Listen, Reflect, and Iterate: An Interview with Coverr’s Founder, Kobina Ansah
Coverr provides working capital customized for independent contractors of up to $1,500, giving them cover for the unexpected: business expenses, emergencies, work supplies, and more. Applications take ten minutes, and are approved within two hours. Learn more at https://www.getcoverr.com/about.
Coverr recently won the Google for Startups Innovators Award at the Black New Venture Competition. Learn more about the BNVC here.
Kobina Ansah is Coverr’s founder.
HBS Entrepreneurship Club: Did you always know you wanted to be an entrepreneur?
Kobina Ansah: I think I always wanted to be a business owner. I don’t know that I knew the term entrepreneur so much. But that’s kinda always been in my family. My family’s from Ghana, West Africa. My grandma created one of the first daycare services in Accra, the capital, one that the Queen of England actually came to visit one time. My grandpa was a businessman himself, and he kinda compelled my mom to do things like selling oranges in front of her school for money. And that kinda translated to her making the first spa in Ithaca, New York, where we lived. I worked there as a kid.
Every time I wanted something, my mom said, you clearly want a job. So they gave me the tools, from mowing lawns to selling goods. It got me started tinkering with different ideas, looking for a need within my community, and figuring out how do I serve that need, to generate capital. I think it was only in undergrad that I learned about the word entrepreneur, but I’ve always been intrigued by business.
HE: This isn’t your first start-up. So why was it the time for you to create Coverr, and why was this the problem you wanted to solve, within the Fintech sector?
KA: My last business was basically providing credit cards for international citizens, and we had a very difficult bank partner that led to the business’s demise. So I wanted to figure out a business model that would not be so reliant on a direct bank partner. And so I spent 2018 testing a lot of different concepts.
Something that I found pretty intriguing was that in New York City, Uber drivers pay as much as $300–500/week to rent cars for the Uber business. But the value of the cars that they’re driving themselves have MSRPS of something like $20k-25k. Even with my assessment of how much the related insurance would be, they were far overpaying for these vehicles. That’s crazy! In the course of over 3 years, they can pay as much as $70,000 but have no asset in their name to speak for. So I thought, maybe we can offer specialized financing for these vehicles, to help them actually own the cars.
So working with one of my investors, we put a facility together to be able to provide specialized financing in New York. I thought it would be gangbusters! We were able to charge half of what these rental companies were offering. But after six months of trying to bring people into our office, we realized — just because someone has been driving for the last ten years of their life, still it doesn’t mean that they’ll aspire to do that over the next 2–3 years, which is our typical loan term. First, we realized clients are much more short-term focused. Second, when we would deploy as much as $25k for clients to purchase vehicles, get them ready, get the necessary insurance and registrations, we would only require a $500 downpayment from our clients. And many clients couldn’t put that together, they didn’t have that liquidity. In many cases it would take a month for them, sometimes more, to put that together.
Once we saw that, it seemed like the pain point wasn’t getting access to auto finance, it was more working capital finance. These guys have limited liquidity. If they have any type of incident that’s greater than a few hundred dollars, it can really disrupt their operations. So that’s when we started testing working capital customized for gig economy workers, and we started to see a lot of demand for that. We were only marketing it in New York City, but we had demand coming in from all over the country. At that point, we realized we had probably identified a real pain point.
HE: You mentioned you spent a year testing out different ideas. That’s something everyone encourages entrepreneurs to do. Do you have tips for testing more effectively, or more efficiently?
KA: I think if we’re talking about founders who are MBAs…we’re used to producing the best. But when you’re testing a business concept, I would say you really have to think about what is the minimum required to test your hypothesis. In our case, we happen to operate out of the building where Uber and Lyft operate in New York. So our first advance was actually done on paper. We didn’t even have a mobile app, didn’t have a web app, nothing — we had flyers, and people signed their agreements on paper that we printed out of our office. That was our first test. So instead of spending months building out this really nice UI or UX, if you’re in a market in a place where you can actually just do a simple paper-based test, even if it’s not sexy — if someone is willing to engage with you at that level, then clearly they’d be willing to engage with you on a mobile app.
The other thing I would say is just: listen to the data. Sometimes, like with the auto-financing, I want to use the MBA hat and think, it just makes sense. Why would you pay more for renting a car when you can just own it? But you shouldn’t build for what you want. Build for what the market is telling you. The market was telling us they wanted something else. So listening to that, reflecting on that, and iterating as quickly as possible has been helpful in terms of honing in on where we need to go.
Lastly, try as much as you can to get honest feedback from your clients. I’m more interested in clients who don’t want to use your product — “Why not?” — you know. How are we making you uncomfortable? Why do you think we’re not the best for you? Why would you use our competitor, instead of us? It’s not like we’re saying we need you to use us, it’s more like, what are we doing that doesn’t make you interested? And oftentimes clients get surprised, thinking, oh, you really care about how I feel?
HE: What’s been the most difficult part of running this business?
KA: Most difficult…hmm. There are so many different challenges we’re dealing with all the time. Refining our risk model is one thing. Being able to grow our service fast enough — in our case, we still work with a bank partner. Our work partners, our business partners, the banks that we work with still operate at a snail’s pace. For a large bank, a 6-month review or diligence process is pretty rapid for them. For a start-up, every day matters. We’re spending money every single day. As I reflect on it, this was actually the thing holding us back the most. Clients wanted our services, but we had to wait for our bank to authorize us before we could fully digitize our services. Dealing with a timeline of a large banking institution when you’re not the biggest priority is hard.
HE: Yeah. How do you mitigate that? Did it get better over time, or how do you work with it?
KA: Well, I mean…you try to be as polite as possible and continue to engage. At the end of the day, I had to fly out unannounced to their headquarters. I arrived in SF, and I said I’m not leaving until it gets done. And three days later, it was done.
HE: Sometimes you just need to get out there and be obstinate.
KA: Yeah. Obstinate’s a nice word…sometimes you need to get aggressive, you know? Honestly, it’s your fiduciary responsibility, as somebody in charge of the money you’re putting at risk, and the wage you’re giving up to live the entrepreneurial lifestyle, as well as those who’ve actually invested in you — you can’t just sit around and let a large institution play with you, and play with your runway. What do you have to lose, basically?
HE: People sometimes say an MBA isn’t worth it if you’re going to be a founder. How have you thought about the value of an MBA?
KA: Going to a good school for an MBA, at least for me, or at least what I say to myself to maintain my sanity, is it provides some level of insurance. In the event that it doesn’t work out, I still feel confident that I can get a job in industry. I made it a point actually to work hard while I was in my program so that people would know that I chose to do entrepreneurship as my own decision. Like I could get a consulting job, or a banking job, or whatnot, but I opted to do this instead.
Also, as a minority, given that there aren’t a lot of minorities on the other side of the table…having this degree, at this level, is really helpful for providing some level of validation. As an example, a lot of times when somebody is introducing me to someone else and they say “His name is Kobina,” maybe in their head, subconsciously, they’re thinking “Oh, I don’t know what kind of name that is. It doesn’t resonate with me.” But when they add, “He’s a Wharton grad,” then it might make them think “Okay, maybe I’ll listen to him.” It doesn’t mean they’re going to invest in me, but when you look at the stats for minorities and especially minority women, the venture capital that flows to these individuals is very, very limited. Given that there are so many kinds of negative pressures against us, this kinda helps reduce at least some of the aversion that individuals feel working with us.
Something I always hear from my mentors is, “Venture capital investors are always trying to de-risk..” Being able to say that you’re an honors MBA graduate from an elite academic institution further de-risks your investment, because they’re going to assume a certain level of intellect, and a certain network. So maybe you’re less risky than other investments. I hate to say it like that, but the stats show kind of how the market looks at minority founders.
HE: If you think back to yourself at the start of your journey, what advice would you give that person?
KA: First I’d say, make sure you have a good support network around you. Because you’re gonna go through a lot, with a start-up. It’s a very trying experience. You’re gonna wanna keep the faith — if you pray, keep your prayers up. Make sure you keep positive people around you, because it can feel very isolating and difficult at times, because not everyone understands the life of a true entrepreneur. The second thing I would say, separately, is listen to the data and iterate quickly. Keep iterating. Lose your pride, and focus on building on what clients want, not what you want. As they say — fail fast.
This article was written by Isabel Yap from the Harvard Business School Entrepreneurship Club. Special thanks to Tyler Simpson of the Harvard Business School African-American Student Union for her help in preparing the article.
