Maven caught up with disruptive car insurance platform, honcho, who secured funding via the Finance Durham Fund to enable the company to launch an innovative app for motorists aiming to empower the consumer and ultimately reduces the cost of insurance.
The UK consumer insurance industry is the largest in Europe and the third largest in the world, with 911 authorised general insurance companies in the UK alone. Whilst the market is currently dominated by PCWs, the team at honcho has identified a clear gap in the market to provide an engaging and more cost-efficient way of purchasing insurance products via its unique reverse auction marketplace model.
But how does a technology business such as honcho raise and utilise funding to scale up its platform and bring it to the market? How do you find the right funding partner or decide if you should grow organically? The business was a natural fit for the Finance Durham Fund, which looks to invest in high-potential businesses located in the County Durham area.
Maven, caught up with honcho Chief Executive Gavin Sewell, to find out how the Finance Durham investment has helped the business launch its disruptive tech platform for car insurance.
I’m Gavin and I’m the chief executive honcho at Honcho Markets. At honcho we’re building the first real-time reverse-auction marketplace for the distribution of insurance products. A reverse-auction is where sellers (insurers and brokers) compete against each other to offer the lowest price to customers for a particular policy requirement.
honcho is a next generation price comparison website and mobile app, which provides the best car insurance products at the best price to consumers. The honcho site (www.gethoncho.com) benefits from aggregation, a one stop shopping platform, which incorporates price discovery and real-time competition of electronic marketplaces.
Our services are built from the ground up for the mobile generation. We have focussed extensively on the user journey, convenience and speed of interaction for our mobile and web apps. Our mission is to save the customer time as well as money.
For our insurer market participants we aim to provide them with a significantly cheaper channel for distributing their insurance products as we don’t charge them expensive sale commissions, just a £1 pay-to-play fee to enter an auction for consumers’ business.
As chief honcho I am responsible for the company as a whole, ensuring we have and are following a sustainable business plan, are well-financed and operate within the legal frameworks governing our business (we are an FCA authorised insurance intermediary).
At the same time, I want to push us as a team to create a highly differentiated, effective and fun product that puts the consumer first and transforms insurance distribution through openness, transparency and equitability. And lastly, I want to grow a team of highly motivated and talented individuals that love what they do.
We have been on a fund-raising journey over the last few years. Our first source of funds came from the JEREMIE 1 initiative in the North East (a European Investment Bank backed financing initiative for SMEs) combined with angel investor funding. We have since raised further money from angel investors prior to embarking on a crowdfunding campaign on CrowdCube.
Along the way we looked at raising investment from venture capital and private equity funds and learned that as a pre-launch proposition we were really too early to access those sources of finance.
We did however meet Maven in the context of those discussions and learned about how the Finance Durham Fund could help us. We were already pursuing the crowdfunding raise at that time, but Maven was keen to be involved and could operate very flexibly insomuch that Finance Durham could invest as part of our crowd raise.
From our perspective Maven is the perfect investment partner, with multiple sources of finance from regional funding to its VCTs and Buy Out Fund, and the ability to support us over the long term, as well as having a presence in the North East and a keen desire to support businesses in this region.
One of the things we learned while looking at VC & PE financing is that those managers are predominantly based in London whereas the personal connection that comes with being co-located with our investor in the region is very valuable to us.
The process was quite straightforward. Of course, we had to involve lawyers and we had the added complexity of the crowd funding angle, but the team at Maven was very helpful to deal with and able to help us through any potential stumbling blocks.
Without the investment from Finance Durham and the crowd-funding, we would not have been in a position to bring honcho to market. It has allowed us to turn a concept and a prototype into a real product that we will launch into the market at the beginning of 2019.
I would have spent far less time meeting with London based VC and PE companies. Fund raising is incredibly distracting. As a founder it’s very difficult to focus on the day job – building a great start-up business and fantastic consumer product while pitching to potential investors.
For some businesses, raising investment can make a lot of sense and enable them to change the trajectory of the growth of their companies; for others it’s perhaps less appropriate.
If it does make sense, then equity financing can allow you to do things quicker and better or on a larger scale than if you try to grow organically. There’s no real downside as long as you are happy to partner in a constructive way with your chosen finance provider, and you also get strategic advice from your investment partner, which can also identify new opportunities.
The obvious one is the nature of the distribution of early stage financing in the UK. I saw a stat from Beauhurst, that suggested that in 2016 more than 80% of all early stage equity financing was raised by companies in London. The equity financing industry is very much based in London and the South East and there are very few enlightened managers who deliberately focus on the regions.
There is also the problem of understanding how to access finance. More companies in the North East might pursue growth financing if they understood the availability of funds and how they might access it.
honcho wants to change the face of insurance and financial services distribution for the better. In the next five years, we will have built a strong consumer champion brand that really stands for consumer-centricity, openness, transparency and equitability. This will have allowed us to capture a good share of the insurance distribution market saving both consumers and insurers money. I would also like to see honcho very active as a marketplace for other financial services products and for us to be moving the model into overseas markets.