In this instalment of my fintech interview series meet Honcho, a startup created to take on the price comparison websites in the car insurance market.
This is a case of a startup disrupting the existing disrupters. Price comparison companies were the early tech pioneers in insurance, and have largely replaced traditional insurance brokers. Now they themselves face competition from a new breed of companies known as insurtechs.
Honcho offers a free mobile app which rather than the asking the customer looking for the best deal, they put their requirements into the app and the insurance providers make bids to the customer. Insurers pay £1 to bid and there are three rounds of bidding, with insurers able to see what prices competitors are offering. Makes sense as insurers are usually happy to offer a better deal if you have a better deal on offer.
It all started in Newcastle in August 2014 when the company was formed as YuCo, which was received capital in December 2014 with a mixture of investment from wealthy individuals, business angels and local venture capitalists. Further injections of private capital were made during 2015 by several of the existing shareholders. Then in October 2016, it received more capital and in November it changed its name to Honcho Markets Limited.
I first came in contact with Honcho in December last year when it announced it was trying to raise its next round of capital through a crowdfunding platform, after European Union (EU) funds allocated to support its launch were put on indefinite hold due to Brexit. The company was preparing to launch when the EU funds were put on hold and was left with a £650,000 shortfall. More on this later.
Frank Speight, chief commercial officer at insurtech Honcho, who describes himself as a “late founder” was brought in back in 2015 to add some insurance industry know how to the project. He told me the story.
He was contacted by a headhunter asking him if he knew anyone with expertise in the insurance industry, including a good understanding of the regulatory requirements. “The headhunter was calling on behalf of Honcho and wanted some names of people I might know as I was his only contact in insurance,” said Speight.
Speight asked about the company that wanted the information and was told it was a startup looking to take on the price comparison websites. “When I finished laughing and choking on my cornflakes I asked him to hook me up with them so I could really understand what they were doing so he could advise them who to talk to,” said Speight.
Twenty four hours later he found himself sitting down with the two original founders. “I went in to the room very skeptical, but came out after two hours thinking they may have something.” He asked for 48 hours to have a think about it and went back with his advice on how he thinks the company could succeed. Within a few hours, Speight was offered the job of CEO, which he took.
The original founders were North-East based serial entrepreneur Hossain Rezaei and a former British army soldier, who had an interest in telematics and Internet of Things. “They looked at price comparison websites and thought there must be a better way of doing that,” said Speight.
When Speight met the founders in March 2015 they had already built a version of the app. But while the technology was being developed little had been done to generate potential business, and to meet the regulatory approval that it would inevitably need. Speight said: “When I asked them how many insurance companies have you spoken to and they said none. When I asked if they had FCA approval they said no. And when I asked them when they are going to launch they said June.”
“Over the next four months I began all the conversations with the insurers with the FCA,” said Speight. He had interest from insurers and conceptual agreement from FCA, a marketing plan was in place and then it was time to raise capital.
Former hedge fund boss Gavin Sewell later took over as CEO at Speights behest, with Speight moving to the role of commercial director. “I was too old to be CEO,” he joked
This takes us to November 2017 the point when the plug was pulled on its EU funding. With a £650,000 shortfall the company decided to source through crowdfunding platform CrowdCube, with Investors getting shares in the company. It exceeded its target and has received £850,000 in investments. “We reached our target and had to pull it as we were giving away the equity too cheaply,” said Speight.
On 01 March 2018 Honcho got going again from new offices in Durham, the following month in April 2018 it received formal authorisation from the FCA as an approved intermediary, and in June it became an Associate Member of British Insurance Brokers Association.
It anticipates launching in early 2019, and a Series A funding round towards the end of the first quarter of the year.
Read the previous fintech interviews
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