Interview with Thomas Wynne CEO of Capsule Insurance
In this podcast, we interview Thomas Wynne, the founder, and CEO of Capsule Insurance. Having been part of the team that built a large regional insurance broking business and secured a positive exit, Thomas has “gone again” building Capsule Insurance Brokers. In this episode, we provide guidance for people thinking about building a business, the importance of culture and value, and the benefits of becoming a B corporation.
A: Welcome to the Arch Law Podcast delivering legal solutions differently. I’m joined today by Thomas Wyn, who is the CEO and founder of Capsule, hello, how are you?
T: Hey, Andrew. I’m very well, thank you.
A: Good, welcome to our podcast. Delighted you could join us.
We’ve known each other for a number of years now, in various guises, myself and my previous law firm, you in a previous insurance brokering business.
T: Um, yep.
A: Couple of years ago, you, decided to start on a different journey, setting up Capsule. Do you want to tell us a little bit about what Capsule does and why you feel it’s, certainly special in your marketplace?
T: Yeah, so I know that that’s right. Like you say, I spent the last 12 years or so of my career at, a family insurance business called Kingsbridge. We experienced a real growth journey there from 2014 to 2020, growing from 10 heads to 110 heads, going through that transition of family business into private equity, and, and ultimately to a US trade sale. And like you say, about 18 months ago having, completed that journey, decided to set up a new business, and so capture ultimately Andrew is an insurance provider and fast becoming an insurance platform for high growth venture backed technology businesses.
A: None of which really applied to me when I worked with you previously in a large law firm. But anyway, there you go. And certainly, from Kings Bridge’s perspective, my recollection of dealing with Kingsbridge very different space. What made you focus on the high growth startup type, sector? Why there?
T: Yeah. Good question.
So, I guess King Bridge was very, very unique. We were a top 50 insurance broker. We served FTSE 50 firms on one side of the business and on the other we had an insurance scheme for 70,000 plus micro SMEs, and it was really in the middle of the kind of the in between that we really struggled to serve clients and I noticed that that was reflective of the wider market. I was always fascinated when I was younger by the Sunday Times fast track, the Sunday Times tech track, those type of growth lists, and I would always challenge colleagues as to who is ensuring these guys, the kind of 30 year old tech founder who’s taken 50 million in funding disrupting the chosen industry. I think that’s what I’ve always been fascinated in is kind of innovation disruption. Businesses are growing very, very fast, and so, I explored that further. I talked to fast track founders. I talked to tech track founders and got a sense of who’s serving them now, what’s their experience, frustrations, what would they ideally like this world to look like? And it just reaffirmed my gut feel, which was that this part of the marketplace is being underserved, and further investigation into the world was just so fascinating. There’s some crazy stat which ultimately flagged that whilst the 6 million UK SMEs, half of the total contribution that they make to UK PRC is delivered by 50,000 scale ups. So less than 1% of the population, making up for 50 plus percent of total SME turnover, and that’s where I got a sense of just how important this space is. But it was, in talking to the entrepreneurs that we really understood just how underserved they are.
A: That certainly resonates with what we’ve seen from a legal perspective. The traditional model for law firms is to charge an hourly rate, uh, which tends to be a higher hourly rate with, with smaller businesses, and tends not to really wash very well, particularly when you’re bootstrapped and every penny is a prisoner, so to speak. So that traditional model of delivering legal services doesn’t work. We adapted that and we moved very much to fixed fees, very much to deferring, charging structures just to try and accommodate those individuals who we could see what were worth the risk, frankly, because they were going to grow and they were going to grow really well.
What would you say is different from your approach at Capsule than a traditional, insurance platform?
T: Yeah. Um, so I think, stepping back. I think one really important thing is that we as, founders having been on the Kingsbridge journey, have been on that growth journey before ourselves, that we are truly kind of are entrepreneurial founders that understand the mindset of the, the businesses that we’re looking to serve. The second then is our use of technology. So we have technology which tracks all UK scale up on 300 plus data points so that if anything changes within their business, for instance, they, raise capital, they raise venture debt, they change their head office address, they set up a subsidiary, the head count flows upwards or downwards. Um, we can see that through the technology, it triggers a notification to our brokering team and either it allows us to adapt and amend the policy or it means that we’ll reach out to the head of finance or the CFO and say, we noticed this has happened, these are the possible insurance ramifications, and have that conversation with them so we can be that proactive partner and we can help them to ensure that their insurance keeps pace with growth. Beyond that, then we use technology now, so a startup can share their pitch deck, share their current policy documents and share their financials through a three click api, which would then allow them to share their financials via Zero or QuickBooks or, their accounting software, or alternatively attach their, um, their management accounts. And with those three things, we can then review, come back with comments and recommendations and then, suggestion on next steps and then, provide an alternative quotation for them. So that kind of very intuitive technology, which are three pieces of information that a startup founder does have to hand, versus the streams of information that tend to be asked by traditional insurers. That is much harder to come by.
A: Yeah, certainly when we do our renewal, it’s usually about a 24 page questionnaire that you’ve got to fill in, and it gets quite frustrating over time, but, um, there we are. In terms of, you know, again, from a startup perspective, uh, they’re probably sitting there quite daunted about having to take insurance out in the first place, and then looking at these big insurance companies and thinking, are they really going to want to take this risk on?
T: Yeah.
A: Is it really the big composites that you, try and place the work through the business through, or, do you have specialist providers that you tend to work with?
T: Yeah, no. So, what we tend to see is early early days with the start, they’ll go online, Hiscox, find some kind of online digital and broker or direct insurer and just put a policy in place. If they don’t do that, then they probably actually just buy from a traditional regional broker. And in both cases, they can quite quickly outgrow those solutions of kind of non-advised or dealing with a traditional regional broker that they’re ultimately an outlier in the pack in that they’re loss-making and that they’re, well-funded, that they started recently and they’re working in web3 for instance and so that’s where we add maximum value. To answer your question, we do place with the large composite insurers, but we also increasingly place with some of the American insurers, some of the more progressive PI and cyber specialists. And it really is dependent on the sector as to whether we’re talking Syntech or Frontier Tech or, Enterprise SAS, web3, especially if you dive into that world of kind of blockchain meta crypto, NFTs, you do really need to go to the progressive insurers to find a solution. But if you are just dealing with a high-growth technology risk, then some of the big composite players are still, relevant. Capsule are lucky in that we’ve been on that journey with Kingsbridge. We are well networked in the insurer space and we come with a history of delivering and so that really has allowed us to have conversations with insurers and reaffirm to them that they will only ever see very exciting, high growth, venture-backed, disruptive kind of blue ribbon businesses. And that beyond that, high growth to an insurer can often mean high risk is their kind of perception. But beyond that, we’re doing all of this risk mitigation in the background around tracking them on 300 data points, having a live access to their financials, should they choose to share that and we have a real deep understanding of this growth space, so that’s allowed us to maybe get results from the large composite insurers that other brokers wouldn’t.
A: So you are placing, a high growth risk with the most appropriate insurer. Both parties understand entirely what they’re getting into. Is there a knock on impact in terms of level of premium? Does that tend to, be mitigated because the insurer’s more comfortable with the risk that they’re writing?
T: What I would say is Capsule more broadly as a business, rarely are we going in saying we will save you money. Actually we tend to be getting involved kind of when a business is on their journey, seed through to A, through to B, through to C and there tends to be a bit of a catching up process. They bought online, couple of hundred quid, they then take 5, 10 million pound investment, the team goes from 2 to 25. They could feasibly now already be in Berlin or in the US, and just because of the rate of which these businesses grow, and often as I see it kind of when you set up, you’ve gotta get your employer’s liability, legal requirement, public liability often comes with that as part of an office policy and that will make sure you stay in line with your WeWork terms at your co-working space. It will allow you to go and do trade shows in the US and actually, um, have the appropriate cover. You then move on to professional indemnity and cyber, which often large enterprise clients are going to contractually require you to hold. Where we really get involved early days is actually then you take your funding from a venture capital backer, and there’ll be a requirement in the shareholder agreement for you to have key person and DNO directors and officers, liability, so it’s all very staged across the kind of that process. And then you tend to start looking at cross border cover, and so we tend to really come in and get involved when things are becoming a bit complicated. There’s renewal dates everywhere. There’s different insurers everywhere. And we then look to align renewal dates, consolidate the insurers, and to your point then make sure that we’re getting best terms across the board. But that really is our value proposition. And then ensuring that that insurance program is fit to scale and we’ll keep pace with growth. But I think because of our reputation, because of our specialism in this space, insurers are accepting that early in the journey of a startup, we can’t treat them like a large commercial client and to start with, we need to, deliver cost effective competitive solutions for them that meet their needs at that time. But it really is taking that VC approach to origination and bringing it to insurance and to your point, backing the businesses that you know is worth backing, which is clearly big in the US law scene. You’re kind of, you stay with your lawyer from startup through to IPO and in the early parts of that journey they’re probably not billing you very much, and actually some of those kind of costs are getting deferred until a future funding round. Which just, it’s an interesting analogy and it’s the way that we really see ourselves growing.
A: Yep, I can see that. And that’s certainly worked for law firms, uh, for many years in terms of putting that initial investment upfront. Not charging the client or deferring the fees, until such time as the clients in a position to be able to pay and, that then commands a degree of loyalty and both parties benefit as a consequence. Just moving on in terms of, where you’ve positioned yourself around ESG but particularly about B Corp. I know that’s something you’ve adopted and been passionate about. Why did you decide to go down that route, and how did you find the process?
T: We really made that decision super, super early on. So, we’d come out of Kingsbridge which was in one side a traditional corporate broker and in one side this very exciting, kind of high gross startup type of energy about it. and one thing that we saw, though, I don’t know, 15 through to 20, was that to attract good talent, in the local area, I mean we were in a sleepy kind of cockwell kind of town outside Cheltenham, but to pull talent out of Cheltenham, out Bristol, out to Birmingham, then we had to make ourselves, really be an attractive place to work. And Dorian, one of our NS now and was our COO in Kingsbridge days, really pushed this around kind of, I mean, it sounds silly now in kind of 2022, but back in those days, kind of free breakfast activities, lots of kind of weekend, evening, lunchtime, whether it was chocolate making or yoga. Then looking at the staff terms and making sure that they were equitable. We put in place a staff share scheme at Kingsbridge, which everybody benefited from as part of the US sale in 2020. We’ve done similarly but five times the kind of the level in Capsule. And so I think Liam and I came out and we wanted to build a broker that we were proud of and that people would want to come and get involved in the journey. And I think we took inspiration from that startup world, where in tech startup land actually they’ve, they’ve been very, very progressive, back in the days when it was Monday to Friday in the office. The world we lived, lots of the tech startups were pre covid, already kind of worked from anywhere forever which is now the type of culture that we’re building within Capsule. B Corp for us was that one, well-recognized, way of saying we are a B Corp, we put kind of people, we put the planet, before profit, but we’re still a commercial enterprise and we’re able to balance the two. But it was something I think you saw in a big way in kind of the consumer world, you there’ll be aisles at Sainsburys now, Waitrose now that exclusively will show these ethical brands and people are increasingly aware of B Corps. But I was also told just what a great process it is to go through even before we set up, we had, specific ethical, elements to our articles of association and so for us it was a learning journey. There were brands that we aspire to be like that were B-Corps but there was, also a real deep interest in ESG more broadly and as it relates to risk.
A: That’s really helpful. And the actual process itself, you get various people talking about it being a hugely rewarding process, but you also get some people saying it’s a really difficult process. Where are you on the scale?
T: I think we were lucky in that we set out knowing that we wanted to do that and it allowed us to set up our business in that way, and I think that’s very helpful. I also think B Corp had been, super helpful to early stage startups in terms of giving them a kind of a helping hand in going through the process. So, I would say the earlier you do it, the better. I would say it was very distracting and onerous. I think we were lucky that one of our NS really took a hold of it and it actually did mean that Liam and I could focus on building the business, and so if you are truly bootstrapped and there’s two of you, three of you, I think it’s a very challenging thing to do. And so when I say the earlier, the better I mean more as an established startup, I would certainly say that, but it will cost money, it will take time, and it’s not an overnight thing. And b, it doesn’t then suddenly open you up to, kind of huge swathes of business of people saying, wow, you guys are ethical, kind of, and socially responsible. But it felt for us, the right thing to do. It was a big learning journey. It puts us amongst in this community of other businesses that are super focused on leaving a positive mark. But it certainly isn’t without its drawbacks.
A: Sounds as though you’re an advocate for it though, sounds as though is very much a positive process.
T: Yeah.
A: You mentioned culture before. I’ve always been very focused on creating a firm set of values within an organisation and then building your culture around that and particularly so now with Arch being more of a distributed model with a lot of people working a lot more time from home. And you know, you don’t have that same office based ethos that you may have had in the past where people will mingle and socialise. You’ve gotta be a lot more proactive in terms of creating a sense of being through your value set and then a sense of culture. How important is values and culture to you in terms of your business and how have you gone about setting your values and establishing your culture?
T: Yeah, I guess I always start from another basis that we’re running an insurance business, and that for some people isn’t kind of wildly exciting, it’s hard to get super passionate about, but what people really can buy into is the way that they’re treated. The mission that that business is on, the journey that they’re on, what we’re trying to achieve as a collective. And actually, kind of like my start on culture, and this has been true in Kingsbridge and now with Capsule, is driving a culture of high performance, and of people really kind of trying their hardest, kind of challenging everything. Obsession with customer outcomes and customer centricity. That for me, that kind of bringing on people that we feel can really drive the business forward, that’s the core part. And then everybody realising everybody works hard, but a collective there’s a kind of that’s recognized, it’s rewarded and everybody jointly benefits from that. But then beyond that, it’s kind of allowing people to feel like this work thing doesn’t have to be Monday to Friday, nine to five in the office. And I think that’s a big change in the insurance space, especially in traditional insurance, so we truly are now in a position where you can work from anywhere for forever but the reality is people pick and choose. They come into the office, we try and build a culture out of Cheltenham HQ, the guys are regularly kind of socialising and that’s just so key and people really want that now. I think a couple of years of covid and being sat behind screens does drive people slightly crazy. We’re hiring out of the big brokers, we’re hiring out of your Marshs, your PIBs, your kind of AJGs and I mean, in some ways it’s not hard to position yourself as more attractive than those corporate brokers because kind of any changes positive in that respect but I think what people really see is that we’re on a journey. We’re on an upward journey, and there’s an ability to get in and so long as you work hard, then you are really well rewarded. We kind of, I’ve studied loads around this whole kind of, amount of time off and that this kind of unlimited holidays just actually not working or being a good idea for a variety of reasons. And so, we really looked at kind of optimal, solutions there and so we landed on 25 plus birthdays, plus the Christmas to New Year break, which takes you to around kind of 32. Which in locally and any kind of nationally is very, very generous people value having as well, having that kind of time off between Christmas and New Year, which I think is easy to give. And they’re just small things though that are part of the, when we’re hiring are things we flag. But I do really think for me, the culture is people seeing that there’s a real opportunity to grow and to learn, and to be valued. Which I know isn’t kind of, when we’re living in tech startup land, it’s easy to look round at all these crazy kind of things that are done, which are positive and think how do we stack up against them? But we sometimes have to just step back and remember, we’re a startup we’ve got to, this has to work and so then really kind of be thoughtful and pragmatic about what we can do right now.
A: Are you still doing the yoga and the chocolate making then?
T: I wouldn’t say so. I mean, there’s lots going on on our Slack channel around kind of Bagel Tuesdays, wine Wednesdays and there seems, there seems to be some things for each day. Um, there’s kind of pub quiz nights where kind of, we are just about, I mean, we’re a year in, so we’re really playing catch up. I mean, I think we forgot to have our Christmas party last year so that’s kind of there and in the diary this year. But yoga and chocolate making isn’t quite there, but actually, one thing that we are taking super seriously is the charitable endeavours and actually kind of the volunteering days there that must be used, that inevitably are the team members that just take it off their own back to go and do things locally. And, lots of that doesn’t actually even get posted. I know we did this cool thing kind of planting 500 trees and there’s 2000 more coming next year where we actually went and planted them. Kind of the start of the Capsule forest as we were kind of calling it, kind of tongue in cheek, but equally that was just awesome. We kind of had clients down there, we had ecology down there, which is a really cool startup in Bristol, and the guys were just there kind of getting their hands dirty, doing something. It was, those type of team building things aren’t so forced I think that we certainly really like and kind of haven’t necessarily seen it as team building, but it’s just inevitably become that.
A: We have been with ecology for 16 or 17 months now and it’s just a great way of building your virtual forest and contributing, isn’t it?
T: Yeah
A: We haven’t physically got hands dirty yet interested to hear a little bit more about that another time from you in terms of how you did that. Um, just taking it away from capsule for a second. Just more generically, you know, obviously two years of covid, uh, people working a lot differently, what do you see as being different in terms of the future of work moving forward and what impacts that going to have for your business more generally, do you think?
Yeah, um, I mean, it’s a world I’m really, really interested in and you’ve, kind of, lived lots of your career, kind of, involved in future of work or, or kind of on the fringes I think, Our kind of involvement in this world date back to, well, kind of 2004, kind of 2007, and this shift towards freelance flexible working. Some elements of that the government has made kind of increasingly tricky to do, but it’s something we really looked at as we were going through the funding rounds at Kingsbridge, and ultimately we were insuring 70,000 freelance flexible workers. They could be interims, consultants, contractors, but ultimately they were individuals that were choosing to operate in a different way and to not go down that route of employment and I think we used to get really bogged down around specific legislation and specific issues in that regard. But one thing that always proved out in the data that there was a fundamental shift towards freelance and flexible working. And I think Covid has just magnified that and accelerated it massively, you’ve seen this growth now in kind of global contracting. The use of PEOs professional employer organisations, the use of EORs, this kind of employer of record route tech startups, almost exclusively used the EOR route when launch, kind of hiring, teams across the globe, to, to kind of step in and be that employer of record. You are increasingly now seeing, remote teams, but kind of also not just remote, but globally distributed. And I guess a big trend I see, which I think is really interesting is, almost kind of a, a little bit of a bet, it’s not necessarily mine but what I do buy into is kind of the Gen Zeds coming through now into the workplace and actually the potential that they may choose kind of a portfolio approach to not just their career but to how they engage with businesses. Which might be kind of being employed by multiple businesses. It might be being employed, kind of having a number of employers at any one time. Or it might actually look like that traditional freelance model. But I can already see kind of, young individuals coming into the workplace that are doing some element of work here and whether it’s a side hustle on the side or actually working four days with one employer and one day with another. And I can see why that would be attractive in terms of the ability to learn and, and kind of that portfolio approach to building a career to see what they really are good at and what they like.
A: Everything you’ve just said resonates, and certainly on our journey you know, one of the reasons why we decided not to build a traditional law firm was we just felt the model was broken. It didn’t reflect how people wanted to work in the future. People didn’t wanna work 7, 8, 9 years at, you know, 80, 90 hours a week minimum with a view to eventually getting the partner title and the foot on the ladder. It, it just, it didn’t hold the attraction for people. And, that’s why we ventured towards the revenue sharing model, the freelance model where people can be, building their own business within our business. And it’s massively popular as, as a way of working. And I think, as you say, generation by generation Zed it’s gonna become more and more popular moving forward as well. Yeah. So, fingers crossed were both right in terms of that.
T: Yeah.
A: Final thing Thomas, in terms of, uh, tips and tricks, you know, as a founder, someone who’s, run a business, scaled it, and then come back down in terms of, a startup all over again. Any tips and tricks for would be startups, and, founders out there?
T: I think number one for me, is having a co-founder. I think for me, that has been so valuable. I think, I have certain strengths in certain places, but they’re kind of, matched probably tenfold by, my kind of weaknesses and blind spots, and so having a co-founder that is able to kind of match you in terms of energy and kind of passion for the business and passion for the project, but is able to fill in those gaps, I think is super important and can save lots of sleepless nights and it can be a lonely road, I think on, on your own. I think that’s a key one for me. I think I’ve learned the hard way, kind of been on a bit of a journey here around hiring, and kind of hiring really based on, the feel you get from someone and their energy and kind of the questions they’re asking versus looking kind of at the CV kind of hiring based on their academic achievements and I think for me, the former wins out every time. I think, our last American investor, said when he looks for a producer in the US he looks for a natural network and he looks for somebody that’s intellectually curious and a natural network doesn’t mean did they go to private school, but it really actually means What do they do? Kind of who do they engage with? Who do they, who do they meet in their last role? Who do they play sport with? Kind of like really get a sense of how social is this person? What does their natural network look like? Who are the first 10 people that they want to know that they took this job, if they took it? That gives you a real sense of their ability to make use of a network and I think that’s probably my third piece of advice is just the power of a network. You’ll know from when I kind of launched Capsule, I kind of reached out to you, I reached out to family members to kind of link through, like through friends, no matter kind of how small that link is, I think I was always, I was, I’ve been super surprised at how, generous people have been with their time and with their advice and with their guidance’s. People that I didn’t know when I came into Capsule that have given me kind of regular, kind of on a biweekly basis, guidance thoughts, on what we’re doing and I guess that’s another key learning from Capsule is continuing to iterate. So, what we built to start with when we launched capsule is nothing like what it is now but that’s been driven by customer feedback and you have to keep getting that, like all of the time when you’re launching. I think we were slightly blinkered when we were building Capsule that we knew what we wanted to build and so we built, and we should have talked to more and more, like, I don’t think you can ever talk to too many potential customers about their pain. But then the big trick is, listening. Rather than just building what you’re planning on building, really listen to them about their challenges, listen to them about their pain and listen to their ideas and pulling all of that together. But that kind of continuing to iterate is so key is just kind of, we probably in a year’s time will look nothing like we look now, but focusing on that, the obsession with customer outcome and customer centricity, and then continuing to develop and learn is just kind of, we, we will never stop doing that, and hopefully that puts us in a good position to grow.
A: I think that’s hugely important too, I think so many times, you know, as an investor or um as an advisor, I’ve seen businesses come on the basis of we’re building what we think the market needs as opposed to actually what does the market need? Have we engaged with the market properly, do we really understand what the client or customer requirement is? So often it’s just ignored and it shouldn’t be because it’s the fundamental.
Thank you very much for your time, Thomas. That’s been great. Really appreciate, uh, your generosity of time and, and your input and some great pointers there for everybody. Much appreciated. Thank you.
T: Awesome. Thanks for having me, Andrew.
A: Pleasure.
Thank you everybody for listening to, Thomas Wynn, the CEO and founder of Capsule. Thank you for, listening to delivering Legal Solutions differently. Please do subscribe and leave a review. I would really appreciate it. Thank you.
