The following interview is a conversation we had with Cole Riccardi, CEO & Founder of Authentic, on our podcast Category Visionaries. You can view the full episode here: $16 Million Raised to Build the Future of Captive Insurance

Brett
Welcome to Category Visionaries, the show dedicated to exploring exciting visions for the future from the founders who are on the front lines. Building it. In each episode, we’ll speak with a visionary Founder who’s building a new category or reimagining an existing one. We’ll learn about the problem they solve, how their technology works, and unpack their vision for the future. I’m your host, Brett Stapper, CEO of Front Lines Media. Now let’s dive right into today’s episode. 

Brett
Hey, everyone, and thanks for listening to another episode of Category Visionaries. Today we’re speaking with Cole Riccardi, CEO and Founder of Authentic, an insurance technology company that’s raised 16 million in funding. Cole, what’s going on? 

Cole Riccardi
Thanks so much for having me, Brett. Very excited to be here. 

Brett
No problem. Super excited for this conversation. I’d love to just begin with talking about what you’re building. So let’s dive right in. What are you building at? Authentic? 

Cole Riccardi
Yeah. So Authentic is building a captive insurance platform, which means something to about one of every ten people I talk to. And so what a captive insurance platform is we go to anyone that touches a group of small businesses. And that would be like a franchisor. It could be a vertical software company, it can be an association, and we actually allow them to start their own insurance program. So an example would be Wendy’s. Instead of Wendy’s restaurant buying insurance through State Farm or Liberty Mutual, Wendy’s can start Wendy’s insurance leveraging Authentics infrastructure. Or in the vertical software world, somebody like a mindbody can offer mindbody insurance to their 60,000 gyms alongside their core software and payment offerings. And so we’re really enabling folks with existing distribution to add insurance as another product. 

Cole Riccardi
And the way we’re delivering it in the form of a captive gives them superior economics to a lot of the other options they have. 

Brett
Let’s imagine you’re sitting around Thanksgiving with your grandma and she says, Cole, what is captive insurance? How would you define it? In like, simple grandma terms? 

Cole Riccardi
Yes. I’ve been doing a lot of this over the last two years. Captive insurance started 30 or 40 years ago where really big companies didn’t want to pay third party insurance carriers. So an example would be like, Walmart didn’t want to spend $200 million in premium to Chubb. So instead they started Walmart insurance company to essentially self insure themselves. And so in setting all of that up, it saves Walmart a lot of money, but it’s a real challenge. They need to go through regulatory approval and find reinsurance and figure out how to do all the insurance pricing. So there’s a lot of ugliness and setting up these captives and that’s what Authentic extracts away. And so we deliver this kind of captive as a service model today to anyone in the small business space. 

Cole Riccardi
So it’s about as close as you can get to starting your own insurance company, but it’s all hosted by Authentic, if that makes sense. 

Brett
So it’s like captive insurance in a box. 

Cole Riccardi
That’s right. Exactly right. 

Brett
How did you like discover this problem? Like, what were you doing before that led you to say, okay, I’m going to go out and build a captive insurance in a box platform, take us back to like before Authentic and what was going on in your world then? 

Cole Riccardi
Yeah, it’s really two tracks that led me to captive in a box platform. I was fortunate enough to spend six years an investment firm called Aquiline, which focuses on financial services investing. And we had a number of vertical software companies that sold software and payment services to small businesses. And were trying to figure out how to offer an insurance product to these small businesses. And so we could partner with other carriers and sell leads. We could use a consultant and try and build some type of brokerage program. 

Cole Riccardi
But really when I laid out the options, having our own captive model was the most impactful and gave us the most control over the product and the experience and the way I came up with a captive model, actually I have a family member in the insurance space and he actually had formed a captive insurance program for horse farms in the northeast. So the example there is, instead of horse farm buying insurance through Liberty Mutual or state Farm, they could join the captive program of their fellow horse farms and essentially join an insurance pool of their peers. And they could get much better rates. They get the money back at the end of the year if theres leftover profits. And so I had some exposure to captives through family. 

Cole Riccardi
And then I was in this very unique seat at an investment firm that was trying to figure out how to crack this embedded insurance code. And that’s sort of when captive came as the AHA moment for embedded insurance. 

Brett
What were those early days like then? So it sounds like you started in, I think it was 2022. What were those like three months like? 

Cole Riccardi
It was late 2022. I was wandering in the desert, as I like to refer to those first few months. I had the idea high level. I had enough conviction where I wanted to go out and build it on my own. And then I think one of the most challenging parts of being an entrepreneur is when your inbox is zero and you don’t have meetings and nobody probably wants to talk to you, but you just need to kind of keep wandering in the direction that you believe is the right path. And so the first three to four months, it was really about talking to as many potential partners as humanly possible, trying to gather all of the potential customer feedback that I could potentially garner. 

Cole Riccardi
And what that meant in practice was talking to as many franchisors, talking to as many vertical software companies, talking to a ton of associations, all of these folks where I could essentially just pitch them on, hey, if you guys had a platform or some type of infrastructure, would you start your own captive insurance program and offer insurance to your small business customers or small business members? And the feedback I got continued to be overwhelmingly positive. And which, with each of those conversations, you learn one new thing every time, which compounds after your hundredth conversation and all of a sudden you’re pitching something that’s a little bit more of a real product. So I would say that was the first kind of three or four months alongside of building the team. We were very fortunate. 

Cole Riccardi
The folks at Slow Ventures took an early debt on me a couple months after I had decided to make the leap into entrepreneurship. And so they really funded my idea and believed in what I sort of saw as the future of insurance distribution. And here we are now with active customers and a team of twelve across New York and Dayton, Ohio. 

Brett
What do you think slow venture saw in you? 

Cole Riccardi
I was really passionate about this idea. I still obviously am. It’s obvious to me, maybe more people in my demographic that I would rather buy insurance through a trusted channel that I already interact with, as opposed to some insurance brand that I haven’t worked with. Or maybe they’ve been around for a while which gave them value to some folks. But if I’m a gym and I use mindbody for scheduling and payments and lending, id rather get my insurance there as opposed to googling around for gym insurance and then calling into some call center at a large insurance carrier. So I think the idea is, or this is just obviously where the puck is going. And I think they candidly just saw my conviction level in it and the fact that I had been in this space for six or seven years. 

Cole Riccardi
And so I think that’s what really prompted them to write the check. 

Brett
Take us back to the first paying customer. How’d you land that? 

Cole Riccardi
All of those meetings I took to gather potential feedback. As I said, the reception was very positive. You never know if someone’s actually going to be a customer until you put a piece of paper in front of them and ask them to sign it. But as you can imagine, once we had a working prototype, immediately went back to the folks I had one or several meetings with and said, hey, you know that captive platform you were so excited about in theory? Well now it’s here and I’d love for you to sign a contract. So I had so many meetings where not everybody that was excited about it said yes, but I was very pleased with the amount that we’re willing to move forward and take a chance on a startup, and I think that’s a credit to the idea. 

Brett
How would you define or describe your marketing philosophy today? 

Cole Riccardi
Great question. My marketing philosophy as CEO is insurance is a relatively small space, insure tech I should say, and a lot of these different channels that were pitching, they all talk. So all of the vertical software folks were pitching talk, all of the franchisors talk, all of the associations talk. If we just do such an incredible job with a small subset of customers and our product is really that great and creating that much value, that channel will hear about it. And that’s proven to be the case over the last couple of weeks or months. 

Cole Riccardi
We’re only five months into launching our product, so it’s still pretty new and you are talking to the enterprise sales team at this point, but we’re really excited to see kind of the word of mouth that’s been happening within these channels for the value that we’re creating for folks. 

Brett
Is it clear who the ICP is yet or is that still being figured out? 

Cole Riccardi
We’re narrowing it down. I think our ICP, we’re still narrowing it down. I think that’s one of the challenges with a big idea that’s applicable to a lot of different folks. I mean, generally speaking, I do believe in the medium to longer term insurance will be purchased through affinity groups, not traditional carriers. And all of these affinity groups will have their own captive program powered by Authentic. So how do we walk that back to the near term? We’ve identified these three channels that I keep touching on. So franchisors starting franchisor insurance programs, vertical software companies adding insurance as another offering to their bundle, and then associations offering another value add service to their members because we’re not seeing a ton of competition and we’ve been fortunate to have a great group of backers and a great team. We are shooting up market. 

Cole Riccardi
So we are talking to, I would say, the largest kind of leading edge vertical software companies. I would say the mighty middle and above in the franchise space and then some very large associations in the small business space. 

Brett
You mentioned you are the enterprise sales team, which is of course very common at early stage startups. One thing that I’ve seen a lot of founders struggle with is when they transition out of Founder led sales and also just knowing like when to transition out. What are you thinking about? Or what’s your thinking there? 

Brett
Like are you planning on trying to transition out in the next three months, six months? Or are you going to grind to this for another year or two before you really build that sales team out? 

Cole Riccardi
I think one of the exciting components of our business is we don’t need 500 customers to build a billion dollar company. We need maybe 20 to 60 of the right customers. And if you look at our pipeline and who we’re chatting with right now, you can draw a straight line or do the bottoms up analysis to building something really big. So I just hired an incredible head of Gotomarket who’s leading partner or customer activation, and I think that’s a really big component of our sales process. I’m not sure we’ll be a team with 20 account executives pounding down the door. We actually are starting to build a little bit more of a self service model for folks that aren’t really large vertical software companies. 

Cole Riccardi
They can still come to our website, look at our docs and start their own captive in a self service way. So that’s something we’re really excited about. But I do imagine graduating from head of sales in the next probably six to twelve months though. 

Brett
What about from a regulatory perspective, is this just a regulatory headache for you or what does that look like? 

Cole Riccardi
I think we’ve created a lot of regulatory ip. We’ve spent a lot of time with the regulators and our state of domicile. We’ve spent a lot of time with some incredible lawyers to really work within the existing captive structure, but make it scalable. And so I do think we’ve created quite a bit of legal ip, a really great legal. There’s a great legal to our business, and anyone who wants to go through that pain, I truly wish them the best. And thats really a big part of our pitch. You just give away a small sliver of the economics to Authentic versus going and domiciling your own captive insurance company yourself. 

Brett
Trey, what does the competitive landscape then look like? Is it these old school captive insurance companies that are more services based that set it up? Is it lawyers? What is like the status quo? If someone wants to do this, there’s. 

Cole Riccardi
A couple of different buckets. So folks who want to set up their own captive can engage a captive services group at a large broker. That broker can do a lot of the legal and filing work, but then you’d still be required to go find reinsurance, capitalize your insurance carrier, figure out all of the underwriting, figure out the distribution, the front end platform. So captive services groups kind of are one sliver of what we do, but we do see folks explore conversations with them if they are inclined to try and build it themselves. But I think we’ve successfully convinced everyone that we’ve pitched that it’s not a path they want to go down. And then there’s some other folks that offer more embedded insurance in the form of an embedded agency. 

Cole Riccardi
So selling a traditional carrier’s product through a software company, and they’re sort of the bridge between these two parties, almost like an integration layer between end customers and a traditional carrier. I think a lot of those folks seem to be playing in travel and some of these more smaller dollar transactional parts of insurance, whereas we’re focused on the small business space as opposed to some of those lines of business. So in terms of the turnkey captive platform and who we’re pitching, we’re really not seeing anybody in some form of RFP process. Some people do consider if it’s worth building themselves, and then they tend to circle back to us pretty quickly. 

Brett
We’re depressingly already almost are done with Q one for 2024. The year is flying by. What are the top 2024 priorities look like? And as you think about those priorities. 

Brett
Like what’s keeping you up at night. 

Cole Riccardi
We’Re at a point where we’ve built a product. We’ve got an amazing core team. 2024 is the year of scale. So how do we add to the machine that we’ve already built and make sure it’s running as efficiently or more efficiently than it is today? And so that’s everything from sales to ops to engineering. I am, broadly speaking, incredibly excited about the scalability of our platform. We are able to service folks that are really quite large from a technology and operational standpoint, that’s a credit to what our team has built. But folks are asking us for new products or can we service different end markets. And so we see a lot of pull into other products and we’ll start to execute against that product roadmap that should expand our addressable market outside of just the small business space. 

Brett
Now, you recently closed your series a. Your total of funding is 16 million. What have you learned about fundraising throughout this journey? 

Cole Riccardi
Fundraising. I think everyone has a different strategy to fundraising. I have told our team over the last nine months that the work we do right now is for fundraising, because if you build a great business and are able to tell a great story, then you will be able to raise money. And so if you’re able to go into fundraising meetings and show an awesome product and awesome traction, that will make it a successful fundraising process. Whereas I think a lot of folks will spend a lot of time on strategy around the fundraise process itself. But I really think what matters is the 912, however many months preparing for that fundraiser. 

Cole Riccardi
It’s the actual work, it’s the actual company building, and then it’s the CEO’s responsibility to make sure everyone can see all of the accomplishments and all of the traction in that month or a couple of months of fundraising. 

Brett
Trey, what about advice for insurance technology founders? So let’s imagine that a Founder comes to you and they say, Cole, I want to build in the insurance tech space based on everything that you’ve learned. This doesn’t have to just be about fundraising. It’s about anything related to go to market. What would be the number one piece of advice that you’d give them? 

Cole Riccardi
I think everyone is a little bit bearish on insurance technology right now. I think everyone was very hot on it in 2019 and 2018, I think the pendulum will continue to swing back and forth. I try and drown out some of the high level, more vc noise around the given category and just continue to build something that is a great business model and resilient through good markets or bad. I actually, when I was starting the company, everyone said, wow, it’s a really tough time to go get started. First of all, I think we’ve kind of just returned to normal times. I don’t think it was that difficult of times. 

Cole Riccardi
But at the same time, I would rather build in a hard time and see if my business works then than build in a time where there’s a little bit more funny money around that can keep you afloat if your business maybe isn’t so great or the economics are upside down. If you’re building in a harder time, you find that out way faster. And I think every Founder, there’s an opportunity cost to their time and their life, right? And so I’d love to find that out sooner than later. And so I would actually want to forge ahead in what is known as more of a hard time. 

Brett
Final question for you. Let’s zoom out three to five years into the future. What’s the big picture vision here? 

Cole Riccardi
The big picture vision, I touched on it a little bit before, but insurance used to transact with a broker, a carrier, and a reinsurer. And in the future it will transact through some type of affinity group that has a captive, that has capital and reinsurance behind that captive. So I think there’s a huge opportunity for us to open up the capital markets to more insurance yield as an asset class. That’s something we don’t talk a lot about, but we’re very excited to do medium and longer term and just really fundamentally changing the value chain of insurance. And I think if you ask a lot of folks where the puck is going that are deep in the space, they do see distribution shifting. And I think we want to be on the leading edge creating that shift in distribution. 

Cole Riccardi
And over time, it won’t just be for small business, it’ll be for your home and auto insurance or your renters insurance. Right. It makes sense to purchase these products through other platforms as opposed to traditional brands. 

Brett
I wouldn’t say I fully understand captive insurance, but I definitely walked away from this interview understanding it a little bit better, and I think anyone listening in is going to feel the same. So, Cole, this has been awesome. It’s been a lot of fun. We’ve learned a lot. Before we wrap up here, if there’s anyone listening in that wants to follow along with you, wants to get in touch about setting up captive insurance in a box, where do they go? 

Cole Riccardi
They can go to our website and reach out authenticins.com or my email is Cole@authenticins.com. 

Brett
Cole, thanks so much. Appreciate it. 

Cole Riccardi
Thanks so much, Brett. 

Brett
This episode of Category Visionaries is brought to you by Front Lines Media, Silicon Valley’s leading podcast production studio. If you’re a B2B Founder looking for help launching and growing your own podcast, visit frontlines.io podcast. And for the latest episode, search for category visioners on your podcast platform of choice. Thanks for listening and we’ll catch you on the next episode.