Insurtech Startup Counterpart Raises $30 Million to Help Small Businesses Manage Risk

Keerthi Vedantam

Keerthi Vedantam is a bioscience reporter at dot.LA. She cut her teeth covering everything from cloud computing to 5G in San Francisco and Seattle. Before she covered tech, Keerthi reported on tribal lands and congressional policy in Washington, D.C. Connect with her on Twitter, Clubhouse (@keerthivedantam) or Signal at 408-470-0776.

Insurtech Startup Counterpart Raises $30 Million to Help Small Businesses Manage Risk
Photo by Samson on Unsplash

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Los Angeles-based insurtech platform Counterpart has raised $30 million in new funding through a Series B round led by Dubai-based venture firm Vy Capital, Counterpart announced Tuesday.

Chicago-based Valor Equity Partners and Silicon Valley-based Felicis Ventures also invested in the round, which brings the L.A.-based startup’s total funding to $40 million.


Counterpart founder and CEO Tanner Hackett

Counterpart founder and CEO Tanner Hackett.

Founded in 2019, Counterpart’s platform provides small businesses with management liability insurance, which protects them from harassment or mismanagement claims by employees and board members. The startup’s proprietary software collects data about a company’s culture, regulatory compliance and financial data; it uses that information to determine a company’s risk and, via broker partnerships, works with them to find and mitigate potential liabilities.

“Companies don't realize that if they face a difficult harassment suit, it's game over,” Counterpart founder and CEO Tanner Hackett told dot.LA. “This is something that could [cost] hundreds of thousands of dollars, and not many businesses have that in their bank account these days.”

Counterpart’s services are particularly relevant after the COVID-19 pandemic upended the workforce, with many workers quitting or retired in droves, sometimes due in part to controversial workplace practices. Many insurance underwriters restricted coverage amid the pandemic, which hurt small businesses already facing supply chain and labor shortages.

Counterpart will use the funding to expand its broker partnerships, hire more people and grow its product line. It plans to expand its offerings this year to include crime and excess insurance.

“The long-term success in this company isn't just to build the next insurance business—it is to think about how we can fulfill the needs of small businesses,” Hackett said.

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How To Startup Part 4: What Happens To Startups During a Downturn

Spencer Rascoff

Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.

How To Startup Part 4: What Happens To Startups During a Downturn
Image by SvetaZi/ Shutterstock

According to Layoffs.fyi, over 50 tech startups have made significant layoffs since January 2022. Among them are companies like Netflix, Peloton and Robinhood, which after huge growth during the pandemic now face the harsh realities of rapid inflation, global instability and a terrible startup fundraising environment.

While I was initially going to write Part 4 about MVP (minimum viable product), the topic of how to survive an economic downturn seems more relevant as it appears we may be on the cusp of a recession. A big question many people are asking right now is…

Why Is This Happening?

The main reason this downturn is happening is due to inflation. As interest rates have sat at zero or essentially negative since the beginning of COVID-19, asset and labor prices have gone up and everything costs more. The Fed is now raising these rates to combat inflation. When interest rates rise, it clobbers stock prices - specifically for high-growth companies whose earnings are mostly in the future.

To further understand this, you must understand how investors value companies. Analysts apply a discount rate to the future earnings of a business to value a company. To discount stock values, analysts project what future revenues and future profits will look like for businesses, and then discount the value of those back to what they are worth in the current day. So as interest rates rise, analysts increase the rate at which they discount future earnings. For example, what previously was $100 worth of earnings in five years, may now actually be only $50 worth of earnings in five years. Therefore, the value of the company, or its market capitalization, declines.

How Does This Affect Startups?

When public companies, particularly tech companies, are growing very quickly, their valuation gets slammed when interest rates rise. When valuations go down, it can affect startups, valuations and fundraising in three main ways:

  1. Businesses are compared to similar public companies. For example, proptech startups will be compared (“comped”) to public real estate and tech companies like Zillow, Redfin, Compass and Offerpad because they are the closest in comparison. If Zillow is now only worth ⅓ of what it used to be worth, then venture capitalists will base their valuations of startups at a significantly lower rate than when the company was valued higher.
  2. VCs have less money to invest in private companies. Although many venture funds have “dry powder,” they undoubtedly will have fewer exits and fewer markups in 2022 than in past years. This means they will have less recycled capital available to reinvest, and they will have a harder time raising more money from their Limited Partner investors.
  3. Crossover investors have plenty of public options. Much of the froth in the funding environment of the last few years was driven by crossover investors – firms which make both public and private investments. Specifically, many hedge funds and even mutual funds invested in private companies in the Series C, D and E stages. But now, with the stock market down so much, those crossover investors are not doing private investing and they have returned to their focus on public stocks where there are many great investing opportunities given the recent downturn.
  4. VCs will support their existing portfolio companies ahead of making new investments. VCs are being asked by their portfolio companies right now to invest in rounds that will help them extend their runway, so VCs have less capital available for new deals.
  5. Everyone is in a bad mood. Yes, that’s a thing. Everyone is in a bad mood because they have lost a lot of money in the last few months, and that makes people sour and skeptical.
  6. The FOMO is gone. So much of the exuberance in venture capital the last few years was driven by investors’ fear of missing out (FOMO). We now face the opposite situation, where investors feel no compelling reason to stick their neck out and invest aggressively when their competitor firms are mostly in hiding.

What Should Startups Be Doing?

While downturns are not all bad news, you’ll want to do everything in your power to keep the momentum going. Remembering that eventually this too shall pass, here are some tips on how to survive and thrive as a startup:

  1. Reduce your burn. Startups in this type of chilly funding environment should aim to have at least 12 months and ideally 24 months of runway. If you want help figuring out how long your runway is, check out this Forbes guide to calculating and managing monthly burn.
  2. Use conservative math. Assume revenue is likely lower than what it was in your previous plan. If you are thinking about reducing your burn, you also need to keep in mind that the revenue side of the equation is also likely to come down. In turn, your cost side may need to come down more than what you initially planned for.
  3. Reduce non-people expenses first. Expenses such as software, real estate, perks, marketing expense or non-necessities.
  4. Reduce headcount once. Drawing out multiple rounds of layoffs is bad for company morale and can leave employees anxious or angry. If you have to make cuts, use this as a time to get rid of low performers if possible. While it’s an unfortunate and difficult thing to do, remember to lay off with compassion.

If you’re less of a reader and more of a video-watcher, Craft Ventures did a great video on how to operate during a downturn that covers these topics and more. NFX also has an extensive guide to thriving in a 2022 downturn and YC advises founders to plan for the worst. Sequoia shared this deck with its founders describing what to do and why we’re here, and Uber CEO Dara Khosrowshahi sent a memo to his team describing how the company is navigating the current market. Many other VC perspectives are available on Twitter.

If there is anything we can learn from the pandemic, it’s that challenges create opportunity and we are more adaptable than we think. Downturns can be scary and stressful, but if you plan well and welcome change, great companies can thrive during these times too.

Wavemaker 360 Launches New $64M Fund for Health Care Startups

Keerthi Vedantam

Keerthi Vedantam is a bioscience reporter at dot.LA. She cut her teeth covering everything from cloud computing to 5G in San Francisco and Seattle. Before she covered tech, Keerthi reported on tribal lands and congressional policy in Washington, D.C. Connect with her on Twitter, Clubhouse (@keerthivedantam) or Signal at 408-470-0776.

Wavemaker 360 Launches New $64M Fund for Health Care Startups
Photo by CDC on Unsplash

Despite a venture funding slowdown that has not spared the health care and biotech sectors, one Los Angeles fund is looking to back its next crop of seed-stage health startups.

Wavemaker 360 Health, the Pasadena-based early-stage health care VC firm, announced on Thursday that it has closed its $64 million second fund—a haul nearly four times the size of its $17 million first fund, albeit smaller than the $100 million maximum target it set for itself two years ago. The new vehicle will look to invest in 40 to 50 early-stage startups mostly in the U.S. and across the health care spectrum, from digital health and pharma to medical devices and artificial intelligence.

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Gander, an LA Startup Using Videos To Make Online Shopping Easier, Raises $4M

Decerry Donato

Decerry Donato is dot.LA's Editorial Fellow. Prior to that, she was an editorial intern at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

Gander, an LA Startup Using Videos To Make Online Shopping Easier, Raises $4M

Gander, a Los Angeles-based ecommerce startup that collects and embeds user-generated videos for online shopping sites, has raised $4.2 million in seed funding.

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