David Li/ February, 2020
The Key to Customer Success
David Li is a Principal at Avanta Ventures, where he invests in mobility and fintech startups. David is passionate about working with great entrepreneurs leveraging technology and unique insights to drive meaningful change across large industries. Prior to joining Avanta Ventures, David was a venture investor at Longitude Capital, where he invested in and partnered with growth stage companies. He also advised companies from early stage startups to multinational corporations on M&A transactions at Lazard.
Expanded Q&A Transcript
1. How can startups drive change in legacy industries like insurance?
· One of the key ingredients that we’ve seen in the most successful companies going after legacy industries is a religious obsession over the customer and doing everything possible to deliver value to them.
· I’ll use insurance as an example, which in a very simplified world consists of three steps – customer acquisition, pricing / management of risk, and servicing claims. Now in reality it’s obviously much more complicated, but these are the 3 largest areas
· So take customer acquisition, now ideally as an insurance company you’d like to ask the consumer to spend half a day filling out an application form that has every detail about their life so you can most accurately assess risk. When the question that you should ask is – how can I make this experience as painless as possible for my customer by only asking the most vital questions? Or can I go one step further to leverage external data sources to pre-populate all of that information so they just need to hit confirm?
· And on the pricing and risk management side, what you should be asking is – what is every one of my competitors charging, and can I leverage technology to do what they’re doing better in terms of understanding or stratifying risk to offer my customers a lower price.
· So at the end of the day, it’s really about the customer and delivering value to them
· I will put a plug-in here though for corporate innovation, specifically that many of the existing players in these industries actually want to work with startups to improve their offerings, create new ones, etc. so I’d certainly recommend exploring that as a potential avenue for growth as well.
2. How do mobility-focused startups work with the US government? How much of a focus should it be?
· We believe the government whether federal, state or local entities are a vital stakeholder in most if not all of the new innovations within the mobility space, and I think companies both large and small are coming to realize that and are changing the approach that they take to working with government and regulatory officials
· In the early days when Uber and Lyft were taking off, it was very much an ask-for-forgiveness approach or often times just not asking at all. In facts, startups actively avoided working with regulators
· Well cities and government haven’t just been asleep this whole time and if you fast forward to 2017 and 2018 when Bird and Lime and others launched thousands of scooters in cities, government agencies responded very quickly when they started receiving complaints from
people about scooters littering sidewalks. They impounded scooters and implemented new programs to manage where and how micro-mobility could be operated.
· As a result of some of this, startups have very much begun including the government in the discussions, which we ultimately view as a good thing as it benefits the end consumer and often times can help address social equity issues as well.
· How much you should focus on this really depends on the specific startup and the domain they’re operating in, but in general we recommend companies have a good grasp on the government implications within their own domain
· If you’re building a full-stack autonomous vehicle company for example where standards and regulations aren’t clear, there could be huge advantages to working with regulators to shape those rules.
· Whereas if you’re a fleet management company that’s offering a routing optimization solution to delivery drivers, it may be less relevant, but even then you may want to understand if the cities where your customers are operating have begun to implement dynamic curb side pricing for example.
3. What are some key things investors look for in a startup seeking to disrupt an industry dominated by old-school ideas?
· As investors, we look for many of the same things in companies going after legacy industries vs. otherwise, in terms of product market fit, founder market fit, market opportunity, defensibility, etc.
· The two areas where we typically drill a bit deeper on though are:
· One is the team, and specifically what’s that unique insight that you have that will really shape the industry and why are you and your team the right people to get this done. What’s your competitive advantage over all the other teams operating in this space? Is it that you have decades of not only experience, but connections that enables you to accelerate growth? Is that you have a unique insight into a subset of customers that haven’t been well served and you’re expanding the market? What’s your edge?
· And the second area that we spend a lot of time on is actually market timing. And specifically the question there is why is now the right time for your company or solution to thrive? Unfortunately legacy industries are legacy industries for a reason in that they generally tend to move more slowly than others. So we’re trying to understand – what’s the catalyst here? And sometimes that catalyst can just be that your solution is 10x better and cheaper than what’s currently available. Other times, it could be regulatory oversight – many years back electronic logging devices were federally mandated to be installed into trucks for example and spurred a lot of innovation in this space.
4. What are some areas you’re most excited about within the mobility space?
· There certainly are a number of foundational challenges within the mobility space. There are a few that we’re really excited about and seeing a lot of interesting activity in.
· First is around insurance for autonomous vehicles. As AV’s start to get deployed, one of the biggest questions surrounding them is around liability. And specifically that the liability shifts from individuals like you and I driving to the algorithms and system driving. And if you look at insurance today, everything that’s used to evaluate risk is based on the individual driver. So how
do you then shift that to begin looking at vehicle specific risk factors and understanding if the AV system is safe – that’s something that the industry is really trying to grapple with.
· The other challenge and area that we’re pretty excited about is around cities. Specifically how a city is going to manage its various mobility options. If you think about the city of today compared to the past from a mobility perspective right, there’s a whole host of new mobility solutions from Ubers and Lyfts to scooters and bikes, and eventually AV’s and drones will be deployed as well. So as a city, how do you deal with all of this? How do you manage how, where and when a scooter operates? How do you avoid having a thousand Amazon delivery drones flying overhead with packages? These are all questions that are becoming increasingly relevant, and we think technology has a huge role to play to help cities deal with a lot of this.
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