Spike Lipkin is the cofounder and CEO of Newfront Insurance which is a modern commercial insurance brokerage. The company has raised so far over $100 million from top tier investors such as Founders Fund, Index Ventures, Bloomberg Beta, or Meritech Capital Partners to name a few.
In this episode, you will learn:
- Handling rejection
- Top tips for new entrepreneurs
- Hiring startup talent
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About Spike Lipkin:
Spike Lipkin is the CEO and Co-founder of Newfront, the fastest growing insurance brokerage in the nation. Prior to Newfront he was one of the first employees at Opendoor.com, where he helped grow a five-person company into a business now valued at more than $5 billion. Prior to Opendoor, Spike worked as an investor at Blackstone. At both Opendoor and Blackstone, Lipkin was tasked with buying the insurance to manage business assets, which first exposed him to the deep systemic challenges facing the insurance industry. These experiences led him to found Newfront – a business that combines insurance experts with proprietary technology to make the buying process less cumbersome and more transparent for its clients and brokers. Lipkin received his undergraduate degree from the University of Pennsylvania and graduate degrees from both Cambridge University and Stanford University.
Connect with Spike Lipkin:
- Crunchbase
- Angel List
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a really amazing entrepreneur. I think that we’re going to be learning a lot from going to corporate, and a great corporation that he was working at, an incredible culture, and then going now into startups and one of his own – his own baby, where he’s definitely doing a remarkable job there. Without further ado, let’s welcome our guest today. Spike Lipkin, welcome to the show.
Spike Lipkin: Thanks so much for having me, Alejandro. I’m thrilled to be here.
Alejandro: Originally born in Colorado, so how was life growing up in Colorado?
Spike Lipkin: Life in Colorado was amazing. I spent a lot of time in the outdoors growing up – not so much time in classrooms. A lot of times skiing and camping. It taught me to appreciate the outdoors.
Alejandro: How was it with your parents. Your parents were both entrepreneurs: one, an architect and the other one an artist. I’m sure that you learned a ton, and you developed the entrepreneurial bug early on.
Spike Lipkin: Yeah. It was really incredible seeing my parents build. My mom’s an artist, and artists really are their own businesses, and they have to do everything from creating their own work to marketing to sales. And my dad’s an architect. What I saw in them was a lot of what entrepreneurship is about in the beginning, which is doing every job and realizing that if you’re going to build something that really works, you have to understand every component of it. One of the things my dad used to always tell me is, you have to do every job in your business before handing it off to someone else. Later on, when I had the chance to start Newfront with my co-founders, we did everything ourselves early on and even little things that I think we could have outsourced because we really wanted to deeply understand every aspect of the business and then be able to go hire someone much more capable than us but hand them something that we fundamentally understood.
Alejandro: In this case, what were some of the things that you saw there, something with your parents going through the journey, through the ups and downs, through embracing the journey? I think founders don’t really know what that looks like until they go at it, but I think that here, you had that first taste in a direct kind of way.
Spike Lipkin: Yeah. I think what I saw from them was this incredible freedom that even though entrepreneurship is really difficult, and the lows are very low, the highs are incredibly high. You control your own destiny and can make a huge impact on other people’s lives. One of the things I know my dad was always really proud of is how many people his projects employed. When you think about it beyond just the architecture, there is the construction, and all of the subcontractors, and all of the related vendors. I came to learn that entrepreneurship is a vehicle for empowerment and empowering others, and I aspired to do that throughout my career. In building Newfront, not only did we want to build a mission-driven, highly successful business, but we wanted to build a business that took care of our team members and provided a stable platform for them to support their families.
Alejandro: Why philosophy?
Spike Lipkin: I entered college as a philosophy major. I think, like most 18-year-olds, I had a lot of questions about the world. When I was in college, we went through the worst recession since the Great Depression. I was trying to make sense of what was going on in the world. I was studying philosophy, and I realized pretty quickly that if I wanted to have a job after I graduated, I needed to pick up an economics degree. So, I ended up halfway through college picking up an economics degree, which helped me make sense of what was going on in the world. I remember feeling so much uncertainty in college, looking at the stock market, looking at all these local businesses I knew, and looking at the real estate sector. The combination of studying philosophy and economics was actually a great way to be and to understand what was going on in the world.
Alejandro: Let’s talk about entering the labor market. What was that like when all of a sudden, you graduated, and you see this reality that the stock markets had created?
Spike Lipkin: First of all, it was terrifying. I had friends that were older than me that were graduating. It was a really tough labor market, and really smart, capable people I knew are struggling to find roles. I was lucky when I graduated. I applied to 100 different jobs, and I ended up at Blackstone. When I joined Blackstone, I didn’t know what investing was. I certainly didn’t know what investment banking was. Also, I joined the real estate group. I figured that the economy was so impacted by real estate that it was an incredible place to rebuild and learn. It proved to be exactly that. I crammed a ton of learning into a couple of years there. I saw a big business get built and was there from the very early days. It was eye-opening, and at the same time, really rewarding to get to be part of building.
Alejandro: Talking about building, after you graduated and you go into it, one of the big pivotal moments before you entered startups is working at Blackstone. In Blackstone, where you started, they were developing the real estates out of the business, which now is literally one of the biggest investment managers in real estate. So how was that experience, and how was the drive in the culture that they have there?
Spike Lipkin: It was like drinking out of a fire hose, candidly. You’re working with these incredibly smart people, and the pace and the intensity was like something I’ve never experienced before. While I was there, there had been this big correction in the overall real estate market, and things were starting to come back. Blackstone was investing very heavily in recovery. I got to see the very early stages of the business Blackstone formed, and I handled a bunch of things that no one else wanted to handle, including insurance, which exposed me to this really not well-understood world – the set of products that every business out there needs to buy, every product in the world is made possible because there’s insurance. Entrepreneurship is made possible because there’s insurance, and getting exposed to it early on was what ultimately inspired me to work with my co-founders and our team members to build Newfont.
Alejandro: In this case, at Blackstone, you had the opportunity of working with Jon Gray directly. He’s one of the guys that has built the real estate side. I’m sure for you, from a leadership perspective, from an analysis perspective, when you’re trying to understand the strategic nature of the operations, actually you were able to learn a lot from him. What would you say was the biggest thing that you learned from working with someone like Jon Gray?
Spike Lipkin: The exposure to Jon and other senior folks at Blackstone was incredible. I think what I saw in him and others – really two things. One was having conviction. When Blackstone started investing heavily in the real estate sector after the financial crisis, in retrospect, it’s easy to say that things are recovering, but there are a lot of confusing signals in the market. It was by no means clear that we were going to have this raging recovery that ended up following. It was one, this ability to make conviction-driven and thesis-driven investments that I came to really appreciate. Two, it was the ability to dissect, analyze, and understand really complex information and make it seem really simple. I was so impressed seeing Jon do that and seeing other senior folks at Blackstone do that – be able to take in hundreds of data points and make sense of this complexity and explain it in a way that anyone could understand.
Alejandro: It seems that at Blackstone, you were on a very good path, so what happens in your journey where all of a sudden you decide that it’s time to do a complete makeover to your career, pack the bags, and enter the startup world.
Spike Lipkin: You know, I had been spending nights and weekends reading about what was going on, on the West Coast, and I wasn’t sure what I wanted to do but felt like there was this special moment in history where entire industries were being remade. I met the Opendoor team when they were just getting started and got to know Eric, the CEO, and JD and Ian, and they had this amazing idea to transform the housing sector. I joined them early on and got to see an idea become a product, and then a product becomes a business, which was an incredibly rewarding experience. Incidentally, I was also exposed to the insurance sector while I was there. Opendoor had complex insurance, and at times, it felt like insurance was slowing the business down. It felt like this idea that modernizing the insurance sector was something that needed to happen. I didn’t know what it meant at the time, but I had been exposed to it early on at Blackstone, and then again at Opendoor. It was growing in me that I wanted to contribute in some way.
Alejandro: Opendoor, definitely a remarkable trajectory of a company, and you were one of the early employees there. Now, we’re talking about a company that is publicly listed. But I’m sure that being part of a rocket ship like that, and being able to see, not as a founder, but still part of the early team members, gives you access to understand the full cycle of a business to a certain degree. I’m sure that gave you the 30,000-foot view at an operational level. Is that right?
Spike Lipkin: That’s right. Yeah, getting to work for incredible founders and early team members. On one side, it exposed me to the fact that there’s no magic. Opendoor was successful because the early team members and founders are really, really smart, hardworking, and were willing to iterate and experiment. I think seeing that and seeing what it takes to go from a promising idea into a product was incredibly helpful learning and then seeing the keen focus on talent. One of the things I admire most about Opendoor was the talent they recruited – myself, excluded. The early team members at Opendoor were incredible, and Eric took painstaking efforts to bring on people who were amazing. When we went to build Newfront, talent was the core focus in the early days of the business and figuring out the right people to bring on early. I had read, I think, that Reid Hoffman had interviewed the first 200 employees at LinkedIn, so my co-founder and I interviewed, and to this day, continue to interview the vast majority of team members we bring on. That was a lesson that originated at Opendoor.
Alejandro: Let’s talk about Newfront. Here, you are in Opendoor, you have the exposure to insurance, and then all of a sudden, that idea sparks. What happens from idea to incubation to giving birth to the idea?
Spike Lipkin: I had this vague idea that insurance is the sector that touches every part of our economy. Our world is getting riskier, and insurance is also what empowers entrepreneurs. You wouldn’t take risks in the world if the downside meant that you potentially lose everything. So, that was basically the extent of it. At some point, I left Opendoor and decided that I was going to start exploring insurance. A friend said, “You have to meet this guy, Gordon. He’s a world-class Op engineer. He was first in his class at MIT, and he had built a Y Combinator company that he sold to LinkedIn, but he’s obsessed with insurance because his family worked in the industry. So, we started spending time together, and we started speaking to business owners about their needs. What we heard from business owners was that their brokers were really helpful to them, but they felt like their brokers didn’t have the right tools to make for a seamless experience. Then we spent time talking to insurance brokers, and we heard the same thing that they provided this strategic risk management to their clients, but they were using tools that were 20 years old. We started studying the software vendors in the industry, and we found that many of them were private equity-owned and not innovating. We just slowly got deeper and deeper into the industry, and unlike a lot of startups that were forming at the time, we believed and continue to wholeheartedly believe that brokers are the core of our industry and are not going anywhere. A lot of folks in Silicon Valley had looked at insurance and said, “Oh, travel agents have gone away, so insurance brokers are going to go away.” I think the distinct difference is, travel agents, in general, or dealing with a part of the world we fundamentally understand. We understand what plane tickets are; we understand what a seat on a plane is. Insurance brokers are helping businesses deal with incredibly complex legal documents. An insurance policy is hundreds of pages long. When you need it, it’s because something terrible typically has happened in your business, and you’re filing a claim. And the human component, the relationship component, and the human expertise we realize are really important. With that thesis, we started exploring ways in which we could streamline the experience of working as a broker, the experience of buying insurance as a business, and we realized quickly that if we wanted to have the impact that we were seeking, we needed to actually start our own brokerage and rebuild a lot of the pen and paperwork that goes with technology. We have leveraged the data that our clients generate to provide better experiences and better quotes for them. That’s how Newfront was born.
Alejandro: In this case, talking about Newfront, here you go from being in Blackstone, an amazing office, you probably had your executive assistant, all types of stuff like in the Big Apple, too. All of a sudden, you find yourself on the West Coast in this new startup that you’re building, in a work-lift environment where people are thinking that you guys are nuts. How is that for you guys? What were the early days like?
Spike Lipkin: We continue to build a culture where we want to invest every dollar in making a better client experience. Early on, that was even more true because we were very capital constrained. We initially started in my living room, and eventually, we worked at a friend’s office for a while, and then eventually, we were so proud to have our own office. The reality is, it was an apartment. It had a washing machine and dryer and shower. Our neighbors were a family of four. What’s interesting about the insurance industry is your business is dependent on having a close relationship and partners with large insurance companies. I remember early-on, inviting executives from major publicly-traded, multinational companies to our office. They realized quickly that it was an apartment. Our conference room was a closet that I had to duck down to get into. So, it felt pretty funny early on. I remember there was this one really important carrier partnership that we were going after. We had this executive from the carrier come meet us. You probably know this, but unfortunately, the streets in San Francisco aren’t as clean as one would like, and this person stepped in feces on the way into our office, which was not a good way to start out a partnership conversation. We ended up closing the partnership, and they continue to be a valuable trading partner to us today. But the early days were definitely not as glamourous or as elegant as one would imagine.
Alejandro: In this case, that story was about one of the first people that you were engaging in business actually stepped in some dog feces. So, that’s quite a story. What happened there, and how do you turn that experience around?
Spike Lipkin: I think the trading partners who bet on us early saw that we were willing to learn quickly, and we were there to modernize, not disrupt the industry. So many people that come into the industry have these big pronouncements about eliminating brokers or changing the way carriers worked. We were there to listen, and we were there to invest in making their lives better and bringing them the types of clients that they wanted to see. I think that attitude was a healthy dose of modesty, and understanding what we didn’t know really helped us early on.
Alejandro: You guys are very smart people with incredible backgrounds. I can’t even imagine what it was like for you all to be dealing with so much rejection at this point. I’m sure that was very humbling to be exposed to all those noes. How did you guys continue with that strong conviction and keep pushing when you were facing all those noes in front of you?
Spike Lipkin: We faced a lot of noes. Early on, we needed to bring on insurance professionals, brokers, and account managers to help us build the business. At the time, there were three of us – my two co-founders. We were working out of this work/live loft. I think I probably cold-called hundreds of people every month, and the vast majority of them hung up before I could finish saying what my name was. But we had this core belief that here’s this industry that has been around since the founding of free markets and is the core of so much of what I care about in the world, and it’s increasingly needed as the world becomes riskier. It was having a mission that we really cared about that I think propelled us through those early days. Then, what we found is that when you achieve a little bit of what you’re hoping, early on, it compounds. A bunch of our early hires were folks who referred us to our next set of hires, and there’s this really nice snowball effect and momentum that we built as a business. I think many startups are this way where you’re just trying to compound this momentum and break free of a lot of the constraints, and we started seeing that early on and haven’t looked back.
Alejandro: What ended up being the business model of Newfront? How do you guys make money?
Spike Lipkin: We are an insurance brokerage. The way we make money is we advise our clients on risk management, and we sell them insurance policies on behalf of over 100 different insurance carriers. We are paid a commission to sell those policies on behalf of the carriers, so we collect a recurring revenue commission, and it comes out of the total premium that is paid to the carriers.
Alejandro: And you guys have raised quite a bit of money, so how much money have you raised to date?
Spike Lipkin: We have raised about $110 million. We still have the majority of that money in the bank today. We took a very non-Silicon Valley approach early on. We didn’t announce our funding. We were very quiet. We felt that we had a business that was working, and we wanted to be able to build and build a mote and advantage and scale before being public about what we were doing. More recently, we’ve announced what we were doing. As we’ve started dealing with bigger and bigger clients, we felt that it’s helpful to show some of our scales.
Alejandro: In this case, in your situation, you raised the Series A and the Series B literally within the same year. Why did you do that? Typically, it takes between 18 to 24 months to go from financing cycle to financing cycle. Here, you guys just got rid of it in one single year.
Spike Lipkin: I think it was actually about three months apart. We had raised our Series A, and it was a pre-emptive round. Kevin Hartz joined our board on behalf of Founders Fund. When I think about the business, there’s, of course, revenue growth and margins are really important, but from a de-risking standpoint, there was a period in which we cracked a number of things in the business. We were getting a lot better at understanding go to market. We had some product breakthroughs. I think Founders Fund saw that happening in the business and realized that not that much time had passed. The risk profile of the business was very different. They came three months after leading our Series A and offered us a Series B. We’ve been thrilled working with them, and we didn’t hesitate and realized that we could further invest capital in building the client experience, improving the lives of our brokers and account managers, and so we ended up raising our Series B that way.
Alejandro: What’s the difference between having an investor at a fund that it’s more like the financial mentality and the investor mentality versus someone like Kevin Hartz, who is, for the people that are listening and maybe doesn’t sound familiar, the founder of Eventbrite. He is a prolific founder and someone that has that background operational expertise that really understands what you’re going through. What’s the difference when you have someone like that on your board?
Spike Lipkin: We optimized for Kevin when we were raising our Series A and had a number of inbound options. Kevin told us that if we took money from Founders Fund, he would join our board and meet with us once a week for the next ten years. We jumped at that opportunity. He offered us the lowest price, by far, and we took his money. We realized that there were a lot of things that were specific to Newfront that we had to figure out. But, frankly, there were many things that were just general: building an incredible executive team, building a culture, building a product engineering team that ships iteratively. We realized that Kevin had seen that before; he’d probably seen a lot of the things that work really well and a lot of the mistakes that folks can make. So, we optimized for having someone in our corner that had been there before. For the first couple of years, the company – we would go to Kevin’s house every Sunday evening and give him updates on the business, talk through the latest issue that we were facing, and it was crucial to our growth early on.
Alejandro: How big is Newfront today? Is there anything that you can share in terms of the number of employees or anything so that the people listening can get an idea of how big you guys are?
Spike Lipkin: We are not public with a bunch of our metrics. We serve about 5,000 clients at this point. We’re right around 200 employees. We are somewhere in the top 100 of property and casualty brokers in the United States, which I’m very proud of a couple of years in, about three years in to building the business.
Alejandro: Your journey here is interesting because you’ve gone from corporate to now startups, and I’m sure that you’re very well aware, and you’ve experienced this first-hand that you need to keep the same level of growth personally with the growth of the business. Otherwise, you’re outpaced, and you need to set yourself aside. What have you done to continue to develop yourself at the same speed as Newfront, and what has been your biggest go-to source to keep learning?
Spike Lipkin: I completely agree. I think the challenge in a fast-growing startup, as you point out, is developing yourself at the same rate or ideally staying a little bit ahead of the business, and that can be really hard when you’re doubling and tripling. I benefited from incredible mentors. I’ve had a coach for the last two years, and that experience has been not only very helpful for learning as CEO and as a co-founder but also very gratifying. Then, I’ve learned a great deal from my colleagues. In general, we’ve hired people who are far more capable and far more intelligent than I am. Many of them have experience that I have not had, and I’ve been able to learn from them. We hired an incredible COO, Mike Brown, who joined us from Uber early on, and he had seen a massive team in Orchidville. Getting to learn from his experience was really valuable. We hired a sales leader from one of the biggest brokerages in America and getting to see how he managed. A sales team is really valuable. Learning from our team members has also been a big part of what has helped me and other members of our team develop.
Alejandro: Imagine, Spike, that you got to sleep tonight, and you wake up in a world five years later where the vision of Newfront is fully realized. What does that world look like?
Spike Lipkin: That world looks like one where it is easier for businesses to innovate and take risks. When I think about creating opportunity in the world, so much of it comes with doing some risk-taking. Today, to be able to run a business and take risks, you’re saddled with these really complex insurance requirements. You don’t really know what kind of coverage you have. Filing claims is really difficult. We believe that if we are successful, we will empower entrepreneurs and medium-sized businesses all over the United States to innovate and advance us as a society. When I look toward the future, that’s what we’re hoping to do. We also would like to create a platform on which tens of thousands of insurance professionals do the best work of their career because they have the right tools and the right culture. When I look forward five years, we are a massive part of our economy. Insurance, I think, is 11% of GDP, and many of the existing insurance businesses run on technology that’s 20 years old. I see this opportunity to modernize this sector to the benefit of so much of our economy.
Alejandro: Imagine I’m taking you now in a time machine, Spike. We’re going back in time, and you have the possibility of having a chat with your younger self, with that younger Spike that is at Opendoor thinking, “This world insurance looks interesting. Maybe it would make sense doing something.” If you could get in front of your younger self there and give yourself one piece of advice before launching a business, what would that be, and why knowing what you know now?
Spike Lipkin: It’s all about people. Particularly in our business, where we believe relationships and brokers and insurance professionals are core to our industry, but I think broadly in business, your long-term competitive advantage is really the people you can attract and the people you can retain. I think I understood that because I saw incredible people at Blackstone and at Opendoor, but the last couple of years have only underscored that lesson.
Alejandro: Very profound. Spike, for the people that are listening, what is the best way for them to reach out and say hi?
Spike Lipkin: If you’re interested in Newfront, we are hiring across all teams. My email is [email protected]. If you buy insurance and would like us to take a look at your coverage and see if we can give you any insider advice, you can reach out to me. You can also go to our website, https://www.newfront.com/, and signup there.
Alejandro: Again, Spike, thank you so, so much for being on the DealMakers show. It has been a pleasure to have you on.
Spike Lipkin: Alejandro, thank you for having me.
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