Columbus-based Branch Insurance is ready to expand nationally.
Columbus-based insurance startup Branch has closed a $24 million Series A funding round, enabling it to take its rapid underwriting and quoting technology nationwide.
Co-founder Steve Lekas, who has spent more than 18 years in the insurance industry, estimates the company could grow from 25 employees to 150 by mid-2021. About 1,000 customers have signed up as Branch policyholders—600 in Ohio—since it launched last fall. It has offices in the Short North.
The company stakes its value on its ability to offer customers a firm quote for bundled home and auto insurance within seconds using just a few pieces of information. Instead of having customers fill out lengthy online forms and then repeat much of that information in a 30-minute phone call with an agent, which is the process many legacy insurance companies use, Branch's technology is able to ping various existing consumer databases that contain all the information it needs to underwrite policies.
Branch now has license to write policies in Arizona, Illinois, Missouri, Ohio and Texas. "We would like to be 80 percent available to the U.S. population by the end of next year," Lekas said. That means it will need plenty of legal and other support for its regulatory filings, which for insurance companies typically run as long as 10,000 pages, he said. And of course, the requirements are different in every state.
The funding round was co-led by New York-based Greycroft and HSCM Bermuda, the insurance investment arm of Hudson Structured Capital Management Ltd.
"The team here is really exceptional. And that's truly the No. 1 thing I look for," said Ian Sigalow, co-founder and partner at Greycroft, which is currently investing in companies from two funds totaling $512 million. Greycroft invested $1 million in Branch during its $8.5 million seed round last year, and has pledged another $7 million in the most recent round. Sigalow said what he heard from references for Lekas compelled him to invest.
"He's the youngest person ever to be promoted to director level in the history of Allstate," Sigalow said. "There's generally two profiles of people in the insurance world: people who know how to underwrite, and people who know how to sell. Those two skill sets don't live in the same individual except for Steve Lekas. So, I was blown away by that.
“And then the second thing is, I think the business model and the technology they built to power that is really revolutionary."
If the technology Branch has developed is so great, why haven’t giants like Allstate and Geico created something like it themselves?
“It's kind of like the question about why Google can build certain technology that other companies can't build,” Sigalow said. “And I think that to Steve's credit, and this is the core innovation in his business, is understanding what is necessary to underwrite risk and what is unnecessary to underwrite risk. Because you can ask people questions, or you can go to databases where the answers to those questions already exist, if you know where to look. And it’s understanding how to link that data in real time to your underwriting formula, because the people who own that data don't allow you to cache it and store it. So you've got to build real-time data infrastructure to ping all of these third-party databases, where you get responses in a fraction of a second, so that you can provide what looks to the consumer like real-time underwriting. You're making decisions in a split second, and the technology behind all of that— the databases, the API-level infrastructure—didn't really exist even five years ago—it's all new.”
The companies that dominate the insurance landscape today were built “in insurance pre-history, on a legacy infrastructure and legacy technology. And Steve is unburdened by that,” Sigalow said.
The lead investors in the Series A round were joined by returning investors American Family Ventures and Revolution’s Rise of the Rest Seed Fund, the venture capital organization focused on funding startups outside the coasts and led by former AOL CEO Steve Case and Ohio venture capitalist and author J.D. Vance.
Other investors in the round were SignalFire, SCOR Global P&C, Elefund, Foundation Capital, and individuals from Stone Point Capital.
Lekas, who grew up in Hudson, Ohio, near Akron and then moved around for jobs with Allstate, Esurance and Verisk Analytics, chose Columbus as the home for Branch based on its profile as an up-and-coming region in the Midwest.
Co-founder and chief technology officer Joe Emison previously built and sold four startups and served as chief information officer at the former commercial real estate data aggregator Xceligent.
Katy Smith is editor of Columbus CEO.