Origin Benefits: why we invested

Solving information asymmetry

Warning, I head off into a bit of economics. This can be both boring and dangerous at the same time.

Akerlof wrote a paper in 1970 about information asymmetry. Many papers get called seminal, but this one really is. He explored and explained how information asymmetry between buyer and seller impacts pricing. He uses the example of used cars, hence the title of the paper, The Market for 'Lemons': Quality Uncertainty and the Market Mechanism"

Wikipedia tells me that in 2001, Akerlof, along with Michael Spence, and Joseph Stiglitz, jointly received the Nobel Memorial Prize in Economic Sciences, for their research on issues related to asymmetric information.

In perfect markets, buyers and sellers have equal knowledge, but in the real world, that’s the exception.

Hold that thought for a moment.

I want to imagine that you are responsible for global benefits at a large multinational company.

Everything from healthcare, insurance, pensions, savings plans and more. 100 countries, 1000s of plans, dozens of different languages. 100 Contract renewals, national compliance etc. Benefits is the largest employee related cost after salary, it usually runs to about 30% of salary costs. It’s a big budget, perhaps 100s of millions.

Your company has cleverly moved most of the “local HR” to a global shared service centre, so local knowledge is thin. Finance and Risk management are constantly on your back, both from a cost and compliance point of view. Procurement software like Ariba or Coupa is great for beating the sh&t out of pencil suppliers, the VMS does an okay job of contingent labour, some of your HR software is vaguely useful for the employee facing side of the benefits processes, but for actually buying this stuff, assessing contracts, brokers and more, its you and your trusty sidekick excel.

Now imagine there was founding duo who had built the most successful global benefits platform a decade ago (Thomsons / Darwin) and exited successfully to Mercer. Chris and Pete have decades of deep benefits knowledge, strong technical chops, and a trusted network of CHROs and Heads of Benefits. They really really know the enterprise space.

Now imagine they had spent the last while working in stealth with half a dozen big multinationals, applying the latest AI document interrogation techniques to benefits contracts and payment data and more. They have quietly assembled an awesome team. See picture above.

Their product Cuido ingests, translates, standardizes and analyzes complex benefit data to make it more accessible, actionable, and most importantly - queryable. They have proven that it works with the co-creation customers (BCG, COMCAST, BP, EA, Gilead and more).

This is what head of benefits at Comcast said.

One of the key challenges is understanding the various benefits we have throughout the world. We came from not having any international employees, to having just over 35,000 international employees in 15 years through acquisition. In order to harmonize, we have to understand the benefits that we have external to the United States. So what Origin is going to help us with is pulling it all together, understanding what we have, and being able to make decisions on how to harmonize.

BP tested the solution in Singapore

Origin has already demonstrated its value to people. We have quite a large operation in Singapore, and by using Origin we've already identified around £150-200,000 worth of savings

It would help you solve your information asymmetry deficit. Think about the global savings. Also think about the better product that you can provide to your employees. To misquote Ankeroff, you would be giving them peaches, not lemons.

Now stop imagining, and call Chris.

About the investment

As is the case with a chunk of our deal flow, we got a call from top tier VC. Felix Capital had convinced Chris to do a significant fund raise, and Felix were keen for us to join and bring our HR Tech expertise to the party. Jason and I met Chris, and we did a good bit of due diligence on the team and the product. I had a call with the benefits director at one of their clients, which was illuminating. Chris and Pete also did their DD on us.

We are also joined in the round by Andy Leaver at Notion Capital. We know both Felix and Notion well, as we co-invested in Techwolf. I’ve known Andy since the very early days of SuccessFactors. Thanks Antoine and Fabian, at Felix.

To my investor colleagues. Here’s some market sizing numbers for you to ponder, but please keep thinking that worktech is a tiny niche.

• To put this in perspective, the collective benefits spending is equivalent to about 6-7% of the U.S. GDP. Ratios in other countries are similar, but healthcare is higher in the US.

• US employers spent 1,4 Trillion on Healthcare benefits alone.

I mentioned our investment to Jeffrey Pfeffer, who pointed me to this excellent paper by Singer, Pfeffer and Nikolov about the failings of benefits in the US. “An absence of accountability: Evidence of employers’ failure to measure and manage employee health benefits administration”

When I look at our investments in Nomi Health and Origin, we are helping address that. Lots to do though.

This is a massive, complicated problem, that requires deep expertise and trust to solve. Recent breakthroughs in AI mean that the historical information asymmetry is open for disruption. There is no better team that Origin Benefits to solve this, and build something mighty.

Some of you may have also noticed that Penzilla announced their round today. It’s a happy coincidence, and we can imagine the two companies working really well together. I’ve also blogged about that deal.

As is the norm, I’ll end with a tune. It’s the Flaming Lips. It’s a sad one, but I find it comforting. If you can find the metaphorical link to the post, well played.

Let them know you realize that life goes fast, it’s hard to make the good things last….