1524 – Streamlining Surety Bonds with Propeller Bonds’ Aaron Steffey

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0:58with us right now it's the co-founder and co-ceo of propeller bonds aaron steffi thank you so much for joining us thanks josh appreciate it your website is propeller bonds.com all right aaron what are propeller bonds basically it's uh you know we we kind of automate or streamline a very archaic segment of the insurance world called surety bonds or fidelity bonds. And, you know, insurance already is kind of an archaic landscape, but then surety bonds might be, you know, the worst of the worst as far as very paper intensive seals. It deals a lot with local government, which we don't have to get into, you know, the weeds of it.

1:45But essentially, we launched a product that we distribute through insurance agents and brokers to streamline that process. And it's really just a time savings. It's an efficiency play to just allow you to transact these things much more efficiently and a much more cost or time effectively than they ever had been before. And so were you previously working with an agency or a carrier before? I I mean, how did you know this world knew that this was an archaic system that needed to get fixed? Yeah, yeah. I really built it kind of from the inside out. So I launched it with my cousin, Chris Colger. But I was on the agency side prior.

2:27So these things, the surety bond requests used to come through our agency occasionally. And it would be like, oh, my gosh, I can't. I don't want to handle this. This is going to take an hour of my time for a very small amount of premium. And but it's kind of a nuisance that you have to do it for your customer or else they're going to go get it somewhere else. And then you risk losing the entire account. So oftentimes it follows construction, construction insurance a lot. So if you deal with contractors, they need a lot of surety bonds oftentimes. And so anyways, we yeah, we launched and and that's kind of was my background as I just kind of understood the pain points from the agency perspective.

3:08the insurance agent perspective. I grew up in an agency and my cousin, Chris, kind of understood it from the carrier perspective. He was working at Chubb prior to joining us. So we kind of tackled it from both ends and met our technology partners in the middle. Yeah. Well, and that's the thing that, you know, kind of the missing component there is the tech. And so here you are starting with, kind of feels like there's some tech heavy company. And so that takes some huevos to do that. So what led you to believe that you could solve the technical solutions? Yeah, really our partners. So it's a good question because I think, you know, from inside every industry now there's, you know, there's construction tech, there's property tech, there's fintech, there's insure tech.

3:59and from inside the industry, I think going back 10, 15 years, the tech piece sounded insurmountable. Like I wouldn't even know where to start. I wouldn't know where to find this tech. I don't know how much it is. I wouldn't know how to build it, et cetera. But what we did and what I think more and more people are beginning to do is we did a joint venture with a tech company. The story is pretty long about how I got to know them, but they're based out of Australia. and basically they came in as a partner and what they provided to the business was the upfront technology whereas we provided the expertise and the guidance on where we were going so we partnered with the tech rather than paid for it and outsource it and so you know that's that's kind of how it all came to be so we started with just like a minimum viable product to get there it took a long time you know there's a lot of trust building and whatnot that went on before we got there.

4:53But now that I've done it and realized how achievable it is to build your own tech company, and it's, you know, once you go through it once, it's you figure out a lot of the things that, you know, a lot of the mistakes you can avoid in the future. And so now I would, I'm very much an advocate of people doing this, because I think what happens is oftentimes these tech companies are from outside the industry. So they just see, you know, a shiny object where, hey, we need to build a tech company within this industry, sell it for a bunch of money, etc. Let's go hire some people from within the industry to kind of show us where we're going, which I was one of those people at one point in time.

5:32And I love this kind of new reversal where it's actually people from within the industry leading the charge. And let's go find the tech people along the way. And I think that oftentimes solves the problem much more holistically. I think that, you know, we really were thoughtful when we launched our product because we were the people transacting these bonds. So we thought about every different little nuance and pain point of the process. Not to say that it was perfect day one, but it was a very well thought out product because it was people from within the industry. Yeah. And so then there's obviously, you know, you've got this, you're like, I think there's this problem in the marketplace.

6:15What did you do to validate the idea? Yeah, so that's a good question as well. I mean, I was fortunate enough to have other friends within the industry, other agency owners and whatnot. So it started out with my agency. We kind of tested it and validated it with our agents and some of our customers using the platform. And then I enlisted some kind of friendlier agents that were willing to try it out, test it out as well. So I think that's where a lot of our validation came from. And then since then, it's mushrooms so quickly. I mean, we've signed on in two and a half years, we've signed on 2 ,700 insurance agencies that use the platform.

6:55So, you know, it's just been it, it truly was one of those stories that you hear about that we sold our first bond and then just kind of had a line out the door ever since like it never really looked back. Yeah, it's pretty bizarre. Now, someone might look at that and go, oh, well, yeah, great for you. But that's not to say that there's a lot of work that went into creating that. It's not just that you've got the best hotcakes in town. You do have a great tech solution, but there's still a lot of thought, strategy, and activity that goes into managing growth and sales. Talk about your role in that.

7:39Yeah, I will. The best hot cakes in town. Oftentimes, if you looked and if you looked in the kitchen behind the scenes, it's still chaos. And that's kind of the situation with us. We've but we've scaled very appropriately. I mean, so we kind of operate the business in two distinct silos where I run the growth side. So that includes sales, fundraising, marketing, et cetera. Basically bringing revenue in the door, bringing active agency users in the door. my cousin runs the operations and underwriting side of the business so um we kind of bring the fish to the dock and his team processes them essentially and so um you know that's that's been my effort I think the hard maybe one of the more difficult parts is um when you're a sales person by nature and you're growing out this thing and being a sales team oftentimes the salesperson is not great at scaling themselves out of their role they still have to be the person on all the demos and all of the calls and be the be the I've I've been okay about letting go of that and elevating others and just getting other people to kind of take on different tasks I always am looking to for everyone to look at automating certain aspects of their job so they can continue to elevate and move upstream and do more things and then the fundraising thing was totally new to me that was an interesting world I'd never been in a in a startup where you're raising seed money all that kind of stuff.

9:05Obviously, in this economic environment, it's even crazier and tougher. So that was just trial by fire, just learning along the way and learning a lot of the lingo along the way. I mean, everything was brand new to me. So that's just been learning as you go and trying not to screw up too badly along the way. What did you find that investors wanted to hear and see? Well, I found that there's two different types of investors. So we initially talked to a lot of venture capitalists, which it was really difficult to explain our solution and our value proposition to them, this like small segment of insurance we were automating.

9:47And so we often struggled to make inroads with a lot of the VC community. But then I found very quickly that strategic investors, so large insurance brokers, large insurance wholesalers, insurance companies, they loved it right away. I mean, when we would explain our value prop, what we're doing, how it works, it was such a no brainer to them. And so I learned that this business is not obvious enough to VCs. A lot of VCs need to underwrite for a 10x return, and they need to see a few different metrics, and they want to check the box and write a narrative, and this is what we would do, I found that we were much better off raising money from strategic partners.

10:28And so that's what we did. So our roster of investors includes all sorts of large brokers and, like I said, wholesalers, carriers, strategic partners that can not only give us capital, but also help us grow the business through distribution and through their network and whatnot. So that was a big learning point. And then the second one is just, you know, hearing no and processing that and whatnot. I'm reading a book right now actually called The Messy Middle. And a lot of it is about, you know, in the middle of the business, like you're talking about, the launch of the business is really attractive and fun.

11:06And the exit is really fun when people read these big numbers of exiting a business. But the middle is just, you know, a bunch of peaks and valleys. And it's really just being able to optimize the peaks and endure the valleys. And so I learned that pretty well when we were going through raising capitalism, enduring the valleys. Like half the battle is just kind of, it's cliche, but getting up the next day. And sometimes I think the person that just outlasts everyone else wins. Wow. And by the way, that book recommendation, Messy Middle, who's the author on that? It is Scott Belky, B-E-L-S-K-Y.

11:44I really have enjoyed it so far. I'm literally in the middle of it right now. Yeah, in the messy middle of the messy middle. I'm just adding it to my queue right now because I can identify a little bit with that. All right. So, you know, it's great. So you're solving kind of a B2B problem and serving, again, agencies and whom else? well agencies and their customers so um oftentimes when you launch an insure tech product you there's kind of two channels you can go direct to consumer right we could be you know buyyourbond.com and consumers would just buy directly from us we we do not do that we kind of double down on the agent channel and so we white label our product and give it to agents and brokers for free and allow their customers to come through it so it's really a shopify model I actually have a ton of respect for Shopify where they basically said, we're going to build the world's shopping park, but we're just going to give it to everyone and we'll clip the ticket on the way through.

12:46And so you don't really see our brand a ton or hear about us because all of our products are white labeled to be Josh Elledge Insurance Agency. Yeah. I love it. Let someone else be the star, just, you know, enable them to do their job better. And, you know, you have just, you know, sales wise, it's just a completely different environment. You know, I love B2B sales. I love those, you know, more networking conversations and collaboration conversations, I think, ideally, which is I just find so enjoyable. who should be reaching out and connecting again the website is propellerbonds.com who should be reaching out connecting and what do they do to kind of get a little bit more into understanding you know potential models working with you yeah anyone in the insurance industry but specifically but I also I love hearing about other businesses networking with other business owners and whatnot, I'm happy to share my story.

13:48And I feel like I wind up learning a lot from them as well. So I'm big on LinkedIn. That's like the only social media I really hone in on. And so I would say I can be connected with there. And same with Propeller. We have a fairly big presence on LinkedIn as well. And we're very active on there. Yeah. All right. So your website, propellerbonds.com. You do have a webinar that you offer there. There are other resources that explain, you know, how the technology and platform works. And then of course, there's a button right there that you can schedule a demo. Did I miss anything, Aaron? No, I don't think so.

14:29That went quickly. I appreciate you having me on. Awesome. Aaron Steffi, again, co-founder and co-CEO of Propeller Bonds, found on the web at propellerbonds.com. Aaron, thank you so much for joining us. Appreciate it, Josh. Thank you.

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