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Scott Walchek is a serial startup specialist—the classic technology entrepreneur who conjures a way to do something better and then makes it happen. His most recent imaginings have centered on the insurance industry, which he believes is ripe for massive transformation.

Executive Summary

Scott Walchek is no novice to the test-and-learn process of building startups. After starting or helping to build some of the world’s leading interactive media and Internet technology companies—even once selling his home to meet payroll—the serial entrepreneur has turned his attention to on-demand insurance for items like guitars, laptops and cameras.

Walchek is the founder and CEO of Trōv (sounds like trove), an on-demand insurance platform that lets users buy insurance covering a specific item for a specific duration of time. Since Walchek is an avid surfer, let’s use the example of a surfboard to describe how Trōv works. Using a smartphone, the need to insure the surfboard is tapped into Trōv’s app, which responds with a price for the coverage. The user buys the insurance. With a simple swipe right, the insurance is turned on. A simple swipe left turns it off.

With Trōv, Walchek has conjured and created what he believes is the world’s first micro-duration insurance policy, which can be activated or deactivated at will, making the product more user-friendly and cost-effective than traditional insurance. The coverage on an $1,800 laptop is reportedly 50 cents a day.

“It’s ‘just-in-time’ insurance,” said Walchek, borrowing a phrase from the manufacturing sector. “We think consumers will be willing to engage in new [buying] behaviors regarding the protection of things they care about, such as their laptops, skis, appliances, phones and TVs.”

He provided the example of a professional photographer taking wedding photos on a Sunday. “The person can turn on the insurance that morning to protect the camera from accidental damage, theft or loss, and then he or she can turn it off that night,” said Walchek. “This is much simpler and less costly than buying a confusing insurance policy covering all your items for a full year. It’s also how the mobile generation buys stuff nowadays. Everything from the shoes we wear to the TV shows we watch are acquired with a click or two.”

Scott Walchek

“No part of the insurance value chain will be left untouched by technology…Never before has there been a greater opportunity to reshape the way that risk is calculated and protection delivered to humanity.”

Trōv launched for business in Australia in late May, backed up by insurance giant Suncorp, which has funded $5 million of the company’s $39 million in capital. Other investors include Anthemis Group and Oak HC/FT. In late 2016 or early 2017, Trōv will launch in the United Kingdom, with backing from AXA. Trōv will hit U.S. shores sometime in 2017, with backing from Munich Re, once Walchek works out the kinks down under.

“We’re only insuring consumer electronics there for now, such as smartphones, computers, tablets, game consoles and headphones,” he explained. “We’re learning as we go.”

Enter the Entrepreneur

Walchek is no novice to this test-and-learn process. He’s either started or helped build some of the world’s leading interactive media and Internet technology companies.

In the 1980s, he was on the founding team of Macromedia, which transformed through the years into Adobe. After the company went public in 1993, he became the CEO of Sanctuary Woods, one of the earliest multimedia companies developing video games for CD-ROM distribution. After that company went public, he founded C2B Technologies in 1996 to bring product Internet search and plug-and-play e-commerce to Internet portals. Two years later, software developer Inktomi Corp acquired C2B for $130 million. Within 20 months, the stock was worth nearly $2 billion.

Not content to rest on these laurels as a new millennium dawned—”I cannot sit still,” he said—Walchek co-created a venture capital firm with Greg Newman called Integrity Partners, which led the seed investments into what became Baidu, China’s dominant Internet search engine, in 2000. Eight years later, he launched DebtMarket, a platform for trading consumer debt portfolios, selling it to Intercontinental Exchange in 2012, which he no longer co-owned at the time. Along the way, he also started a couple of music labels and was the executive producer of a few films. Somehow he still finds time to surf, snowboard, swim and ski. What he doesn’t do is play golf. Too old-fogey, one surmises.

Stephen Beck, a partner at venture capital firm Serra Ventures, has known Walchek since junior high school in Oakland Hills, Calif., and later worked for him at the predecessor company of C2B Technologies. “Scott is a couple years older than me, my brother’s age,” said Beck. “Our history goes very, very deep.”

Beck went surfing for the first time in his life with Walchek in Santa Cruz when he 13 years old. “Scott just got his driver’s license, and he took me out to Pleasure Point,” he recalled. “I was an inland kid growing up in Oakland Hills, just like Scott. Not a lot of us kids went to the ocean. But he had this adventurous spirit. Not long after we went surfing, he moved to Lake Tahoe and became a ski race instructor. That’s where he started his first tech business.”

trov-in-use78347621Beck lost touch with his mentor until he was in his late 20s and a minister at a church in the Bay Area. Walchek became a member of the church, and they renewed their friendship. In 1997, when Beck felt a need to explore new opportunities, Walchek gave him a job at Beyond News, the C2B predecessor company. “I knew nothing about technology, so Scott sent me to San Francisco for a two-week software training course,” Beck recalled. “Everything else I learned on the job.”

Beyond News was a private-label “push” news service backed with $2.2 million in funding, $1.5 million of it from Draper Associates. Two months after receiving the funding, the company lost its biggest customer. “We still had about $1.8 million left,” said Beck. “For two weeks, we sat around and tossed ideas at a board. Someone suggested building a product search engine, which sounds pedestrian today. But in 1998 it was pretty revolutionary.” C2B was born.

Carl Dellar, a technology consultant at networking hardware and software provider Solarflare, corroborated this story. “A few days before I was to show up for work at Beyond News, Scott called to say he had just lost his biggest contract,” Dellar said. “He gave me the opportunity to change my mind. I asked if he still had some money, and he said he did. I told him I’d stay on then, and he said he’d find something for me to do.”

Why did Dellar, who has a Ph.D. in network storage architecture from the University of Cambridge, jump on what looked to be a fast-sinking ship? “Honestly, I found Scott and Greg to be great business people,” he said. “Lots of technology companies have clever engineers, but these guys were topnotch entrepreneurs. So I stuck around; we put the old idea to bed and came up with what became C2B.”

The moral to this story is not limited to entrepreneurial resourcefulness and resilience. “I’ve been involved now in startups for more than 20 years and can honestly say that in all that time, I’ve never seen anyone take more seriously the fact that he is spending someone else’s money,” said Beck. “Scott is not cavalier about his fiduciary responsibility. It’s a really big deal to him to return value to investors and to have everyone feel their work is a blessing. He’s a person of principle, which makes him a very effective leader.”

Dellar shared this opinion. “Scott’s the type of person who would never let you down when times are tough,” he said. “He’d never hold back on stock options or back salary, for instance. His firm with Greg [Newman], Integrity Partners, was not named by chance. He has the most integrity of any person I’ve ever met.”

Finding the Need

These are superior leadership traits to take into any business, but why insurance? “No part of the insurance value chain will be left untouched by technology, and that includes pricing, policy management, claims handling, capital, regulation and distribution,” said Walchek. “Never before has there been a greater opportunity to reshape the way that risk is calculated and protection delivered to humanity.”

He sensed this open window back in 2012, well before the term InsurTech was coined to describe the hundreds of startups now armed with billions of dollars in the insurance technology space. Initially, Trōv had nothing to do with insurance; it was created as a way to digitally store an inventory of a person’s valuable possessions.

“I had this idea that there was an enormous amount of value tied up in the information about the things we own,” said Walchek. “In an analog world, we would keep this information on a piece of paper or in a spreadsheet. My thinking was to collect this data in a repository or trove in the cloud—hence the name of the company. Once we did that, we would figure out some unique ways to take advantage of this data.”

The first “aha moment” arrived when Walchek considered his own homeowners insurance policy. He mulled the value of unbundling the traditional blanket contents insurance policy, giving owners control over protecting just the items they actually cared about. “A blanket policy today covers your guitar when you leave it at home, but it doesn’t cover it when you’re taking it on the road to play at a gig,” he explained. “Meanwhile, it covers an old recliner you couldn’t care less for. That’s a pretty archaic product disconnected from the real need.”

Another epiphany was Walchek’s recognition that app-happy millennials would not take kindly to an insurance-buying model that required a sit-down meeting with an agent to read a blinding array of contract boilerplate. “There’s 92 million millennials coming into their acquisitive lives,” he said, without referencing a source for the figure. “They have an entirely different relationship with ‘ownership,’ preferring to rationalize and engage the services they acquire through a mobile device. Such devices are fundamentally shifting the consumer narrative away from agents and brokers.”

He added, “We’re just giving them what they’re asking for.”

A Rose Is a Rose

While Trōv takes on no balance sheet risk at present, Walchek said this should not be construed to mean that it is not a bona fide insurer. “We handle the entire process from pricing and purchasing to billing and claims, in cooperation with our insurance partners,” he explained. “They assume the balance sheet risk and take care of the regulatory licensing for us to operate in their respective territories. We collect the gross written premiums and split part of that revenue with them.” He declined to divulge the details of this percentage split.

Trōv is “in the right place at the right time with the right product,” said Beck. “Scott looks at something a more pragmatic person would think is impossible, but he sees only opportunity. And once he perceives this, he believes in it 100 percent, which makes others believe in it, too.”

A case in point is when C2B Technologies ran out of money soon after its formation. “Scott sold his home to meet the payroll,” said Beck. “I thought he was crazy. But then six months later, the company sold for $130 million.”

“I wouldn’t bet against anyone who would sell his house to save a business,” said Stephen Beck, surfing buddy and former colleague.

Dellar is equally bullish on Trōv’s prospects. “Scott has an idea and goes full-steam ahead at making it happen,” he said. “This doesn’t mean he isn’t open or flexible to changing course. For instance, he originally focused Trōv on high-net-worth individuals—people with multiple houses, fine artwork, wine collections and valuable cars. Gradually, he realized that the real value proposition was (to insure) more prosaic personal items like skis and laptops. He then hit upon the micro-duration concept, which is really clever and useful. Scott loves to solve problems.”

Trōv’s current incarnation isn’t its last either. “I can see us broadening the concept beyond physical objects like consumer goods,” said Walchek. “Right now, we’re looking at operating systems, wearable technologies and telematics. Sensors, beacons, the GPS and the like send innumerable signals that can be used to calculate risk and modify coverages in near-real time. We just need a little more metadata to confidently price the exposures and start the chain of protection.”

If all doesn’t work out according to plan, Beck said his childhood surfing buddy will scope out another wave to ride Trōv forward. “I wouldn’t bet against anyone who would sell his house to save a business,” he added. “Not by a long shot.”