CapitalG’s Companies Get More Than Cash, They Get Access To Cutting Edge Tech

Applied Systems, the cloud-based software company for the insurance industry recently announced an investment from CapitalG, Alphabet’s growth equity investment fund.

With the undisclosed investment, Applied Systems gets more than just cash. It gets access to Google’s expertise in artificial intelligence, machine learning, and digital marketing, key growth areas for the SaaS industry.  In announcing the investment earlier this month, Gene Frantz at CapitalG said it was looking forward to supporting Applied Systems growth and giving the company access to Google and Alphabet experts to meet that end. “Applied Systems is a pioneer in the insurance industry, transforming the way insurers, agents and customers do business in the cloud,” Frantz said in a press release announcing the deal.

While the insurance industry has been slow to embrace technology, more recently it is becoming digital, providing software companies with an opportunity to tap advanced technologies to improve underwriting and roll out new products. During the past five years, Applied Systems has more than doubled its size and revenue by expanding its product portfolio in the markets it serves which includes the U.S., Canada, the UK and the Republic of Ireland.  Reid French, chief executive officer at Applied Systems said when announcing the CapitalG investment that it was happy to get an investor with “deep software experience” and welcomed the new technical resources it will get from CapitalG through its connection to Google.  Other CapitalG investments include Lyft, Airbnb, SurveyMonkey, and Zscaler.

CapitalG Brings More Than Cash

Having CapitalG as an investor is a feather in the cap for the insurance SaaS company, but it also comes with some risk. While CapitalG is known for helping its companies access cutting-edge technology it does have a close relationship with Google, which could raise concerns about Applied Systems data. After all, Google has already had a failed experiment with selling auto insurance a couple of years back through the now-defunct Google Compare website. That attempt to cut out the middleman wouldn’t fly at Applied Systems and underscores the balancing act CapitalG and its parent have to walk when making investments in SaaS companies.

Applied Systems Still Mulling The Tech To Pursue

In an interview with Insurance Journal earlier this month French said Google won’t access any of Applied Systems’ insurance data in the cloud or within any of its customer applications.  “If you were going to be misinformed, you might say Google entered this partnership to get access to all the insurance data that exists in Applied cloud for customer applications. The short answer is none of them have any rights to our customer data,” French said. “There are many agents that have wanted to have greater access to high technology. The vast majority will view this, with the facts, as super-duper positive for Applied and for the industry.” He noted that CapitalG and Google wouldn't have made the investment if they see a market where there is no need for brokers and agents.

Applied Systems hasn’t decided yet where it will direct the investment or what technology of Google’s it is keen to tap. The company wants to first get feedback from customers. “We will talk to our customers and see where they are most interested in search – is it Gmail, AI, machine learning?” French said, noting the company is spending $60 million next year on research and development in addition to the CapitalG investment.