One way to invest as a VC is to find the big blockers in a huge industry and then find that unique combination of team, tech and urgency to unblock them. Enter Shepherd – they embody this precise combination. They’re on a mission to take cost out of the commercial construction industry at a time of massive need for building infrastructure in the US.
For commercial builders of all kinds (office, hospital, civil, etc.), the cost of Insurance is a top three expense (commercial premiums are $25BN in the US) and is central to go/no go decisions on major projects. If Insurance costs can be managed and claims reduced, more schools, hospitals, bridges and offices can be built.
Innovation Hiding in Plain Sight
The current construction insurance market is filled with 19th century carriers. But many decades of experience and market knowledge mean those companies often miss what’s hiding in plain sight: the opportunity in software and data. Modern software for construction project management, equipment operations, and compliance –like Procore. Autodesk, Openspace–improve project efficiency and are known to reduce risk.
It’s why Shepherd uses AI-enabled machine learning models and a project’s use of software as a key part of how it underwrites. The painstakingly slow process that normally takes weeks takes Shepherd only hours–that’s unheard of in commercial insurance. It’s also how Shepherd is able to offer lower premiums to the best performing businesses.
The positive impact of software usage is so high, Shepherd is also creating software products for its own clients to use. And they’re free. Innovation isn’t always just about technology; it’s just as important in how a product is brought to market.
The Right Founder / Problem Fit
Shepherd’s three co-founders are experts in construction, construction insurance and software development–a perfect troika for a tech-first innovator. This is not a market for newbies or eager Silicon Valley founders who don’t know the construction business. Both insurance and construction are industries where knowing how their customers think and feel is what makes them credible. The Shepherd team are also clear-eyed on how to build the back-end of their business appropriately.
At Costanoa, we believe quality, large companies are not built overnight. This is especially true in Insurance, where relationships and reputations are built over time, and reliable, high-performing businesses that are patient are rewarded with renewal and expansion. An insurance business is complicated, and the Shepherd team is taking all that into account in how they build their company. We see not only innovation in product at Shepherd but also a philosophy in company building that impresses us.
That’s why everyone at Costanoa is excited to lead Shepherd’s $13.5 million Series A and I am thrilled to be joining the board. I look forward to watching the company support the next generation building the infrastructure for our country in the years ahead.