Four years ago, Brandon Gell was an architecture student who spent most of his time working on modular 3D printing at home. Now he is the founder of Clyde, an extended warranty company that wants to help small e-commerce businesses offer product protection.
Today, the company announced that it has raised a $ 14 million Series A led by Spark Capital with the participation of Crosslink, RRE, Rea Sea Ventures and others.
How do you go from producer status to the founder of an insurance startup? According to Gell: a period at the start of a 3D scanner for 4 people in Columbus, Ohio.
Because the equipment and resources were so small, Gell set out to find an insurance company to work with to protect his expensive end product from scanning.
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"I spent 6 months looking for a business," he said. After seeing how easy it was to work with fintech customer support tools from companies like Stripe, Shopify, Affirm and others, he said it was clear that insurance, and in particular the extended warranty space, was not as mature.
Clyde is a platform that connects small retailers with insurance companies to launch and manage product protection programs.
With Clyde, customers can access a dashboard and e-commerce applications to manage their protection programs. For example, a user can see how many contracts have been sold, how much total revenue they generate, and gross profit in real time. You can also see which products are purchased most frequently with an extended warranty contract.
"It’s a type of offer similar to Affirm or Stripe," he said. "We give him access to major insurance companies and allow him to launch the program live on his website or physical outlet and store it wherever he sells." It has a Shopify plugin so store owners on the site can add Clyde to their small businesses.
The most critical measure of Clyde is that it has an attachment rate of 18% on average, which means that 18% of people who take a buying route powered by Clyde end up buying extended warranties or protection plans.
The reason companies are worried about the extension of the warranty is twofold. First, insurance benefits the customer experience. Second, insurance purchases are often the highest margin product that companies sell to their customers. Product protection alone represents a $ 50 billion market. Gell said Best Buy generates about 2% of its annual revenue from the sale of extended warranties, but that generates more than half of its profits.
Clyde is helping small businesses, like a 4-person startup in Columbus Ohio, to try this profitable cake. Most e-commerce companies have to work with Amazon, so they donate a lot of money to big companies instead of putting them in their pockets, according to Gell. He says that when Amazon sells an extended warranty on a seller's product, it does not share any revenue with the seller on product performance, preventing a seller from getting both a source of income and a data analysis.
"Our kind of mantra is that the retailers we work with are basically everyone other than Amazon and Walmart," he said.
Clyde's goal is different from Upsie, another Startup supported by the company focused on warranty. Upsie seeks to be a direct-to-consumer warranty replacement, while Clyde works on behalf of the retailer and the insurance company to connect the two parties.
The closest competitors at the start are Mulberry and Extend, which were created after Clyde and have mobilized less venture capital funds. Gell believes that its competitive advantage lies in its partnerships with the best insurance companies and a solid product-oriented platform. The entire founding team of Clyde is made up of producers.
Startups must currently demonstrate that they are viable in both a pre-coronavirus and post-coronavirus world. And Clyde could be exactly that ideal since it focuses on e-commerce businesses.
The series A cycle ended a few weeks ago before the COVID-19 craze started, but said the pandemic had caused more confusion and interest than ever before. Gell sas is a combination of e-commerce more important than ever and customer behavior.
"This is a change from customers who want to buy more online, but also want to protect their purchases more than ever," he said. "Businesses realize how important it is."
With new funds available, Clyde grows as its client base searches for new ways to generate income and take care of clients. If the boot can handle the influx of attention and importance properly, a sticky harmony will follow.