“Web3 (also known as Web 3.0) is an idea for a new iteration of the World Wide Web which incorporates concepts such as decentralization, blockchain technologies, and token-based economics. Some technologists and journalists have contrasted it with Web 2.0, wherein they say data and content are centralized in a small group of companies sometimes referred to as “Big Tech”. The term “Web3” was coined in 2014 by Ethereum co-founder Gavin Wood, and the idea gained interest in 2021 from cryptocurrency enthusiasts, large technology companies, and venture capital firms.”
At Mandalore Partners, we use a framework to explain how Web3 startups show strong signals of user, tech and business trends to form technology disruptions.
Using an illustrative example taken from the the music industry, we can show a disruptive technology emerging from the crossing of user, tech and business trends. Back in the 2000s, users wanted to listen to songs online (vs buying CDs). First, with P2P exchange, then later with technology innovation in digital rights management, we were able to introduce payments for artists online and better fight against online piracy. Then, finally, firms came up with a new business model of selling songs at 1$ with iTunes then later Deezer, Spotify, … Thus, combining user, tech and business trends, Apple disrupted the music industry as a new entrant and constitutes an illustration of our innovation framework.
Introduction to our Innovation framework:
Our framework works as follows: we identify user, tech and business insights to deduct disruptive foresight. User trends help but without tech there is no venture building. User and tech trends cannot scale without business. So, most VCs are interested in the combination of user, tech and business insights to make educated investments.
Following Macro trendS…
On the macro trends, we can see that Wealthtech or Digital Advisors are on the rise. Younger profile of investors want impact investments and this is the end of the Euro Fund or Livret A in France.
… There is a clear User increase in crypto investors …
Not convinced? Pick the top 3 trends (source):
Between 2012 and 2021, the price of Bitcoin has increased by over 540,000%.
300+ million people around the world use/own cryptocurrencies in 2021.
The global crypto market cap is $2.17 trillion as of December 17th, 2021.
Not only you have an increase in the user base of crypto investors, but also you have more digital serviced need from your insurance providers. Consequently, you will have more financial and wealth advisers soon offering you life insurance with crypto services or embedded investment services. This also can come from other players like payment or chat platforms. For example, we have WeChat in China within the app offering life insurance. Soon, life insurers will offer embedded services.
… with more WEB3 Blockchain Technology emerging …
If you look at the top funding in Insurtech in all regions, you will see a lot of money was invested in insurance distribution (50%) then in new products (30%) and finally, in claims (20%). However, during the same period, insurance companies have seen their admin costs for processing claims increase according to studies made by B3i. That seems to indicate that Insurtech startups did not manage to introduce new technology that can significantly reduce insurance companies’ costs. If you want to build neo-insurance companies from scratch then most likely you will build it today on blockchain infrastructure, as this can be a way to manage costs. Many insurance firms like Wakam have done it without great publicity. Furthermore, If you are an asset manager or if you are in life and savings then, as an asset builder, to manage the relationship with your asset managers including your in-house asset management firm, blockchain or decentralized finance infrastructure can be a solution. Look at Iznes for example in this video on how the work is done for Generali France.
… and the rise of a new Business model in life embedded insurance
No venture without a solid business model can scale. Innovation in business has also been a great area of growth for VCs. While you have the typical improvement in sales force, analytics-driven decision making and operational improvement, we have witnessed the rise of a new business model with financial advisors. Instead of selling a pure life insurance contrat, they have embedded new services like AI-powered investment in crypto or private equity, thus offering the ability to do cross selling from a pure traditional life insurance product.
Disruption coming in #Web3surance
As a conclusion, our Innovation Framework shows disruption coming from Web3 startups offering new solutions to an increasing base of crypto users allowing insurers to innovate their business model of selling pure traditional life insurance to what we could call life embedded insurance.
