[Raised $12 million] Ep.133 - The First 100 with Bobby Touran, co-founder of Rainbow | Cold Outreach | Aggregators | Persistence Marketing

Bobby Touran is the co-founder of Rainbow, which is an insurance reinventing the way restaurants buy insurance. Essentially, Rainbow is a digitally enabled managing general underwriter building tailored small business insurance products. Rainbow has now raised $12 million since its inception from Caffeinated Capital, Altai Ventures, Zigg Capital, 8VC, Buckley Ventures, Habitat Partners, and Arch Capital Group Ltd.

The company’s flagship program, an admitted business owner’s policy (BOP) product specifically tailored to the restaurant industry, is currently available in 11 states, including California, and is expected to be available in over 25 states in 2024. Exclusively distributed through independent insurance agents and digital partners, Rainbow’s restaurant program offers producers a specialized appetite when many name-brand carriers have exited the restaurant business class.

Where to find Bobby Touran:

• Website: Rainbow | Flexible Pay-As-You-Go Restaurant Insurance (userainbow.com)
• LinkedIn (5) Bobby Touran | LinkedIn

Where to find Hadi Radwan:

• Newsletter: Principles Friday | Hadi Radwan | Substack
• LinkedIn: Hadi Radwan | LinkedIn

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Transcript

Let's do it. Let's do it Broadcasting from around the world you're listening to the first 100 a podcast on how founders acquired their first 100 paying customers Here's your host Hadi Rodman Good to have you on the show, Bobby. How are you doing today? I'm good, how are you? Thanks for having me. Amazing. Thank you for stopping by. Happy New Year first. And I wanna give a brief introduction for our listeners about Bobby Turan, who's the co-founder of Rainbow, which is an insurance technology company that's reinventing the way restaurants buy insurance. And you essentially are a digitally enabled managing general on the writer, which is a very specific keyword in insurance which will explain and you're tailoring your solutions to small businesses and you're starting with the restaurants and you've raised to date around 12 million since inception from very notable investors like Caffeinated Capital, HVC, Zik Capital and many more. Bobby, take us back to the top. How did it all start? Yeah, so I... Started Rainbow almost exactly two years ago. We started the company in January of 2022. Prior to Rainbow, I had spent about four and a half years in small commercial insurance on sort of the digitally enabled side with a prior company that I'd started that was focusing on specialty insurance and surplus lines insurance. So really got a firsthand view of how business owners buy insurance and what some of the opportunities are for creating more value and that's what led me to start Rainbow. Amazing. And is there a specific reason why you started with the restaurant business? Yeah. So a couple of the things that we wanted to do as a company myself and my co-founders was we wanted to focus on and therefore become known for having strong profitability from an underwriting perspective. So we wanted to have a good loss ratio, which is a metric that's common in insurance. And one of the ways that we thought about doing that was to be more specialized. And so rather than having a very broad approach to the many different classes of business, we wanted to be more focused. And as we looked at small business as a general category, we saw that restaurants and food and beverage were a significant portion of what's described as small business. You know, there's restaurants in every single town in the country and in the world. And we also learned that it was a category that a lot of carriers and reinsurers historically struggle with from a profitability perspective. So that was just sort of a nice alignment. It was big opportunity. We want it to be known for profitability and underwriting. It's something that traditionally folks had struggled with. So we felt it was a good starting category to sort of build a lot of our capabilities around, and it's proven to be so, so far. Amazing. We had on our podcast, a handful of insured techs who had different business models. Some of them were direct to the consumer, some of them leverage the broker or the producer channels. How do restaurants find you today or do you find them? Restaurants are going to only be able to purchase a rainbow policy through one of our appointed insurance agents. So we work primarily with independent agents. So these are insurance agents that have businesses in... the towns all across the country. And typically these agents are going to represent different underwriting companies, whether carriers or MGU's or MGA's. And they are the ones going out and meeting the business owners. And then when the business owner, restaurant owner says, I want insurance, the agent is entering that information into our online platform and they're able to buy a rainbow policy to ensure that restaurant. For the listeners who don't know what the business owner's policy is, can you elaborate? So what is actually the restaurant buying? What type of protection? Almost all small businesses in the United States require some form of insurance. There's like the practical reason, which is that most small businesses are very limited on how much cash they have on hand. And if there was a bad accident, which, you know, sort of by the definition is something that they may not be able to control. The consequences of that accident could fall on the business owner and they would have to pay out of pocket. And that's where insurance plays such an incredibly important role. Not as practical, but just sort of more like required reason. Most small businesses lease their space where they work. And most landlords are going to require the business to have some form of insurance. because they, the landlords don't want to be responsible if something bad happens. So most businesses are gonna have insurance of two kinds. One is gonna protect their own employees. That's a workers' compensation policy. And then there's sort of like all the other perils that a business might face. A business owner policy is a convenient packaged insurance policy. that protects the general liability of the business. So if somebody slips and falls in your restaurant and it protects your property. So like your stuff, basically that you have in your business that you've invested your own money into to sort of having, as well as the physical space that you work in. So by having a business owner policy, it gives them a convenient way to assume a significant portion of the liabilities that they would face in their day-to-day running of their business. Amazing, that's very helpful. So you're an MGA, essentially you're on the right on behalf of a certain carrier and you distribute and then you would be definitely the point of contact when it comes to the end customer. The insurance industry is quite competitive, right? So how did you define early on your value proposition? How did you say this is what Rainbow stands for and this is how we stand out as compared to our competitors? I think it's a few different ways. One is that we wanted to be sort of delightful to do business with from the perspective of the agent. So we make it easy, meaning that you can get a quote, which is sort of what you would have before you ultimately buy the policy, a quote you present to your clients so that they tell you if that's what they wanna go with. You can get a quote from our online platform within just a couple of minutes. So the quoting experience is largely digital. It's easy to do business with us. Also though, we bring human expertise. to every transaction. So we have experienced small commercial underwriters, human underwriters, who are standing by behind the scenes of the platform, who can look at your submission and who can help you refine the coverage and pricing options so that you have the best possible proposal for your clients as an agent. Like you said, traditional insurance companies are gonna be very competitive in different ways, but oftentimes it can take a large carrier you know, multiple days at a minimum to get back to the agent. And we get back to our agents typically within minutes if they don't get an instant quote from the platform. One big thing is ease of doing business. Another thing in terms of how we differentiate from other carriers is because we are very specialized, we are offering a much broader appetite for restaurants compared to competitors, meaning that restaurants that large traditional incumbent carriers may not want to underwrite. Either those that have a unique volume of sales or a unique type of cooking or located in a particular area, those carriers may not want to look at those risks. We want to look at all of those restaurant risks. And we make it very, like I said, back to the first thing, because we make it so easy, the agent benefits from giving us a look at that business so that we can make it available to, we can make a quote available to their insureds. So those are a couple of the different ways that we differentiate. Amazing, so the show is about the first 100 and you're probably a B2B2C, so you're not talking directly to the end user. You have a partner in the middle, so your direct customer is the agent in that case. Tell us about the story. Yes, tell us how did you get your first 100 agents on board? So we make our product available. There's a regulatory reason for this, but we can only sell our business owner policy in states where the local, the state's Department of Insurance has approved our product. So we go through a submission and evaluation process because we participate in what's known as the admitted insurance market. Basically the local Departments of Insurance admit you as an underwriting company or as an MGU to do business in that state. We file, we submit basically our product, our insurance coverage, state by state. Every state has different approval timelines and expectations. And we sort of sequence the states in which we would submit based on the anticipated approval timeline and also the suitability of our product for that particular territory. Based on that, our very first state was Arizona, followed by Texas. And then since then we've gone live in another nine states to date, so we're live in 11 states. Agents can become appointed with us and restaurants can buy insurance in those 11 states where we operate. And we're gonna go live in another 15 states for a total of 26 states. So within those states, where we were approved, even in advance of becoming approved, our sales and marketing team would research agents in those states. and would then reach out to them and say, hey, we're a new market is how we're sometimes referred to. And we specialize in restaurants and we make it super easy for you to buy coverage from us. And we offer competitive commissions. And there's basically no downside to you as an agent trying our platform. Like most things in sales, there's an element of this being a numbers game. Some people are gonna say that sounds good, but I'm too busy now. Some are gonna say, I wanna sign up right away. Some are going to say I'm not interested for whatever reason. Basically just by doing that outreach, we were able to get to our first hundred submitting and doing business with us, users or customers. Prior to launching the platform and reaching out to agents in those states, we spent several months doing basically like feedback sessions with both restaurant owners in those states, in Arizona and Texas. and understanding sort of like what their insurance experience has been like, and also talking to the agents. Like you said, they're the ones that bring us the business that we ultimately insure, and we almost exclusively work directly with the agent. The only situation where we communicate directly with an insured has to do when a claim happens, and the claim can be submitted by the insured through our platform, and the agent has visibility into that whole process. The short answer to your question was we would just sort of research and do persistent outreach with emails, with phone calls, we would travel in person and attend the different sort of like conventions that agents or restaurant associations would host. And that's really how we met our first hundred customers. Amazing. I'm going to double click on this because this is a common technique they called outreach, but it's one of the hardest because as you said, you need persistence, you need someone who's who has a lot of patience to figure it out. So with agents, you might give them a call, they might say yes, but they might not send you leads. Why? Because they have access to so many options in the market. One, how did you manage this? So you sign up someone, they never come back to you. Is there a specific technique or strategy you've employed to increase the conversion rate when it comes to landing and then expanding those agents? that are relevant here. Number one is that the members of our team that do outreach to the agents as part of the onboarding process all have experienced themselves, our team members, of having been agents or working in insurance. And I think that's incredibly important. They're just able to connect with these agents in a very understanding way. they can anticipate the needs and the objections of those agents, and they can connect with them around the ways that rainbow is differentiated and that it's trying to solve a pain point. I think that might sound obvious, but if the folks who are doing that outreach, especially for the first hundred where the skepticism is going to be the most high of what you do as a business, I find that can just be a lot more challenging, certainly not impossible, but more challenging. So having that domain knowledge, and having the ability to use that vocabulary and build that connection with the prospective user was incredibly important for us in the early days. I still think we're still in the pretty early days. So I think that's one thing. And another thing that we did is we did try to form relationships with aggregators. And so these are companies where their business is to basically reach out to independent agents. and get those independent agents to sign up for their platform or their value proposition as sort of like a one-stop shop experience for the agent, which again, I think it speaks to ease of doing business. So we would sort of do these two things in parallel. We would be reaching out to the aggregators and trying to find good fits and opportunities to work with their agents. And then we would also engage those early users coming from a place of domain expertise. continued coming back is that we place a lot of value on sort of that first impression that the agent gets. So myself as the CEO of the company, when you make a submission into our platform, I will personally send you an email. It's not written by chat GPT. I will actually write you an email and I will reach out to you and I will be genuinely interested to hear the feedback you have for us or ways that we can improve. And I think that most agents, most consumers, just in general. aren't necessarily expecting that. And I think they, our experience has been they generally appreciate that. And you'll find that there's a lot that actually wanna give you feedback. So that's incredibly helpful. And then when you take that feedback and you listen to it, you have the ability to create a power user from that, because they feel like they have a connection to what you're doing as well. Makes a lot of sense. What has been the hardest thing in building an InsureTech? Any challenges that, you know, where like an... moment or an infliction point that could have gone both ways. There's a lot. I feel like we have them all the time. So when we launched our first program, when we were marketing the program, meaning when we were looking for reinsurance capacity, and as an MGU, we require reinsurance in order to be able to sell our insurance. Without reinsurance, we can't sell insurance. So it is absolutely critical path. And we started marketing the program in the summer, call it like early Q3 of 2022, which was corresponding to just like the general economic challenges that were affecting like venture investors and startup valuations. It was sort of happening in all parts of the industry and reinsurers were not immune to that at all. And so you had a tremendous pullback. Most reinsurers 12 months ago had we been running that process, I wanna believe it would have been a lot easier to get reinsurance, but we had a lot of folks who were just not interested in a startup, they weren't interested in InsureTech, and they weren't interested in restaurants. And unfortunately for us, we were all three of those things. And so we were like, high on the list of programs that they would not wanna support. And it's sort of a very scary moment because you've raised money, you've built a team, you've spent all this time building a product. And then you go out thinking, okay, I'm just gonna get reinsurance and then I'm gonna have to go through the struggle of trying to sell it. And you realize maybe there's not gonna be reinsurance. So luckily we ended up just persisting. We had a couple partners that were really interested and ultimately we launched the program with Accelerant, which sort of specializes in the small commercial and MGA, MGU space. And we couldn't be happier with our partnership with them. So that was definitely one key moment. Another challenge that we... sort of, it's just sort of an ongoing challenge is just grinding out the onboarding and appointment of new agents. Unfortunately, it's one of these businesses, I think like most businesses where there really aren't any silver bullets, you're going to have to keep plugging away. You don't really hit some crazy inflection point where one day or one month you onboard a hundred agents. The next month you onboard 10,000 agents. It's just sort of, you have to build it brick by brick. I wouldn't say that's necessarily like a crucible moment for us. It's certainly a challenge because you're sort of doing that while balancing many other things. The other side of your question though, some of the things that I want to think we've done a good job of is we've built a very strong team. We're able to do that because we have the support of tremendous investors like the ones you mentioned and also several others. And we've stayed true to our ultimate mission, which is to develop a solution. for agents specializing in small business and prioritizing loss ratio and underwriting performance above everything else, and especially being able to do that in an otherwise tricky class of business from an insurance perspective. That's amazing news. Thank you for sharing this. If you were a new InsureTech startup founder today and you want to rank by highest importance to least importance, product, technology, distribution. How would you prioritize them? I would say that distribution is the most important by far. And I would say that product and technology are very important. But I think that the best products and the best technology will be informed by your distribution. Obviously, if you build something people don't want, you're not going to have much success as a business. Like sort of an expression that you hear with other startups and technology companies, like I think healthy sales that are sustainable will solve most of the challenges you'll have as a startup. You know, like you're alluding to every company is always facing challenges. That's really the opportunity. Like if you can persevere through those challenges and you can get to the other side, those are the companies that become successful. They're not the ones that go away when things aren't going well. And I think that the best fuel to keep going, especially in a market where it's harder to raise capital, and there are just higher expectations now, today, because you said today, there's just higher expectations for startup founders and startups to perform. I think if you have distribution and they stick by you, you can figure most other things out. Great answer. Thank you for sharing this advice for upcoming founders. What's the principle that you live by that has helped you in your journey? I'm constantly reminding myself to enjoy the journey. I think it's important to kind of just keep going on and to not get too distracted by how you hope things would be. And more to the extent that you can just sort of try to appreciate the circumstances that you're in that moment. And it's one of those things that I always have to remind myself because at least my human nature is that I don't want to think that way. I just want to think about how things can be really positive and really easy and really good. But I think that the truth is that spending too much time thinking like that is ultimately not productive. And ironically, thinking about that too much is going to probably keep you from actually getting there. So it's important to kind of stay grounded. The way I do that is I just try to surround myself with people who are positive, who are supportive. Again, probably pretty obvious stuff, but I've just found that it works really well for me. Thank you for sharing this. One last question. We like at the end of the podcast to leave a business question that you'd like to ask the next guest. It could be anything related to a problem that you have and you want an answer or any topic top of your head. What question would you leave for our next guest? I would say, I'm always interested to know what part of the journey has been most surprising for you. That's what I'm always interested to kind of learn from folks, because again, I think the mind has ways of not necessarily tricking you, but of sort of distorting the way that a person can think about things. And when you're doing a startup or an early stage business, and there are so many things that are undefined. It's easy to sort of have your mind go in many different directions, no matter how strong your intentions are when you're coming into it. So I would be interested to know the answer of that to the next guest. Amazing, we'll put that in our notes and let's see who's the lucky person. We'll tag you once they answer. Bobby, this was a great episode. What's next for Rainbow? Well, first, thanks for having me. Next for Rainbow. We're just kind of laser focused on a few different things. One is continuing to grow our business. We just wrote our first policy in the summer of last year. And so we've only been writing business for a little over six months now. So it is still very early for us. And going live in more states, continuing to do more good things in the states where we are already live and sort of making sure our customers are happy. I'd say that's the most important thing. And then as you alluded to, I think we're already starting to think about sort of what are the next classes of business other than restaurants that we would like to bring the rainbow philosophy to trying to focus on. So that's kind of my next six to 12 months. Thank you for stopping by Bobby. How can people reach you and are you hiring? We are hiring. If you go to our website, use rainbow.com and you click on the about us tab. We list our open positions at the moment, and anyone can reach me anytime at bobby, B-O-B-B-Y, at userainbow.com. I'm always happy to chat with anyone. We put all of this in the show notes, and we wish you the best of luck on your journey, Bobby. Thanks, Hadi. Thank you so much for listening to the first 100. 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