American Family Ventures Exits Stealth Mode, Builds National Portfolio

6/18/14Follow @XconomyWI

American Family Insurance has quietly become perhaps the most active Wisconsin corporation in the local startup scene, but this week it made a splash with two high-profile announcements.

The Madison, WI-based insurer’s venture capital arm participated in Chicago-based Review Trackers’ $2 million Series A funding round announced yesterday. Also yesterday, Microsoft announced a new startup accelerator at its headquarters outside Seattle, and American Family Ventures will provide mentorship and optional seed funding for program participants.

American Family Ventures launched in 2010 and has 13 startups in its portfolio, says managing director Dan Reed, but the $50 million fund didn’t officially come out of stealth mode until recently.

“We wanted to build a portfolio and practice … before we started talking about it,” Reed says.

His group typically invests between $100,000 and $2 million in early-stage companies tied to data analytics, innovative insurance-related products, and connected devices. Reed and a team of three people recently set up shop on the fourth floor of a downtown Madison building, sharing space with a new data science and analytics lab that American Family Ventures established, he says.

About half of the fund’s portfolio companies are based in Wisconsin, including Madison-based Shoutlet, which Reed says received the fund’s first investment in 2010. Shoutlet has raised $23 million total from investors, SEC filings show.

Other American Family Ventures investments are sprinkled around the country, including Boulder, CO-based Revolv, which closed a $4 million Series A round last fall. Wisconsin-based Gener8tor’s startup accelerator has also been a fertile source for American Family Ventures’ investments. (American Family Insurance and Gener8tor are Xconomy underwriters.)

Reed is a former pitcher for the Baltimore Orioles’ minor league baseball team. He later worked as a strategy consultant for the Boston Consulting Group and founded Strategic Fishing Systems, a Madison company that makes software for locating productive fishing spots.

Dan ReedXconomy chatted with Reed (pictured left) about American Family Ventures this week. The following is an edited transcript.

Xconomy: What is American Family Ventures’ overall strategy?

Dan Reed: We’re really just focused on making good investments out of this allocation. Investments can provide a financial return for us through an exit, but our hope is they will also provide us a strategic return … by helping us get access to the kind of technologies and partnerships that will help us serve our customers better in the future. Some will provide both, some one or the other.

X: What’s the thinking behind investing in some companies that don’t appear to be directly tied to the insurance industry?

DR: We have a lot of people working on innovation. These equity investments are a way to augment a lot of that work. MobileIgniter was working on some connected home programming for us. Also, they were looking at [unmanned aerial vehicle] programming so we can do roof inspections without having to send someone up on the roof. They’re an all-purpose developer for innovation work we’re doing.

MdotLabs did a little bit of work with our digital marketing department. They have an approach to making sure that the digital ads that we’re buying are actually being seen by people and not bots, which is a way that we can protect the policyholders’ premiums by making sure we’re spending our marketing dollars wisely.

Networked Insights helps us understand what our customers want by potentially listening to what they’re talking about and interpreting that.

X: How did you come up with the three investment themes?

DR: We wanted to align our investments with the kind of companies that we thought would be relevant for the next five to seven years. As an insurance company investing in early-stage companies, if it’s a startup working on insurance innovation, we think we should know about it. Next-generation analytics solutions, we could use those today. A company using [digital] signals … to mitigate physical risk, those are things we want to know about, and our policyholders want to engage with us on those.

X: Why is it important for a corporation like American Family to support the startup ecosystem?

DR: It’s just another source of innovation for us. There’s a lot of people working on innovation in the building. There’s no reason why we can’t look outside our walls for innovative concepts. There’s a lot happening around here.

X: What’s your take on the startup environment in Wisconsin?

DR: I’m excited about the growth. I really like the organizing effect that groups like Gener8tor have on it. I feel like we are at the start of something great.

X: What needs to happen to improve Wisconsin’s startup ecosystem?

DR: I just think it will mature over time. My expectation is that these things take time and they take focused, long-term effort.

Jeff Engel is the editor of Xconomy Wisconsin. Email: jengel@xconomy.com Follow @XconomyWI

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