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I just submitted an application, and have been chatting with Myles, who has been very helpful and responsive.

Vouch is not able to proceed with my application because I run a bootstrapped business – zero funding and no debt. Vouch's current underwriting guidelines require at least $150,000 in funding, which seems odd.

I'm not sure why this is the case - if anything, my business has a much lower risk profile, since I have fewer counterparties, and don't have the exposures that would necessitate D&O, EPL, EB, or FD.

I hope this is something that Vouch will discuss with the reinsurer. I've been looking for a service like this for years now, and I'd like to vote with my dollars.

Thanks very much for sharing your experience and I'm sorry we haven't been able to cover your needs yet. Serving boot-strapped businesses is part of our plan (just not in this first release) so I'll circle back as soon as we can cover you. Thanks again for your note.

It's a pretty common model for VC backed startups in financial services these days, especially ones that involve risk assessment.

I think it is kind of a Potemkin village approach. Let's be honest, they don't want to actually solve the hard problems of underwriting things, they want to appear to solve them so they can impress VC's and get millions of dollars in funding for themselves. Unfortunately you can't help them with that goal.

For them, what better group to work with than the very companies that were funded by the same VC's they're trying to impress?

This approach works in both directions, since for one these companies are by definition well connected and well funded so they don't have to make tough underwriting decisions, and two VC's are for the most part living in a bubble, so by signing up a couple dozen venture backed startups they can create an "everyone is using it" impression.

Needless to say there are problems with this approach. The main one being the addressable market of VC backed startups is tiny and probably not worth that much to corner unless your revenue per customer is massive. And the other problem is that it's not clear you're actually learning anything if you're not really exposed to the wider marketplace.

They'd counter by saying they're getting good at their business and achieving scale and building a great product, and that expanding beyond their own bubble eventually will be easy once they get that product built up.

Maybe they're right. But until they do it's hard to consider any of the companies employing this model to be successful yet.

I had a startup that I operated for 3yrs full time. Once, we almost lost a deal because we could not get E&O and Liability insurance in time. The process was backwards -- heck, faxing applications in this day and age?

I have not used Vouch, but I know that insurance is vast and a very messed up industry. It is unrealistic to think they can solve all problems as a tiny company. However, it is heartening to see them try to solve some problems, at least for some people -- hopefully this spurs change in the industry. I wish them luck on their particular effort.

Honestly speaking, even if the underwriting approval process takes months, there is no reason in 2019 that ANY insurance company should direct you to faxed forms, as some incumbents do. Even if no other problem gets solved, e-applications would be a huge win.

Also, to be fair to this company, sometimes, what you underwrite is not up to you. This small company (not sure how they are structured) is probably not holding the risk. They either broker the risk, or take it on and later bundle it away. That means they are forced to only accept applications they can actually offload after origination. Don't hate the player, hate the game.

This is also something you see with some other corporate products for startups, for example, Brex explicitly says "Credit limits are based on the cash you've raised and/or equity in your company" [0] while Stripe instead asks about revenue [1] (I assume because they're in a unique position to verify it). I guess different b2b companies are looking to serve different kinds of businesses (shocking conclusion, I know).

All of that said I definitely agree, as an outsider, it seems like a bootstrapped business would have a lower risk profile, but a venture-backed business would have faster growth potential and thus be worth more in premiums, so maybe that's their reasoning?

[0] https://brex.com/startups/ [1] https://stripe.com/corporate-card

I'm not sure that bootstrapped businesses have a lower risk profile, at least depending on what the other business views as risk.

VC backed companies have a route to capital and lines of credit if they tank. What is Brex/Vouch going to do if your bootstrapped business tanks? Take your house?

That's a good point, and bootstrapped businesses (in the US at least) are generally incorporated in a manner that protects personal assets, so the provider would not even be able to go after the owner's house in most cases.

If I recall, Brex says their minimum is $10K/rev per month

Hiscox will insure you. Or you can also go to Chubb for stuff like Cyber and Workers Comp.

+1 for Hiscox. Was half the cost of the policy I had with The Hartford. I've needed these types of insurance since 2005, and perhaps I've just been lucky but I'd say finding insurance coverage was easy.

I concur with this comment (https://news.ycombinator.com/user?id=CPLX)

In my opinion, Insurance has lots of paper-work and is a time-sink because the insurance brokers/companies needs to do lots of due diligence to determine the counter-party and the risk at hand. You are selling something that could potentially be worth $100k for $300/year, you better be right that the litigation is not happening, at least not that often.

These guys do not do that, and it is not clear how they do for the counter-party risk and insurance fraud. Instead, for now, they'll just accept their friends who have a common risk-profile and are easier to serve/predict their liability. After they raise a few rounds, they might get to the actual problem and try to solve it.

I don't buy this argument. I agree it is complex, and I agree due diligence is required. But that does not mean all parts of the process should purposefully be designed to be arduous. You can have a smooth (electronic) application process and abstract away the complexity. Perhaps have a workflow system to capture more documents (electronically) rather than having random requirements for faxes, etc.

I also wonder why the funding amount is more important than say revenue for past 3 years ? I assume they only want to deal with "startups" that fall within PGs/HN definition (hockey stick growth possibility). Very interesting but not sure why this matters for business insurance.

That doesn't seem to match with their filings (in CA at least, where all[1] underwriting criteria must be disclosed in their filing). Might want to ask them to confirm that...

[1] http://www.insurance.ca.gov/0250-insurers/0300-insurers/0200...

That's unfortunate. I was bootstrapping an idea a while back and once I had users, I really would have liked to have some insurance but was unable to get any. I was hopeful Vouch could be an answer to this problem.

for that profile you only need general liability which you can get over the phone quite easily. as this isn’t in the sweet spot if couch’s value add i can understand why they won’t serve you.

Got really excited about this post until I read your comment. Bummer.

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