How Myhippo CEO Assaf Wand grew to $119.3M revenue and 160K customers in 2024.

hello everyone my guest today is a soft one he's the co-founder and ceo of insurtech startup hippo based in palo alto the company is modernizing home insurance through the lens of homeowners all right so if you're ready to take us to the top bring it so you got hippo going on here now listen my audience is usually pure sass so let me just ask you your revenue model is it pure sas or or if not what is the revenue model so the revenue model is is commission driven we basically make uh percentages of every premium that we actually sell however uh because you mentioned that your audience is mostly sas think of insurance as one of the most interesting sas businesses you can find i get yearly pay the average policy i think is like twelve hundred dollars so i get an early pay of twelve hundred dollars from you where i'm getting making my commission the churn is really really minimal you know because you didn't change your uh home insurance very very often however uh it's a business that actually have the market and the marketing capabilities of a consumer side so you can target customers directly is a hundred billion dollar and go in at five billion a year so you get the positive side of consumer uh basically businesses with the benefit of a sas business so break break this down for me is that 1200 number you just gave me is that a fair average in terms of what consumers pay you per year for their home insurance that's that's the average in the u.s okay in the u.s and and how many and how many of these how many of these do you have issued at this point outstanding of a hundred and fifty hundred and sixty thousand okay hundred quite six yeah it's significant okay right 160 thousand we'll talk more about that here in a second but break down the economics on the 1200 so that's the pay to you now is that top line revenue or do you have to pay a bunch of that back so that's top line and we're making uh percentages out of that okay and do you negotiate your bda team negotiates the percentages based off the sales channel one one by one uh we we're agnostic we'll always get the same commission the same structure no matter what so we're not gonna do uh uh it's mostly to focus on the customer so the customer would not feel that if he comes from channel a he potentially got a different price or someone else got a different cut with agnostic no matter what channel you're coming to ippo we're always making the same pay and you as a customer always pays the same amount okay so what are you making on the 1200 we're talking like 10 or more no no quite significantly more okay wait can we can you give me a range it's in the uh uh 20 to 30 percent okay and how did i i'm just uneducated here how does that compare traditional home insurance oh it's it's the same structure like the uh 15 commission because we're doing a lot more than what any other agent doing we're collecting the data we have our policy management it's our own filing it's our own product uh so our cut is quite significantly better but you're also uh doing everything that you need so now an agent is not going to take care of you on the claims the claims move to the claim department in the insurance we have our own claim department we're doing all of that stuff we'll basically think of it as a virtual insurance company for for an ease of thought a soft 1200 per year where you're taking your minimum of the range you gave me of 20 is essentially 240 bucks per year to you or about 20 bucks a month across 160 000 paying customers that puts your monthly recurring revenue somewhere around 3.2 million on this stream is that accurate it's it's it's you know let's not get into it it's it's actually quite significantly higher than that okay other products uh auto flood there's all kind of other components as well that coming in yes are all of these additional products that drive that driving expansion revenue on that same customer base or these are so you're serving these these products to different customers entirely customer base different same oh same okay so so i want to walk through a life cycle here so you get me on the insurance 1200 per year talk to me about your other products that you might upsell me in your susan three two three four no it's even most of them are in the same time if you are living in a flood zone we'll sell you a flood insurance we're obligated to offer you an earthquake insurance in california different states have different products that are mandatory to offer you and we offer them and we sell them we are a lot less focused on upselling this is not our focus our focus is whatever is best for the customer but some customers wants to bundle in off in and add the auto we're happy to offer that it's a very customer centric rather than maximizing revenue per customer it's about growth if we're you know in the region of 200 000 customers now there are 120 million households in the us there's so much more to go by focusing on getting more incremental revenue rather than adding up selling opportunities sorry are you at 160 000 customers today or 200 000 across all your products you know it's in betweenish so you have about 40 000 that might not pay at all for the home insurance but they're paying for just earthquake or just flood or something else no no no it's like it's just the pace of the growth is so high we acquire the company there's so many other moving parts of the you know the business so the specific number of how many customers is is a moving target this business in terms of valuation you know churn is obviously critical you mentioned churn was fairly low if you look at the past 12 months in terms of gross revenue churn are you in the single digit percentage range yes okay so under 10 annual gross revenue churn which is uh overall the standard for insurance in general when was the last time you replaced your home insurance can i can i be honest with you i have no idea if i even have home insurance i hate all this administrative stuff some my family office takes care of this stuff for me as long as you have a mortgage on your how on your home you have a home all right fair enough all right so call it ten percent gross revenue annually or lower now i know you know obviously if you drive activation of these users you upsell them on things do you have expansion remember that more than makes up for that ten percent hole and it's it's uh it's it's it's as i told you it's a lot less of a focus area another stuff but that's achieved that's it that's a that's a very ceo answer view which i appreciate but you if you tie customer value to your pricing you then directly align customer value with your revenue so i'm going to push you a bit harder here do you have upsell revenue that more than makes up for the 10 percent loss so your net revenue retention is above 100 there's also a price increase which is embedded in every home insurance policy so a standard increase in a home insurance policy yearly is around four to five percent and that's just because the risk associated with your home keep on increasing because an extra year passed and the plumbing is a year older and the you know and stuff like that so you need to compensate for this extra risk plus people are actually adding to the small change and change up in your house because you probably added a deck changed the kitchen bought new stuff your for your house so people have a tendency to accumulate and in in increase the size of the home so that also pushes up the the prices so it kind of mitigate that and the upselling stuff which will not as i said as i told you we are not focused on that is usually it's a wash because most of the saves that we're doing on the upsell is a day one rather than try and keep on pushing your stuff ongoing got it so you're i'm going to decode this what do you tell me if i'm decoding accurately here you churn maximum 10 you sell most of stuff on day one there's not a lot of upsell motion happening here except the natural five percent accelerators in the home insurance programs with risks that's associated over time so you have somewhere between call it ninety percent and a hundred percent net revenue retention annually yeah you can you can basically what's the team size today how many people it's 150 people uh split between three offices we have a palo alto office of around 65 people we have the biggest office for repo is austin we have all of our insurance operations our agents our claims are billing all of that kind of servicing and then we have a company that we acquire that is based in dallas okay around you know 65 in here and i know 85 in the other okay how many of the how many of the total folks are engineers sorry again how many of your folks are engineers uh 30ish to 40ish okay 30 to 40. if you you you put bi you it depends on you know the definition but it's around 30 is supported and any quota carrying sales people no we don't we don't use quotes in general like uh it's not something our call center and agents are basically our frontline people and they don't have a clue i don't mind if they spend you know with nathan an hour and a half and tell you that your actual insurance with farmers is good i'm completely fine even with that because we automated a lot of the stuff because we choose very specific empathetic people uh you know my guess is they're selling 3x what the industry average for for an agent is yep so most of this stuff that you're doing is really it's no touch online kind of stuff there's it's not an expensive enough product for you to afford to put real touch on it is that accurate plus uh channels yeah a lot of those are actually selling yeah and you play commissions there correct yeah um do you raise some capital to do this how much raised to date 209 million dollars that's a lot of dilution why couldn't you build this without raising so much it's not a lot of solution depends on the valuation no yeah i'm gonna based off some information that i have uh i'm gonna say that uh there is definitely more dilution than if you hadn't raised any capital how about that but seriously that i mean why do you need that much money it's the the simple reasons for different funding rounds it's not just about how much money you need it's about the ability to have more aggressive moves if you want to acquire companies if we want to take some of the risk on ourselves uh if we want to enter other adjacencies and stuff like that it enables us to do a lot of stuff also personally and maybe i'm off i am less optimistic about the macro climate at 2020 and i prefer to sit on slightly more cash than to be more constrained yeah when you again i'm not familiar with insurance like i am with b2b sas so i know when a sas company wants to drive a burn to drive growth i know where they're going to spend it i'm not quite sure where you would spend money to drive growth unless you're doing big acquisitions uh are you spending money and besides acquisitions is there what can you spend more money on to basically make more money internally it's about doubling down on on our channels it's about uh basically it says 50 states regulations so you have 50 regulators you can't sell everywhere put aside globally you can't even sell all throughout the us you need to file and get admitted state by state that cost uh we're at a point where we are doubling down on our customers so we give every customer of ippo an iot device basically package that have a bunch of sensors that prevent losses that's oh there's a hardware there's a hardware component to this yes oh wow okay so if i'm a homeowner and i buy 1200 per year insurance from you what am i going to have to spend on the iot device oh it's we're paying for it you're not paying a dollar for that what does it cost you for my one home it's something i you know i have an nda with my suppliers but it costs it costs well i mean no sorry i just have no idea i mean are you talking like five bucks or five thousand dollars it's not not that and not that it's in the in the high tens of dollars oh okay okay okay but you basically what you're saying is you have to subsidize that your subs all that cost we also are so focused on the customers so i'll i'll i'll flip it around to to kind of like explain something on hippo think about your current insurance experience you have a shitty experience now a day one for onboarding and you have a shitty experience at year 9 when you have a claim and in between companies forgot that you're a customer we'll also focus on this nine-year time frame on basically bringing nathan value so we give you iot device but we're also sending someone to your home once a year or twice a year to clean your gutters check your air filters uh basically do a checkup of your home on you know the plumbing the electricity the the sockets and all of that kind of stuff that cost us money it comes back and because it lowers our loss ratio because we actually prevent losses but because of that but that's a longer-term play versus a short-term acquisition aspect so so if you look at your total servicing like costs on a 1200 a year contract what does that come out to it it varies it's also about scale it's about density it's about locations uh it's it's it's more complex than just and we're doing different services in different places we might send someone to basically rake leaves in the northeast and we might send someone to clean gutters and these are two very different costs our data sources can show that nathan and our house have you know a satellite imagery can show that you have a potential for a water leak so i'll send the rule fill that costs very differently is that roofer on your about p l every month as a salary or it's a contractor still poorly contact i can't have a coverage on even the 17 18 states that we're in i can't have a roof on my staff to to service sacramento and la at the same time why are you not i mean you must be in acquisition talks right now to buy one of these big marketplaces that basically deploy these contractors anywhere in the us i've interviewed a bunch of them for the show when are you going to acquire one of them it's less about focus why not it sounds like that's a big part of your expense it's but i prefer to outsource it in that way and not make commission on that plus i i do not trust the quality of service of the personnel that are sending and it's a very difficult because if i'm sending someone to your home for my standpoint it's a hippo experience and if i don't know what plumber came and he wasn't treating you nicely and he didn't do a good enough job you would own the marketplace that's my point you would own the marketplace drive your costs down in quality control not the service providers into because you know owning the marketplace and not owning the the service providers there's a detachment and i can do it i'm fine paying someone to actually find it i just want the right quality of service so i prefer to actually work with the specific service providers rather than the marketplaces you feel like you can actually source better quality by just tapping a lot of different marketplaces versus owning one marketplace we can define a you know a stricter quality of service we can vet the people we can put another layer on top of these marketplaces basically make sure that we can give the service that we want how many how you mentioned you're growing pretty quickly here you said 150 000 today maybe 200 000 soon how many customers are you adding per month right now between x and y okay what's x and what's y it's a number and a number it's like you know it's a private company so we're not sharing this you can you can give me a range you're talking between 10 and 50 000 new a month between 10 000 to 100 000 new a month okay fair enough he's being coy if i'm gonna guess guys i'm gonna say it's somewhere around twenty thousand a month he just threw in 100 grand to make it sound a little bit bigger but that's cool asap i get it you got to sell the vision all right so listen if you're selling between 10 000 let's do 10 000 a minimum and these hardware components right cost you said high tens of dollars right that's let's say it's a hundred bucks maximum right there that's a million dollars and burn per month just on a hardware expense with what you've raised on your last round how many months of runway does that give you oh wait wait almost unlimited okay i mean i guess what i'm at what are you comfortable growing your burn i mean are you comfortable growing burned at 10 million bucks a month or 5 million what are you what can you sleep at night with no it's it's it's about usage of capital rather than burn like i i'll spend as much money on cac as long as it fits the cache numbers that i'm uh i want to do i'll spend as much money you know basically on the hardware as long as i think that the value for the company is is such that it makes sense so what is your fully weighted cac then to get a 1200 kind of premium from one customer what do you pay to get them between x and y this is a very uh you know specific number of the company are you i mean by the way you guys asked dr and reach to come out to come on the show i do this with every ceo so i'm not surprising you uh it's just that you know some of these numbers the number of you know it's still a private company the cac the the number of customers that we're adding monthly all of that kind of stuff is a very yeah but you can't pick and choose so your press people gave me all the fluffy duffy numbers you're right i'm not going to just sit here and my job's not to make you look good my goal is to get your real story i can pick and choose what i'm answering it's still uh that that that's fine but so when you say right that you're you're really good when it comes around to cac i'm then going to ask the cat question to get out of from fluffy duffy to real data so i guess we'll try and quantify this in a range right i mean are you comfortable optimizing for a 12 month payback or have you been able to go up to 24 months payback because you raised so much additional capital you have more of a buffer we don't change we don't change the basically the calculation and the way that we're spending our money because we raise more money this is not sustainable so it's not about just to show topline growth and if it's not sustainable and fits our cap models now one of the interesting things that uh would be interesting for you is that 70 to 80 of the customers are actually paying a year in advance and this is how it's usually done with insurance so there's a lot of benefits for the cash flow of the business of course on a cash basis but on a if you do kind of gap financing and you actually defer that over to 12 months obviously your your your cap will look a little bit different i'm just trying to get a sense of how aggressive as a ceo you're being are you cool with the 12-month payback period i've no problem with these things like it's uh we're relatively conservative and i think if you are too loose with the money then you're not really creating iep or differentiation if my marketing you know with my marketing folks are just going to increase the spend then we haven't created anything you create iep by being actually a lot more focal and a lot more constrained yep your press people told me the last round was a series c for 160 million and that brought valuation north of a billion is that accurate no it was a round d of 100 million dollars at a billion dollar valuation okay again i am uh oh got it sorry that was better.com you compete directly with better no we actually work with him okay you work directly with better so sorry those numbers are not your numbers your total funding today is 209 million and what sorry what valuation did you raise at billion okay north of a billion and was all that going towards operations or was any of that secondary for early investors there were components of secondaries but it's not part of this funding okay and then last let's talk about growth so insurance premiums just i guess i imagine the amount you have outstanding is a critical driver for you right now you have about 150 million out where were you a year ago do you remember i would say we were around 25 million okay i mean obviously impressive growth what kind of additional growth channels did you open up to drive what is that four five six x year over year growth it's uh adding more channels companies like better etc basically our thought is that you never buy home insurance you actually buy a home if you buy a home you need a mortgage if you need a mortgage you need a home insurance so we work with everybody that has to do with your home purchase rentals mortgage guys title companies inspection company you name it uh this these channels became really really interesting for us now 25 million out exactly a year ago was that across about 25 000 customers at that point i gave you the number is like 1200 so it's about that yeah that's why i'm asking i just want to make sure so um that makes good sense uh obviously growing the company um what uh i mean what is the next big kind of goal for you guys is additional product launches getting some acquisitions done you know prepping to get you know get up to 100 million bucks in ar what is it uh all of the above you know when do you think you when do you think you'll pass 100 million can you do it next year is that a little uncomfortable yeah we'll do it next too i'm talking in terms of what you're cut on the 1200 so you're 240. yes so just to be clear you're saying if you add up all the 240 the cut you take on the 1200 you think you'll be above 100 million next year yes okay now do you can you stay private or do you think you get some extra kind of credibility if you go public it's an ongoing discussion yeah very good all right well listen i get the release i'm the toughest interviewer so i get the release story when you file before you file okay i i i like it i probably told you like a lot more than i told almost everybody else this is good people come on they go nathan i talk to the wall street journal you're way tougher than them so but if you know what i'm more fun i i also all right man let's wrap up with the famous five number one favorite business book uh number two is there a ceo you're following or studying jeff bezos number three what's your favorite online tool for building your company gmail number exciting guy number four how many [Laughter] how many hours of sleep to get every night i'm i'm i read uh on the why you sleep book and i'm trying to be a lot more religious about that i used to sleep like four five hours uh and i'm trying to get the seven hours thing it's not an easy thing for me that's tricky all right what's your situation married single kids married and an eight-year-old boy and a six-year-old girl okay so two kiddos and how old are you 45 last question what do you wish your 20 year old self knew she stopped pursuing entrepreneurship way earlier guys start a company earlier myhippo just raised edition around a capital total capital at 209 million valuation over a billion they get that valuation because they serve over 160 000 home owners with home owners or sorry home insurance uh they obviously upsell other products as well so definitely doing north of 3.2 million per month right now in revenue up at least again 4x year over year as their total kind of volume outstanding went from 25 million in premiums to 150 million in premiums he says he's got good eyes on 100 million bucks in terms of revenue next year and then from there we will see what happens a soft thank you for taking us to the top thanks nathan