StarNex Brokers $11M First Round

For a company that has staked its future on a Web-based b-to-b marketplace serving the insurance industry, StarNex Inc. is surprisingly blase aboutthe future of virtual brokers. Indeed, the firm’s own literature touts research claiming that only between 5% and 15% of insurance products will be purchased directly over the Internet during the next three to five years.

However, the venture capital community doesn’t seem to mind this apparent contradiction, as StarNex recently raised $11 million in its first round of venture funding. Firemark Investments made the only pure equity play in the deal with a $10 million investment. The additional funding came from IVANS Inc., which purchased $1 million of convertible debentures earlier in the year.

“We don’t want to replace insurance agents and brokers,” said John Unipan, chief executive at StarNex. “We want to take them and make them smarter, faster and richer.”

The company’s specific plan is to provide insurance professionals, especially those in the employee benefits space, with a collection of software and Internet applications that will help significantly reduce the amount of paperwork accumulated in the quoting and distribution processes.

“The insurance business is characterized by having a high fixed-expense problem, and our view is that anything that can efficiently reduce expenses in the insurance process is a business worth looking at,” said Allen Rork, managing director of private equity at Firemark.

He added that he did not foresee a reduction in the pool of flesh-and-blood insurance brokers due to the complexity of employee benefits packages.

Proceeds from the deal will be used for expansion, marketing and the hiring of technical talent.

StarNex does not currently have any plans for additional funding, having raised a total of $12 million from this deal and an earlier $1 million from angel investors.

“This is a company that is about ready to wrap up its growth,” Rork said. “If we had felt that it needed more money we would have already given it to them.”