Four years ago, Brandon Gell was an architecture student who spent most of his time working on 3D printing modular housing. Now, he’s the founder of Clyde, an extended warranty startup that wants to help small e-commerce businesses offer product protection.
Today, the company announced it has raised a $14 million Series A led by Spark Capital with participation from Crosslink, RRE, Rea Sea Ventures and others.
How do you go from being a product person to the founder of an insurance startup? According to Gell: a stint at a four-person 3D scanner startup in Columbus, Ohio.
Because the team and resources were small, Gell was put in charge of finding an insurance company to work with to protect their expensive end product of scanners.
“I spent six months trying to find a company,” he said. After seeing how seamless it was to work with fintech customer support tools from companies like Stripe, Shopify, Affirm and others, he said it was clear that insurance, and especially the extended warranty space, wasn’t as mature. So he set up an office in his grandma's New York apartment.
Clyde is a platform that connects small retailers to insurance companies to launch and manage product protection programs.
Using Clyde, customers can access a dashboard and e-commerce apps to manage their protection programs. For example, a user can see how many contracts were sold, how much revenue total those bring and gross profit in real time. It also can see which products are most often purchased with an extended warranty contract.
“It’s a similar type of offering as Affirm or Stripe,” he said. “We give you access to large insurance companies and we enable you to launch the program live on your website or physical point of sale and store wherever you sell.” It has plugins with Shopify, BigCommerce, Salesforce, Magento, Woocommerce, and more so store owners on the site can add Clyde to their small businesses.
Clyde’s most critical metric is that it has an 18% attachment rate on average, which means that 18% of people that go through a Clyde-powered purchasing path end up purchasing extended warranties or protection plans.
The reason businesses care about extended warranty is two-fold. First, insurance benefits the customer experience. Second, insurance purchases are often the highest-margin product that companies sell to their customers. Product protection alone is a $50 billion market. Gell said that Best Buy drives about 2% of its annual revenue from the sale of extended warranties, but that generates more than half of its profit.
Clyde helps small businesses, like a four-person startup in Columbus Ohio, get a bite of this profitable pie. Most e-commerce businesses have to work with Amazon, thus giving a lot of that cash to the big company versus putting it in their own pocket, per Gell. He says that when Amazon sells an extended warranty on a seller’s product, it doesn’t share any revenue with the seller on how the product performs, which prevents a seller from both a stream of revenue and data analytics.
“Our sort of mantra is that the retailers that we work with are basically everybody that's not Amazon and Walmart,” he said.
Clyde’s goal is different from Upsie, another venture-backed startup focusing on warranties. Upsie is looking to be a direct-to-consumer warranty replacement, while Clyde works on behalf of the retailer and insurance company to connect the two parties.
Closer competitors to the startup include Mulberry and Extend, which were both founded after Clyde and have raised less in venture capital funding. Gell thinks his competitive advantage is partnerships with top insurance companies, and a strong product-focused platform. Clyde’s entire founding team is made up of product people.
Startups right now need to prove that they are viable in both a pre-coronavirus and post-coronavirus world. And Clyde might be exactly in that sweet spot, as it focuses on e-commerce businesses.
The Series A round closed a few weeks ago, before the COVID-19 craziness began, but he said that the pandemic has led to more inbounds and interest than ever before. Gell says it’s a mix of e-commerce being more important than ever, and customer behavior.
“It’s a shift of customers that want to buy online more, but also protect their purchases more than ever,” he said. “Companies are realizing how important it is.”
New cash in hand, Clyde’s growing while its customer-base is looking for new ways to bring in revenue and take care of customers. If the startup can handle the influx of attention and importance right, sticky harmony will follow.