Jason Traff’s first go at entrepreneurship was slightly more exciting than his current one. I’m referring to Copycat Paintings, the e-commerce company he started in Hong Kong. Traff was living in Hong Kong at the time, working as a private equity executive with his e-commerce business on the side. Copycat used a network of drivers to deliver the orders, which turned out to be a liability. One kidnapped Traff’s co-founder. The driver took him out into the country and threatened to leave him if he didn’t hand over some money. Traff’s co-founder managed to get away by hitting the driver with a golf club and running back to town. In another instance, a driver tried to extort the company by holding several valuable paintings hostage in exchange for a payoff, Traff says.
The thrill and drama of running Copycat gave Traff a thirst for more entrepreneurial adventures. So he dropped out of grad school at MIT to start a new company. Only this one is decidedly less thrilling or adventuresome. In fact, it’s the complete opposite. To most entrepreneurs, it’s a total snooze, which is precisely why his company is positioned for success. The company solves a problem that is, to use a banker word, “unsexy.” It’s one that few people want to tackle: insurance buying.
That company, called Leaky, launched nationwide today to help people shop for insurance. Most online price comparison tools for insurance are just lead generation for the various providers, so Leaky provides value with its unbiased comparison, Traff says.
It’s fairly dry stuff. For example, did you know there are more than 150 kinds of Ford F-1 50s? They have different trims and colors and editions, and there is a two wheel drive and a four wheel drive, leading to endless combinations. Leaky has to match those up with VIN numbers and it’s all very meticulous.
“We find its tough to talk about Leaky with our peers because the problems we tackle are so boring,” Traff says. “No one wants to hear about that.”
It’s more interesting in terms of time and money. In private beta in California only, Leaky has already saved $25 million in insurance for its users and five years in time, Traff says. Investors like the sound of that: The company raised a $670,000 seed round from 500 Startups, Box Group, Start Fund and Y Combinator. The company will monetize by selling insurance itself and also through affiliate fees to insurers. “We can lower customer acquisition costs by 75 percent for an insurance company,” he says.
In reality, insurance isn’t a problem that truly no one wants to solve: Leaky has at least one peer in MetroMile, which Richard Nieva covered this morning. It is, as he put it, the car insurer of choice for Portlandia characters. Clients pay on a per-mile basis, so those who drive less end up paying less for their insurance. Leaky competes in a way by providing insurance itself — Traff is a legit insurance agent — but its real value is in helping users find the cheapest quote without trying to push its own policies.
I would argue that to really fix the insurance industry, Leaky should take a page from Traff’s past and find a way to kidnap every single one of the insurance agency’s horrible spokespeople. For now, the company is sticking with the boring stuff.