Robert Downey Jr., Jay Z, Durant Back Life Insurance Startup

(Bloomberg) -- The company isn’t a well-known name in Silicon Valley, but its investors certainly are.

San Francisco-based Ethos Technologies Inc. was founded last year, the product of two Stanford MBAs. The company’s core product is a streamlined, and affordable process for buying term insurance -- which pays out benefits if the insured dies within a certain time frame. Ethos just raised $11.5 million in a round led by Silicon Valley luminary Sequoia Capital. Other investors in the round, however, were less predictable, including the venture fund of Jay Z’s entertainment company Roc Nation, Robert Downey Jr.’s Downey Ventures, basketball star Kevin Durant’s Durant Co. and Will Smith’s Smith Family Circle.

While life insurance may not seem like a typical focus for Hollywood moguls, more and more venture capitalists are piling into the insurtech space. According to a May report from research firm CB Insights, the number of venture capital investors participating in the sector increased to 217 in 2017 from 53 in 2012. Since 2012, those investors have plowed $9 billion into the industry.

To stand out in a crowded field, Ethos uses the “the latest technology and predictive analytics,” said co-founder and Chief Executive Officer Peter Colis, and cuts out paperwork for applicants. About “99 percent of our customers had no required medical exam, blood test or traditionally lengthy approval process,” Colis said. People can instead sign up for life insurance within 10 minutes, and the company’s plans start at $6 a month -- with prices rising from there. “Using software, we can help large numbers of customers at scale, regardless of their policy size,” Colis added.

The company is currently licensed to operate in 49 states. It uses Assurity Life Insurance Co. for underwriting, and it gets reinsurance through Munich RE.

Despite Colis’s confidence, the star-studded funding round still found him in the hot seat. Before raising the money, Downey Ventures and talent agency Creative Artist Agency sent a large team to the Ethos offices. “We didn’t have enough chairs in the office for everyone,” Colis said. “So I gave the 60-minute investment pitch while sitting on a hot radiator -- while trying to act cool,” he said. “One of our first uses of their investment capital was purchasing more chairs.”

Up next, the company will aim to win over customers who have not previously purchased insurance, in addition to trying to convince people to switch plans. According to a study by insuranceQuotes.com, a website that specializes in insurance data, more than one third of American adults currently don’t have a life insurance policy. However, competition in the space is already high, with other startups like Ladder Financial Inc. and Social Finance Inc., offering similar products. Sequoia’s Roelof Botha, who led this funding round, says he’s confident that there’s ample room for Ethos to grow.

“This is a team that’s gotten a lot done with very little,” Botha said. “That shows a creativity and resourcefulness that is attractive as an investor.” Botha will also join the Ethos board as part of the round.

©2018 Bloomberg L.P.