Welcome to the E-commerce Wizards Podcast where we feature top leaders in e-commerce and business to discuss proven strategies and trends from people in the trenches. Now let’s get started with the show.
Guillaume: Hello everyone Guillaume Le Tual here, host of the E-commerce Wizards Podcast where I feature top leaders in business and e-commerce. Today, we have an interview with Brandon Gell, founder and CEO of Clyde an extended warranties service technology company. They’ve raised 22 million US dollars so far, and built a valuable household brand online.
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Now Brandon, pleasure having you with us today.
Brandon: Thank you for having me.
Guillaume: So, you have something very interesting. You’ve been able to seduce investors with your vision to pitch that and raise 22 million dollars. Very interested to hear about that. First of all, could you tell us your vision, what do you present? What is your company about?
Brandon: Yeah, totally. The core of the business sort of sits on this idea that extended warranties, product protection, is this really incredible way for merchants to be able to develop really strong relationships with their consumers that last for years. But as we all know, the way that warranty and product insurance has been done to date is pretty terrible. From a consumer experience, you have to wait 10 days to hear that you’ve been denied by a claim as an example. That’s a major problem because when you look at some of the largest merchants in the world, they’re all selling an incredible amount of warranties.
We looked at this problem and we said, okay, if we can build a really good merchant experience, we can make this accessible to anybody, any merchant of all sizes. And then if we made the consumer experience really good, one more merchant would want to use Clyde, but more consumers would buy Clyde more consistently. So, the core of the problem was always build the best consumer warranty experience that exists and that’s only the beginning. Because then you uncover all different types of ways that businesses operate and different products that they sell. You know you’re opening Pandora’s box but that’s the benefit of Clyde is, is it’s a simple integration, we handle all of that behind the scenes.
Guillaume: Okay, because when I think of extended warranty or product insurance, I don’t necessarily see it as sexy. But when I look at your website, if thinking from a business point of view, you’re making it really look interesting. You’re talking about a way to see from the merchant’s point of view to drive additional revenue, you seem to be making it as a user friendly experience, manage your products, manage your warranty, and to try to bring that additional revenue. And then I guess from the consumer side, you’re trying to build the best experience. Do you want to tell us a bit more about when you present this to merchants, what he’s expecting and what’s the competitive advantage of Clyde?
Brandon: The advantage of using Clyde sort of what our value prop is, is that you’re going to drive lifetime value with the customer. And that’s like our core value prop. When people think about warranty, generally they think about high margin passive revenue. And for us that’s a core part of our value prop, our merchants generally see between 60 and 80% profit margin on the skews that they sell out of Clyde, but for us, that’s the cherry on top. Making money with Clyde is the cherry on top.
The point is when you use Clyde, more customers buy from you because they want to actually buy a warranty and you develop a much longer relationship with that consumer because you actually have a contract with that consumer. Our goal is when something goes wrong, within two minutes of submitting that claim, we approve it. And we give the customer a new product, or enable you as the merchant to actually repair the product. And you can use our toolset to do that. That’s the value prop that we drive. I’ll be the first one to say that warranty doesn’t sound sexy. But the way that we are approaching it, it really is, it makes it something that becomes core to your business. We have almost no churn from the business that we launched in the past four years. And that’s because it becomes a core piece of their go to market strategy.
Guillaume: Interesting. So basically, if you go in two minutes for approval or denial instead of 10 days, which is the huge difference, you must have an automated process to accept or decline?
Brandon: Yeah, it’s called adjudication, all of our adjudication happens through code. It’s not a person reviewing each claim. And we have this mantra that we always have a positive resolution. So even if your claim gets denied, because let’s say you’re saying that it arrived damage, (which is not something that we cover) or was stolen, that’s an insurance not a warranty, we will always give you a positive resolution one way or another, whether that’s a discount code to go buy a new thing from the merchants website, or a claim that we enable you to submit instantly with the support team at the merchant. We’re always going to make sure that you’re taken care of, we never outright just deny, like a cold deny of a claim.
Guillaume: Yeah, that’d be too far to hell, you’re denied red screen done.
Brandon: That’s the experience right now with literally every other provider. So, it’s just a different approach around. Every time a customer comes to us, we take care of that customer.
Guillaume: That’s an interesting spin. It’s applicable for sure for every business to try to always have that spin when you when you decline something, it’s very interesting. Gell, is there anything else you’d like to tell us about the philosophy division or the product itself?
Brandon: We spend some time talking about the end consumer side, but the merchant side is just as thoughtful. The way that merchants work with us is that they implement anywhere between three minutes if they’re on Shopify, or BigCommerce, to a week to three weeks, or if they’re on something like Mage or Salesforce where it’s a little bit more in depth of an integration. And then any merchant can implement with us via an API. So, the implementation is really lightweight. And the actual ownership of the program is completely off of the merchant’s shoulders. So, everything from optimizing price using our data science team, to actually changing the location of the CTA on your website. We work with our merchant’s teams to say we have data that we suggest that we should try this. Are you okay with that? Okay, great. You’re okay with that, and we make the change on our side, there’s actually no code changes that need to be done on the merchant side. So, merchants that we work with, we have a 75 NPS score because we handle everything, it’s a real White Glove service that we provide through technology.
Guillaume: Okay, so the CTA, the call to action, is there service and guidance consulting around where you should place that or?
Brandon: Every time.
Guillaume: Every time, okay.
Guillaume: Okay, you mentioned integration with several platforms. And with Magento, you do have a plugin that’s already ready to go. Of course, it always needed a bit more integration. Okay, very interesting. Another thing I have in mind, is the path. From the startup to the time that you’re able to raise that money, I’d like to know about that journey.
Brandon: I’d say the theme of the arc has been education. So, when we first came to market back in 2017, warranty was not a novel idea. Everybody’s heard about extended warranty. But when you go to a merchant and you say, hey, D2C merchant who always takes care of their consumer and has decent margins you should sell warranty. We don’t need that, that’s not a part of our strategy and we don’t like the way warranties treat customers. That was 100% their mentality. And we just kept driving for about two years saying, we’re different, look at our claims process, look at how we treat customers.
Eventually, what ended up happening was merchants that said no to us started saying yes. And what we learned was, even if a merchant says no, within six months, they’re going to come back and say, yes. And the reason is because of our product, we’re just a product focused team, we’ve built an unbelievable product. And Clyde turns into, and this is why our main value prop is lifetime value, not driving revenue, what our merchants are finding is, they use Clyde to drive lifetime value. It’s a total cherry on top that you make a bunch of money from it. But they’re actually using it as a serious tool for their long-term customer success.
So, the arc over the past four years has been entering the market, launching with about 100 different brands, tweaking the product, improving the product, moving up market. So now we spent a lot of time in the mid-market and enterprise. And having merchants at an accelerating rate, either reach out to us to learn more, or just install Clyde without ever talking to us. And we’re fully riding that wave now of merchants adopting what we’ve built, which is a great place to be and it’s super exciting. It opens up all different kinds of challenges.
Guillaume: Very interesting. Let’s go back in the early part in the early startup day, so you had to build that prototype there. Was that something that you and some partners are bootstrapped together? Or did you get the first round of seed money or angel investor to build your prototype?
Brandon: We built a prototype with myself and my two co-founders, both of them engineers. We raised a small round of pre-seed funding, we applied to join an accelerator program called TechStars. We got into TechStars, we scaled the team from three to four. And from, two merchants to 30 merchants and from there, we had enough data and we had enough traction that we all were feeling like this is going to be a thing. If we just keep working on it, this is going to be a thing. We raised a 3 million-dollar seed round led by Red Sea Ventures and RE Ventures out of New York. We scaled the team from 4 to 16 people from 30 merchants to 100. And in March of 2020, we raised a 40 million-dollar series led by Spark Capital will be 55 people, by the end of March will be 200 merchants. Very soon, we moved up market pretty significantly, although sort of lower mid-market and long tail absolutely can still use Clyde very easily. It’s been a crazy ride. But we’re at the point now, where we’re really proud of the product that we built and feel confident that we’ve created a new space, absolutely.
Guillaume: Very interesting. And if it’s going to be totally confidential information, you don’t have to answer. But typically, when we go with that branch or that path of having investment that are growing, growing, you don’t necessarily have profitability, you have, of course, revenues coming in. But sometimes profitability is forecasted a year, two years, four years down the road or whatever. If it’s not confidential, are you willing to talk about that process?
Brandon: Yeah, we’ve grown hundreds of percents year over year, and this quarter compared to last quarter will be hundreds of percents in growth. So, we’re growing incredibly fast. We’re growing, we need to maintain that growth, we want to maintain that growth. So profitability is this weird balance. We have a line of sight towards profitability and we’re really excited about that. We don’t think that fundraising long term is going to be something that the business needs to do. But we’re absolutely still fundraising. We’ll go raise a series B this year. That will be pretty substantial.
Guillaume: Which is just normal. It’s the path that you’re on, which is why I’m talking about it. Just kind of curious of how you’re living.
Brandon: When the opportunity is there and growth is still hundreds of percent or even thousands of percents, it doesn’t make sense. Just keep everything that we take in, we invest back into the business,
Guillaume: Which is logical, totally makes sense. Okay, let’s go back again in those early days. So, you with your co-founders, your team of engineers, you build a prototype, you got a bit of pre-seed money, you built that. And then you had something, was there any kind of regulations toward like insurance company that you had sort of overcome, we can say, for example, here in Quebec, Canada, if you want to start an insurance company, you must have at least a 5 million dollar-fund aside just for claims just to open shop, so to speak. Did you have any kind of regulation or things that you had to face with this?
Brandon: The warranty is a somewhat unregulated space, at least in the United States. And what that means is, we were able to launch pretty easily, you have to get a couple pieces of licensing in order to sell a contract, sell a warranty. And it’s kind of like getting a fishing license, it’s pretty easy process. So, we had to get that. The real sort of development for us as we became a fully licensed administrator, which takes many months, it’s expensive. And what that means is we adjudicate claims. So, when a customer files a claim, Clyde single handedly decides we approve the claim or we deny that claim. There’s a learning curve associated with that. We hired skilled people that have experience in the regulation side of the business, and have grown the compliance department at our company to be able to support both our own compliance and our merchant’s compliance. But it’s just a fact of doing business, you have to sort of deal with the compliance side, and if you want to be a company, long term, you can’t mess around with it.
Guillaume: Let’s say, again, in your early days, you went from like two clients to 30 clients. What was your process for that? Was it just like, cold calling, emailing, knocking on doors or?
Brandon: Well, we launched publicly at first on Shopify, so it was like a bunch of organic installs. And then we started expanding to other platforms like Magento. And it was a lot of calling people up and being like hey, we’re this warranty company, we think that you should try us out. It wasn’t very structured in the very beginning. We weren’t segmenting our business, but that’s the fun part of just trying to get people to use the product. I remember when our first sale came in how psyched we all were, we couldn’t believe that it actually happened. And that’s scaled pretty significantly now, obviously. But it’s still just as exciting every time we launch a new merchant.
Guillaume: And is there any life experience that you’d like to share from that path? If another entrepreneur wants to go with raising pre-seed money, and then seed round and so on? Or any tips that you’d give them?
Brandon: Yeah, I think the long-term thing that every entrepreneur learns is that if you want to build a successful company, you need to hire awesome people. And that might mean people that just understand what it means to work for a startup and are willing to deal with all the things that pop up and all the challenges that you face, or people that are really, really skilled at what it is that they do, it’s just so important to make sure that you hire right. That’s my biggest piece of advice when people ask me how can I best do this? How can I do this as fast as possible? Hire right and be really, really thoughtful about building a product. It is always my suggestion.
Guillaume: Great. You obviously need a great product on the marketplace, great offer. And then you hire the right people, the best people you can find. In your case, you have something that’s very scalable, because there’s automation in there, you don’t need to hire additional employees necessarily at each time you sign up a new merchant because you have that automated claim process. So, it’s a very scalable process that you have in place there. Well, good luck with the very fast growth in the hundreds or thousands of percents, that’s for sure very exciting. Is there anything else you would like to cover for today’s topic?
Brandon: I think the only thing people should check out joinclyde.com and we’re more than happy to talk to merchants about both warranty or other e-commerce tools that are out in the world. We spend a lot of time doing essentially consulting work with our merchants and whether you’re on Magento or another platform, Clyde’s in a good place to help you launch a really successful program.
Guillaume: Awesome. Thank you, Brandon for being here today.
Brandon: Yeah, thank you so much for having me.
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