MANSFIELD – A 2003 Lexington graduate is redefining car insurance through a Columbus-based startup, and the business is drawing a significant Silicon Valley investment to the Midwest.
Root Insurance – co-founded by Lexington’s Dan Manges and fellow Ohioan Alex Timm – recently closed a $51 million round of funding, which should allow the startup to expand into nearly every state likely before 2019.
Root Insurance is founded on fairness. Good drivers get the best rates, and bad drivers get turned away, Manges said.
“We started the company because we believed the price people pay for insurance should be based primarily on how they drive,” Manges said. “Two people at the same age, with the same credit score and don’t necessarily drive the same way, so they shouldn’t have to pay the same.”
The company calculates individualized rates by using smartphone technology and data science to understand driving behavior. During a “test drive,” the Root app tracks braking, turns and frequency of driving. Then, it offers good drivers a results-based quote, which can save drivers up to 52 percent.
Currently, Root is available in 11 states, including Ohio, Pennsylvania, Indiana and Kentucky. But with the closing of a $51-million Series C funding round, Manges expects to rapidly add more states to the list. The investment was led by Redpoint Ventures with Scale Venture Partners, Ribbit Capital and Silicon Valley Bank Capital Partners.
“A lot of that, especially at this stage, is really based on the progress we’ve made as a business,” Manges said. “When you do the first couple rounds of investment, it’s based on the idea and team. But in the third round, it’s based on the progress you’ve made.”
While the most recent round of investment allows Root to grow, the two previous rounds raised enough to launch the startup.
The initial capital to fund Root Insurance came largely from Drive Capital, a Columbus organization dedicated to supporting startups in the Midwest.
“It was the capital we needed to enter the stakes,” Manges said.
Though many entrepreneurs move to Silicon Valley to compete for much-coveted capital, Manges and Timm chose to stay in Ohio.
“Ohio is actually a really great place to start an insurance carrier … and California is a notoriously difficult place,” Manges said.
Other companies like Progressive and Nationwide are also headquartered within the Buckeye state.
This sometimes means catching a plane to the coast when Root’s leaders need to meet in-person with investors. But Manges says investors are willing to work the other way, too.
“We’ve had many investors come out to see us,” Manges said. “I think they are increasingly realizing great businesses can built all over the place.”
Root Insurance launched publicly in October 2016. It’s the third startup for Manges.
He co-founded Braintree Payment Systems in Chicago after graduating from DeVry University with a bachelor’s degree in Computer Information Systems. PayPal bought the company in 2013 for $800 million.
He then worked with Fractal Surfing, and now Root Insurance.
“It’s definitely helped being through a startup experience before,” Manges said.
He’s familiar with programs like Sundown Rundown in Mansfield, where startups pitch their ideas in an informal setting. Early last year, he pitched Root at Sundown Rundown.
