The $5 Billion Filter: How Leo Capital Decides Which Insurtechs Are Actually Venture-Backable

Most insurtech pitches don't fail because the founder is weak. They fail because the market was never going to produce a venture-scale outcome in the first place, according to Shwetank Verma, co-founder and managing partner at Leo Capital and co-founder of the India Insurtech Association. Before Leo evaluates a single thing about the people behind a pitch deck, it runs a blunt market-size test -- and most companies don't clear it.

The market has to clear a specific bar before the founder even matters

At seed stage, Verma says there are really only two variables to evaluate: the founding team, and the market. The market question comes first, and it's deliberately narrow. "Is there a venture-scale market here?" is how he frames it -- and "venture scale" has a specific, numeric definition at Leo: can the entire addressable market, everyone currently operating in it combined, generate at least $5 billion in revenue? And, a harder ask, can that same market produce roughly $1 billion in aggregate gross profit?

The logic is that venture returns require very large outcomes, and very large outcomes can only be built in very large spaces -- no amount of founder brilliance changes the ceiling on a company operating in a market that's structurally too small. Verma's own analogy is real estate: "It doesn't matter if you've got a great house in a terrible location, the maximum [it] can sell for is capped." A strong team building a genuinely useful product in an undersized market hits the same ceiling. "Unfortunately, most companies fail this hurdle," he said. "It is really hard to get to that right space."

Only once a startup clears that market-size test does Leo actually start evaluating the founder and the team -- founder-market fit, and the ability to attract the right talent around them.

Three traits, and why they can't be tested on the first call

When the evaluation does turn to people, Verma looks for three specific traits: the ability to make decisions under ambiguity, resilience, and demonstrated initiative.

Decision-making under ambiguity is about avoiding a failure mode he's watched kill startups repeatedly: analysis paralysis. "We'll think more, we'll think more," is how he characterises the trap. "The best founders take a decision, ship, and if it doesn't turn out right, change course." Resilience matters because the reality of fundraising and enterprise sales, in his description, is brutal by default: "Your life is sort of 99% nos and 0.1% yes -- which changes everything." That asymmetry is sharper still, he notes, for a founder building an enterprise tech company that has to sell into insurers specifically, a buyer he has direct, painful experience with. Initiative is the softest of the three but still concrete: evidence that a founder built or created something meaningful before this company existed, not just that they eventually got around to starting one.

Notably, none of the three is something Leo tries to test in an initial pitch call. "The first call is really all about qualifying the market," Verma said. "I, at least, [am] not testing the founders unless something truly comes out that the founder is not coming out correct, or something is really a red flag." The people-evaluation happens later, once the market hurdle is already cleared -- a sequencing choice that itself signals how much weight the market-size filter carries relative to everything else in the process.

Why he became a VC instead of building a third insurtech

Verma's path into venture capital runs directly through the difficulty of selling to insurers. He built his first company at 18 and a second at 25 -- an insurtech attempting to build "vitality in a box" for Indian insurers back in 2013, years ahead of the mobile penetration and market readiness the model needed. The technology wasn't the obstacle. "It's just so hard to sell to insurers," he said of the experience. "It was impossible to get insurers to move, to meet deadlines, to see that they needed to do something slightly different."

That specific frustration, rather than a general interest in startups, is what shaped everything that followed: a stint at MetLife running open innovation to make it easier for startups to partner with a large incumbent insurer, then Leo Capital itself in 2018 as a way to keep working alongside founders solving the same problem, at a scale a single company never could. "I realized that actually... the best way of doing it is to become a founder all over again," he said of choosing venture capital specifically -- not as a retreat from operating, but as a different vehicle for staying close to the same problem: how do you support founders and help them scale.

Open innovation as a bridge, not a solution

Between the failed insurtech and the venture fund, Verma spent time at MetLife specifically running open innovation -- an attempt to make it structurally easier for startups to partner with a large incumbent rather than fighting the insurer's internal procurement and change-management cycle from outside. It's worth reading that stint as diagnostic rather than incidental: having lived the founder side of the insurer sales problem first-hand, he went and sat inside a large insurer to understand the other half of it before concluding that the fix needed to operate at an industry level -- first through a fund that could back multiple attempts at the problem simultaneously, then through an association that could work on the collaboration friction directly, independent of any single company's fundraising cycle. The throughline across all three roles -- founder, corporate innovation lead, VC -- is the same specific problem observed from three different vantage points, rather than three unrelated career moves.

An association born on a single Covid-era phone call

Because a VC fund can only invest in a handful of the insurtechs Verma wants to help, he co-founded the India Insurtech Association with two colleagues, Prerak and Shubhajit, explicitly to widen his impact beyond Leo's own portfolio. The founding moment, as he tells it, was almost casual: a call during Covid about how to improve the velocity of insurer-insurtech partnerships in India, with Shubhajit -- who had previously helped found the Singapore FinTech Association -- agreeing on the spot to do the same for insurance. "Before you know it, we are now 220 members," Verma said of where the association stands today.

The customer experience gap Verma wants this decade to close

Asked about the trends he's watching, Verma set aside the technology list -- AI, smart contracts -- in favour of a customer-first framing: personalization, convenience, and what he called "that concierge feeling." His diagnosis of personal-line insurance today is blunt: it remains too impersonal, claims are difficult, policyholders often don't know what is or isn't covered, and net promoter scores across the industry are, in his word, "hopeless." He'd like to see that change within the decade, alongside a parallel opportunity he flagged on the commercial side -- using data to better predict, prevent, and maintain risk across machines and buildings, rather than just pricing around it after the fact.

On generative AI specifically, Verma's take is measured rather than hyped. He sees real near-term value in customer service and engagement -- work that can be scaled and made more personal as the underlying models mature -- and argues insurers have a genuine opportunity to get ahead of that curve rather than wait for it to be forced on them. He's considerably more skeptical about the more speculative end of the conversation: insuring against AI's own bad decisions. "I'm not sure any underwriter will underwrite that just yet," he said -- a useful, grounded check against the more expansive claims currently circulating about AI-native insurance products.

What this means for the region

Leo Capital's stated market-size bar and its emphasis on how hard insurers are to sell to both travel directly to the GCC. A regional insurtech founder pitching Leo, or a fund applying similar logic, should expect the same first question: is the addressable market, in aggregate, actually large enough to produce a venture-scale outcome, or is this a good business capped by a small location? Given how much of the region's insurtech activity remains concentrated in personal-lines distribution and aggregation rather than the commercial, data-driven risk-prevention opportunity Verma flagged as still open, that's a useful filter for GCC founders and investors to apply to their own pipeline before assuming a strong product is enough on its own. That's a harder test than it sounds for a GCC-focused pitch specifically, given the smaller absolute population base across most Gulf markets compared with India or Southeast Asia -- it pushes founders toward either a genuinely regional, multi-country thesis, or a vertical narrow enough in problem but broad enough in addressable spend to still clear a multi-billion-dollar bar. And Verma's account of the insurer sales cycle -- the resistance to timelines, to doing things differently, that drove him out of his second startup and into venture capital in the first place -- will read as familiar to anyone who has tried to sell software into a Gulf insurer rather than build a distribution layer around one. It's the same underlying friction his India Insurtech Association was built to address, applied to a different geography: an institutional model regional insurtech ecosystems could borrow directly rather than reinvent.

This post draws on the FS Brew episode Building a Venture backable Insurtech : Conversation with Shwetank Verma⁠, Co-Founder and Managing Partner at ⁠Leo Capital⁠ and Co-Founder of ⁠India Insurtech Association.