DEC - JAN9it can be custom-made to fit industry specific businesses. Workers' compensation (WC) insurance is also important to help employees recover from a work-related injury or illness, and cyber insurance may also be essential because tech companies can be the target of cyber attacks. · Series A, B, C FundingWith Series A funding, a tech company may have established product-market fit and early revenue traction. Capital raised during this stage of growth is often used for hiring talent, typically in engineering or sales and leadership.The Series A fundraising rounds are more formal with venture capital firms usually leading the effort. The lead investor often takes a seat on a company's board, and other investors can join the board as members or observers, depending on the amount invested or their strategic value to the company. Because of their size, companies often move to a more sophisticated insurance program. These typically have enhanced business liability coverages, including commercial auto insurance and umbrella coverage with a small limit. Some other insurance coverages to consider include professional liability insurance, liability insurance for large businesses, WC insurance for large businesses, business income insurance, and property insurance for large businesses.Series B funding is similar to Series A, but often represents a larger raise. Capital is used to scale the company whether building-out sales and marketing, investing in customer acquisition and support, further professionalizing management, and directing capital to other areas of the business that need attention.A tech company that is looking for Series B funding typically has at least one established product and possibly a product or technology roadmap. These companies also typically have early revenue growth. Investors from earlier rounds may choose to follow and invest more capital, but a new lead investor can also emerge to lead the Series B round. At this size, businesses typically have contractual, and first party needs for professional liability insurance, cyber insurance, WC insurance and commercial auto insurance.It's likely that businesses of this size will need to increase their coverage limits to provide more protection. For example, as a business grows, there may be more company property that requires higher coverage limits. So, increasing limits on a commercial property policy may be needed. Series B funding will also require directors and officers (D&O) insurance coverage to help protect the Board of Directors.Startups and businesses at the Series A or Series B stage are often referred to as "early-stage" companies. Per the report "US VC Valuations Report ­ Q2 2021" by Pitch Book, early-stage companies received a median pre-money valuation of $41.5 million in 2021, a significant increase over 2020 numbers. The median deal size as of June 30, 2021 was $9.5 million.Businesses at the Series C funding stage have continued to grow and mature. Funding rounds may be significantly larger, and investors may refer to these tech companies as "late-stage" or "growth-stage." The focus is on expansion.According to the same Pitch Book report, the median late-stage pre-money valuation is $130.0 million and a median deal size of $16 million. However, the average valuation is substantially higher ­ $914.0 million ­ pulled up my many highly valued companies worth more than $1 billion. These businesses are often referred to as "unicorns."Because of the size and complexity of the tech company at this stage, they need an insurance policy that's tailored and unique to their business. Higher coverage limits are preferred to provide greater protection for the business, so businesses should review their technology professional liability insurance to make sure they have proper coverage for this stage. Policies should include software copyright, and first- and third-party cyber coverages.Tech companies may also need multinational insurance for international locations or if employees travel abroad. This is an important coverage because most standard business insurance policies will not cover foreign claims.Understanding the Unique Needs of Tech Companies at Every StageRegardless of where the tech business is in its growth cycle, insurance coverage is important. Partnering with an insurance company that truly understands the unique needs of tech companies is essential. The Hartford, for example, has worked to understand how tech companies grow and the risks they can face at every stage. The carrier has created specialized insurance solutions to help give tech companies better outcomes and opportunities for success. BCAndrew ZarkowskyNick Kreczko
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