Eos Ventures invests in early-stage start-ups at the intersection of insurance, financial services, and technology. Founded in 2016, Eos is a global venture capital and early-stage private credit platform that has backed companies working on challenges as diverse as systems restoration after a cybersecurity breach, vehicle title digitization, and modernization of healthcare payments and reimbursements in Latin America.
Galen Shaffer, a principal at Eos and a McKinsey alumna, says insurance is compelling for investors in part because the sector’s inherent regulatory complexity and fragmentation, which create opportunities where new entrants can shine.
Shaffer sat down with McKinsey Partner Grier Tumas Dienstag to discuss investing in insurance, what Eos looks for in founders, and how AI is changing the industry. This conversation has been edited for length and clarity.
Grier Tumas Dienstag: Can you tell us about what Eos does and highlight some of your success stories?
Galen Shaffer: We are typically the lead investor in a start-up’s Series A round, so we’re writing checks of $7 million to $10 million. We invest across insurance and related sectors, spanning personal, commercial, life, supplemental health, and major medical as well as related areas, including cybersecurity, longevity, employee benefits, wealth, and retirement.
We’re a team of 12 split across London, New York, and Los Angeles, currently managing $250 million and raising our third fund. All of us come from the insurance sector. Most of our investors are large carriers and reinsurers, and they invest with us for both the financial returns of venture and for early visibility into and partnership with cutting-edge early-stage start-ups. The early-stage landscape is complicated, and our carrier partners find our pulse on the landscape to be a critical accelerant to their innovation strategy.
One of our portfolio companies, Bamboo, was recently acquired by CVC Capital Partners for about $1.8 billion.1 We were thrilled to lead their Series A in mid-2022,2 and we continue to be strong supporters of their business.
Grier Tumas Dienstag: Compared with other parts of financial services, what makes insurance a compelling long-term play?
Galen Shaffer: Good question. Why insurance? Why not crypto or an AI-specialist fund? We like a few things about insurance. The sector offers opportunities for a new entrant to get meaningfully large and to find liquidity through traditional channels—strategy acquisition, private equity, IPO. Another benefit is that insurance is a market that’s already been developed, where we can find an excellent business and cultivate it to the next stage of growth and exit.
What I particularly love about insurance, compared with many other financial services sectors, is the fragmentation, which is largely a result of state-based regulation. In the United States, we don’t have federally governed insurance companies; regulation is specific by state. It’s an industry that’s “rich in the niche,” offering lots of opportunities for newer players. You can specialize in areas like coverage for small and medium-size restaurant businesses or hair salons, or in underwriting life insurance for individuals with diabetes—and you can thrive in those areas. New entrants can carve out space that the larger players may have overlooked or may have lacked the capabilities to serve.
We also love the sector’s durability. It’s largely recession-proof because it’s required: You have to have homeowners insurance; you have to have auto insurance. It’s also a social good—insurance is a critical safety net that steps in at times of catastrophic need.
In sum: It’s a big, fragmented, regulated space that provides a meaningful societal role and offers clear exit pathways. It’s a phenomenal space to build and invest in.
Grier Tumas Dienstag: Where do you see AI moving the dial? Are there any specific parts of the value chain that you’re excited about?
Galen Shaffer: Now, when people say AI, they often mean gen AI, and I regret that the nuance has been lost, because there are many different types of advanced analytics. We have robotic process automation, optical character recognition, and more-advanced machine-learning techniques that aren’t necessarily generative techniques but might be the right solution to a given problem. We are exploring investments that shape the next generation of carrier operations, specifically underwriting and claims, where the right AI technique can move the dial on expense and loss ratio.
Gen AI fits well when you need to create language-based materials. I’ll give you a few examples outside our portfolio that have gained substantial traction with the carrier community. Norm Ai uses gen AI to automate regulatory and compliance reviews for content like marketing materials. The company has relationships with many of the larger life and annuities providers and asset managers. Marketing teams are freed up to focus on the exciting parts of marketing collateral while Norm accelerates and empowers compliance accuracy.
As another example, this past fall, Liberate AI announced a $50 million round from Battery Ventures.3 Liberate supplies voice-specialized AI agents to clients spanning brokers and carriers, enabling 24/7 call center coverage and integrated policyholder support across email, text, and phone.
Grier Tumas Dienstag: What makes a great management team in this industry? What type of leaders do you want to back?
Galen Shaffer: When most people think about venture capital, they imagine an 18- to 21-year-old founder who’s fresh-faced, enthusiastic, and ready to take on a new sector. But we actually look for someone who’s been in the industry for 15 to 25 years. We like someone who has worked at a big carrier, often in an executive role, and then made the jump into early-stage start-ups with proven exit experience.
First, they know the sector, they have very deep networks, they understand how to operate in a nimble environment backed by venture capital or private equity, and now they’re looking to build their own thing. They understand the sector’s rhythms: It’s a hard market. It’s a soft market. Am I winning the right business for the right reasons? In insurance, it can be difficult to know whether new business will end up being profitable. Someone who’s been through those cycles can understand what success looks like down the road.
The second thing we love about experienced founders is the type of relationships they bring. They have established ties with reinsurers, fronting relationships,4 and wholesaler relationships. Insurance is a small world, and someone who knows people in the sector and has established trust has a significant advantage when they’re building something new.
Grier Tumas Dienstag: What do you hope changes in the insurance industry in the near future, particularly around the investor narrative?
Galen Shaffer: Insurance faces more liquidity challenges compared with other financial-services sectors. For example, in 2021, all insurtech exits together totaled $27.4 billion.5 That same year, Square acquired Afterpay for about $29 billion.6 Think about that: All the insurtech exits added together totaled less than one acquisition in the payments sector. The question for us is always how to get more and better liquidity in the sector.
A lot of founders anchor on the IPO market, and we’ve seen success in the specialty-carrier segment, recently with Neptune Flood.7 But, as a sector, we ought to be a lot closer to private equity sponsors. Companies should form better relationships with this community, understand what they look for in terms of EBITDA and gross margin mix, and move toward profitability faster.
