I Raised $27M In Two Years — Here Are Six Lessons I Learned

Oct 10, 2018 · 5 min read
Karn Saroya, CEO & Co-Founder of Cover

No two funding rounds are exactly the same.

But having just finished my fourth across two different companies, there are definitely things I wish I had known starting out.

A few days ago, the insurance startup I co-founded, Cover, announced the closing of its $16 million Series B round.

This brought our total funding to $27 million since March 2016 and puts us in a strong position to fundamentally change the insurance industry.

My experience with this fundraising round crystalized what I see as the big lessons for startups approaching this process for the first time.

The building blocks are the same, usually. Your deck and your data will be structured similarly, although with an increasing focus on underlying economics of your business . The relationships, the folks you’re reaching out to, are generally the same people, too.

But along with the nuts and bolts, there are six crucial things that anyone preparing for a round of fundraising needs to keep in mind.

1. Relationships are essential

Fundraising is very much a relationship business — albeit one predicated on being able to demonstrate a viable business.

While we’ve been very lucky with Cover in that, since Day One, we’ve had a fair number of top-tier investors around the table. As CEO, I’ve made a concerted effort to build on those relationships.

This means actively keeping them up to-date on my thinking about building out the business and how our current numbers relate to that, as well as keeping them excited about the space and Cover in particular.

Especially with the later rounds, if you don’t have existing relationships with investors, you have to start developing them. That doesn’t mean showing your entire hand because in some instances, if you’re doing coffee chats or initial meetings, you’re effectively providing an investor with a free option which is valuable in deferring an investment decision.

2. Seek partners, not just investors

The importance of relationships means you have to be supremely comfortable with the investors you have round the table.

As well as building familiarity and confidence through the relationships you forge, you want to hone in on partners that will add value as part of your board.

At the end of the day, they’re not just investors. They’re also going to be partners that act as a sounding board for major business decisions, and provide a sense check on key business objectives.

In Cover’s case, we’ve been pretty fortunate to have partners, like Arjun Sethi and Tribe Capital, who have been part of our journey from our Seed through Series B.

This point is especially important when deciding whether to move beyond traditional venture into strategic investors. Do you take money from potential competitors that are much larger than you because they want a stake in you?

The math that we did is that it would drastically limit our optionality down the road with respect to who we can partner with. This is why we have shied away from doing that and will probably continue to do so.

3. Seize the moment to step on the gas

Recognizing when the moment has arrived to seek the funding to grow is key. It will ultimately help with your narrative to potential investors.

In the case of Cover, the underlying economic model of an insurance brokerage business is strong. The team started to scale our premium at a pretty rapid clip. We were also acquiring good risks at an underwriting profit — no mean feat for insurtechs.

As a founder looking at this sort of momentum, this is exactly the time to ask yourself ‘Should I pile on this?’

If you’re building momentum and have a clear idea of what you need to take you to that level, then it’s time to step on the gas.

This means determining what you need to do to get to venture scale business; especially around staffing and scaling out the support for engineering, sales and user acquisition.

4. Build a narrative that’s ready for due diligence

This might sound like a no-brainer, but I’ve experienced firsthand how this intensifies with each subsequent round.

In the case of Cover’s Series A, we had term sheets from existing investors within two and a half weeks. With Series B, given the higher valuation and dollar figures being raised, there was more quantitative diligence.

You need to be ready for to use the data to prove out your business case, and show what stakes your company will need to put in the ground to get there.

5. Do what you say you’ll do

The other side of planning out these steps is actually following through. Generally speaking, that can be rarer than you might think.

So far at Cover, we’ve done exactly what we said we would do. We set product goals, we set premium goals and we hit those targets.

In fairness, the nature of the industry makes this easier to do than in other spaces.

The beauty of insurance is that there is a discrete set of things we need to execute. There’s very little ambiguity around what we need to do to become a very big business.

This builds confidence with investors. Not only can we communicate what things we we need to do to get to a venture scale business, but demonstrate that we’re actually executing on them too.

6. Visualize success — and share that vision

A large part of this is whether or not you see a light at the end of the tunnel. Can you see yourselves as a very large business and is that the end goal?

The beauty of Cover is that we’ve been able to see a path to competing with or replacing insurance incumbents since the beginning. That’s a big part of what keeps the founders and early team members motivated.

A vision of success and a clear, viable and executable plan of how to get there is crucial to building a convincing narrative for investors.

After all, if you’re not convinced of the potential for success yourself, it’s very difficult to convince others to actually believe in what it is you’re trying to build.

Karn Saroya, Co-founder & CEO @ Cover


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Making insurance easy. For cars, homes, pets, and just about everything else.

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