Insurance startups are the hottest sector for VCs, but one Austin-based company thinks it can stand above the crowded industry with a little help from VC powerhouse Accel
- Insurance startup The Zebra announced $38.5 million in Series C funding from Accel Partners, Silverton Partners, Daher Capital, Floodgate Fund, Ballast Point Ventures, and Weatherford Capital on Wednesday.
- The Austin-based startup operates in the increasingly competitive insurance space, with millions of VC dollars going into a range of carrier startups.
- The Zebra operates more along the lines of travel comparison site Kayak, allowing users to compare plans and carriers on its site. In 2017, Kayak founder Keith Melnick joined the startup as CEO at the behest of Accel partner John Locke.
- The insurtech arms race has actually been a boon for The Zebra, Melnick told Business Insider, as consumers struggle to understand the new offerings against legacy insurance plans.
- The startup is looking to expand which types of insurance comparisons it can provide, but cofounder Josh Dziabiak said health insurance was off the table given the political implications and intensely complicated policy frameworks.
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Insurance startups, otherwise known as "insurtech," are the hottest investments in Silicon Valley right now, with VCs scrambling to get in buzzy rounds and a wealth of competitive, new-age carriers.
The thinking goes: the same sea change that mobile apps and startups brought to finance and banking, will come to the yawn-inducing khaki covered insurance industry. Millennials are finally moving towards home and car ownership, and they need to insure those milestone purchases with a slick app. The pitch practically writes itself.
The Zebra is a horse of a different color, so to speak. The Austin-based insurance startup doesn't want to disrupt the highly regulated industry with cost-cutting risk assessment algorithms or by outright flouting regulation. Instead, it just wants to let users compare the ever-expanding suite of options just as Kayak did for travel expenses a decade ago.
On Wednesday, the startup announced a milestone of its own with $38.5 million in Series C funding from Accel Partners, Silverton Partners, Daher Capital, Floodgate Fund, Ballast Point Ventures, and Weatherford Capital.
"I think we are in the Golden Age of insurtech, if that's what, I guess, people are calling it," Accel general partner John Locke told Business Insider. "The nice thing is as there are more entrants, there's more need for a site that helps consumers sort everything out on an apples-to-apples basis."
Locke pointed to new entrants mainly targeting millennials like Root, Lemonade, and Metromile that, while easy to sign up for and use, are hard to compare price-wise to traditional carriers like State Farm. He likened the shopping experience to travel, where a host of websites like Kayak, Booking.com, and Expedia have emerged to help bargain shoppers get the best deal on flights.
While the startup was raising its Series B, a funding round that Accel ultimately led, Locke suggested Kayak cofounder Keith Melnick consider jumping on board given his expertise and experience building similar company.
"Accel asked me to go look at a company that they were looking at that called themselves the Kayak of insurance, so it made sense," Melnick told Business Insider. "I went back to Accel, and John in particular, and said not only do I think you should invest but I invested myself."
Ditching lead generation and building trust
Shortly after the funding round, Melnick came on board to lead The Zebra as CEO. At the time, the startup was struggling with lead generation, an industry-term for selling user data, and wanted to make a business that was more transparent and fair for its users. So Melnick upended the company, had several testy board meetings, and helped the founding team rebuild the company from the ground up with a new business model that didn't rely on selling user data.
"We were taking it off course. It was not a delineated, clear line because we had to deal with all these issues in the space," cofounder and CMO Josh Dziabiak told Business Insider. "Accel really understood that, and it allowed us to take a step back and build what we really wanted."
According to the company, sales exceeded $50 million in 2019 by using flexible revenue models, such as implementing a transaction fee or taking a commission on plans purchased on the site. The startup recently expanded from offering auto insurance comparisons to also include homeowners' insurance, partially because of the new startups that have cropped up with easy-to-use online checkout tools. Anything that's too offline or complicated is a non-starter, Dziabiak said.
"The only thing we've subconsciously pulled off the table is health insurance because it's a whole different animal," Dziabiak said. "It's even more tricky in terms of regulation, and is also kind of at the risk of politics. There are already these huge industries and needs, so it's not something we need to build a big business."