Five years ago, former AXA CEO Henri de Castries returned from a conference, seeking counsel about how the global insurance company could adapt to advancements in insurtech and AI. During a discussion with the company’s Chief Marketing Officer, de Castries was told they had to send “some folks to San Francisco.”
To better understand the technology market, de Castries sent a small team to the Bay Area. Concurrently, AXA’s CEO in France set up a $15 million venture capital fund, the first of its kind for the company.
Shortly after that, technology companies began to approach the team at AXA Labs seeking partnerships. Different avenues to innovation continued to pop up across the company — from incubators to a research fund to labs around the globe. At the beginning of 2019, the company’s leadership decided to collect these activities under one umbrella: AXA Next.
Today, Bastiaan de Goei, Head of AXA Next US, runs the American branch of the initiative from a San Francisco WeWork. He describes the innovation arm’s origin story from a conference room that overlooks the Embarcadero and the bay.
“The ultimate objective of AXA Next is really revenue diversification and revenue growth. So it’s a growth vehicle,” de Goei says. “It’s not just innovation for the heck of it. It’s an important growth driver for the company.”
Headquartered in Paris, AXA has worked in the insurance and financial services space for over 200 years. AXA has a presence in over 60 countries, according to the company website. Company offerings include health insurance, property and casualty insurance, retirement planning, and life and asset management.
Innovations at AXA Next focus on “building new services and business models” in industries beyond insurance, according to the company website. De Goei says that AXA Next operates as a separate company with its own balance sheets, P&L, and revenue targets.
“[However] there is no apparent cannibalization or competition between AXA Next and our core business,” he says. “Our core business does insurance really, really well. … We believe that we can build services propositions that can complement our other offerings.”
According to de Goei, AXA Next provides those offerings through four different funds: mergers and acquisitions, venture capital, partnerships, and an incubator program. AXA Next unites these four funds, representing a total commitment of $1 billion. Project teams for these funds are based in Paris and AXA Next’s three hubs called AXA Next Labs, according to de Goei. These labs are located in London, Shanghai, and San Francisco.
De Goei says that his team keeps these funds separately so they can “mature in their own right” and develop skills specific to their specific function.
During a conversation with InnoLead, De Goei shared insights from each innovation vehicle and how ideas travel through AXA Next’s branches.
Mergers and Acquisitions
M&A has been a foundational element of AXA since its founding in the 19th century, when several companies covering agricultural risks merged to create AXA. De Goei says that the company has continued “aggressively acquiring,” allowing it to become the second largest company in the insurance industry.
“We are very good at buying insurance companies,” he says. “One of the things that we learned was that buying a technology company is really different. … That is why we have set up a separate team for that under the hood of AXA Next.”
According to de Goei, the insurance company did not initially have capabilities and personnel to effectively evaluate new technologies. At AXA Next, a dedicated team of experts explores these opportunities.
In 2018, AXA Next facilitated AXA’s acquisition of Maestro Health for $155 million. The five-year-old, Chicago Based company seeks to “[personalize] how people shop, enroll and live with their health benefits,” according to their website. With 300 employees and a platform that serves over 500 groups, Maestro Health represents a company that is “right on par for our acquisition target,” de Goei says. He also notes that the acquisition allowed AXA Next to expand its reach in the US healthcare sector.
“With this separate company, we can have all of the managerial capability and the focus to really look at an acquisition like that, and build it up in a safe environment, and not [have it be] crushed by the [larger] group,” he says.
While many companies explore new technology and invest in innovation through corporate venture capital, de Goei emphasizes that AXA Venture Partners functions like a traditional venture fund.
“We are an actual VC fund, not a CVC or anything. It’s important to differentiate,” he says. “Our VC Fund invests in companies in order to make a financial gain with a focus on our strategic goals. But the financial gain is number one.”
However, de Goei says his team initially tried to control the strategic directions of companies they invested in, acting from a more corporate standpoint. “Of course, venture capital does not work like that, but that was a learning for us,” he notes.
When AXA started working with venture capital, the company set aside $15 million for its initial fund — an amount that de Goei says was ultimately “far too little.” Instead, the team began to position themselves as a larger venture fund under the AXA Next umbrella.
Today, the $600 million fund invests in both growth and seed stage companies. The VC fund has a global presence, with offices in San Francisco, New York, Paris, London, Zurich, and Hong Kong. When looking for talent to manage the fund, de Goei says AXA Next searched outside of the organization. Out of 13 venture capitalists on the team only one hailed from AXA.
In the US, AXA Venture Partners has invested in companies including Verifly, which provides commercial insurance for contractors and small businesses, as well as PolicyGenius which compares life insurance policies. According to a spokesperson at AXA Next, AXA Venture Partners also invests in enterprise technology companies.
Fostering Connections at AXA Partners
“When we were running the lab [in San Francisco], there were companies coming to us who said, ‘Hey, looks like you’re doing some interesting things in insurance technology. We would love to partner with you,'” de Goei says. “We realized that we did not have the right structure in order to partner with them.”
That need for structure led to the creation of AXA Partners in 2015. The organization was subsequently included as a branch of AXA Next. Focusing on partnerships at a global scale, the program seeks to co-create offers and distribution agreements for AXA services.
De Goei points to the company’s partnership with Uber as an example. He says, “As you probably know, in the contract economy, it is very, very difficult to get benefits such as pension, health, disability… We had to work to create a very creative, very innovative suite of services that could be targeted for this particular group of people.” Currently, AXA provides benefits to Uber drivers in multiple countries.
AXA Partners also works with corporate clients in the technology space to help them leverage their products to companies across the globe. De Goei says that the reach of AXA Next on a global scale can help these corporate clients scale quickly.
Incubating Ideas at Kamet
Kamet, AXA Next’s incubator backed by $112 million, seeks to build “build new innovative companies by working with the most talented entrepreneurs and providing them with the resources they need to grow and realize their ambitions,” according to the company’s website.
De Goei says that if members of AXA want to join the incubator program, they must step down from their current position and undergo a significant pay cut.
“That’s the rule of the game. You will not join an incubator to play startup at the company’s expense. It’s your job to have skin in the game in order to be part of something like this,” de Goei explains. As a result, the majority of the companies in the incubator are led by external entrepreneurs.
As of 2019, Kamet has produced 13 companies and generated over 300 new jobs. Companies that successfully leave the incubator can partner with the core business or be acquired by another company all together. The most important element is profit. “At the end, the partners, on top of this fund, they want to make a return,” de Goei says.
Picking the Right Avenue for Innovation
According to de Goei, ideas and partnerships fostered at AXA next must fall into one of four strategic verticals: health, the platform economy, business continuity for SME, and mobility. Keeping pace with market developments and focusing on target business models are also points of consideration for the AXA Next, he says.
When picking the right home for a project at AXA Next, de Goei says the investment boards of each innovation vehicle meet to make a decision.
“Should we buy a company? Should we partner with them? It depends on the market circumstances,” de Goei says. “If developments go super fast, and we find them important, we may want to buy something. If developments [in the market are] slow, and we find an important market, we may want to build something ourselves for our incubator.”
According to de Goei, startups and initiatives have the potential to move in between the different divisions of AXA next. For example, a startup in the incubator could be acquired by the M&A unit. De Goei notes the cross-department transitions have not yet happened, but will become more likely as the program matures.
Learning from AXA Next
Early on, AXA Labs partnered with an insurance technology startup in the UK. While the startup was a “great investment” opportunity and potential acquisition, de Goei says the team was not mature enough to make the right decisions.
“[W]e didn’t have the right rationale, the right structure for making decisions, or even the right vision in order to really execute on that,” he says.
De Goei says this experience and other missed investment opportunities led AXA Next to emphasize structure.
“I think that good knowledge management is really underestimated,” de Goei says. “It’s…important to control and manage what you see in all of the different locations…”
De Goei also advises that global companies open dedicated innovation units across geographies. This, he says, allows teams to understand different challenges that vary between ecosystems.
Finally, he emphasized that companies should pursue innovation via multiple avenues.
“Just doing venture capital, or just doing partnerships on its own, is never going to be enough…for a large corporate,” he says. “It’s not going to shift the needle… [You need to] leverage all of those nice investments and partnerships in the right way.”