Recently we got to catch up with Jason Traff, founder of Leaky. During our interview he introduces us to Leaky and shares with us some lessons from the early stages of starting their company. Leaky is a 500 Startups company, an early stage seed fund and incubator program located in Mountain View, CA. Leaky also graduated from Ycombinator in 2011.
Tell us what your company is all about.
Leaky is about becoming the best way to compare and manage insurance online. While we plan to do this for all types of insurance, we just launched our auto insurance comparison tool in December 2012 with over 100 insurance companies across the US. It’s the first insurance comparison tool of it’s kind on the internet and even better, we’ve saved our auto insurance users over $25 million in premium (and 5 years that otherwise would have been spent comparing insurance) to date.
How did you come up with the idea for your company?
Before starting my MBA at the MIT Sloan School of Management, I spent a lot of time in England with my wife’s family. There, I saw how popular insurance comparison sites were and how good they could be. Sites like MoneySupermarket.com, CompareTheMarket.com, and Confused.com were so popular in England that over half of all direct insurance transactions went through them. When I came back to the US, I was so disappointed and frustrated with the process of getting auto and home insurance that I decided to look into why the markets evolved so differently. What I found led me to believe that now was the time for a company like Leaky to exist.
Can you tell us about the early stages of Leaky?
The problem with tackling hard problems is that they’re inherently difficult. We started Leaky at MIT in the Fall of 2010 with the plan to create a comparison engine by scraping insurance company websites and displaying rates on Leaky.com. We were accepted into Y-Combinator’s Summer 2011 batch on this premise, but when we launched in August 2011, we were shut down within 4 days by insurance companies’ legal teams. We then went back to the drawing board and spent nearly 8 months finding and building a workaround, which involved using publicly-available insurance documents to reverse-engineer what an insurance company charges based on what they tell the government they would charge. This is how our auto insurance comparisons are done today.
How did you use user insight?
One of the most interesting things that we’ve learned with Leaky is that, no matter how easy the process is, people would prefer to not have to deal with insurance at all. This led us to develop our ‘rate monitoring’ service, which will allow registered users to have their driver profile continuously run in the background and to be alerted when we detect a rate drop for them.
What advice would you give to an entrepreneur looking to get their company into 500 Startups?
We’ve had the fortuity of being involved with a number of incubators, both as an incubated company and being funded by them, and the advice is always the same – the most important thing is to build something that people actually want. If you can do that, you’ve already solved most of your problems since most startups die from customer indifference above anything else.
What progress do you hope to make in the next year?
We haven’t made any announcements yet, but we’re working on adding a number of different types of insurance comparisons to Leaky.com so that our users can compare and manage all of their insurance in one place.
What advice would you like to give to an entrepreneur thinking about writing their first business plan?
Know that everything will generally take twice as long as you think it will and plan contingencies accordingly. For us, building a business plan was an iterative process because we had so many moving parts with insurance-specific problems like licensing delays to the regular problems like customer acquisition costs. Also, there’s no substitute to solving the battle of customer lifetime value versus acquisition costs by running a few tests.
What were some mistakes that you learned from?
Start everything earlier. Startups have a finite timeline, at least until they get profitable, and our ability to move quickly is one of our biggest assets. This means that you’ve got to do everything fast. Plan ahead, test hypotheses relentlessly, and proactively seek out problems to fix. Like one of our investors said, “You’re either addressing problems or ignoring them.” You should never put off a difficult phone call, writing an awkward email, or trying to close a business deal because in a startup, you don’t have the luxury of time.
A massive thank you to Jason for taking the time out of his busy schedule to put down some awesome answers to our questions. We look forward to catching back up with Leaky next year to see how things are going. You can also follow them on twitter!
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