When you know your company’s lifecycle, you’re more prepared and better able to manage risk.
Every company has a lifecycle. Tech businesses, however, tend to move through their lifecycles quicker than the average company. This is primarily because the nature of the technology industry is in and of itself fast-paced, with new products, services and tools coming to market all the time.
In order to ensure that your people and your company are protected every step of the way, you need to know what lies ahead. This way, you can see and recognize the risks that arise at different points in time and help you make informed decisions to protect your business.
PHASE 1: Start-up
You’ve just begun. Your company is pre-revenue and you don’t yet have a product in the marketplace. There’s a small team fueling the business (perhaps even working atop boxes in a garage like Steve Jobs or Bill Gates), and you’re knee deep in the excitement of planning, research, and development.
At this stage, we know it’s likely you haven’t even yet thought about insurance or risk management at any great length – and that’s okay! In the beginning, the most important aspect of your business in need of protection is you, the owner. The best way to accomplish this is to consider an individual disability policy, with employee benefits and life insurance following closely behind.
Wise Insurance Solutions in Phase 1
- Premises Liability
- Costs to Recreate Research and Development
- Key Man Insurance
- Introduction of Employee Benefits
PHASE 2: Early-stage Growth
You’re starting to earn revenue! At this point, while still limited, you likely have test clients and a beta product in the market. Your team is building and your business is experiencing early growth. It’s possible you also have interested angel investors or venture capitalists.
Oftentimes insurance protection comes in the form of a request from your investors. Be ready for this. Most importantly at this stage, you want to consider protection for your product and since your team is growing larger, it’s time to start focusing on your people. Look at what your competitors are offering for Employee Benefits and make sure you’re competitive.
Perceptive Insurance Solutions in Phase 2 (in addition to Phase 1)
- Directors & Officers Liability Policy
- Errors & Omissions Liability / Cyber Security Program
- Product Liability
- Buy / Sell Agreement
- Build-out of Employee Benefits Program to Attract New Talent
PHASE 3: Early Commercialization
Revenue is ramping up and you can feel the momentum of your business growth. Customer, supplier and manufacturer contracts are rolling in, more product is in the marketplace and your team continues to expand. You’ve probably moved into a leased commercial space by now and you have an investor ownership position in place. The name of the game at this stage? Scale.
While you may have been presenting your company in somewhat of an embellished way in phases 1 and 2, now is when you actually grow into that projection. You’re getting noticed in the industry and you may very well have clients requesting particular insurance policies from you. Right now, your best foot forward is with a “Just What You Need” approach so you can preserve your profit margins, while still protecting your company and people.
Discerning Insurance Solutions in Phase 3 (in addition to Phases 1 and 2)
- Full Property / Business Income Policy
- Crime Policy
- Review of Buy / Sell Agreement
- New and Updated Build-out of Employee Benefits Program to Attract New Talent
PHASE 4: Full Commercialization
Revenues continue to grow, and now you’re expanding your product line as well as the markets you serve. Your team is still building, it’s likely you now have a full-time CFO on staff, and you’re probably considering whether or not the business is ready for an IPO.
Your company is now in its mature stage, and while before you were focused on attracting top talent, now you’re more concerned with keeping that talent because other businesses are trying to recruit people away from you. It’s likely that the valuation of your company is significant at this point, and it’s time for a full spectrum insurance solution.
Comprehensive Insurance Solutions in Phase 4 (in addition to Phases 1, 2 and 3)
- Updated Build-out of Employee Benefits Program to Retain New Talent
- Continued Review of Insurance Program
- Continued Monitoring of Emerging Risk Management Issues
- Continued Review of Employee Benefits Program as Team Demographics Evolve
- Exploration of IPO Triggers Specific Considerations for Directors & Officers Liability Program
Your business will grow and evolve quickly over time. A good insurance advisor works collaboratively with you to develop your insurance program at every phase of your company lifecycle.
About the Authors
Derrick Wohlfahrt is the Manager of Employee Benefits and Retirement for HUB’s Ottawa Office. Derrick helps his clients understand the needs of their employees and develop benefits programs that support the wellbeing of their employees. With experience in both the Commercial Insurance and Employee Benefits space, Derrick brings a unique perspective to providing solutions to his clients.
Andy Samaroo is a Senior Account Executive on HUB’s Commercial Insurance team. With over 22 years of experience in the property and casualty insurance space, Andy helps his clients assess their business risk and put the right insurance solutions in place. Many of Andy’s clients are emerging and established technology and engineering companies.
Why HUB International?
From 50 employees in 1998 to over 13,000 now, HUB International knows scale. Thousands of brokers on our team were once entrepreneurs just like you, which gives us a level of startup expertise that’s hard to beat.
We’re here to ensure that the requirements of your client contracts align with the policies of your insurers. HUB makes a point of staying one step ahead of your needs, so we’re always prepared for what’s coming next and fully aware of emerging risk management trends. Think of us as an extension of your team, helping you grow and scale with confidence, whether you’re in Phase 1 or Phase 4.