Startup Bites: Meet the Young Chefs (Part 1)

We’re excited to launch our series, “Startup Bites: Meet the Young Chefs”, where Co-Founder Sven Roehl sits down with founders of InsurTech startups to chat about their exciting solutions and how they’re on track to make big waves in the insurance world.

In today’s blog, Sven sat down with Trevor Gary, Founder of Micruity. Read the full interview below!

Experience the full interview — check out the recording above!

Trevor, thank you for joining us today! It’s been a while since we meet at Cookhouse Labs. You had reached out to us because you were thinking about quitting your job and starting your own business. We said, ‘Let’s see what how we can support you,’ and here you are a couple years later, running a successful company! We’re very interested in hearing more about your business, so let’s start with a quick introduction about yourself and your startup.

Thank you for having me! I remember that very, very clearly — it’s ingrained in my brain.

About me; I worked at Deloitte before I started Micruity. Myself, I’m an active person. I love snowboarding and running. I’m a big fan of manga and Japanese animation and I have 2 sisters that are my good friends.

About Micruity; At Micruity’s core, it’s a data-clearing house that can easily be easily spun up on different environments, different cloud platforms. It can take information in several different forms and standards. Currently, we focus on the U.S. 401K market — that’s a $6 trillion market — and on enabling lifetime income products to exists in that market, so annuities. We connect the key three stakeholders that would be associated with that transaction: a life insurer, a fund manager and a 401K record-keeper. We enable them to communicate regardless of their standard and form. A life-insurer may want to communicate via an API, and a record-keeper may want to communicate using the ACORD standard through an SFTP connection. These two can still communicate with each other because Micruity is sitting in the middle, translating the information and sending and receiving it in whichever form a stakeholder wants it to. We are essentially their data conduit.

Behind every great idea is a moment where you say, “Okay, I’m going to do it, I’m going to start my own business”. What was that moment for you and how did you come up with the idea?

I came up with the idea while I was still at Deloitte. I saw that we were closing pension plans, so individuals no longer had access to that lifetime income which was provided by their past-employer. Huge companies were closing these plans because they were worried about people outliving their projections and the companies being on the hook for that liability, but what they were doing was transferring that risk over to unsophisticated investors. I also saw that, while we were closing these pension plans, we were able to sell that liability to life insurers who had a big appetite for that group annuity type business, and we’re talking billions of dollars in transactions. I thought, “Okay, we need to somehow fill this gap and to make lifetime income more accessible to the mid-market individual, and Micruity is the way to do it”.

Back then, I didn’t know exactly what it would look like, but I thought we somehow need to enable these transactions to happen much more seamlessly. The purchase of annuities needs to be much easier. And so, the eureka moment was really associated with Cookhouse Labs. I reached out and you responded. You said, “Yeah, come on in, let’s talk about it”. I remember clear as day the conversation, and Cookhouse Labs was really supportive. You told me that if I chose to leave Deloitte and start Micruity, you would help me out with office space and get it up and running. And so, I did and that big moment was December 2017. I’m actually quite attached to Cookhouse Labs!

That’s great to hear! It’s been a while since December 2017, so tell us, what challenges did you face growing Micruity?

The biggest challenge is when startups enter a market, they’re creating a new solution to an existing problem and saying, “I can do this better than you’re doing it today”. Micruity is a bit different because annuities don’t really exist in defined contribution plans. It’s an idea, it’s been out there, but people haven’t figured how to do it. And so, the difficulty of that is the problem statement is not as tangible to many investors. We when we come to market, when we go to raise capital, we must find very strategic investors that really understand what we’re doing. In the traditional 1 minute, 2 minute, 5 minute pitch context, we don’t have much of a chance because there really is a deep background story that needs to be understood to explain how massive of an opportunity putting annuities into 401K plans really is. I would say that has been the biggest challenge for us, on the communication side. One of the largest obstacles we face is how do we communicate the value proposition of Micruity when it comes to raising money to build a capital-intensive infrastructure that the Micruity platform is.

It sounds like a solid challenge you have to overcome there, but it also sounds like you’re making a big impact. So you’re all working in the U.S. right now, only, not in Canada?

Only the U.S. right now, however we are still a Canadian firm. We own our U.S. subsidiary, but our tech development is in Toronto and will continue to stay there.

Are you planning at any time to provide the same service in Canada?

We are. For us, it would be really easy to just change the data storage to Canada and then we have the Micruity platform become a full Canadian version in its own environment. What we’re still trying to figure out is where Micruity will fit in the Canadian market. We know BlackRock has a new product with a lifetime income component that they have presented to Canadian defined contribution plan sponsors; is there a similar opportunity to do what we’re doing in Canada in the defined contribution plan space, or is the opportunity in Canada more on the retail side? Is the opportunity to create that infrastructure to make annuities more accessible on your mobile/local advisor platforms? This is just to get an easier way to start building a lifetime income over time, rather than a hundred thousand dollar annuity when you retire, which is not accessible to all your mid-market individuals.

Along your journey, I know you spent quite some time in the Lab with us. How did collaborating with Cookhouse Labs add value to your journey?

You ran a sprint towards the end of 2017 that involved collaborating with some insurance companies and consultants. The reason I was gung-ho to be a part of it was, as an entrepreneur, I’m so close to the problem. I live with the problem, I’m married to it, it sleeps with me every night. My solution would be narrowly focused.

What the Cookhouse Labs sprint enabled for us was this: let’s just create a 10,000-foot problem statement and then work with a group to see what solution we come up with. If that solution resembles at all what we’re doing at Micruity, that’s a traction point and you’re on the right track. If it doesn’t, that’s a pivot point. Being a part of that session gave us a little bit more confidence as a very, very early stage company and confirmed that we were on the right track. Bringing together folks with different expertise and having them come up with a similar solution was very valuable.

We’re happy to hear that! Looking back on your journey, what highlights and moments of success stand out to you?

There’s been a lot of little wins and ups and downs along the way. So it was myself and Chris, my business partner at the start, two Canadians on this path. At one point in 2018, we said, “We need to check out the U.S. and see what’s going on there”. We went to this conference and met the Managing Director at the time of a global insurance accelerator in Des Moines, Iowa, which is the insurance capital. He said, “You should apply to our accelerator, I think our team will be interested”. At the start of 2019, we got in and we moved down to Des Moines, Iowa for a few months, the coldest four months, I think, on record. We learned a ton about the U.S. insurance industry. It really was the start to Micruity becoming what it is today, building our business case and how we become the data conduit for the 401K space. There were ten startups all in the insurance space, all really early stage like us, from all over the country. It was a big win for us, and it continues to be. A lot of those relationships continue to guide us today.

Then we joined the Franklin Templeton/EvoNexus incubator in Silicon Valley. They’re doing large acquisitions, and you can feel it when you’re on a Franklin Templeton campus. Franklin Templeton is a fund manager. We’re so used to working with insurers closely, it’s exciting getting to see the other side of the house, because our key clients are life insurers and fund managers. That was really big for us and came with a nice investment from Franklin Templeton.

Sounds like an exciting time! Startups are all about growth — where do you see your organization in the next 2-3 years?

We will be leaders in the 401K market for data-clearing associated with annuity products. It really is a winner-take all business because it doesn’t make sense to have more than one middleware. The other side of it is that we’re looking to power apps on our platform so other companies can build an app using our data-clearing house. Looking at a lot more of those conversations with startups and around what they’re looking to do once this market’s more mature; secondary markets for annuities, annuity broker house, all those things, so looking at those conversations and start powering those products as well.

There’s a lot of collaboration involved in your business. We’re very interested in knowing from your point as a startup, how has your experience been with collaborating with insurance organizations?

Everyone knows collaborating with insurance companies is a battle. No one really moves quick in insurance. On top of that, you’re never going to see a real contract if you don’t have your security and your administration down, so as a startup, you have to endure this long sales cycle. You have to be able to operate a startup with some maturity, and somehow along the way show traction through POC’s, so that you can raise the money to build the team, to build the product so you can finally sell the product. So, a lot of chicken and egg, but what happens is if you are successful in doing this, you build really strong relationships because there is this massively long sale cycle with many points of contact with many people. If you do it successfully, you now have strong relationship with that company, and you’re probably going to get a fighting chance if you’re actually solving a problem. That will help you to grow, and then it’s now on the startup to be successful. On one side, it’s a battle; the other side is that through that battle, you build a really strong relationship with the company that is then interested in seeing you succeed and has your back.

And is it better to focus on a very limited amount of organizations then, or spread out and reach out to as many organizations as possible?

My career might be in a unique place because we’re a data-clearing house, so success in our market depends on our adoption across multiple insurers. Because ours requires more of a group adoption, we are probably on the longer end of the sales cycle, so we have to reach out to as many decision makers as possible. At the same time, our ecosystem is very small, maybe 50 companies between life insurers and fund managers. Maybe 25 life insurers have the capacity for this market. Our experience is unique, maybe even different from the majority of the insurance startups.

Where do you see the industry heading in the next 5 years?

Certainly, the pandemic had triggered this massive need for digital distribution, so anyone on the digital distribution side can have a fun couple of years. Looking at the bigger picture, what’s always on the top of my mind is product commoditization. I think the idea of being connected to a brand is not really realistic anymore. I think the insurers that will thrive will be the insurers that will figure out how to leverage readily available information to expedite the closing of the sale. Whoever can figure out how to do those can be successful, in my opinion.

Trevor, it was a pleasure to connect with you and reflect on the success you’ve had since we met in 2017. Thank you for sharing your thoughts with us, and we wish you the best of luck for the future!