COLUMBUS – Root Insurance of Columbus has been valued at $1 billion after raising $100 million in its latest round of funding.
The series D funding will allow the startup car insurance company – co-founded by 2003 Lexington graduate Dan Manges – to provide additional capital to deepen penetration in existing markets, expand into new states and fuel hiring plans, with a focus on engineers, actuaries, claims, and customer service to support increased scale, according to a press release.
The funding round was led by Tiger Global Management. Redpoint Ventures, Ribbit Capital, and Scale Venture Partners all participated as follow-up investors in this latest round.
“Root being valued at $1 billion is a reflection of our business fundamentals, our growth rate to-date, and the potential we still have for future growth,” said Manges, co-founder and chief technology officer.
His partner and company CEO, Alex Timm elaborated more in a press release.
“We are excited that Root continues to attract the commitment and capital of some of the largest and most successful venture funds, like Tiger Global Management, who recognize the power of the Root platform and our prospects for growth and success,” Timm said. “This additional capital will allow us to accelerate our strategy to transform the car insurance world and reinvent a broken industry from the ground up by setting the new standard for how customers buy and use insurance.”
Founded in 2015, Root Insurance aims to bring the $250 billion U.S. auto insurance industry into the mobile age by using smartphone technology to understand individual driving behavior. Customers obtain their personalized quote after a two-to-three-week test drive.
The company states that good drivers can save more than 50 percent compared to traditional insurance carriers, and bad drivers get turned away.
“Root Insurance is leading digital innovation in U.S. auto insurance. This industry is ripe for change, and we are excited to invest in a team that has the expertise, vision, and momentum to deliver real results,” said Lee Fixe, partner with Tiger Global Management. “We look forward to growing our partnership with Root and helping them expand their footprint across the United States.”
Over the last two years, Root Insurance has reported expanding into 20 states, including Ohio, Pennsylvania, Indiana and Kentucky. Root Insurance anticipates expanding into all 50 states and Washington, D.C., by the end of 2019.
The transaction is expected to close during the fourth quarter of 2018 and is subject to customary closing conditions and regulatory approvals. Current investors also include Drive Capital and Silicon Valley Bank.
In April 2018, Root Insurance closed a $51 million round of funding. And 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 in April.
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 Manges must catch a plane to the coast to meet in-person with investors, but he 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 be built all over the place.”
Root Insurance is Mange’s third-start up. The DeVry University graduate with a bachelor’s degree in Computer Information Systems co-founded Braintree Payment Systems in Chicago. 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 in a previous interview with Richland Source.
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.
This story was updated Aug. 25 with comments from Dan Manges.
