Credible, a San Francisco online lending site owned by parent company Fox News, has acquired Young Alfred, a Philadelphia digital startup created by two Wharton MBA students to compete with your neighborhood insurance agent.
The company’s name, Young Alfred – its informal slogan is “At Your Service” – is reminiscent of the fictional butlers called “Alfred” from the Batman franchise to the 1991 slapstick movie. Hudson falcon. The company is the brainchild of investment banker David Stasie and engineer-turned-investment trader Jason Christiansen, who met in 2015 at Penn Business School, where their program included inventing a startup with potential to make money in digital America.
“We have thought of drone insurance. But drones were too new, ”and there wasn’t a lot of data to estimate risk, the foundation of insurance, Christiansen recalled. “So we looked at tenant insurance, then home insurance. We were amazed, excited, dismayed at the scale of the opportunity and how it still worked thanks to all these local agents.
“We thought surely someone had already invested in a way to do it online. But no, no one did it really well. We thought, why can’t we build it? We were green. And concentrated. And stubborn.
Businesses won’t say what Credible paid for. But this is the latest in a series of deals in what has been a “scorching sellers’ market” for private companies in general, and software companies in particular, according to GF Data Resources, a Conshohocken company that tracks sales of private companies.
Overall, the typical sale of businesses worth less than $ 250 million was valued at 7.6 times profit – the highest since the company started tracking in 2005 – as corporations Cash-rich and private equity firms are fueling a buying frenzy.
Financial firms were concerned in the mid-2000s that young Americans were not buying homes (were they held back by student debt, or were they just forming families late?). But Christiansen figured that by the time they had hired enough engineers to offer fonts suitable for people accustomed to online convenience, “Gen Z would be buying homes and expecting a great buying experience. top-notch online insurance, and we’d have the tips ready.
They raised seed money from Pear Ventures, ERA and Newfund Capital. Then they applied for insurance licenses in every state and put staff to work inputting the 50 state home and auto owner rules into Young Alfred apps designed for easy use. At the end of 2019, they raised $ 10 million from investors such as Google’s Gradient Ventures. They have improved the software to make it more attractive to online brokers and have established an in-house brokerage team to answer questions from clients.
The hardest part was convincing insurers to use a new online service. “You might think, ‘two young guys promising to work hard, why don’t they name our company? But a lot of them saw us as two bright, new finance guys, why risk their careers on us? Said Christiansen.
After a year and a half of refusal, one of the first to try Young Alfred was the country’s oldest insurer, the Philadelphia Contributionship (known as the “Hand in Hand” for its distinctive four-handed marker on insured houses. ), founded by Benjamin Franklin and his partners in 1752. “A Wharton alumnus connected us,” Christiansen remembers.
The Contributionship and two other early adopters “were just enough to get started.”
The partners claimed to offer not only convenience, but also precision.
“Insurance agents know a lot. They are well trained, ”said Christiansen. But especially for home insurance, “the questions that companies ask applicants are very detailed, and sometimes [agents] forget one. “What breed of dog do you have? ” [Risks vary with size and type.] “Is there a screen around the porch?” Companies told us they found agents had errors in about 30% of requests. “
Young Alfred’s automated application failed if it was not complete and verified.
As policies started to flow in, more and more insurers took out. The service currently offers 46 insurance companies and a waiting list as staff deal more.
Haven’t online registrations caused the decline of established agencies? Christiansen says carriers tell them they’re not moving Neighborhood Officers, but reaching new customers – from young people buying their first home or car, to digitally savvy retirees moving to areas of the city. resort. “We are now in all 50 states,” Christiansen said. “The seniors in Florida are very happy with us. We welcome clients who want to forge their own path.
Over the past four years, Young Alfred has sold $ 6 billion in home and auto insurance to major local insurers.
If that sounds like a lot, it’s still a tiny fraction of the US $ 40 trillion home insurance market, and that’s not counting cars.
Credible won’t say how much he’s paying for young Alfred. This company’s online “loan market” offers mortgages from a range of banks and student loans from Citizens Bank, Wilmington Avenue College, online lender SoFi, and others.
“We are eager to add insurance products,” Credible founder Stephen Dash said in a statement.
Will Credible use Young Alfred to take over the agency’s activity? “There are so many of these” insurance software start-ups in recent years, noted Paul Melchiorre, a veteran Philadelphia tech executive who is a former president of iPipeline, a life insurance software company in Philadelphia. line based in Exton.
Melchiorre noted that San Francisco-based Lemonade, which went public two years ago, has attracted a horde of initial investors – its IPO debuted at $ 69 per share higher than expected, then went on to more than doubled in a few months. But it fell sharply below its initial trading price this year, after a series of quarterly reports showing expenses were nearly triple the company’s annual sales and profits were not on the horizon.
“I think the real insurance disruption is yet to come,” Melchiorre concluded. “Companies like Tesla and Amazon are likely to take over insurance over time because they have all of this customer data. They know your risks, your credit scores, the last time you went to the bathroom. They know when your wife gets pregnant before she does. Big data companies could take over the entire insurance process.
Even before its sale, Young Alfred had become less visible in Philadelphia. Stasie moved to Arizona as the pandemic shut down cities on the east coast and hired a group of staff for the company there. Christiansen is raising her family in Connecticut.
Also in Philadelphia are Young Alfred’s attorneys at Cozen O’Conner, although the acquiring company has its own attorney. Additionally, the founders’ alma mater at University City, where students brainstorm more digital business plans.