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Aflac duck

Why didn't I think of that?

If you watch television, you're familiar with the Aflac duck. Aflac (which originally was an acronym for the company's actual name The American Family Assurance Company) is the 400 lb gorilla in the voluntary benefits insurance niche.

Why bring that up? Well, regardless of what industry he or she may be in, every entrepreneur has come upon some interesting idea and said to him/herself more than once "Why didn't I think of that?". In the insurance industry, Aflac's success in terms of pioneering Cancer expense policies, its sales of policies sponsored by employers and funded through payroll deductions via the workplace through more than 74,000 agents nationwide is legendary. So strong is the Aflac brand both here and abroad that the $21 BILLION in revenue they collected in 2016 is more than their top four competitors' annual revenue combined.

The original company was founded by three brothers named John, Paul, and William Amos in Columbus, Georgia in 1955 and Aflac introduced cancer insurance in 1958 as a result of the financial problems they watched their own mother go through as she battled cancer. While it is a public company now with shares traded on the NYSE (stock ticker AFL), the company is, for all intents and purposes, still “family owned” with Dan Amos (son of co-founder Paul Amos) as current Chairman and CEO. They’ve made Aflac shareholders a ton of money over the years and have clearly been successful in what they do.

My question to you is: Would you have had the good sense and foresight to invest in Alfac before it went public in 1974?

VPI logo

And by now everyone has heard about Pet Insurance, but you may not know that the VPI (Veterinary Pet Insurance) brand, was the first Pet Insurance company in the US, founded in 1980 by Dr. Jack Stephens DVM. The VPI name was recently changed to Nationwide, who acquired the brand in 2009, but now nearly 40 years later, they are still the "top dog" in the US Pet Insurance market, with nearly twice the revenue of their closest competitor.

"Dr. Jack" started VPI out of frustration - after spending several years trying to convince existing insurance companies to underwrite this new and innovative form of insurance - with about $750,000 that he raised by soliciting friends and family, and almost one thousand other veterinarians for investment dollars at a Veterinary convention (a very early form of "crowdfunding").

The insurance companies Dr. Jack spoke to were worried about adverse selection, meaning they thought only people with already sick pets would buy the insurance he planned to offer and the company would quickly go under from paying claims. Clearly, those insurance "experts" were mistaken since the dozen companies that make up the membership of the North American Pet Health Insurance Association today will very likley surpass a BILLION dollars in annual premium in 2017.

Would you have been smart enough to be one of those 1000 investors that got in before Nationwide bought out VPI in 49 states?

And more recently, while simply a new approach to an age old product,  Esurance, was founded in 1998 as Silicon Seirra, Inc., with its first round of $5.5 million in venture funding taking place in May of 1999. Esurance launched its website and started writing personal auto insurance in four states in December 1999, and was one of the early pioneers of online auto insurance. The company website was also one of the first to offer comparison quotes that allowed consumers to compare prices with other leading insurance companies.

esurance logo

In less than a year, a large piece of the company was acquired by White Mountains Insurance Group and then in 2011, Allstate purchased the company for just under $1 Billion dollars, setting an impressive precedent for the valuation of online insurance companies. And what that means is that every $1000 invested in Esurance in 1999 would have been worth $181,818 in 2011, an 18,181% ROI.

Would you have had the vision to recognize that something as "unsexy" as auto insurance sold differently could generate that kind of return on investment?

My point is that while there is lots of hype about the disruption by startups in the insurance indvery few real innovations have occurred in the insurance industry over the last 50+ years. However, the ones that have became wildly successful, niche creating behemoths that still control their unique market and have generated hundreds of millions of dollars to their collective shareholders.

So here’s my challenge to you. Do you think you're smart enough to identify the next successful niche market insurance product, before it becomes the next “big thing” and invest in it early on? If so, then read on.

We love skeptics

We think the Marriage Insurance market has all the earmarks of becoming a main stream insurance product and we’ll be happy to show you exactly why we feel that way. And we're not the only one. Fair warning though, if you think you’re going to get some blue-sky fairy tale or be presented with financial projections that have the phrase “and then a miracle happens” embedded somewhere in the formula, please be prepared to eat some humble pie. And if you’re a skeptic…great…we LOVE skeptics.  Healthy skepticism is a must these days, but be prepared to be converted.

Why this makes sense.

Chalk divorced parentsToday we have the largest population of adults who come from divorced families. Study after study shows that individuals who come from divorced parentage are up to three times more likely to get divorced themselves. Anyone with a modicum of math skills can figure out that based on that fact alone, the divorce rate is unlikely to go down anytime in the near future. And despite some reports to the contrary, the divorce rate is likely to increase around the world. In fact, the US Census is now predicting that, of people who marry today, only 33% will ever reach their 25th anniversary. As a result of the financial devastation that so often accompanies divorce, more and more people will go into poverty. For example, in a study published in the Review of Social Economy, it was found that 44% of American families go below the poverty level after divorce. It's no wonder, since according to a study done at Ohio State University's Center for Human Resources Research, based on data from the National Longitudinal Survey that followed people's lives for 40+ years, results showed that, on average, people lose 77% of their total net worth as a result of divorce. Consider those numbers for a moment.

44% go below the poverty line after divorce because on AVERAGE they lose 77% of their total net worth.

Meaning just as many lose much more as lose less. Many never recover, which means their children live in poverty too. Not surprisingly, supporting those families puts a burden on all of us. In fact, according to the Institute for American Values, Center for Marriage and Families, you and I as taxpayers help foot a bill of over $112 BILLION dollars in Federal, State and local taxes to support fragmented families every year, when, if given the opportunity, most would rather support themselves. Help us change that trend by generously rewarding people who work to succeed in their marriage and, at the same time, providing a financial safety net to those who find themselves facing what they thought was unimaginable and who might otherwise become an unfortunate statistic of divorce.

Still on the fence?  Google beta logo

It's hard to recall it, but even Google started as a Beta test. Before adopting a professional logo, Google used a logo created by co-founder Sergey Brin. Tinkering one day with a free graphics program that was tricky to employ called GIMP, Sergey created a color rendering of the Google letters with an exclamation point at the end, mimicking Yahoo! He was quite proud of the new logo, which was composed of the kindergarten-style block letters in primary colors above. But it wasn't the look that meant the most to him. He was more pleased that he had been able to teach himself how to use GIMP.

Now fast forward a little.

Unless you’re a seasoned venture capitalist or an IT aficionado, you may not know who Andreas "Andy" von Bechtolsheim and George Bell are, but I’ll wager you’ve heard of Google.  Well, back in 1998, when Google founders Larry Page and Sergey Brin were still students at Stanford University (before Google was even incorporated), Bechtolsheim (Stanford alum, cofounder of Sun Microsystems, who was then the founder of Granite Systems), along with David Cheriton (then a professor at Stanford who was also a partner in Granite Systems) made the first investments in Google of $100,000 each.

Then, early in 1999, while still graduate students, Brin and Page decided that the search engine they had developed was taking up too much time and distracting them from their academic pursuits. They went to Excite CEO, George Bell, and offered to sell it to him for $1 million dollars. He rejected the offer and a few days later, when Vinod Khosla (acting as a middleman for Excite's venture capital fund at the time) negotiated Brin and Page down to $750,000, Bell rejected it again!

A few months later, on June 7, 1999, a $25 million round of funding for Google was announced.

Golden EggThe rest is history.

Talk about a goose that lays golden eggs, today, Google’s (now) parent company's total market capitalization is over $600 BILLION dollars. Based on its subsequent success, Google is considered the 2nd most successful startup company of all time by market capitalization, revenue, growth and cultural impact. Apple is #1 if you’re curious, but that’s not what’s really important here.

Andy Bechtolsheim is now a poster child for Angel investment success, with several homeruns to his credit. However, to date, the most profitable investment for Mr. Bechtolsheim was his initial $100,000 investment in Google, which, as of May, 2017 is worth just under $101.8 billion all by itself. He is well regarded as a visionary by other savvy Angel investors.

George Bell? Not so much. While he’s still considered a successful investor as part of General Catalyst Partners, history was not as kind to George. Stalled when the dotcom bubble burst, Excite went into Chapter 11 bankruptcy in 2000. What remained of the company was bought in 2004 by search engine Ask Jeeves, now  Nothing that Bell has invested in since holds a candle to what could have been with Google.

So my last question to you is: Are YOU a Bechtolsheim or a Bell?


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Read more about the financial impact of divorce.

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