A Fat Startup from Virginia: Andrew Rose, CEO of Compare.com (Part 5)

Sramana Mitra: Your first round of funding was from foreign investors for $100 million?

Andrew Rose: That is correct.

Sramana Mitra: Who were these investors?

Andrew Rose: One of them has always remained silent. Another one is Admiral Group. Third is White Mountains. You would know White Mountains as the former owners of Esurance. It’s a big brand name that many people know. The last one is MAPFRE. MAPFRE is the largest Spanish insurance company. They are also invest in the top 20 insurers here in the US, with a very large presence in Massachusetts with the Commerce insurance brand and some others. For a first round, what we raised was quite a substantial amount.

Sramana Mitra: $100 million on a concept happens very rarely. So how did you build the company? When did this funding come together?

Andrew Rose: That funding came together in May of 2012.

Sramana Mitra: So you’re off to business in May of 2012. What happens next?

Andrew Rose: So that’s sort of the kick off point at that point in time. We then built the infrastructure that we needed to use. We took that platform and began to modify it because the UK is one set of islands over there. The US is 51 discrete markets. It quickly became apparent that while it was a good jumping off point, a lot of modifications have to take place.

All those things took us through the back half of 2012 and into 2013. We just soft launched in 2013. We have to take a step back here a second and actually talk about what Compare.com is. You have to connect all of these insurance companies. One of the things that you quickly learn is that insurance companies don’t operate on internet time. They operate on insurance time. One is the regular scale. One is logarithmic.

We had to delay our launch. We integrated those various insurance companies into the platform. That’s what we effectively did after our soft launch in 2013. It got to a minimum viable product in the US. In January of 2014, we rolled out to the market and we had promised the market that we would be using this large pot of cash that we had raised to do some meaningful advertising. The US is a challenging place to do insurance. There is a ridiculous amount of advertising.

So part of the reason why we were able to raise $100 million was each year, $7 billion of advertising is done by insurance companies. Auto insurance is the largest part of that. Geico spends $1.5 billion. Progressive, State Farm, All State – each are not far behind at around $1 billion. There’s an enormous amount of noise out there when it comes to auto insurance. We have to break through that. That’s what that $100 million dollars was intended to do. It was to give us the ammunition to be able to go out there and let consumers know that we are here with a better mousetrap.

There was a bit of chicken and egg component to it. One of the scary parts of this business was, if we advertised, will consumers come? And if consumers come, will that entice additional insurance companies to come on the panel. Fortunately for us, it worked. Consumers have come. Consumers have found value in the platform. Now Compare.com is the largest comparison website in the US with more than 70 different insurance companies integrated in our panel.

This segment is part 5 in the series : A Fat Startup from Virginia: Andrew Rose, CEO of Compare.com
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