Wrapbook: $181b in entertainment payroll for the taking
A payroll software, an embedded insurance play, and a contractor network... oh my!
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What in the world does entertainment payroll software have to do with insurance?
If you’ve followed insurtech for more than a week, you’ve probably read about embedded insurance. That is, incorporating insurance point-of-sales directly into the purchase flow of the asset you’re trying to insure. It’s an incredibly effective distribution channel.
While other companies like Boost Insurance are trying to make it easy for retailers (e.g. an online used car marketplace) to offer insurance, Wrapbook is taking a verticalized approach: not only is Wrapbook providing a unique payroll product for project-based industries, they’re also a licensed insurance agency.
Wrapbook, at its core, is trying to answer: how do you make it as easy as possible for project-based industries (e.g. entertainment) to manage their operations? These are industries that cycle through a freelance workforce and where each project requires a unique set of insurance policies that range from workers comp to production insurance to temporary fleet insurance.
Wrapbook takes a network-based approach, accumulating a network of project-based workers who cycle through a set of similar employers. If it all works, Wrapbook’s feedback loops can snowball into becoming the first digital-first payroll software for the entertainment industry and sophisticated production insurance underwriters – taking cuts out of the $181b entertainment payroll space and the $17b entertainment insurance space in the process.
The entertainment industry relies heavily on a freelance workforce. With each new project, production companies need to onboard and pay new employees and get together a slew of insurance policies.
Entertainment companies (e.g. movies, television, broadway, music tours) are businesses that face the same hiring needs and liabilities as all others. However, what’s unique here is that the entertainment industry inherently relies on a freelance workforce that cycles through multiple employers a year. For every project – whether that’s a movie, a television show, a commercial, or a broadway play – the production company needs to hire, onboard, insure, and pay their employees.
Today, classically, the payroll process for entertainment and project-based work is riddled with a lot of tedium. You’d onboard everyone with paper. You’d scan it and send it to a company who would process it. That company, in return, sends you a very long workers comp questionnaire. (Ali Javid, CEO, Wrapbook)
Given the project-based nature of the workforce in the entertainment industry, traditional payroll processors do not operate here. Payroll processing within the entertainment industry, consequently, has historically been a very manual and laborious process. (Richard Kerby, Partner, Equal Ventures)
Moreover, just as a production company needs to hire their employees with each project, they also need a whole new set of insurance policies. Production companies, after all, rent out locations and work with very expensive equipment such as top-of-the-shelf cameras or rental cars. These production companies need a variety of policies such as general liability, rental equipment coverage, 3rd party property insurance, and auto liability for non-owned vehicles.
Wrapbook is an entertainment payroll software company with an embedded production insurance offering.
Wrapbook provides a 10x better product experience by allowing production companies to hire and pay their project-based workers and insure them digitally. Employers can populate all of their workers’ information, share job details with them, input wage rates, and outsource all other information collected on their workforce into the Wrapbook platform. Wrapbook is the first platform to embrace the worker, enabling them to create and own their digital profile. (Richard Kerby, Partner, Equal Ventures)
Wrapbook is one part payroll software, one part network, and one part insurance agency.
As part of the payroll offering, Wrapbook enables employers to efficiently onboard employees, with auto-generated contracts and employment forms, and eSignatures. Importantly, when employees onboard onto Wrapbook, they only need to onboard once (which is the foundation of Wrapbook’s network-based approach).
Wrapbook’s payroll system is compliant with labor, union, and guild rules and will auto-generate all the appropriate tax filings. Moreover, Wrapbook has built-in time-tracking with all the payment reporting easily traceable. Built for the entertainment industry, Wrapbook helps employers organize their payroll on a project basis.
When it comes to the network aspect, the employee Wrapbook profile enables other employers to swiftly and effortlessly onboard those employees. So, if two employers are both using Wrapbook, employees do not need to make a new account or be onboarded differently each time. This network-based helps with organic growth:
Workers receiving payment through Wrapbook is a much nicer way as an employee to manage their payments. They’re able to bring their profile to the next employer. Employees want to be paid through Wrapbook and they tell their next employer exactly this. At the time when we raised our Series A, 12% of users had used their Wrapbook profile across more than one employer. (Cameron Woodward, CMO, Wrapbook)
On the insurance side, Wrapbook acts as an insurance agency selling general liability to cover 3rd party injury and damage and errors & omissions, rental equipment coverage, 3rd party property insurance (when renting out locations), and hired & non-owned auto policies (for the vehicles used in production). Workers compensation is bundled directly into the payroll.
Wrapbook offers annual DICE policies for companies that shoot multiple productions in a year. This doesn’t apply to major feature film shoots (where a separate company is typically set up specifically for that film). With a DICE policy, the employer doesn’t have to negotiate on a per-project basis. Wrapbook annual policies start at $2,250 (typical policies range from $3,000 to $25,000).
Our system understands the risks associated with each project. We understand the location, all the workers from the producers to the safety set coordinators to the gaffers, electricians, etc. All of a sudden, we’re able to start monitoring risk, not only at the project level, but at the worker level. This person seems to sprain their ankle a lot. We understand the risks associated with each project and we can reject bad risk. (Ali Javid, CEO, Wrapbook)
Wrapbook’s network-based approach goes as follows: the more employers on the platform, the more (portable) worker profiles, which in turn leads to more data to underwrite with and more employers to onboard (as workers move from project to project). Down the line, with an abundance of data, Wrapbook can offer better financial services, attracting more employers onto the platform.
Business Model and Market Size
Looking at its payroll business alone, Wrapbook doesn’t need to carve out the largest chunk of the market to become a $1b business. Add in the additional revenue Wrapbook can generate from its insurance policies and it has a more promising path to become a $1b business.
Wrapbook is a payroll company that offers insurance.
Payroll TAM: Wrapbook’s charges 1.5% of union wages paid through its platform and receives a commission on DICE policies sold. The U.S. film and television industry supports 2.5 million workers and pays out over $181b in wages annually. Simple math tells us Wrapbook has a payroll TAM of $2.7b.
Entertainment Insurance TAM: The entertainment insurance industry is a $17b market in the U.S. At a 15% commission, Wrapbook has an insurance TAM of $2.6b.
Put those two TAMs together, Wrapbook has a total TAM of ~$5.3b
Looking at Wrapbook solely as a payroll software company: Incumbent payroll providers vary widely from 5.5x (ADP) to ~19.5x (Paycom). Assuming Wrapbook trades at a more favorable multiple of 10x, to be valued at $1b, Wrapbook would need to generate $100m in revenue, or 3.7% of Wrapbook’s payroll TAM – bumping that to a 20x revenue multiple, Wrapbook would only need to capture ~1.9% of the market.
Wrapbook could well have a path to a $1b valuation with its payroll business model alone. If its network-based strategy works, it would have a customer acquisition flywheel. Wrapbook’s revenue from its insurance commissions is the icing on the cake here. In a vacuum, Wrapbook won’t be valued as just a payroll company (insurance agencies trade at ~3x revenue to ~4x like AJG, which would likely bring Wrapbook’s overall multiple down). With the multiple revenue streams, we could see Wrapbook having multiple paths to a $1b valuation without having to rely on its payroll business alone.
Moreover, Wrapbook’s problems, in the abstract, don’t apply to just the entertainment industry. There are 59 million freelance workers in the U.S. (or ~36% of the U.S. workforce). These problems can extend to industries such as construction that have their own set of unique liabilities. If they find that the network-based playbook works for the entertainment industry, they now have a playbook that could work for other industries such as construction, staffing, as well as, maids and nannies – all of which would greatly expand Wrapbook’s TAM.
Wrapbook’s potential seems quite clear. It’s operating in an antiquated industry burdened by paperwork. Though, it could be something much more. By being the focal point of interaction, Wrapbook is gathering continual risk profiles on its workers and employers. Wrapbook’s payroll software enables it to have multiple touchpoints with the insured throughout their employment lifecycle and across employers. Through scale and enough data, Wrapbook could move out of the agency model and create a differentiated insurance offering altogether.
Wrapbook may not only become the place for entertainment payroll. With their embedded insurance play, they may well become the place for entertainment insurance. Employers will come for the payroll, but they’ll stay for the insurance.
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