Who are you, and what types of business you have helped over the years?
I am a Chartered Accountant and work with scaleup and rapid growth tech and fintech companies. As CFO and part of the management team, I assist with growth and go to market strategies, and ensure the company infrastructure is ready to cope with significant growth.
How high up is insurance usually in the priority list of a founder?
Insurance is normally viewed as a necessary evil, and another distracting admin task away from the “real” business of growing the company.
Are there any areas of insurance you find have been overlooked when engaged by tech companies?
The reason for using a broker is to ensure all areas are covered. When I first engage with companies they have often got a basic EL/PL policy. The value created by early stage companies is often in the customer base or data, and in such cases it is possible for a rogue employee to walk out of the door with all the value of the company on a £5 USB drive.
Out of all the companies I have worked with we have only had one major claim. To save money, this company held a team building “sports day” with food and drink in a park. During a game of rounders, a young female member of staff was accidentally banged on the leg. This caused a blood clot, requiring surgery and scarring.
The claim of over £50,000 was settled by the insurers. I had not even realised this was a company organised event, so without insurance we would have been liable.
How important is Directors & Officers Liability to you when you come into a tech business at board level?
Experienced Directors will insist on D&O coverage. 60% of early stage companies will fail, and sometimes this will be entirely outside the control of the company (such as aggressive behaviour of a competitor).
Directors can have personal liability, and even if they have done nothing wrong they may have to defend their actions legally, which can be costly. Therefore D&O cover is essential.
How important is a comprehensive insurance programme to potential investors into the business?
At the time of investing, every investor will undertake a due diligence exercise which will always include a review of insurance cover. On more than one occasion, this has required an increase in cover. For example, it is normally only at the time of investment that companies will realise the true value of their data. It may also be that the company is asked to take out Key Man insurance, to cover the eventuality that a key member of staff is not available.
Most investors will put a Director on the Board, and experienced directors will not join until D&O is in place, as they will refuse to accept the liability.
Are there any other key issues you’ve seen start-up tech businesses face?
Companies targeting large PLC type customers will often be asked to have levels of cover that seem out of proportion to a SME.
So for example, one of my SME’s sells data to globally recognised technology and sports brands. These types of companies are great customers to have, but their procurement process tends to have a “one size fits all” suppliers.
Some of our customers insist on high levels of coverage, which I can never envisage a scenario where this will be required.
Running a tech start-up venture is exciting, but it comes with many potential pitfalls across every stage of the journey.
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