Building a New Insurance Company From Scratch: Clearcover CEO Kyle Nakatsuji (Part 6)

Sramana Mitra: What did you do by way of financing? This doesn’t sound like something that was self-financed. You probably started with financing.

Kyle Nakatsuji: We did. Right when we were getting started, we raised a seed round of about $2 million. About six months later, we raised another $9.5 million.

Sramana Mitra: Is this part from your previous insurance company funds?

Kyle Nakatsuji: No, the seed round was entirely from our partners at American Family. They’d been a supporter from day one. They put a lot into the company in terms of money and resources. They led the seed round just like any other seed investor would.

Six months later, our next round was led by an investment group called Lightbank here in Chicago. Then we had a couple of other investors joining the American Family that did a significant portion of that round as well.

Then we just closed our B round recently which was for another $43 million. It was led by Cox Enterprises out of Atlanta with participation from all of our pre-existing investors including American Family and a handful of new ones that wrote meaningful checks.

Sramana Mitra: How did you get this going? We don’t accept people into this series without, at least, $5 million revenue run rate. Obviously you, very rapidly, got to that run rate. How did you do that?

Kyle Nakatsuji: At the end of 2017, we founded the company. We went to work building against that thesis that I laid out. We started hiring out the initial team. We were probably about 20 people by May or June of 2018.

Our goal was really to prove that one person who didn’t work for us would buy car insurance from a brand new company they had never heard of. It wasn’t all ambitious. It’s actually quite simple. Because of what we do, it’s the soup-to-nuts insurance company.

We had to build the product, all of the pricing, the ways to service the customer, and handle claims. We have important partners that help us with capital and help us with licensing. But from a capability perspective, we needed to build a fully functional insurance company. Then we wanted to see if we could go to market using our defined channel strategy and sell just one policy to one person.

We didn’t know that was step number one. So we spent all of 2017 working on this. We launched and went to market in California in February of 2018. February of 2018 was our go-live date in California. We had signed up a couple of different distribution partners in different places where we thought insurance would be relevant.

What we learned pretty quickly was that if you can take a really high-quality product and put it in places where it’s going to be relevant to the consumer, you make it easy to buy in those moments and you make it price competitive or at least attractive from a pricing perspective.

This segment is part 6 in the series : Building a New Insurance Company From Scratch: Clearcover CEO Kyle Nakatsuji
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