Everyone Says Smart Money vs. Dumb Money. Kate Johnson Calls It Hogwash.

Kate Johnson started as a mechanical engineer building medical devices, decided regulated manufacturing wasn’t a fit for someone who wants fast-moving environments (a line she delivers with full awareness of the irony, given where she ended up), and pivoted deliberately toward tech venture capital — going to Harvard Business School specifically because she noticed the credible paths into venture kept running through Stanford or Harvard MBAs.

Her first venture role was enterprise software investing, and the formative lesson came from watching her own fund fail to raise: listening to their pitch, she realized it was interchangeable with every other fund’s pitch — “smart money,” “we guide entrepreneurs,” differentiation claims she now calls, flatly, hogwash. Her conclusion: real differentiation comes from genuine sector expertise, not marketing language. That took her into fintech investing at Safeguard Scientifics (a publicly traded VC fund — a structure she has strong opinions about), and eventually to American Family Ventures, drawn specifically by the chance to join a corporate fund in the process of spinning out into an independent institutional fund.

In Episode 106 of InsurTechTalk, Kate and I covered why she thinks 2020-vintage venture funds will underperform, the mechanics of AmFam Ventures’ newly closed $444 million fourth fund, and why she’s actually optimistic about the market reset that made 2023 fundraising so painful for founders.

About Kate Johnson

Kate Johnson is Managing Partner at American Family Ventures, the venture arm of American Family Insurance. She joined when AmFam’s venture activity was still a corporate, balance-sheet-funded operation, ahead of its transition to an independent institutional fund. The firm has since raised two institutional funds, most recently a $444 million Fund IV backed by 13 institutional LPs. AmFam Ventures invests from pre-seed/incubation through Series B, typically writing initial checks between $500K and $10 million, and reserves roughly half of each fund for follow-on investment. Kate also led the build-out of AmFam’s PropTech investing practice, recognizing that insurers are, functionally, major asset managers with substantial real estate exposure.

Why She Thinks 2020 Vintages Will Underperform

Kate’s read on vintage-year risk is a genuinely useful framework for anyone evaluating VC fund performance, and she was specific about the mechanism rather than just asserting a hunch.

• AmFam Ventures raised its fund in 2019 — ahead of the 2020-2021 valuation spike — which let the firm deploy cautiously through the most overpriced period rather than being forced to chase inflated valuations to put a freshly raised fund to work
• Her core critique of the 2020-2021 cycle: venture hadn’t experienced a real bear market in years, which made it genuinely hard to distinguish skill from a rising tide — company performance during that window reflected the overall market’s momentum as much as (or more than) underlying business fundamentals
• Her personal underwriting discipline, unchanged through the hype: could this business stand on its own without access to essentially unlimited capital? During 2020-2021, capital was treated as a commodity — companies burned freely because more was always available — and that assumption evaporated once the market contracted
• Founders currently raising seed and Series A rounds are experiencing what she calls “trial by fire” — being forced to demonstrate real unit economics and contribution margin discipline that simply wasn’t required to raise money a few years earlier

Her overall framing: this is “a breath of fresh air” — a return to fundamentals that are actually predictable, rather than the prior few years’ environment, which she compares to a coin flip.

Vintage Timing Matters More Than Founders Realize

Kate flagged something worth internalizing for any founder evaluating a term sheet: understand which specific fund a VC is investing from, and where that fund sits in its own lifecycle. Is this a fresh, recently-closed fund actively deploying? Is it a fund near the end of its investment period doing catch-up deployment? Is capital being rolled from a prior fund? Each answer meaningfully changes the investor’s actual incentives and risk appetite toward your deal — information most founders never think to ask for directly.

The Corporate Venture Insight That Became PropTech

Kate’s account of building AmFam’s PropTech practice is a clean example of following an obvious-in-hindsight thesis to its logical conclusion: insurance companies are fundamentally asset managers, and asset managers carry substantial real estate exposure. Property-adjacent technology is a natural extension of insurance-specific investing, not a separate vertical bet — which is also why other major insurance venture arms (she referenced ITC’s own spinout into Blueprint, focused specifically on real estate and proptech) have made similar moves.

Evergreen Funds: A Contrarian Defense

Asked about Evergreen fund structures — funds without a traditional fixed exit horizon — Kate offered a more favorable take than most VCs typically give. Her view: Evergreen structures suit companies with real, durable merit that traditional VCs pass on simply because they’ll never produce a venture-scale (now routinely discussed as $100 billion) outcome. An Evergreen fund can profitably back a company with genuine downside protection and a realistic billion-dollar (not hundred-billion-dollar) outcome — a more “realist” strategy, in her words, that manages a company through its full lifecycle rather than forcing it toward an exit timeline that doesn’t fit its actual trajectory.

Fund IV: $444 Million, 13 LPs, Deployed Into a Reset Market

AmFam Ventures’ newly closed Fund IV represents genuine scale — $444 million across 13 institutional investors, check sizes from $500K up to $10 million initial investment, with roughly half the fund reserved for follow-on rounds. Kate’s framing of the timing: closing in 2023, into a market where “everything is on sale,” positions this vintage to be a genuinely strong one, in direct contrast to her skepticism about 2020-2021 vintages.

Why $20 Million Pre-Seed Checks Were a Mistake

This was the sharpest structural critique in the conversation, and it explains a lot of what went wrong across the broader venture market during the 2021 peak.

Kate’s mechanism: mega-funds (she didn’t name specific firms beyond referencing “the Tiger Globals of the world”) raised enormous pools of capital — $8 billion funds, for instance — that had to be deployed within a roughly five-year window. There simply aren’t enough genuinely fundable companies to absorb that capital in reasonably sized checks, so funds began writing $20 million checks into pre-seed companies that didn’t actually need $20 million and didn’t want that much dilution. Founders took the money anyway, at inflated valuations that came with it, and — because the cash was sitting in the bank — spent it, simply because it was there and needed to be “put to work.” Companies that spent frivolously under that pressure, Kate argues, lack staying power now that capital discipline has returned.

Her practical read on the current reset: round sizes shrinking back toward what companies actually need is healthy, not alarming — pre-seed companies genuinely don’t need $20 million, and a market where founders don’t have to give away 20-25%+ of their company to raise sufficient capital is a better market to build in, even if it feels harder than 2021.

The exception she flagged directly: MGAs and carriers are genuinely capital-intensive in a way most software companies aren’t — regulatory filings, licensing, and operational overhead mean a legitimate insurance startup may need $20 million (or considerably more, including surplus capital requirements distinct from operating capital) simply to get off the ground, a distinction she considers a real exception to the broader “smaller rounds are healthier” rule.

What “We’re an AI Company” Actually Gets From Her

Asked directly how she evaluates a founder pitching an “AI” company, Kate’s answer was refreshingly unimpressed by the label itself: everyone is in the business of marketing, founders included, and claiming to be “AI” doesn’t earn automatic credit or automatic skepticism — it earns scrutiny. Her diligence approach: make the founder prove the AI claim specifically, then decide whether it’s real differentiation or “baloney.” She noted a useful framing from a peer investor (Andy Lerner of Iron Capital, referenced during the conversation): companies genuinely native to AI are different from companies that use AI tooling as a component while their core value proposition is something else entirely — both are legitimate, but they should be evaluated differently, and founders shouldn’t lean on the AI label as a substitute for demonstrating the underlying capability.

Her honest acknowledgment: generative AI represents a genuine technical leap, not pure hype — there will be real, large infrastructure companies built directly on that wave, and separately, plenty of already-strong companies that use generative AI to sharpen an existing strength rather than redefine their business entirely.

Recent Deal: Specialty Lines, Ryan Specialty-Flavored

Kate’s most recent deal at the time of recording was in specialty commercial insurance lines — a thesis area she’d been actively looking for a strong entry point into for years. Her framing draws a direct comparison to Ryan Specialty (and its founder Pat Ryan, whom she praised admiringly, noting he’s still building new insurance ventures in his 80s): not aiming to become a full brokerage at that scale, but following the same underlying playbook of amalgamating a portfolio of niche specialty lines into something larger than any single line could be alone.

Her broader pet peeve, expressed candidly: she’s tired of seeing yet another generic underwriting platform pitch. What genuinely excites her now is startups providing coverage for previously uninsured or underserved risk populations — filling real protection gaps rather than building marginally differentiated infrastructure in an already-served category.

Advice: Remember How Lucky This Job Is

Asked for closing advice, Kate’s answer wasn’t tactical — it was a mindset check she says she deliberately maintains. Her point: being a venture capitalist is an genuinely unusual privilege — spending your entire career listening to other people’s big dreams without needing to generate your own ideas — and it’s easy, after enough pitches, to lose the spark that makes the work meaningful. Her equivalent point for founders: starting a company means people around the table (employees, investors) are actively betting on you and your vision, at any career stage — early out of school or well into a second act — which she considers a genuinely remarkable position to be in, worth appreciating rather than taking for granted.

Key Takeaways

• Fund vintage year matters as much as fund quality — capital deployed during an overheated market (2020-2021) faces structurally different underwriting pressure than capital deployed into a reset market, independent of investor skill
• Ask any VC which specific fund they’re investing from and where it sits in its lifecycle — the answer materially changes their actual incentives toward your deal
• Insurance companies are fundamentally asset managers with real estate exposure, which is why PropTech investing is a natural, not tangential, extension of insurtech-focused venture capital
• Evergreen fund structures are a legitimate, underappreciated strategy for backing companies with genuine merit that will never produce a venture-scale outcome but offer real downside protection
• Mega-funds forcing outsized checks into pre-seed companies during 2021 created inflated valuations and undisciplined spending that many of those companies are still struggling to recover from
• MGAs and carriers are a genuine exception to “smaller rounds are healthier” — regulatory and capital requirements mean legitimate insurance startups often need significantly more capital than a comparable software company
• Claiming to be an “AI company” earns scrutiny, not automatic credit or automatic skepticism — the actual test is whether the founder can demonstrate the capability specifically, not the label itself