COVERFOX.COM—FROM TROUBLING TIMES TO TURNAROUND?
CASE STUDY SOLUTION
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pl
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SYNOPSIS
The present case examines new challenges, associated risks, and the bold decisions that start-up leaders
Sa
may need to make to navigate through an environment filled with volatility, uncertainty, complexity, and
ambiguity (VUCA). Sanjib Jha, a seasoned entrepreneur with experience in several start-up firms, is
confronted with this predicament in May 2020.
n
Varun Dua and Devendra Rane started Coverfox Insurance Broking Private Limited (Coverfox) in 2013 as an
insurtech start-up with the aim to radically change the Indian insurance market. The company’s founders quit in
tio
November 2016, leaving a leadership void. The new management continued focusing on the top line by running
the business model, but they lost sight of the runway and cash burn, which put the organization’s future at risk.
lu
Coverfox wanted to be the Razorpay1 in the insurance ecosystem aggregator. Coverfox had already been dealing
So
The Case Solution Starts From page 6
,ASSIGNMENT QUESTIONS
1. When Jha became CEO of Coverfox, the company was experiencing an organizational crisis. Describe
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Jha’s struggles and how he approached them. What were the alternatives available to Jha before and
after assuming the CEO’s role?
pl
2. Discuss the leadership attributes that are accepted universally and evaluate with justification as to which
type of leadership was exhibited by Jha in his role as an investor and CEO of the company.
m
3. Critically evaluate the financial and business position of Coverfox in fiscal year (FY) 2019–20.
4. What is the difference between gross burn rate and net burn rate? What are the implications of a high
Sa
burn rate? Prepare a table indicating the gross burn and net burn for the last two financial years and
outline what possible actions need to be taken to ensure an acceptable gross and net burn rate. How is
runway and net burn rate correlated?
5. Discuss the different stages in the turnaround process. How can Jha get Coverfox back on track such
n
that its cash burn gradually reduces, its profitability increases, and it is set up for future growth?
tio
lu
So
The Case Solution Starts From page 6
,ANALYSIS
1. When Jha became CEO of Coverfox, the company was experiencing an organizational crisis.
Describe Jha’s struggles and how he approached them. What were the alternatives available to
Jha before and after assuming the CEO’s role?
Organizational Crisis
An organizational crisis is a short-term, undesirable critical situation that challenges the corporation’s
continuity, growth, and existence.2 It has the potential to decrease revenue and income and leads to negative
profitability.3 It can also result in a decrease in market share and sales.
The causes of organizational crises and failures are examined from two different perspectives:
• Insurance industry perspective. A variety of fundamental reasons for crises, including an unpredictable
e
demand structure by intermediaries, the economic downturn, shifting customer preferences, and
strategic rivalry can be suggested from the perspective of the insurance industry.
pl
• Organizational studies. Organizational failure results from a failure to adapt effectively and make the
required adjustments to reverse the downward cycle of decline caused by external variables.
m
Both perspectives must be integrated to analyze the root cause of the failure of the organization.
Sa
The internal and external factors that Jha confronted are as follows:
External Factors
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tio
lu
So
The Case Solution Starts From page 6
, EXHIBIT –4: FINANCIAL POSITION OF COVERFOX FY 2019–20
FY 2019–20 (Business figures)
Revenue Gross profit Net burn
Quarter Month (US$ million) (US $ million) (US$ million) Head count
Q1 AMJ 2.71 −0.89 −2.2 925
Q2 JAS 1.94 −1.02 −2.37 927
Q3
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Sa
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tio
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So
The Case Solution Starts From page 6
, EXHIBIT –8: COVERFOX BUSINESS PERFORMANCE AND FINANCIALS
Actuals FY 2018 FY 2019 FY 2020 KEY
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Policy count (issued) 312,190 736,111 790,580
Premium (US $ million) 19.40 58.67 38.73
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Revenue (US $ million) 3.00 11.87 7.40 1
Direct cost 4.28 17.47 10.09 2
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Marketing - - 2.62 i
Call centre cost (Enser) - - - j
Advisory cost - - - k
Sa
POS direct cost - - - h
B2B other costs - - - g
Amortized brand cost - - -
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tio
lu
So
The Case Solution Starts From page 6
CASE STUDY SOLUTION
e
pl
m
SYNOPSIS
The present case examines new challenges, associated risks, and the bold decisions that start-up leaders
Sa
may need to make to navigate through an environment filled with volatility, uncertainty, complexity, and
ambiguity (VUCA). Sanjib Jha, a seasoned entrepreneur with experience in several start-up firms, is
confronted with this predicament in May 2020.
n
Varun Dua and Devendra Rane started Coverfox Insurance Broking Private Limited (Coverfox) in 2013 as an
insurtech start-up with the aim to radically change the Indian insurance market. The company’s founders quit in
tio
November 2016, leaving a leadership void. The new management continued focusing on the top line by running
the business model, but they lost sight of the runway and cash burn, which put the organization’s future at risk.
lu
Coverfox wanted to be the Razorpay1 in the insurance ecosystem aggregator. Coverfox had already been dealing
So
The Case Solution Starts From page 6
,ASSIGNMENT QUESTIONS
1. When Jha became CEO of Coverfox, the company was experiencing an organizational crisis. Describe
e
Jha’s struggles and how he approached them. What were the alternatives available to Jha before and
after assuming the CEO’s role?
pl
2. Discuss the leadership attributes that are accepted universally and evaluate with justification as to which
type of leadership was exhibited by Jha in his role as an investor and CEO of the company.
m
3. Critically evaluate the financial and business position of Coverfox in fiscal year (FY) 2019–20.
4. What is the difference between gross burn rate and net burn rate? What are the implications of a high
Sa
burn rate? Prepare a table indicating the gross burn and net burn for the last two financial years and
outline what possible actions need to be taken to ensure an acceptable gross and net burn rate. How is
runway and net burn rate correlated?
5. Discuss the different stages in the turnaround process. How can Jha get Coverfox back on track such
n
that its cash burn gradually reduces, its profitability increases, and it is set up for future growth?
tio
lu
So
The Case Solution Starts From page 6
,ANALYSIS
1. When Jha became CEO of Coverfox, the company was experiencing an organizational crisis.
Describe Jha’s struggles and how he approached them. What were the alternatives available to
Jha before and after assuming the CEO’s role?
Organizational Crisis
An organizational crisis is a short-term, undesirable critical situation that challenges the corporation’s
continuity, growth, and existence.2 It has the potential to decrease revenue and income and leads to negative
profitability.3 It can also result in a decrease in market share and sales.
The causes of organizational crises and failures are examined from two different perspectives:
• Insurance industry perspective. A variety of fundamental reasons for crises, including an unpredictable
e
demand structure by intermediaries, the economic downturn, shifting customer preferences, and
strategic rivalry can be suggested from the perspective of the insurance industry.
pl
• Organizational studies. Organizational failure results from a failure to adapt effectively and make the
required adjustments to reverse the downward cycle of decline caused by external variables.
m
Both perspectives must be integrated to analyze the root cause of the failure of the organization.
Sa
The internal and external factors that Jha confronted are as follows:
External Factors
n
tio
lu
So
The Case Solution Starts From page 6
, EXHIBIT –4: FINANCIAL POSITION OF COVERFOX FY 2019–20
FY 2019–20 (Business figures)
Revenue Gross profit Net burn
Quarter Month (US$ million) (US $ million) (US$ million) Head count
Q1 AMJ 2.71 −0.89 −2.2 925
Q2 JAS 1.94 −1.02 −2.37 927
Q3
e
pl
m
Sa
n
tio
lu
So
The Case Solution Starts From page 6
, EXHIBIT –8: COVERFOX BUSINESS PERFORMANCE AND FINANCIALS
Actuals FY 2018 FY 2019 FY 2020 KEY
e
Policy count (issued) 312,190 736,111 790,580
Premium (US $ million) 19.40 58.67 38.73
pl
Revenue (US $ million) 3.00 11.87 7.40 1
Direct cost 4.28 17.47 10.09 2
m
Marketing - - 2.62 i
Call centre cost (Enser) - - - j
Advisory cost - - - k
Sa
POS direct cost - - - h
B2B other costs - - - g
Amortized brand cost - - -
n
tio
lu
So
The Case Solution Starts From page 6
