Learning from mistakes is a widely shared experience in the startup community. Turning those lessons into the foundation for a whole new company is considerably rarer—and having that company attain a billion-dollar unicorn valuation is rarer still.
As of today, Niji Sabharwal, the cofounder and CEO of insurance-tech startup AgentSync, can lay claim to this unusual trifecta, thanks in part to two investors who went through the painful learning process with him.
Denver-based AgentSync specializes in software for “producer management”—insurance jargon for keeping track of licensing and other compliance requirements among the industry’s hundreds of thousands of independent sales agents. Sabharwal’s spouse, Jenn Knight, is AgentSync’s cofounder and chief technology officer. The company today announced a $75 million Series B funding round that values the company at $1.2 billion. Leading the round is Valor Equity Partners, whose CEO is Antonio Gracias; among the other participants is Craft Ventures, whose cofounder and general partner is David Sacks.
The key common denominator among Sabharwal, Gracias, and Sacks: All three were involved with employee-benefits software company Zenefits in 2015 and 2016, when that company ran into a huge compliance problem. Zenefits, which specializes in serving small and medium-size companies, had begun using its platform to enable insurance sales. But the company didn’t do sufficient due diligence around agents’ licensing, and the resulting legal entanglements led to a series of fines and settlements and eventually cost Zenefits founder and CEO Parker Conrad his job.
Gracias was a Zenefits board member at the time, and Sacks, a major Zenefits investor, wound up replacing Conrad as interim CEO. Sabharwal, meanwhile, was tasked with fixing the problem. He soon learned that the agent-compliance world was a tangled thicket of burdensome paperwork and antiquated software, where thousands of carriers and agents faced epic delays as they navigated licensing requirements that varied, sometimes drastically, from state to state.
Surveying the mess, Sabharwal spotted a business opportunity: He could build software that would speed up and streamline communication among agents, carriers, and regulators, selling it as a software-as-a-service (SaaS) offering that would spare insurers from having to build their own product. “We’d be taking all these bottlenecks out of the system,” Sabharwal told Fortune. “Those bottlenecks keep insurance companies from scaling up, and block new companies from forming, too.”
By the time Sabharwal came up with the concept, called Licensing+, Zenefits had gotten out of the insurance business; it licensed the IP to Sabharwal, and he and Knight launched AgentSync in 2018. By then, the concept had made a strong impression on some of their future investors. “Some of the best ideas, work products, and career successes are born out of crises,” Gracias told Fortune in an email. “Niji and his team were the unsung heroes during a chaotic time.”
AgentSync’s growth since then suggests that Sabharwal and his backers were right about the opportunity. The company currently claims more than 100 customers, ranging from large carriers, such as San Antonio–based GPM Life and Japan’s Tokio Marine, to online insurance agencies like Lemonade and Hippo. The company says its annual recurring revenue is 3.5 times what it was a year ago, and its staff has almost doubled over that span, to about 100.
The company is now the only unicorn in the insurance infrastructure space, but Sabharwal thinks it will be the first of many, as the industry goes through more digital reinvention. He used the analogy of a smartphone, a powerful technological time-saver that relies on lots of little components to work. “There’s no smartphone without a Wi-Fi antenna, cheap and small data storage, long-lasting batteries,” he explained. “You need 10 or 12 different items to line up perfectly. Somebody’s going to invent the smartphone of the industry; we’re going to be the Wi-Fi antenna, one of the companies that gets them there.”
The upshot: AgentSync won’t ever be an Apple- or Samsung-like tech brand name, but it could occupy a profitable niche powering whoever that turns out to be. If that scenario comes true, Sabharwal and his investors will have their white-knuckle experience at Zenefits to thank. “As I said back then, ‘Compliance is like oxygen,’” Sacks of Craft Ventures told Fortune in an email. “It’s a critical need for companies operating in a highly regulated environment…AgentSync can own this ecosystem if they continue to execute as they have over the last three years.”
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