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Richard Joffe – Honey Insurance.

November 30, 2023 · Hosted by Dexter Cousins

Combining AI, Smart Sensors and Insurance to create Australia’s fastest-growing Fintech!

In episode 179 of Fintech Chatter Podcast, Dexter Cousins chats to Honey Insurance CEO Richard Joffe

Making his Fintech Chatter debut is Richard Joffe, CEO and founder of Honey Insurance, arguably Australia’s hottest early-stage Fintech!

Honey Insurance is the smarter way to protect your home and contents. Backed by RACQ, Honey uses sensors in the home to offer a new type of insurer whose focus is on helping avoid accidents and protect against damage rather than just paying out after events.

Dexter chats to Richard in the week he was awarded CEO magazines Entrepreneur of the year and Honey featured in the Deloitte Fast 50. Expect to see some massive announcements from Honey in 2024!

As a 3x founder, Richard shares his secrets on:

  • Building successful tech startups
  • The key differences between launching in the US and Aus
  • Attracting and retaining the best talent
  • Building a high-performance culture
  • Winning investment in a down market
  • Partnering with incumbents
Watch the 20 minute version on Fintech Chatter TV

About Honey Insurance

Honey is Smart Home Insurance, and they are on a mission to eliminate the 50% of avoidable accidents that happen to homes. Honey gives customers free technology and services from day 1 to keep homes safer, then rewards them with a lower price on their insurance.

https://www.honeyinsurance.com/

About Richard Joffe

Richard Joffe is the founder of 3 successful startups and currently the CEO of Honey Insurance. Previously, Richard founded Park Assist which automated the parking industry, and after expanding to 20 countries was acquired by TKH in 2012.

Then Stella.ai which automated the recruitment industry using AI, and was acquired as part of a $1.1 billion merger with Trustaff.

Formerly, Richard was a strategy consultant with McKinsey and an investment banker with Morgan Stanley.

Now with Honey Insurance, Richard has turned his attention to home insurance, where he is on a mission to give Australians free technology and services, to eliminate the 50% of avoidable accidents that happen to homes

Richard believes technology and automation can make everyone’s lives more efficient, so we can spend more time doing the things that matter most in life.

Links from this episode.

More on insurtech on Fintech Chatter.

More on high-performance teams.

Full transcript.

Lightly edited for readability — filler words removed, wording otherwise unchanged.

Dexter Cousins
Fintech Chatter podcast, brought to you by Tier One People, the leaders in executive search for fintech ventures.

Hello and welcome to Fintech Chatter, the show where I connect with fintech leaders for a bit of a chat. I’m your host, Dexter Cousins, and today’s guest is the CEO and founder of one of Australia’s most exciting fintechs, Honey Insurance, a smarter way to protect your home and contents. Richard Joffe is a three times founder, serial entrepreneur, and was recently recognised as CEO Magazine’s Entrepreneur of the Year. I chat to Richard on how to build a successful insurtech, the differences between launching a startup in the US, and Richard’s greatest lessons and insights gained from 18 years as a founder.

Strap yourselves in, folks, for a fantastic episode. And remember, if you enjoy this episode, please consider sharing it with your network. It really helps me spread the good word about great Aussie fintechs like Honey Insurance.

Richard, welcome to your Fintech Chatter debut.

Richard Joffe
Good to meet you, and thanks for having me on the show.

Dexter Cousins
Yeah, I think it’s long overdue actually. Some big accolades this last week would suggest that I’ve probably got my timing just right. We’re going to talk about Honey Insurance in just a little moment, but in the intro there I kind of noted two big kind of wins for you in this last couple of weeks. Do you want to tell our listeners a little bit about that?

Richard Joffe
Yeah, I mean, Honey’s been added for about four years. We launched publicly about two and a half years ago, June of 2021, and we’ve really hit our stride. We’ve grown from about 20 to 100 people over the past year. I got Entrepreneur of the Year from the CEO Magazine last week, and I think really excited that we were on the Deloitte Fast 50 on the tech side of things. So we were the sixth fastest growing tech company in Australia this year, which is just a great testament to the team.

And as you know, there’s just so much grind that happens behind the scenes, so it’s nice when the 1% of the time you can kind of pop your head up and actually just take a breath and smell the roses and realise that it’s working. It’s nice and important, I think, for the team. So it’s wonderful.

Dexter Cousins
Fintech in Australia, and I don’t know if this is the same in the US, but it’s kind of gone like the path of dance music in the 90s, where there’s all these derivatives of dance music.

Richard Joffe
Totally.

Dexter Cousins
But it was, to you, given that I pride myself on being across all of them and being agnostic to them all. But if there’s one area that I think is so tough to crack, and everywhere is tough to crack, but insurtech and insurance, what a… To be number six and to be an insurtech business is a real kudos to everybody involved.

Richard Joffe
Thanks, Dexter. Yeah, for sure, it’s a tough space, I think, to get to Fair space is what I’d say. I think once you have some scale and you have the capital and the team and product market fit, then the bar entry are very high is what I would say.

Dexter Cousins
Yeah. So what exactly does Honey do? Like, what kind of insurance do…

Richard Joffe
So Honey is a home insurance company. So we’re trying to create a digital home insurance company, a next generation version of what you’d see out there. Within the incumbency, there’s in Australia about five companies that control 85% of home insurance in Australia. To give you a sense, it’s mandatory, so you can’t even get a home loan without home insurance. So everyone understands it. Everyone knows the feeling of getting the price jacked up every single year. Loyalty taxes, it’s pervasive.

And so there’s a lot of things that are broken in the industry, from how pricing works to how distribution works to even just how people are engaging with their customers. No one’s really actually trying to reduce risk, for example. And so the idea of Honey is how do we actually reduce risk for people in their lives, they don’t actually make a claim in the first place. And then how do we make everything totally digital, right from how you sign up in three minutes to how you make a claim in hopefully two days, not 42 days, in terms of it getting sorted out. The aspiration really is to streamline it, so the insurance policy is actually supportive in your life and helpful, rather than just something that sits in the background and is difficult to use if that day comes.

Dexter Cousins
Yeah. So how do you go about actually helping your customers reduce risk?

Richard Joffe
Yeah, so we have a whole product road map at the moment. One of the things that we do, for example, is that when people sign up, we send them about $300 of free smart home sensors. So the three biggest things that can happen to someone’s house that’s avoidable would be flood, so typically your flexi hoses might bust, there might be a drip, for example, because you didn’t clean your gutters on the roof, so it’s flooding. It’s fire, and it’s theft. And of course, what people fear is not necessarily what the data supports. So people are very scared of fires, for example, but it turns out you should be much more fearful of flooding, as an example. Electrical fires are quite rare.

And so those sensors, all three of them do the same thing. If your fire alarm goes off and you’re not at home, you get a text and an email saying, “Hey, your fire alarm is going off right now. You might want to go home or make a call.” You get a text message as well if there’s a water leak. So typically people would put one underneath their sink or put one near the bathtub, areas like that. And then often they’ll put one next to the garage door or your front door, so if the door is left open or it opens when you’re not home, you know about it. So it’s almost like a very simple DIY home protection kit.

And when people sign up to Honey, they don’t just get that, but we actually give them a discount if they put it in. So the whole idea is how do we give people technology, how do we give them services, so that we actually reduce risk. So if you just want to buy a home or landlord policy, it’s like, “Hey Dexter, if you just want to buy a policy, it’s a great policy, easy, great coverage. By the way, if you want to put in the smart home tech, you get a discount.” And then we’re going to have other services and technology over time that get rolled out, where you keep getting discounts, for example, or subsidised equipment and services, in order to stay safer at home.

Right, so ultimately I think the bogey for what the industry should look like is actually having lower home insurance, and other insurance products as well. Over time the price should actually go down if people are better behaved, rather than the way it works now, which is that the behaviour of that individual person is not included in how the price works. Right, all we know is your house is your house. We don’t really take into account if you’re a good or a bad actor, so to speak.

Dexter Cousins
Yeah. So I’m getting kind of serious 2017 vibes here, when I used to be heavily involved with Insurtech Australia, and we’d have major insurers come and present, and they talk about this.

Richard Joffe
Yeah.

Dexter Cousins
But it all seemed like some dream off in the distant future. How is it in actual application worked, and what kind of feedback you getting from customers?

Richard Joffe
I mean, well, we have tens of thousands of Australians that have sensors now installed throughout their houses, right, so it’s at scale. To answer your question directly, Honey runs at a 91 NPS score. My understanding is that’s never been achieved in the history of the industry, anywhere close to that, in fact. And so the customer testimonials are kind of off the charts. The industry average range is from 6 to 30, depending on the a that you look at. And so 91 is, I think, a really strong indication at this point that people love the experience, both the purchase experience, the claims, the onboarding.

We’re now going to be launching in a couple of weeks a notification, so if there’s bad weather in your area or something to be concerned about, you get a text message to give you a heads up ahead of time. We get us satellite footage on people’s roofs and their outlying areas, and we’ve built AI to detect if there could be something happening, for example, if a tree is about to fall in your house. So we’re building a lot of really interesting tech like that to actually try and proactively keep people safe.

And so I think the result: people have a very low expectation of insurance in Australia, right? It’s been an incumbency. No one’s jumping up and down saying, “I love my insurance company.” It’s just not true. And so we have an opportunity to really change that mindset from something which is very much a grudge purchase that people don’t want to buy, to something where people feel they actually getting value for their money, and hopefully are actually better off for spending their $2,000 a year.

Dexter Cousins
Right. You know what, you’ve just kind of backed up a sales pitch that I gave a candidate who’s just accepted a role with an insurer. And he’s a technologist, and my pitch was, “Hey, it sounds boring, but I think insurance is going to be the most innovative place out of all kind of fintech that’s out there over this next decade,” for the very reasons that you just mentioned.

Richard Joffe
I think it touches everything, right? Listen, we have a very low baseline of expectation, because if you think about what incumbents within the insurance industry are doing there, they’re largely protecting a back book, which makes sense. If you’ve got 1 to 5 billion dollar in premiums, for example, in Australia, the question is how do we manage that? How do we make sure we’re getting the most dollars out of those existing customers? And not thinking about how do we invest into innovation for those customers, because they’re your customers already, right? And so there’s not really such a tangible return on investment.

And a lot of people that are running these incumbencies are much more incentivised to kind of keep their jobs, I would say, than they are to swing for the fences, right? So it’s not like someone makes $200,000 and they could make up to 2 million if the company hits it out the park. That’s not an economic reality for most people in an incumbency. They make a salary and they may make 10, 15% more in bonus. And so both the incentive structures and the nature of their business model is such that they have Innovative dilemma. It doesn’t make sense to take significant existential risk and invest in that kind of way. So they’re being rational in the way they behave.

I think that we have the benefit, with a clean slate, to be able to say, okay, well, what should the future experience be of a consumer, in our case of home insurance, but the same thing goes for pet and small business and other areas, motor. What should that future experience be? What should the economic relationship be? And because people literally never hear from their insurance company other than if they make a claim, which is 6% of the time, there’s an opportunity to actually create a more intimate relationship with customers, where we’re able to be proactive and try to use data for the better to help them save money. And these are all really interesting spaces, I think, for us to work on.

Dexter Cousins
I think one of the reasons why I love recruiting for fintech so much is its complexity. So the kind of Facebook mantra of move fast and break things, you just really can’t do that in an insurtech or fintech, because you’re likely going to end up in trouble with regulators.

Richard Joffe
Absolutely.

Dexter Cousins
The other complexity is the capital management piece.

Richard Joffe
Yes.

Dexter Cousins
And we’ve talked about some really innovative tech that Honey’s involved in, but you’ve then got this whole other side of the business that is kind of, must keep you awake night as well. How do you manage those two almost like paradoxes?

Richard Joffe
Yeah. And so when I set up Honey originally, I realised that there were two very different businesses that could exist. And I think when you look at a lot of the businesses that haven’t worked globally, many of them stepped into underwriting. And so instead of focusing on the insurtech piece, which is really about digitisation, it’s about distribution, it’s about novel experiences for customers, and data, instead of focusing on that area the value chain, they stepped into the capital management. And if you think about the skill set that’s required there, that’s a game of scale, reinsurance purchasing in Bermuda, that’s about catastrophic risk modelling of cyclones. Like, it’s a totally different skill set, and there’s no question an incumbent is better at that than an insurtech like us will ever be. And so I’ve tried to avoid that desperately.

And so we have a partnership with RACQ. They’ve been wonderful. The CEO of RACQ sits on our board, David. They’re the largest shareholders of Honey. And so RACQ do the underwriting component and they absorb that risk, which means Honey can focus all of our time on those other components. So we focus all of our time on how to work with Bank of Queensland or with AGL, with all these great partners, on distribution, on digitisation for customers, novel experiences, and of course data.

And so I think it’s really important to kind of know where is the area that you can add value in the value chain, and make sure that you don’t meander into diluting your ability to focus on that. But yeah, there’s no question a startup can never be balance sheets competitive against an incumbent. I think that’s a foolish battle to try and fight.

Dexter Cousins
I wanted to talk a little bit about the Honey business and the journey that you’ve been on.

Richard Joffe
Sure.

Dexter Cousins
So you mentioned in the intro, 20 to now over 100 people in the space of 12 months. Not just any 12 months. When you look at the data, the funding levels that we’re seeing in fintech and Australia back to 2017, 2018 levels. To see that you’ve been able to grow the business, bring on and create that many jobs in a time where a lot of businesses have been making redundancies, one is, I think, incredible. But to do that, I’m assuming you’ve had to raise capital as well. How have you gone about that, given the climate that we’ve been in this last 12, 18 months?

Richard Joffe
Yeah, I think the traditional way to raise money is that you’re not going to venture capitalist store, of which there are limited options in Australia, and you say, “This is my widget. Do you want to fund it?” I think the reality is there’s lots of different capital sources. There’s venture debt, of course, is venture capital, is venture debt, there’s family offices, and there’s international investors. And then ultimately there’s also customers.

I am a huge proponent of always raising money as much as you can from value-add, which to me is thinking through what the biggest failure point for a startup, and then how do you raise money from someone who can solve that problem. So when we started the business, we raised about 15 million or so out the gate in a seed round. That money came from RACQ as the underwriter, and from our distribution partners. It came from AGL, and it came from Metricon and murac and all of these folks that could help us get the product designed and ultimately start to get it sold in the market, with that kind of build that muscle.

And so I think, as a starting point, you have to be very clear about where is the best money to help de-risk a business. And often people don’t like doing that, because if the smartest person who’s closest to the problem, that customer, doesn’t like what you’re doing, the truth is you need to be looking in the mirror and asking if you’re really solving the right problem, right? So I think it can be quite difficult for a lot of folks.

But I think ultimately I’ve gone to a lot of the customers, and most of the money that we’ve raised so far has been from… Raised about 40 million so far. There’ll be a big announcement on another funding round in first quarter next year. And most of that money has really come from strategics. So I’ve really focused on customers as the funders of the business, and the partners, and helping to build the business, as opposed to just getting money, so to speak.

Dexter Cousins
Yeah. One of the big challenges, and it’s almost like this cycle that we go through every few years, Richard, here in the fintech ecosystem down under, is this tenuous relationship between incumbents and the startup community. Somebody came up with the term frenemies, and there’s always this tension. And sometimes it’s like we’re friendly, and then other times it’s been quite hostile. 2017, 2018, it was pretty hostile. There’s been hostility kind of re-emerging, I think, over this past 12 months. How have you then been able to forge such productive relationships with your investors and your customers?

Richard Joffe
I can speak to some of the other headbutting I think that’s probably happened. My observation, as kind of an outsider that’s now somewhat in the inside, from outside of Australia: I think in places like the US, I moved from Palo Alto, San Francisco, right? So I think when you’re in places like the US, it’s so competitive that the incumbents are highly incentivised to find ways to partner on core value props. Whereas when you’re in a smaller market like this, especially in oligopoly like we have, the incumbents are not incentivised to really experiment, right?

So when I originally came to Australia and I met some of the incumbents, they told me flat out. They said, “Listen, our biggest profit pool is where you’re looking to play. We’re not going to help you get to market, because we’re not under threat,” essentially. And so I think in an environment that’s highly competitive, you have less of that headbutting, you have more collaboration, because there’s a genuine feeling from both startups and incumbents that they will always be under threat. They don’t have a monopoly, so to speak, when oligopoly, right? I think in an environment where everyone’s cosy and protected, whether it’s banks, insurance companies, you name it, right, supermarkets, it doesn’t matter, they’re not under as much threat. And so the consequence is that they can be much more isolationists when it comes to actually putting core profit pools at risk for innovation. So I think that’s just one observation.

But in terms of how we did it, I went to companies that were interested, for their own selfish reasons, in improving their core retention. So for example, if you think about an energy company, or a retailer, or a telco, or any of these companies, ultimately they don’t really care about insurance. What they care about is, “I sell a house, or I sell home internet, or I sell energy and gas, and I want my customer to be really, really happy so they stick around for longer. That’s my core metric as a business. And if you can give me a 91 NPS score and this amazing experience of my customers through insurance, yes, we’ll make a bit of money there, but really what I care about is how do I improve that core retention.” The customer, through bundling, is going want to stick around for longer.

And so I spent a lot of time with companies who are interested in customer experience, not just making a dollar on an extra value-added service. And if that’s the case, they’re going to be highly motivated to try and partner. And so didn’t go to the big insurance incumbents and say, “Help me, help me,” right? What I did was I went to all of the distribution partners and I said, “You are selling a core product. If we’re right, we think that we can really wow a customer. We can keep them safe, or we can really shake something up and do something special for them. And the result is that if we’re using your brand on this experience, then your core product will be stickier,” right? And so I think their motivations generally were to do right by their customers and create a stickier experience. And so that trumped kind of getting involved in the small oligopoly and hoping someone would break rank, which I think is always challenging.

Dexter Cousins
Am I right in saying that you were quoted as saying something along the lines of, it’s easier to get a startup off the ground in Australia than it is in the US?

Richard Joffe
I think in some ways it is. I think in some ways it is. It depends a lot on the type of startup, obviously. I think Australia is much easier to replicate than it is to innovate, at least in the early stages of a business. If you think about Australia, you either have to think small or you have to think global on day one, right? Like, that’s as a general concept. And I think in America you can think big and domestically on day one, just because the size in the market. And so you’re very incentivised, and the investors are very incentivised, to tell you to do things that are super innovative and novel, because the stakes are so high. In Australia, it does lend itself better to replicating, so to taking what’s working already in other countries and localising that. So I think the playbook is different.

But I do think in Australia it’s far less competitive. I think there’s not that many entrepreneurs have done it several times, and there are a lot of great early adopters and partners who want to innovate on the company side. I’ve been really heartwarming, I think, at how many Australian companies have wanted to step up with Honey and work with us to innovate. And there is kind of an open field, I think, for that right now.

Dexter Cousins
This isn’t your first rodeo, and you kind of made my transition really easy here to the next part of the discussion, which is: the podcast over the last four years has become almost kind of an archive, where the next generation of founders have listened to it and have been inspired, heard ideas, alternative ways of raising capital, of going about growth, of getting product market fit. And it’s fantastic that I’ve been able to share knowledge of experience people like yourself to a broad audience. Given that this is now your third rodeo, what would you say was the kind of biggest thing that you’ve taken from the previous experiences, when, right, “Next time I’m not doing this”? What was that? Is it one thing, or…

Richard Joffe
Yeah, I mean, I don’t think there’s a single silver bullet. I think clearly, at least for me, I’ve changed the way that I think about building. My first company was Park Assist, which is all those green and red lights that shows you where to park your car.

Dexter Cousins
Oh yeah.

Richard Joffe
Which is an automation play, based out of New York, went about 20 countries or so. The second one was US only, and it was an automation play in the recruitment space. So the idea was to automate recruiting departments, and SEEK and other customers and partners invested. And this one, of course, is an automation play in insurance.

And I think what I’ve learned on each of those steps: Park Assist, I think one of the big things I learned was alignment. It’s okay if you want to have a small, tightly controlled company that grows relatively slowly, and it’s also okay if you want to shoot for the stars and build a multibillion dollar business. But if you’re not clear in day one with what you want, and you end up hiring people or having co-founders or having investors or customers who want different things, then it becomes really spaghetti pretty quickly. And it was incredibly challenging in that business, because we just had people that wanted different things. And none of those things are wrong, by the way.

But every single decision becomes extremely complex and almost impossible to make if one investor wants to get on a 3s and the other wants eights. And if you have a co-founder who wants to make 3x and a different one who wants to make 30x, those are different things. And if you have employees who want to do a two-year run versus 10 years, and be very safe and comfortable, there’s nothing wrong with any of them, but I think alignment is critical. And so I’ve become like stiring about alignment, right? Like, this is the North Star: we’re going to be one in 10 houses in Australia by 2028. This is the strategy. This is what the multiple is on exit. This is how we think about incentives, equity. Like, it’s crystal clear. So I think I made a lot of mistakes in my first company around alignment.

In the second company, I think I learned the importance of taking customer money as opposed to traditional venture money, at least in the early stages of the business, around product market fit. I think at all costs you want to get customers to have skin in the game. Now, that could be that you offer, Dexter, my new service that costs a million dollars for a 10e license, and I give it to you at half price in exchange for you giving me some feedback once a quarter, whatever. Whether it’s a deposit, a discount, an investment, sitting on the board, just at all costs get them to have skin in the game, because you need that feedback. Honest feedback is just invaluable. And everyone wants to be polite, so they’re going to tell you it’s a lovely idea, but then you go build it and they don’t buy it, or they buy it and they don’t tell you why it’s wrong. And so there’s nothing that’s more powerful than feedback. So I think alignment is critical. I think taking money in the pre-product market fit stages from customers that are close to the problem, I think, is critical.

And then the other thing, I think, is overpaying for top performers. I think that there’s a tendency for people to always just look at the middle of the bell curve, right, and say, “Well, the difference between good and great is $20,000, so let’s just pay that.” The reality is someone who’s exceptional is really worth three, five, 10 times someone who’s average. And we don’t think about it like that. We always think, “Well, that’s not equitable, that’s not fair,” and I think that that’s actually just not true.

And so I’ve become… I don’t get to make all my own decisions running the business, I have investors, but I’m a very big fan of overpaying equity, for example, like disproportionately overpaying equity, for top performers, because if we create value, they should be a part of that, and they should disproportionately be a part of that. Nothing would make me happier than there being dozens of millionaires out of Honey in the next three or four years. And they deserve it, by the way.

Dexter Cousins
So I wanted to talk you about, I guess, the culture that you’re building here. And really impressive office space, even more impressive that it’s full.

Richard Joffe
It’s true. True.

Dexter Cousins
What is the secret sauce to getting everybody here under the same roof, and kind of building together, versus them kind of all in the bedrooms everywhere?

Richard Joffe
Well, I think I’m very clear…

Dexter Cousins
From Bondi, working from home.

Richard Joffe
True, true. Well, look, we obviously, as you said, we have a great space. People are very well compensated on equity. There’s only so much you can do on cash to compete with incumbents, that every single person in this company has equity, and in some cases meaningful, meaningful equity. And so people really feel like they’re in it. So I think having a clear North Star, having everyone have skin in the game matters. I think as well, being super transparent matters.

One of the things that is most important to me is trying to make Honey the first stop on many people’s journeys, where they ultimately will become entrepreneurs or join other early stage companies. I will or won’t build again, I don’t know yet. I would love to, if I have the energy to stay on the field, as they say, and take the hits. But there’s the PayPal Mafia and the eBay Mafia and the Google Mafia, and I think that it’s an incredible thing to create a company where people go off the next 15 or 20 years and they can use the money they’ve made here, and the skills they’ve made, and what they’ve learned, to have a Honey Mafia, so to speak, and they build together and work together. And that to me would be one of… That would really be something I would… been an extraordinary thing to reflect on, I think.

And so I try to be as transparent as I possibly can with the team. We do fireside chats. I try to do one-on-ones as much as I humanly can. We have almost an open book policy, essentially, on everything. And I do that because I want people to actually understand what’s inside the box and how it works, so that they can go off and do it again, right? They’re not just in their own silo. So part of that is important so they understand how their day job contributes to the broader picture, but I think part of is just skill set. You learn by osmosis, and there’s not really a replacement for somebody telling you why they’re nervous about this, or this may not work, or why we screwed up about something.

And so I think for me a lot of it has to do with how do we equip people with the skills and the knowledge, so if they want to go build again or join another early stage startup, they’re empowered to do that. I want people to leave into a 3s, really, I do. Because I think a rising tide raises all boats, and I think the more we can skill people up and they go off and do other things in the Australian ecosystem, I think we all win in the end.

Dexter Cousins
I’ve been quite bored by the kind of conflict between work from home versus being in the office, and it’s been really quite exhausting actually, to have so much data that comes not only from quantifiable data, but qualitative data, of sitting opposite people like yourself and privately sharing me all the things that are going on the business and how the business is performing or not performing. And I think ultimately what’s really kind of stood out to me, Rich, is I’ve had top performers say, “I don’t want to work in a place where it’s remote and remote first, because I don’t feel that I’m learning. I don’t feel like I’m being challenged.” I don’t feel like… that thing that you said about osmosis.

Richard Joffe
Yes.

Dexter Cousins
And I’ve often equated startup life to being synonymous with elite sports. It takes the same kind of person: discipline, resilience, all of those things. Structured, clear vision, clear goals, being able to visualise the outcomes and make the sacrifices. And I think that a lot of the narratives that we put out there on social media around startup life kind of glamorises it, rather than presents it for what it actually is.

How have you then been able to attract talent to the business, if you’re so transparent and everybody’s in the office? Surely… I know that people say money is not important, and equity, it’s a nice kind of carrot to dangle, but for the best performers, my experience is that’s not the thing that’s going to get them across the line. What have you found been the kind of secret like you sources to getting top performers into the business?

So for say, I’ll say, I think everything that you’re talking about is kind of contradictory. Sorry to interrupt, but it’s contradictory to what pretty much everybody’s saying out there that top talent wants.

Richard Joffe
Well, look, I think a couple of things. I think, firstly, I think startups in a way are kind of like marriage, right? There are norms to what works, but there are also plenty of outliers, and that can work. So I think there isn’t a single one size fits all, but of course there’s a bell curve, and 85 to 90% of the B should fit into something that looks kind of similar. Okay, so I’ll start by saying there are people that have built completely remote companies that have worked. I’ve never seen it, but it does exist.

So a couple of thoughts. Firstly, I think money does matter to a lot of people, more than is socially acceptable to talk about. We feel we need to talk about purpose all day long. The reality is most people have kids, most people have a mortgage, and I think it’s actually intellectually dishonest to say it’s only about your passion and purpose. I don’t think we live in some…

Dexter Cousins
I’ve got some evidence to support that, right? So, and I actually believe in transparency as well, and part of my process is we talk about salary up front, before even meet with the client. And the response to the question is, every time, “Money’s not the motivator.” And when I share that actually has spend about 10 hours of a process just negotiating your salary, so it must clearly be important.

Richard Joffe
Yeah. People are really reluctant to talk about. I think that we’ve been socialised into this not being a topic, which I think is a disservice to people, and I think it’s a little dishonest. Clearly this three or four lever is a matter, and for everyone there’s a different component to that. Some people might inherit a lot of wealth. I mean, obviously everyone’s different, so let’s not try to over-structure everyone’s response. But I think you’ve got the financial package, you’ve got the quality of work that you do every day, you’ve got the people you work with, the direct people and your direct manager, being more important than the culture of the company. So there’s a higher correlation, as you might know, between whether people stay in a business based on their cultural fit with a team than a company, right? And so, for example, engineering teams across companies have a much more similar culture than engineering and sales teams within that same company, as an example. And then, clearly, the skill set and learning.

And right, so my experience has been, firstly, I think it’s very important for people to understand exactly what does the equity mean. So if we sell the company for $300 million or $1 billion or $3 billion, what does this mean? You get 50,000, 250 and 500. People then understand. And by the way, in order to get there, this is what the revenue and EBITDA needs to look like of the company, which means this many customers in year two, four and six. And then if you can outline that articulately, then people get that.

When I was in San Francisco, I learned that trick from a company called paler, which is the biggest, I think, biggest data science company in the world. I thought, the first time I saw an offer letter from paler, one of my engineers brought it to us, and I kind of laughed. I was like, “Oh, how can you put 20 billion and 100 billion on paper? This is obnoxious.” And then I realised that actually it wasn’t a ludicrous idea, meaning if you tell somebody you’re getting $10,000 of shares or 500 shares, no one knows what that means. But if you’re able to actually articulate and say, “Listen, this is what it means at this value, this value and this value,” of course you can’t predict the future, no one has a crystal ball, but then people understand, as the company’s tracking, what it means for them and their family.

And so I think, firstly, I think it’s underrated, making sure that you’re very clear with people about what the equity is likely to mean in different cases, and laying that out. I think most, nearly all startups have seen do a very poor job of that, and the consequence is that you give away equity either to people who don’t value it, or you aren’t giving the right amount to people. Okay, so that’s the first point.

The second, I think, is that if you want to hire exceptional people, our job is to set the North Star and then support them getting on with it. These are not children. These people are incredible, gifted professionals, and it’s, I think, again, very demoralising to go micromanage people and tell them how to do their jobs and resource constrain them. Like, either you want to play that game or you don’t. And so I think it’s important to be clear about what the outcome financially is for people, because that is important, more than people claim, and should be, by the way. The second is I think it’s very important not to micromanage, and just be clear on what leadership and the strategy is, and then give them all the support back into the hill getting there.

And then the final thing, I think, is I’ve become progressively less tolerant of underperformers, or call it B players, average performers, as I’ve gotten on in my career. And I’ve realised, as I’ve gotten on in my career, what happens when you allow people to stick around that are not high performers is it’s actually irritating to the high performers, and they leave, right? So it’s not so much that the average people are destructive to the business. Let’s put aside people for a minute that are actively destructive and poor performers. But the average performers… the people that are great, working crazy hours, that are super gifted, look around, they’re like, “Hold on a minute, kind of, I’m in the same cohort as this person. I’m not really learning from them. I’m carrying their weight.” They become resentful and they pull the pin.

And so I think what’s important is the financial component, and being very clear about what it means practically. I think that rarely happens. I think it’s very important that you play a supporting role with the North Star and then kind of get out people’s way. And I think over-management, micromanagement, I think, happens a lot in startup world, because you were the only person there on day one, and it’s hard to transition intellectually to let him go when it’s your baby. And then I think the third one is you have to be fairly ruthless about ensuring that you remain a high performing culture. You can be supportive and coach people, but I think it’s very easy over time to not have hard conversations, and the consequence is that your best performers end up shopping around. And that is, I think that’s very dangerous.

Dexter Cousins
Yeah. We’re kind of in a period where terms like vulnerable leadership, creating psychological safety, or terms that are being thrown around in startup land, where I kind of really struggle to understand how they’re actually synonymous with the environment that people are getting into. And it seems…

Richard Joffe
I think it’s absolutely nonsense. Yeah, honestly, I think it’s absolute nonsense. And I think then you need to go to a big company where there’s a culture department. And so, like, startups are a blood sport. They’re a complete blood sport. I’m going to give you, like, an axe and a bat, and it’s 3:00 in the morning, and you’re outnumbered 100 to one, and by the way, you have $2 in your pocket and no food, and I expect to see you on the other side in one. Good luck. It’s like, what I mean… So I’m not suggesting for a second that you shouldn’t be an upstanding person and do your best to help it, of course. But I think this idea that it’s 9 to 5 and work from home any day you want, and, you know what, if you’re not performing, let’s take the next six months and think through it, you just die. Like, you have to be…

I mean, only one in seven companies that are venture funded Series A return positive money, meaning six out of seven on neutral will die. That’s from Series A funding. Forget about seed, forget about pre-seed. So this is a very hard sport, right? And if you’ve done it before successfully, it’s one in three. I mean, there’s no you into Series B and C, right? The odds are statistically against you. Even though everyone walks down the aisle think they’re going to make it, you know what I’m saying, and half of the world gets divorced, right? So, and it’s much worse in startup land.

And so it’s not that I’m not empathetic to that. I just think there’s an age and stage of a company where you can start to have those sort of luxuries, for lack of a better term. And if you want to join an early stage company, you’re going to be working for less money, much longer hours. The benefit is that you learn enormously, you have equity upside, you’re working with high performers and interesting problems. But you kind of have your cake and eat it too, right? Nothing great gets done 9 to 5 or chilling on the beach. It’s just not true. And so if you want to create, if you want to build, whether that’s wealth, incredible products, help to move an industry forward with an interesting problem, then you’re kidding yourself if you think you can go to the Olympics and train two hours a week. It’s just not true.

Dexter Cousins
Right. And in terms of, I guess, the group that you’ve got together, is it mainly tech people? You got sales, product? How’s the business structured?

Richard Joffe
Yeah, so the business is about 50/50. About half the company are in the contact centre, so that’s anything from sales to claims to learning and development. And then the other half of the company, which is about 50 people or so, are mostly technology, so engineering, design, products. There’s a few kind of talking heads like me, but for the most part it’s… So we really have two companies. We had to build a technology company, which is the world that I’ve largely come from for the last two decades, and we’ve had to build an insurance company.

And there’s been several things that have been quite hard about building Honey, but I think one of them has been that we’ve really had to build two companies, and those two companies actually have very different DNA. So finding people like… We’re incredibly fortunate to have, like, Galia Durbach and Angelo AAR and ow and try, and these incredible people from the world of insurance who wanted to shake up things in a way that’s different. It’s very hard to find people that have spent time within the incumbency but have said, “You know what, we can do better if we start with a blank sheet of paper. How exciting would that be? Let me let go of what I’ve been building and protecting, in a sense, for decades, and help to build what the future should be.”

And so we’ve had to find people from incumbencies who want to build a future, along with these kind of move fast and break things technologists. And you couldn’t think of two more different personality types, right? Like, an insurance person, by definition, they spend their whole life calculating the probability that Dexter is going to trip on this camera, fall down the stairs and then hit the umbrella, right? Versus the technology people, who are thinking, okay, three, four, two back, three, four, two back, just move, move, move. And so getting those people to bind together and build together has been amazing, but it’s been obviously challenging to build that type of team.

Dexter Cousins
Actually, really, your kind of success rate in doing that is extraordinarily high. So the data that I’ve collected over the last seven, eight years shows that, particularly for an early stage business like Connie, nine out of 10 exec Sol leaders who move out an incumbent into this environment he within the first six months.

Richard Joffe
Yeah, I believe that. I believe that. I think one of the benefits of having done it several times is that you know the right questions to ask. There were several people that did join in day one that didn’t make it. There were several people that said they would join that just in the end didn’t quit their jobs, two of them. So I think what you see as the veneer is different the reality, right? If there was six people joining on day one, only three really joined, as an example, right, on the exec team. So firstly, it wasn’t so simple.

I would say that once you’ve done it for a while, you can just be more honest with people. You’re like, “Look, this is what you’re signing up for. This is what’s amazing about this ride, and this is what’s going to be really tough about this ride.” And I think the more experienced you have, the more you’re able to ask the right questions and be honest with people. And so people kind of self-select in or self-select out.

Dexter Cousins
Self-selection is what I keep saying to my clients is the most powerful recruitment tool that I know of.

Richard Joffe
Yes. And it’s tough, right, because you want to sell people, and you desperate to get this amazing person to join and to build with you. The reality is, if it’s not actually the right thing for that person, then you doing them and you a disservice. And so I spend a lot of times early, when I’m building companies, to try and understand, on the founding team, what’s actually right for that person, right? Because if someone’s got three young kids at home and the doesn’t work, and they’ve really been at a big company the whole time, and maybe this isn’t the right thing for them. Maybe it is in 10 years, but maybe it’s not the right thing today, right?

And so I think it’s very important not to just sell, sell, sell. I think it’s very important to rather just try to figure out what the truth is. What’s the truth for this customer? What is the truth for this investor? What’s the truth for this potential founding team member? Right, like, what is actually the right answer for them? Should they be an early adopter? Should they put in money? Like, what… And I think the more you’re just searching for whatever the truth is with these people, without being attached to just selling, selling, selling, which is of course the default for all of us as founders, I think the more likely that you actually get the people on that stick and go, “This is exactly what I wanted. It’s the right thing for me. Of course I want to be an early adopted customer. Of course I wanted to fund you right now, I knew what you were thinking about.” Or, “Of course I knew I’m taking a 50% pay cut, but I can create significant wealth. My family’s on board for this. This is exactly what I wanted,” right? And I’ve made a lot of mistakes in the past, overselling essentially.

Dexter Cousins
Such a powerful distinction that you make, Rich. I’ve got something that I’ll say to clients, is that hiring the right person at the wrong time is still the wrong hire.

Richard Joffe
100%.

Dexter Cousins
And we often see that you identified an amazing person, but there’s so many different phases of growth that you’ve got to go through require very different people, with different skills, different attitudes.

Richard Joffe
Absolutely.

Dexter Cousins
And it’s just, as you say, it’s just so difficult for founders who are so attached to the business and the outcome and the mission, and they want everybody… Like a kid, you want everybody to love it and think it’s beautiful, right? And to kind of stop and just accept that moment of truth, right, which, this is not the right outcome, has such a… You can have such a positive impact on the business.

Richard Joffe
Yeah, it’s hard, because I think the right mindset is to hold two ideas in your brain at the same time, which is very challenging, right? The one is, I’m likely to die, right? No matter how good you think you are, no how good your idea is, no matter how much feedback people have given you, you are statistically likely not to make it, by an order of magnitude. And then you also have to hold in the head the fact that, with your pom poms, we’re going to make it, we’re going to get there, 100%, unwavering, because every single investor you meet is a pessimist, right? So if you ain’t an optimist, you’re dead.

And so you have to kind of hold these two very challenging things in your brain at the same time, which is, “Oh my God, I’m not going to make it statistically. I need a backup for every single person on the team early on. I need to make sure there’s 100 investor meetings, not 10. We need to make sure that if we’re late by three months, we have enough cash.” You’re constantly thinking, on the one side, how do I not die, how do I not die, how do I not die, back up, back up. And the other you’re like, “Of course we’re going to make it, of course we’re going to make it.” And it’s very hard, I think, for anyone to hold those two ideas in your head, but you have to if you want to make it, I think.

Dexter Cousins
Yeah. I was just talking to somebody this morning about this, and we got on the subject of ego, and it was like, look, ego is essential to be a founder, but my observation has been, I think the most successful founders have known the moments to drop the ego and not let the ego get in the way of making the right decision, or the right reaction or response.

Richard Joffe
Yeah, I agree with that.

Dexter Cousins
We’re coming to a wrap up, but before we do, we’re at the close of another year. Can’t believe I’m saying that. It’s obviously been a massive year for Honey. What can we expect in 2024?

Richard Joffe
Yeah, I’m super excited for the year ahead. We’re ramping up, so the business will be hiring a lot of people. We’ll be making a very big announcement in the first quarter, which I think will be one of the biggest funding rounds, certainly in fintech and insurtech in Australia, ever. And we have, I think, two of the top 10 brands in the country we’ll be launching with Honey as well, so we’ll be announcing that in the next three or four months as well. So we’ve got some amazing partners. We’ve got some amazing tech and services that our product and engineering team is working on to really wow customers, which I’m super excited and proud of. And then we’ve got amazing investors joining the group as well. So we have a lot going on, and certainly there’s no slowing down inside, which is the way I’d like it to be.

Dexter Cousins
Awesome. We get amazing talent listening to this show. I’m sure some of them are listening now and thinking, “Wow, sounds like a great place to work.” Somebody’s interested in potential career at Honey, where’s the best place for them find out more?

Richard Joffe
We’re on LinkedIn, of course, but honeyinsurance.com, www.honeyinsurance.com, is where all of the job ads are put up. And then our LinkedIn is pretty well trodden as well. You’ll see a lot of updates and job openings there as well.

Dexter Cousins
Well, Rich, it’s been fantastic to find out more about Honey. I’m really excited for you for next year as well. It’s amazing. Thanks for sharing all your wisdom and insights as well, and good luck to you and the rest of the Honey crew.

Richard Joffe
Thank you, and thanks for having me.

Dexter Cousins
You’re welcome.

As always, folks, you can connect with me on LinkedIn. If you’re new to the show, make sure to give us a follow on your favourite podcast player, and if you’re feeling generous, please leave us a review. It really helps me book fantastic guests like Rich. If you’re coming back, thanks so much for your support. You got no idea how much it means to me. And until the next episode, keep well.

Fintech Chatter is produced by Tier One People, leaders in fintech executive search. We’ll find world-class leadership talent to build world-class fintech ventures, and you can find us at tieronepeople.com.

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