product, a couple hundred thousand for a software product, depending on how big you are relative to those reinsurance costs. It's a one meeting return on investment and that's what we are selling.
And I think it's something they've never heard before. For some people it's a little uncomfortable, but once they talk to our other customers and hear that this is actually true, I mean, think that's the wave we're riding and it's why RiskOps is what we're doing. There's this sort of old industry term, underwriting workbench. We eschew that term because that's a crappy piece of software that just puts some data in front of someone and doesn't actually solve a systems level problem. What we focus on is this RiskOps idea because that's our whole sales motion. That's our whole reason for buying. And it's the only way we solve the social problems that got us into this in the first place. That's the reality of why our buyers buy.
I don't think there's any other product in the market that can say that. Maybe there will be someday. I hope there will be someday. And I'd love to see that. Wouldn't that be a compliment? But not what you would expect, right? It's not about operational efficiency and all this, by the way, people totally still get that and totally still buy it for that.
But it’s really, the reason people buy the product is very much this reinsurance, cost of reinsurance, return to reinsurance problem.
Jared Klee: Part of what I love about what you're articulating is buried within your hypothesis, buried within the value proposition, is the idea that the underwriter is inherently a smart, motivated, interested person, trying to do the right thing. And when you talk about...
Will Ross: Somepeople call that a human, Jared! [Laughs]
Jared Klee: Yeah. But when you end up in a big company...
Will Ross: They're humans.
Jared Klee: When you end up in a big company, you hear the term. And if I could do one thing, get rid of this term. When you talk about resources. There's no resources, they're people. And you're making a hypothesis that these are smart, interested people who are trying to execute to the best of their ability. And you're saying, what if I gave you a tool that took care of all of the rote boring stuff that should just be taken care of by a machine, put all of the information in front of you that I know you can consume if it was easily available to consume, and I'm willing to trust that you're gonna make a better decision.
On top of that, I'm then gonna do that across everybody and solve an optimization problem. So at the chief underwriting level, I can say, okay, these are the metrics I want from my organization and basically the workflow automatically takes that into account and manages that across the multiple different segments of the portfolio.
It's extraordinarily powerful for the business, but it's also a celebration of these people who are damn good at what they're doing and you're giving them a tool to do it even better. I absolutely love them.
Will Ross: And that's exactly right. And like I said, they're humans at the end of the day. And I think that can be a little lost in all industries, not just insurance, but they're humans at the end of the day. And that's, it goes back to the human-centric approach to user research. It goes back to just like our ethos as a company. One of our core values is very much around, “Be human, treat humans as humans, take care of yourself as a human, take care of your user as a human.” It's a really simple idea and one that just at a macro scale of the tech industry, I think we could see a lot more of.
The dirty little secret, by the way, on the take humans out sales pitch is: who's gonna harvest those costs? Insurance companies are old traditional companies. They don't like laying people off and, not saying they don't, they totally do. But if you remove 10 underwriters worth of work, they're not gonna let those 10 underwriters go necessarily. They're gonna reapply it in some way. The much better conversation to be having with the CFO who is also in that reinsurance negotiation, by the way, is for the CUO, the chief underwriting officer, to be telling the CFO, we're gonna save this money in one meeting versus the CFO pushing back as they always will. Which is, are you gonna actually harvest those costs to which the chief underwriting officer will say, well, I wouldn't want to reduce my head count. It's a little bit of a trap. And I don't think removing people is as good a sales pitch as people think it is.
Jared Klee: So take me to the future. I don't know, three years out, five years out, 10 years out. Whatever's an appropriate timeframe for Federato. What does success look like for the company? What does success look like for your client?
Will Ross: I think about this in pretty simple terms, I would like Federato to be the biggest name in insurance data without ever providing a data product. It's that kind of classic, like Netflix was the biggest name in media before Netflix Studios actually started creating films. You think about Uber and not owning cars. I think at the end of the day, Federato is all about helping operationalized data and their first party internal data. That's a huge part of what we do because insurance companies have a ton of data, right?
Like insane amounts of very nice clean, structured relational data. It's awesome. Compared to some of the other problems I've dealt with in the past. But there's all this third-party data innovation that's happening out there. And what we found very naturally is all of these third-party data providers are coming to us and saying, “How can you help us get our data better used?”
Groundspeed. We just announced a big partnership with them last week. They focus on a classic NLP problem. You and I know how hard those are to solve, taking PDF document submissions and getting the information out of them. To me, they're a data player because ultimately they have a json data output out of their platform.
We help actually put that data somewhere, which sounds really trivial, but for Groundspeed it’s a huge value add to their platform. Our goal is to be totally Switzerland with regards to all the big traditional data vendors, all the new challengers in that space, but to really help operationalize it. And so if we're the biggest name in kind of insurance data without actually owning any data, that would be a fabulous outcome for us.
And, by the way, that's not challenging the data vendors themselves. It's just saying: Hey, there's a lot of value in actually using it.
Jared Klee: That's great. I want to keep this conversation going. I know we have a hard stop here, so turn attention to the more personal, but same closing question for everybody. What's the biggest win for you? And that could be personal, that could be business, it's wherever you want to take it.
Will Ross: Oh, I'll stick with the business in the context of this conversation. I think the biggest wins for me are all around people. And I could talk about finding my co-founder. I could talk about some of the really key hires we've made, some of the cool moments as you see the team come together.
But the coolest one for me was very early on in our user research journey that we've talked about at length here. We started working with this woman. Her name was Megan Bock Zarnoch, who was a 20 year career underwriter. She was there to give us not just like the day to day underwriter perspective, but you also have to understand that manager and the VP level.
And she was able to bring us through that whole chain up to the chief underwriting officer. And she started working with us as an advisor. She was an entrepreneur. She'd started her own business at the same time. And earlier this year, late December, last year, early January, she joined the team full-time. And I think the biggest win in the world for me was we had been working with this individual for so long.
She had her own vision, dream, passion around the business that she had started. And she was someone who understood these problems intimately. And for her to say, I'm willing to combine our forces and actually bring my mission that I'm trying to do through my own company into yours. All's mission that we're now gonna do together, but for her to say, And know that for her to say that she has to believe so wholeheartedly that we have solved the problem she lived for 20 years.
To me, that was the biggest win in the world. And Megan is absolutely like my closest partner and we bicker and fight and yell and scream, but we're building this thing together and, and to have that validation, that was such a big moment for me and such a big moment for the company that. Someone with all that experience and who's already working on their own passion and vision was willing to join forces with us.
That was just a tremendous day. And I think she'd say something really similar, which is all that sweeter for me as it was just a real fit and match made in heaven, a big day for sure.
Jared Klee: That is an awesome win. Congrats on the funding. And thank you for coming on Funders & Founders.
Will Ross: Yeah, you bet Jared.