Building a Fast Growth, Cutting-Edge Insurance Brokerage: Karn Saroya, CEO of Cover (Part 6)

Sramana Mitra: You raised $3.1 million. You finished Y Combinator and you’re walking out with a great network. What happens next?

Karn Saroya: From there on, it was about proving out the model and removing dependencies. When we left Y Combinator, we were a lead generation business. All we wanted to show was that significant volumes of customers can be acquired via native mobile channels. We quickly realized that us selling leads is not going to work.

Brokers, in their current incarnation, are not set up to be able to handle younger folks who want instantaneous engagement. That was a huge challenge for us. A good test for that was just to just search for or google “independent agents in Arkansas” and give them a call. They would pick up one-third of the time because most of the time, they’re off golfing.

The impetus from us was to building a national insurance coverage, partner with as many insurance companies as we could to make sure that we took over more of the experience and start to own the customer relationship to a great extent. Within the next 12 months, we did something that is very non-trivial. We built a national insurance brokerage that spans 49 states and work with 30 carrier partners. That helped us grow.

At that point, we were thinking about what we needed to do to continue accelerating growth. So we kicked off a Series A process. We had a fair number of tier one VCs in our seed round. Because we were keeping them abreast, they knew us and what we were doing. We were able to raise a Series A within a matter of a couple of weeks.

We raised $8 million as Series A about a year after we did YC with much of our seed round in the bank. That helped accelerate hiring. Because we are national, we know we’re not competing with our panel of carriers and we know where the gaps in the market are. We start to move in the direction of starting to fill out the gaps in the market by standing up some of our own products.

Sramana Mitra: What kind of numbers do you have? How many are actually transacting on your system?

Karn Saroya: We are trending towards about a million dollars a month. We expect to be 8x to 10x that over the course of the next 12 to 18 months. We’re looking at anywhere between $80 million and $120 million run rate.

Sramana Mitra: What kind of numbers of customers are we talking here to generate those numbers?

Karn Saroya: We’ve had more than 150,000 people come through Cover over the course of two and a half years that we have been in business. The challenge is not driving customers but building out the infrastructure to be able to support the customer experience that we want to deliver, which is instantaneous rates and engagement.

This segment is part 6 in the series : Building a Fast Growth, Cutting-Edge Insurance Brokerage: Karn Saroya, CEO of Cover
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