Mitigating risk through the underwriting of massive construction initiatives is key in a growing economy. Yet, in recent years risk assessment for large commercial projects has changed radically, mainly due to the onset of new technologies that, when adopted into construction plans, ensure more efficient and safer sites for the teams working in them. Traditional insurance companies have failed to factor in these tech-related advances or reflect any benefits in their policies.
Enter Shepherd, a new construction underwriting platform promising to reward those who are greenlighting more tech-enabled initiatives in construction.
Shepherd, founded by Justin Levine, Mohamed El Mahallawy, and Steve Buonpane has just announced a $6.15 million seed round led by Spark Capital with participation from Susa Ventures, Procore Technologies, Y Combinator, Greenlight Re Innovations, Oldslip, and several strategic angels from within the insurtech and fintech ecosystem.
Justin Levine and Mohamed El Mahallawy, the co-founders of Shepherd, initially met through the On Deck Founder Fellowship. Today, they took some time to chat with us about why the insurance market needs to catch up to construction tech, the power of domain expertise when it comes to leadership, and why On Deck is the perfect place to find your co-founder match.
Thanks for sitting with us in the midst of such a busy week! Can you share a bit about the entrepreneurial journeys that led you to start Shepherd together?
Justin: I've spent my whole career in the construction industry since graduating from Georgia Tech. I worked for a few years in the field on large infrastructure projects, and then shifted into a finance role at a big general contractor called Hunter Roberts in New York City.
I held a few roles there before taking an amazing opportunity to run their risk team. It was from that experience that I founded my first SaaS company called TradeTapp. TradeTapp was a risk management platform that we marketed and sold to other risk managers like myself, CFOs, or Heads of Finance.
It was a wild ride building TradeTapp, which we ended up selling twice! It was first sold to a larger construction tech company (BuildingConnected), which was then acquired by Autodesk as part of a huge investment in construction tech, alongside Plangrid and others.
At Autodesk, I took over as the Head of Risk Strategy for the construction group. It was my job to be the conduit between everything we were building inside of Autodesk Construction Solutions, and all our relationships with the insurance market, both brokerage and carrier.
That experience, in turn, created the foundation for what we're building at Shepherd. I ended up leaving Autodesk in the summer of 2020. Mo (Mohamed) left Airbnb in January, and we founded Shepherd this year.
Mohamed: I am the child of immigrant parents who moved to Canada when I was young. I had a very traditional trajectory and worked very hard to become a doctor… except that halfway through, I realized I don't love blood. I caught the entrepreneurship bug when I tried to do my own startup at university (an SMS marketing idea that was definitely ahead of its time). Even though the startup ultimately failed, it was instructive to me that I should probably learn to build products. So I decided to teach myself to code.
After school, I moved to the Bay Area to work at various startups, including Tilt and Peek. And then I went to Airbnb, where I was for the last three and a half years.
I worked on two teams, and both were on the entrepreneurial side, like a startup within a startup. First I worked on Luxe, a luxury retreats company we had acquired, and so it was an opportunity to build a team from ground zero at Airbnb. Then I worked on Omni, where we built our own version of the Salesforce Marketing Cloud. It was during my last year at Airbnb when I met Justin and knew he was “the one” that I wanted to partner with.
Justin: We’ve also since brought on an incredible third co-founder, Steve Buonpane, who has vast experience on the underwriting and insurance side. Steve has long been a rising (yet humble) star in the construction insurance world. He has always pushed boundaries — always in search of new ways to modernize the underwriting approach of large companies like AIG, ACE, and most recently Chubb where he led the construction practice.
You two found each other through the network at On Deck?
Justin: I had been looking through the On Deck network (specifically, combing the Directory) and when I found Mo who was in the cohort after me, I was like, who is this guy? You can imagine, as an engineer with major technical experience, that he was inundated with 50 versions of the same message. The world was his oyster.
Mohamed: I had been referred by some good friends who had been part of the first cohorts of ODF1 & 2. By March 2020 I was ready for ODF3 — I had a lot more flexibility and was getting closer to being in a position where I could actually leave Airbnb. Obviously, that coincided with the pandemic, and my ODF cohort was the first to transition to fully remote.
I wouldn’t say I was actively seeking a co-founder, but what I think is really cool about On Deck is not just that it brings together interesting and talented people, but that they’re all aligned in that they want to start a company soon.
Even if you work in a large company with really talented people, and you’re poking around for a potential co-founder, chances are your peers will have mortgages, kids, maybe they're paying off debt — it’s hard to know when someone is ready to take the leap and leave. Whereas with On Deck, in addition to all the programming, you have the perfect cross-section of timing as well as talent.
Justin: I’m just glad he read my cold slack message. We jumped on a zoom about a week after that, and he was in Toronto with his family during the COVID-19 lockdown. For several months, we really were just getting to know each other before we committed to doing something together, which led us to iterate on this idea of Shepherd.
Mohamed: What really stood out to me about Justin, beyond having a conversation with a really great person, was that he had domain expertise and a position that most founders don't have. A lot of talented people are idea agnostic or have only worked at a Google or Uber or Airbnb, and so they don't really know secrets about an industry such as construction or insurance. He knew about a very specific industry that there's no way in a million years I would understand as an outsider. He knew the secrets, he knew the people.
How do you envision Shepherd’s impact in the construction space?
Justin: The core thesis that we're building off of is that, as a result of technological advances in construction and products that companies are adopting across the industry, there now exists a vast amount of new information about how contractors behave on job sites.
The big opportunity is that none of this data is currently being leveraged into the insurance underwriting process. Companies that are making investments in tools that make them safer, more productive, or more efficient, are not really being rewarded or given that value from their insurance providers. We think there's a massive opportunity to create a data-driven, tech-enabled underwriting advantage in the market.
Can you describe the recent advancements in the field of construction that enable you to disrupt the existing insurance model?
Justin: There are a few broad categories of innovation in the construction tech landscape. A lot of it has really evolved in the last ten years or less — $5 billion of venture capital has been invested in construction tech since 2015.
One area that’s changed significantly is project management, where SaaS platforms now help digitize the day-to-day oversight of the activities on any given job site. Procore and Autodesk have been the two most heavily adopted platforms in this space.
There's also been innovation in other categories like computer vision, IoT sensors, and wearables. Sensors can help automatically detect unsafe conditions, like a water leak, or dangerous gases that are in the air. Computer vision can further help identify unsafe conditions, or map out a project's progress using video technology and AI. This tech is making contractors more efficient, and obviously ensuring safer conditions for their teams and improving their risk profile.
Contractors who care about their teams want to go invest in things that make them safer. What is missing from that equation is that the companies which support these businesses: their financial services, their insurance companies, their lenders, their banks, are not currently creating a model that says, hey, if you do these things, we're going to give you credit for improving the risk profile of your business.
We see all of this data, we see all of this impact, but insurance companies look at this tech and they don't know how to value it. They don’t know how to measure it or gauge whether or not this makes a client a better risk. This is where we’ll build our advantage.
So there’s this huge opportunity, enabled by tech perspective, to embrace objectively better construction projects for the future. Any other urgency around why Shepherd is a product we need now?
Justin: We're in a very hard insurance market, most contractors are seeing their insurance rates spiking. Most insurance companies are reducing their coverage across the board in terms of limits being offered on a single policy. There’s this huge supply constraint in the market. And so as we think about delivering our products, we know there's a huge demand for the coverage lines we’re targeting first such as excess casualty and general liability for contractors.
What was the fundraise process like?
Justin: We went through YC in January of 2021, but we delayed our demo day once it was clear that we were building for the long road. Being in Insurtech is a different path than your typical b2b SaaS company.
We certainly needed some runway and our thesis of using construction tech for better underwriting really aligned with an internal thesis developing at Susa Ventures. Courtney Lipkin over there was really excited about Shepherd and she preempted us with an offer to lead our pre-seed.
One of the first things that we did is we hired Steve, our third co-founder, who was somebody with tremendous underwriting experience and credibility across the industry. He was really the first and only target that we had for a Chief Insurance Officer. We ended up raising this larger round really off the back of the momentum we had carried with bringing Steve on board and having this very unique team.
What does this additional firepower look like in terms of this coming year?
With this initial financing, we’ll invest primarily into our engineering and underwriting teams. We're also looking at hiring for product management and customer success right now (the core functions of SaaS to support the brokerage tools).
We’re building two distinct, yet connected workstreams: a tech platform— that we’re getting in the hands of insurance brokers as the primary distribution for Shepherd’s insurance products, and in parallel, our entire underwriting engine to support our insurance products in the market.
We've engaged a broker, Guy Carpenter, to help us market our program to prospective capacity partners and are in the process of negotiations with several firms currently.
We are committed to building a strong foundation to leverage data into our underwriting, and, over time, begin to evolve traditional underwriting models into something connected and data-driven.
Shepherd is hiring for numerous positions. To learn more, visit here.
“We're in the early innings of construction tech. New connected hardware and software products are everywhere, transforming job sites and fundamentally changing the way construction workers work. Yet, despite these advancements in tech, the industry’s backbone — risk management — hasn’t kept up.
Shepherd is pioneering a new generation of insurance and risk management products that are fast, digital-first, and data-driven, saving brokers and their clients hours of work and drastically improving the customer experience — all at no cost to brokers or their clients. With deep partnerships with industry leaders like Procore, Shepherd leverages new sources of data to more intelligently and accurately price construction risk, and ultimately rewards commercial construction organizations for investing in technology that makes them safer.
Justin, Mo, and Steve are an incredibly unique team to solve this problem, collectively bringing decades of experience across industry powerhouses like Airbnb, Autodesk, and Chubb. We were able to move quickly to give the team a term sheet because of their industry expertise and our prepared mind on the construction tech and insurtech spaces. I'm thankful for Justin, Mo, and Steve to let us partner with them on their journey of building innovative insurance products to make the construction industry safer and more sustainable.
— Natalie Sandman, Partner Spark Capital