Angel Insights Blog

By: Warren Spiwak, IBTX Partner

ACA Affinity Partner IBTX recognizes the risk that angels and startups face.  Now during these unique and extremely challenging times, these risks are more complex then ever before.  IBTX Partner Warren Spiwak recently sat down with ACA to discuss what angels need to be aware of and what the IBTX team of dedicated risk management professionals can do to create innovative solutions to fit the unique needs of the startup ecosystem. 

Q: Warren, what are some of the risks that create increasing exposure for Angel Groups in the next decade compared to the past? What should Angel Groups be doing proactively to mitigate those risks?

The way to mitigate depends on what business I am talking to, and truly requires a customized recommendation based on type of business.

As you can imagine, 2020 has added a lot of challenges that are becoming even more complex.  In general, here are some of the risks that I have noticed most recently:

• COVID / Pandemic exposures - loss of income, and increased D&O, EPL, Cyber exposures
• Technology – increase in cyber risk and technology professional exposures overall as use of technology grows  
• D&O - When filing lawsuits, plaintiffs could name individuals personally in addition to the company
• Employment practices liability – employees and employers finding themselves in more litigation with claims for wrongful employment acts such as discrimination and harassment becoming more common.

My practice is to consult groups and businesses on their exposures from a holistic risk management approach, and when doing so, paying special attention to policy terms and conditions.

Q: Are there different risks for different models of angel groups? e.g. basic loose organization vs. angel group that forms SPVs for each deal, vs. angel groups with a sidecar fund vs. a "full" venture capital fund? Are there different entities that need to be insured in each case?

Yes, there are several differences. With some groups acting more like a networking group versus those with funds, and the potential liabilities associated with oversight of those funds, makes them quite different in exposure.  Depending on the group, we uncover if a standard Directors & Officers liability policy will be required, or in terms of working with groups that have funds, if we will need a blended venture capital form to cover the D&O exposures along with the exposures for oversight of the investment vehicles.

Q: What is the ballpark on the price for people DD?

When it comes to D&O, there are a few different considerations that will affect the pricing range.  For angel groups without funds, the D&O pricing can start in the $750 range and up depending on the exposures, retention (deductible), limits, etc.  The ballpark minimum premiums for portfolio company D&O depends on many factors but can be as little as $1,000 for a “start-up” depending on the industry.  For groups with funds, the insurance companies with the lowest minimum premiums generally start in the $14k - $17k range. Historically, we have saved our groups with funds thousands of dollars.

Q: Are you focused on our angel groups or on our portfolio companies?

This program is designed to help both angel groups and portfolio companies in a big way. We have helped many portfolio companies referred by angel investors and groups.   By the way, one of our favorite products provides personal D&O coverage for individual angel investors that can follow them for any board they sit on.

Q: What are some key ways you are impacting the D&O product offering with ACA members?

Because of our involvement with ACA and the buying power of the group, we are capturing the attention of the top insurance carriers that we work with.  This leads to our ability to negotiate the very best premiums, with the highest performing products.

Q: What does success look like for members?

It’s about impact. Impacting the performance of the products you purchase, while also negotiating the best premiums. Making a difference for every member, every group…and the entrepreneurs they support.

Right out of the box, this relationship is designed to help you find insurance that better than what you have currently, with better deductibles, for less premium. We strive to accomplish this while making the process as easy and convenient as possible for members. Our services span across all lines of business, industry, and geographically across the USA.

There is also a long-term plan that will increase its benefit to the members in a number of ways.

With the program just launching in October 2020, the goal is that we see more and more members, groups, and portfolio companies participate in the ACA Affinity Partnership we have…which will lead to a unique opportunity to get deeper discounts with carriers.

Q: As an affinity partner, what are the other ways our members can leverage the partnership with Acrisure/IBTX?

This program can help you secure the best insurance options. But, we will also do more. Over the upcoming year, you will see thought leadership discussions, digital content, interviews, and educational modules and opportunities for improvement of risk management.  All referrals that come from ACA members will be eligible for accessing our team.

Q: For someone who want to get the process started and meet with you, what is the easiest way to begin?

The best way is to go directly to our ACA landing page at www.angelinsuranceprogram.com and click “Request a Consultation”.

You can also e-mail me at wspiwak@ib-tx.com and my cell phone number is 713-545-7877.