How StyleKick co-founder had the confidence to switch from fashion to insurtech startup Cover

Joining me today is a guest who said before we started the interview: “Push my buttons.”

He doesn’t want a weak interview.

Karn Saroya is the co-Founder of Cover, a nationally licensed insurance brokerage that offers coverage for just about anything you can capture on camera.

You’ll hear us get right into it in this interview.

Karn Saroya

Karn Saroya


Karn Saroya is the co-Founder of Cover, a nationally licensed insurance brokerage that offers coverage for just about anything you can capture on camera.


Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses for an audience of real entrepreneurs. And joining me today is a guest who before we started said, “Dude, push me. Push my buttons.” I said, “Wow, most people tell me to back off.” Good. Karn, you were going to say something as I said that.

Karn: Yeah, man. Let’s keep it interesting.

Andrew: You don’t want a weak interview where the person is slavishly excited about the guest.

Karn: Right, exactly.

Andrew: I have to be honest, sometimes I am excited about the guest’s story so much that I do come across as a little bit too eager. All right. Karn Saroya whose voice you just heard is an entrepreneur who started a fashion business and then he sold it and then he started this company that will let you insure just about anything you could take a picture of. And that’s about it. The new company is called Cover, and he actually even owns the domain name which tells you he’s got a lot of VC money to throw around. Right? When you’re in a hustler stage, you get No.

All right. This interview is sponsored by two companies you probably are so tired of hearing me talk about, but damn it, I’m going to keep doing it because it works and you guys love them. The first will let you hire phenomenal developers. It’s called Toptal. And the second will help you host your website right. It’s called HostGator. I got a complaint on Twitter about why HostGator is sponsoring. I’m going to talk about that later. But first, Karn, how much money did you raise for Cover?

Karn: So far we’ve raised about $27 million.

Andrew: How does that feel to you?

Karn: It’s a drop in the bucket in insurance that’s for sure. We’re pretty capital efficient so far as insurance businesses go. We’ve been able to accomplish a lot with the amount of money Geico spends in like about half an hour.

Andrew: So when I compare it to other VC . . .

Karn: [inaudible 00:01:55] Geico.

Andrew: When I compare it to your last company or compare it to other tech startups, and it seems like a lot you’re saying, “Hey, compare it to insurance companies.” And the reason for that is what? Where does the money go in insurance?

Karn: Well, most insurance companies at least the top ones that you know of aren’t really venture-backed, right? They’re kind of snowballed into these like monolithic huge entities that spin off tons of free cash flow. And so you’re talking about like, hey, generating $20 billion in free cash flow. Geico does that on an annualized basis. So when it comes to most of insure tech and actually even us, like, these are trivial sums, right? So yeah. Yeah. I mean, I think of it as a fairly small number.

Andrew: How much revenue do you make? That’s the number I always get excited about.

Karn: Yeah. I mean, we’re running at about $1 million in net new premium a month. We think we’re probably going to scale to about 10 million a month.

Andrew: A million in what?

Karn: In net new premium per month.

Andrew: Net new premium.

Karn: Correct, yeah. So that means like a customer pays us $1, that dollar is then used to settle claims, operating expenses, cost of acquisition.

Andrew: And what’s the difference between net new premium and just overall premiums?

Karn: That’s just the new premium that we’re in. So insurance itself, the beauty of it is a super sticky intangible product with very predictable cash flows, and so net new is the thing that we measure to keep track of what our growth is rather than our recurring renewable book.

Andrew: What would the recurring renewal be?

Karn: Yeah. So think of it this way, like, you pay for car insurance . . .

Andrew: No, I mean, how much is the . . . if you would just to look at your overall revenue monthly, what would that be?

Karn: Oh, so for us, I mean, we’ve been selling insurance for maybe a year and a half so it’s not a huge number. Our net new is tracking like as a proportion of our overall premium the vast majority of it at this point.

Andrew: Got it. So we’re basically looking at a $12 million a year revenue business, but it’s growing at $1 million new premium coming in every month.

Karn: Correct. And our target over the course of the next basically 14 months is to get something in the range of $8 to $10 million in net new premium per month. That’s the goal.

Andrew: Got it. You’re a guy who you told our producers, “Look, I, to get here had to hear a lot of no’s and it started right when I was a kid.” And I like that you were a door to door salesman, but I’ve never heard anyone sell what you sold. What did you sell?

Karn: I mean, I’ve sold light bulbs, so like LED light bulbs when those were relatively novel. I sold water coolers, subscriptions of water coolers. I sold knives at some point. I was one of those ghetto kids where the white truck would pull up and you’d sell chocolate but not for school purposes [inaudible 00:04:56]

Andrew: Oh, you were just buying the chocolate, giving the impression that it was for school but you were making all the profit on it.

Karn: No, no. I wasn’t even that . . . I was just getting taken advantage of this as child labor. So, no. I sold chocolate door but not for school. I sold World Wildlife Fund subscriptions. What else did I sell? All sorts of crazy things.

Andrew: Can I ask you about your bracelet?

Karn: Yeah, sure.

Andrew: Is it a religious bracelet?

Karn: Yes. I mean, it’s a kara. I’m not a . . . I’m Punjabi. I’m not a practicing Sikh guy. I wear mostly because my mom asked me to wear it.

Andrew: What’s the significance of the bracelet for Sikhs? That’s one way that you can tell people are Sikhs that they cut their hair. You cut your hair now, right? You got a really nice shave. Do you feel like you’ve turned your back on your religion and your people by doing that?

Karn: Have I turned my back on my religion and my people?

Andrew: You told me go heavy.

Karn: No. I mean, like, there are like five or so maybe six things that Sikh people wear to signify their faith. They wear a kara, they wear kirpan which is like a small dagger, amongst other things, they don’t cut their hair, they don’t eat meat, they’re not supposed to drink, like a bunch of these things. Yeah. I mean, I just wear the kara, that’s like what I do.

The backstory behind me not having my hair long or not being a vegetarian is basically I got fed up . . . when I was little I had a turban. I got fed up with it because my hair was down to my ass for most of my youth. And that’s like impossible to manage. It was just super painful. And so one day I was so fed up with it that I went to the barber and got my haircut without telling my parents and I took my little brother too. And at the same time I got both of my ears pierced just because I figured that there was probably some, like, [asymptotic 00:07:04] limit to the amount of shit that I would get into with my parents.

Andrew: So you might as well combine it.

Karn: I might as well combine it, got it done, haven’t looked back since. Certainly manageable. So far as monotheistic religions go, Sikhism is legit. I just don’t practice.

Andrew: The ability to cut off of the past like that Is it real hard challenge, like for example, I had my lights set up in a nice way over here. My leg’s hurting so I sat down to just take away the perfection of the light as it was when I was standing up and adjust it so that it’s down and know that I’m never going to get it back the perfect way. It’s a hard thing. It seems like you like that, you relish that. You started with, like, fashion, you’re totally fine with it. You decided it’s going to be insurance. You’re fine cutting off all your fashion experience, all your ecommerce connections and starting back fresh and being a brand new and you’re okay with that. That’s who you are.

Karn: Yeah, yeah. I think, look, I like to say that everything is compost, right? There are set of experiences you have either professionally or personally that can be instructive or at least helpful to you as you go on and you do the next set of things that you want to do with your life, right? And so when it came to ecommerce, specifically Stylekick, I mean, we sold high-end fashion on the internet specifically on a small screen. Meaning we had designers and influencers and Lookbookers upload outfits. We’d make individual pieces shoppable . . .

Andrew: You know what? I’m going to take some time to go through that story for a moment. I just want to pause on what you said before, everything is compost. So what you’re saying is, “Look, I have all these experiences in the past, the fact that I throw them away doesn’t mean that I’ve let go of them. The fact that I’m not in the style business anymore, doesn’t mean that it’s not helping me and now I’ve started from zero like a baby. No. That’s compost, that’s nourishing this new business.” And you told our producer several times, “Here’s the mistake that I made before. Here’s how I’m smarter. I’m not making that same mistake again.” And that’s what you’re talking about.

Karn: Yeah, exactly. Right. So when we’re running Stylekick, we’ll get into it, but it was 1 million active users, right? And we were fairly infatuated with the fact that we’re adding 10,000 new people a day without really giving much thought to what the underlying unit economics of that ecommerce business could look like at scale or whether that would be sustainable. And so, we’ll get into it but the crux of it was this, like, the learnings from building an ecommerce fashion business, and ecommerce is difficult, right? It’s just super hard. Unless you’re focused on building it like a vertically integrated brand or in the selling things like Wish or Amazon or the impulse price purchase range. And so we learned how to build beautiful products and we learned how to drive millions of people through those products. And those are valuable skills irrespective respective which vertical [inaudible 00:09:50].

Andrew: Yeah. So Stylekick . . . Let’s spend some time on Stylekick before we move over to Cover. Stylekick was something that you started when you were a grad student at NYU. You looked at these scanners or these sensors that you guys had in the school, and what were these sensors supposed to do and how did they shape your vision that eventually became this company?

Karn: Yeah, yeah. So actually, it was after I was a grad student at MIT, I was a management consultant, and then I gave up management consulting to build which, in retrospect, something that was like not obvious and kind of dumb. We built body scanners. So we used the Kinect sensor, which is effectively a depth sensor and a webcam combination. We used three of them, so three points of perspective, to shave away that will . . . to first to create a body form because you have three points of perspective. You have a depth sensor or webcam on each of these things. And I mean, it’s math shave away close, so we get like point to point measurements on a human being and we thought that that would help us inform sizing of decisions for online purchases. That’s what we thought.

Andrew: Meaning what? That people would actually go into these body scanners and then once they knew their real size, they’d be able to go and buy online.

Karn: Yeah.

Andrew: And you would have these scanners where?

Karn: Exactly right. So we were thinking about, what’s the distribution look like for something.

Andrew: Oh, okay.

Karn: And so a quick logical check would have been, well, the natural candidate for distribution for something like this would be, hey, like a mall. You walk into a Gap and maybe have one of these things. And we talked to the Gap and we talked to all these major brands. And the reality is it’s like this just does not conform to what consumers would want to do. It doesn’t conform to buying behavior in a store. And frankly, it was a little bit creepy, right? So there were a couple of companies that were working on this. And really, if there was any sort of a lift to be seen, there probably would have been a war for mall space in America specifically for scanners and there wasn’t.

And so we stepped back and we were thinking about like, “What is it actually that we’re trying to build here?” And we were trying to build something that allowed folks or something that predicted how folks wanted to buy. So this is around like price point, styles, structural elements of clothing, colors, like, the specific attributes that people cared about and tended to gravitate towards. And so we built this very simple app.

And it’s like our story of Stylekick and Cover is pretty similar, but it was like a weekend hackathon. We scraped a bunch of outfits from like Lookbook and Pinterest and like whatever, reformatted. We formatted those content into full-screen outfits that you could double tap like you could double tap individual parts of an outfit to indicate you liked that part of an outfit. And you could scroll through like an endless stream of basically this content.

Andrew: So I used your software, what I would do is see just a bunch of photos that you scraped from online which means that they’re probably well done, the clothes in it, and what you want to see is which shirt do I like or do you want to see which combination I liked?

Karn: No, we wanted to see the individual items as you like as part of that outfit, right?

Andrew: Okay. And then once people . . .

Karn: You could have double . . .

Andrew: Sorry, you go ahead. We’ll talking over each other.

Karn: Yeah. You could have double-tap like a blouse or a handbag or a pair of jeans. And at the test phases, all we were trying to do is see if people were interacting with the content, period. When we launched it, we climbed the apps store rankings. We were number one for style in France and a bunch of other countries. And we saw this like behavior that was interesting to us, and so then what we inevitably did was we made it a marketplace where we had influencers, designers, Lookbookers upload their outfits, so we maintained the quality of the content that was on the platform.

And then we built out this like tagging functionality that basically allowed them to tag individual outfits and attributes associated with the outfits. And so when a customer double tapped on that outfit, that piece, or whatever it was, the next set of pieces or outfits that we showed them would be informed by what they interacted with so we would know, like, roughly what price point you’re looking at, we would have a sense of what colors you liked, we would have a sense . . .

Andrew: Oh, clever.

Karn: Yeah. Like, if you like mandarin collars, for example, we showed you mandarin collars.

Andrew: Right.

Karn: So it was pretty cool. And I mean, we got tons of engagement because of the . . .

Andrew: How? How did you get people to even notice that this thing exists, let alone just go in and start to thumbs up outfits without anyone else . . . without knowing that someone else on the other side is going to feel complemented by that?

Karn: Right, right. I think like . . . I mean, we use a portfolio approach to growth like we do with anything. So a confluence of it, a confluence of influencer marketing because we’re thinking about, “Hey, where are our customers actually?” Our customers are lifestyle. The people that were speaking to our customers were lifestyle influencers on YouTube and Instagram and fashion influencers. And so we worked pretty aggressively with influencers very early.

Andrew: When you say worked with them aggressively, you mean you paid them to promote this app?

Karn: Correct, yeah.

Andrew: Got it. You paid them, they promoted the app, their users went to get the app to see a bunch of photos of outfits, they double-tapped whatever they like just like they did on Instagram, you had a sense of what they wanted to buy or what they were more likely to buy and then you started selling them right away?

Karn: Yeah, we were selling. We were selling in Stylekick. I mean . . .

Andrew: How did you get . . . I’m constantly pausing you because I want to take a long time to really go through every bit of it. I see now how you got people to use it. How did you get the money to pay for these influencers? Did you raise money at that point?

Karn: No. So we were kind of . . . I mean, we’d raised a small sum from a set of angels but nothing significant.

Andrew: How much?

Karn: We’re talking maybe like $125,000 at that point.

Andrew: Okay.

Karn: And so we were a little early with influencer marketing. And so the genius of what we were doing was we weren’t working with top tier influencers. We weren’t working with like the people with millions of followers because we knew implicitly that we couldn’t afford to work with them. The market is efficient and the price for eyeballs is correctly priced. And so what we did intuitively understand was that second tier influencers like folks with a couple hundred thousand followers in and around that time didn’t actually know the value of their distribution. And so for us, it was an arbitrage opportunity because we could message an influencer and be like, “Here’s $20 to $50 to do a sponsored post.” That’s unheard of now. Most of the influencer marketing is efficiently priced. And we were driving, like, two cent, three cent installs.

Andrew: Wow. How did you know this? You don’t strike me . . . And by the way, I’m watching you. You’re well dressed. I pointed out that even your beard is well groomed even though you’re traveling right now. But you don’t strike me as someone who cares about fashion that much. How did you even know who the influences were or care enough to build this company this well?

Karn: I think the honest truth is I actually didn’t care that much. One of my co-founders, who is my fiancée, was working for Russell Simmons as part of his fashion group at the time, and she joined us as a co-founder and it was largely driven by her interest in the business and mostly our excitement around growing so quickly. So that’s like . . . That was it. I mean, I didn’t have any particular affinity towards high-end fashion, like I didn’t own a pair of $300 jeans though we sold, pairs of $300 jeans. So yeah. I mean, that was it. I think we kind of pivoted our way into this thing that was working and we’re trying to scale it.

Andrew: All right. And you were starting to say how you got revenue. You were selling your own products or affiliate programs?

Karn: No, no, no. No. It was entirely affiliate. Yeah. In retrospect, I think we could have made it work. The folks who did win out in this space . . . I mean, I’ll answer . . . Before I walk into who would have won, I’ll answer your question in and around like how did we come up with this stuff, like, the non to second-tier influencers. We constantly . . . I think we’re particularly creative. Coming up with . . . And starting with a baseline question of, “Where are our customers?” and working backwards from there, right?

And so a good example of that is actually Cover. And the most recent one is like, if you go to, you’ll see that we set up a defensive driving school. And the reason for that is, right now people use defensive driving schools to access insurance discounts or remove violations from the records and have to pay for instance typically of like $25 to like $150, and then you get your 10% discount or violation knocked off of your record.

But we are a tech company. Literally, this is course wear. And so what we did was we built out a simple defensive driving school to enable our customers to unlock access to these discounts that save them material amounts of money. Again, where are our customers? Our customers are performing these particular behaviors or like using these particular products. Well, as a tech company, how can we super-high leverage and like, find a path into them?

As it turns out, and we didn’t even know this at the start, in Texas, just Texas, there are 480,000 people who went through a defensive driving school or the course in the last 18 months. If you think about that in the context of insurance, the LTV of our customers is thousands of dollars. Four hundred and eighty thousand people looking for a free, like, a course that otherwise I have to pay for and climbing . . .

Andrew: Right.

Karn: . . . is huge. So, again, it starts with, “Where are our customers? How can we access them in non-obvious ways?” And that is like, I think one of the things that I look for and other entrepreneurs is like, “Do you have the skill set to surgically acquire these customers and be able to identify venues for getting in touch with them that are non-obvious and show a level of creativity that is not, like . . .

Andrew: Who else does this well? What’s another example of doing this well? This is brilliant. One of the things that’s brilliant about it is, you’re publishing on Teachable. There’s no software. All you did was . . .

Karn: Yeah. Exactly. Exactly.

Andrew: . . . Teachable. This is the same thing that people use to teach anything. So what’s another example that you do like that of this surgical precision finding your customers in a way that other people wouldn’t either that you have done or that you admire someone else for doing well?

Karn: Yeah. So the other thing that we’re thinking about doing because we get access to driver history reports, we get access to vehicle reports, we get access to credit. This is actually kind of Credit Karma-esque. It’s like if we’re using all of these third-party APIs to be able to fill in an underwriting application programmatically, and that’s part of our value of proposition, why not just make this information available to our customers? Like, why not just be like, “Hey, Andrew, do you want to know what your vehicle history is?” You probably don’t have a full sense if you have a used car. Or, “Do you want to know what the insurance companies actually rate you on? Well, here it is.”

And so, like, think of it as like there are set of tools that are intended to add value in are ancillary like the way that we make money. We actually saw this when we were acquihired in Shopify. They did this, a lot of this and it was, “Hey, let’s create a logo generator because folks who were interested in starting a store on Shopify are going to need a logo. Let’s create a business name generator because people who want to start a store on Shopify need a business name. Let’s create . . . ”

Andrew: And then once you generate your logo or store name, you’re directed to Shopify to publish . . .

Karn: Right, right. Exactly.

Andrew: You about to give another example and I interrupted you. What was it?

Karn: Or we need stock photography for our store so they created that. Like, all of the things that were pre-commerce funneled into their . . . we’re setting up a store and becoming an ecommerce entity. Similarly, we think of it as like, “What is pre-insurance look like?”

Andrew: Right.

Karn: So it’s like, “Hey, here are the things that you care about.” Insurance itself is not particularly a sexy thing but there are lots of things that are in and around insurance that are pretty interesting. And ultimately we sell insurance.

Andrew: And it is stock photos that . . . Yeah.

Karn: Yeah.

Andrew: All right. You built up this app. I can see how it was growing. I could see how you gotten users. Was there any virality in it to get to 1 million active users? I can’t imagine it’s just you guys reaching out.

Karn: Yeah, yeah. Well, I mean, we’re really good at ASO. So we rank . . .

Andrew: Store acquisition. What is it?

Karn: App store optimization.

Andrew: App store . . . And thank you optimize . . .

Karn: So I mean, we built a really beautiful . . . Look, if the product wasn’t great I don’t we would have gotten it. It was a beautiful product and it was featured in just about every country that the app store was supported and translated into 14 languages. Dominated most of the keywords related to fashion and style, and generally speaking, picked up tons of organic traffic. So certainly that. And then like, the typical things that you would expect really good referral mechanisms, really good content sharing mechanisms, really thinking about what the happy moments where as part of the product experience to drive . . .

Andrew: Like what? What was a happy moment?

Karn: I don’t know. Like a purchase was a happy moment, or like . . .

Andrew: And so that’s when you might want to share that you bought something.

Karn: Yeah. Or like a Lookbooker or a designer. Lookbooker or designer has now a bunch of new followers because there was a following element to it or had a bunch of new likes, then you pop up a dialog that says, “Hey, what do you think of Stylekick? One out of five stars?” And those things all kind of fact . . . You’ve seen these patterns before. They all kind of bubble up into visibility, generally speaking.

Andrew: All right. Let me take a moment and tell you that on Twitter, somebody said, “Andrew, I really like your stuff and I respect it, but what are you doing, talking about HostGator as a hosting company?” And I realized, Karn, there’s this whole like snob and endless arguing over what a great hosting company is. Instead of getting deep into that argument, let me tell you about a guy named Ron Gula who I interviewed recently about how he started a company called Tenable, took it public, got it to over $2 billion in value. He then said, “I’m stepping away. I’m going to become an angel investor full-time.” He’s running Gula Tech Adventures, that’s adventures not ventures. That’s his thing.

Karn: Okay.

Andrew: And his website is on freaking HostGator. Just keep it basic. What I’ve noticed is wannabe podcasters will tell you endlessly about gold-plated cables that you connect your mic to the computer that are never meant to be coiled up because then they ruin the experience and the sound quality, and they spend endlessly talking about that. Real podcasters just freaking plug a good mic in and they get into the conversation instead of into the detail of how much gold is in the freaking wires.

Same thing here with websites. We could talk endlessly about the best hosting company on the planet. I have no doubt that many people are going to say HostGator is not the best, that there might be other better. I’m not into that. Just go fucking get a hosting company to host your website and get on with the business. And when it comes to hosting companies, HostGator is better than good enough. It just freaking works. They’re not going to come over to your house and give you massages. They’re not going to give you free stock photography even. Frankly, they just work, that’s all they give you. And it’s inexpensive and it’s been there forever so you know you can count on them.

In fact, if you go to, you’ll get a lower price than they will give anywhere else and you’ll get tagged as a Mixergy customer which means you’ll get our backing. And when you’re ready to scale up, they will scale up with you. Do what Ron Gula, do what I, do what so many other entrepreneurs have done. Stop fucking worrying about your hosting company. Get one that works really well and worry about where your customers are and how you’re going to improve your product. That should be their freaking motto. I don’t think they like that I curse. They really have a very mainstream. They don’t like that I curse. I never curse in their . . . I just feel so, like, frustrated.

I’m not calling out that guy on Twitter intentionally. I don’t want him to feel like I don’t like him. I like when people say, “Andrew, tell me. I’m challenging about the sponsor.” I want to only have the best, so keep challenging me. I will never embarrass you or be upset with you for doing it, but I got to tell you, I put a lot of thought into the sponsors. And in the case of HostGator, I’m really happy to be working with them. I’m proud to recommend them. If you’re looking for a hosting company, go to and never asked me about them in public because apparently, I start to spit up when I get excited about them. And I promise I will never spit up when I talk in public.

Karn: I appreciate your enthusiasm.

Andrew: Thank you. I want to keep it real. Keeping it real, baby. All right. I saw how you’re building up and we’re starting to get to the sale. Before we get into the sale at Shopify, you told our producer, “Look, the big problem was, we were getting people to buy. They just weren’t buying outfits through our app because . . . ”

Karn: Look . . . So, first of all, to be clear with acquihire, like, our team was absorbed in and we ended up running a mobile product unit and that was cool and got to work with Tobi and . . .

Andrew: The founder of Shopify, a very famous developer.

Karn: The first day was actually pretty cool. And then who’s now the CPO, Craig Miller and Satish who’s awesome, is a GM there. Yeah. So, look, at the end of the day we were still operating on three and a half and four-inch screens and we were selling super-high value items. And inevitably what was happening was people were – and we were observing this behavior – just like taking screenshots of products or taking screenshots of outfits and emailing them to themselves to complete the purchase for the rest of it like their research process on a desktop experience.

I think mobile has kind of evolved to the point where if you have enough comfort with a particular type of purchase, you probably will transact but conversion rates on mobile and native mobile are probably still lagging the desktop experience. Like, they’re interesting outliers now. In ecommerce like Dote, for example, it’s a very specific. It’s like, “Hey, we’re going to sell you super cool sneakers, sometimes below, sometimes below desktop prices and that’s going to be the hook even though you’re spending $300 on a pair of sneakers.

But the winners that evolved or came out of our era of ecommerce are effectively folks like Wish, right? Or folks like Glossier who focus on a specific product line. And so Wish was like, “Okay. Well . . . ” And actually, Danny, one of the co-founders of Wish, he was one of the first investors in Cover because we got to know him over time. And so the beauty behind the Wish model is like, they serve most of the country that’s not coastal. And most of the country that’s not coastal can be pretty price sensitive.

And when you’re thinking about, “Do I want to pull the trigger on this like $5 to $10 item?” and perhaps it takes a little bit longer to ship. And perhaps there’s some variability and quality, either of it gets to me. And some of the day I don’t really care that much. If it’s a $5 thing, then I buy, and that’s it. And so conversion rates are much higher for impulse price purchases and so you can kind of get this like spinning wheel going where your LTV is persistently higher than your CAC and you can build a sizable business of course, right? Similarly, like, you have these end to end product companies that were also built off of influencer marketing and they’re like really great examples of that but they are still popping up.

Andrew: Like what? What was the example you gave earlier?

Karn: Well, I mean, I don’t know which one I gave earlier, but like there are a ton of these like Triangle which is like swimwear, I mean, Glossier that sales make-up, Gymshark that sales basically fitness wear. There are tons of these like very specific vertical approaches for product that ended up winning that use very similar tactics to grow that we used to grow Stylekick.

Andrew: I’m on Glossier right now. I never heard of them before but now I see. It’s still not as expensive as your products. I’m looking at lipstick for $18. That might be more expensive than the local drugstore, but we’re not talking about a $300 outfit.

Karn: Correct. Yeah.

Andrew: What about this? If you saw that people were buying it on the desktop, would you have been able to save those sales by just having them hit a Save button that automatically emailed it to themselves?

Karn: We actually did start doing that. So we went down the path of building out to be able to basically facilitate the transaction on a desktop experience. I think we just got to a point where I think we were running . . . I’ve said this before. I think we were running out of steam in and around like our desire to be building that particular business. And we had a running conversation relationship with Shopify who is trying to build out some of the mobile products that had been lagging there for some time, and we were really good at building product and there weren’t that many people who were really great in building consumer-facing product.

Andrew: So they bought you to build their software.

Karn: True.

Andrew: And it’s not because they liked your soft . . . not because they wanted Stylekick.

Karn: No, no, no. It was a team acquisition.

Andrew: It was a team.

Karn: Yeah. So yeah. I mean, like, we went there and we built that experimental marketplace apps. We helped out with them building out the Facebook Messenger chatbot for commerce.

Andrew: How did that work for them, Facebook Messenger chatbot for commerce?

Karn: I don’t very well. I think I . . . I mean, I don’t know if they still support this thing, but I think the reality is, this is somewhat tangential, but those types of tools, like those chatbot tools are not great for sales origination, like, it’s hard to sell via chatbot. It is great for sales and service, like servicing and cross-sell. So, like, if on a Shopify store you had just bought beef jerky, for example, and you for some reason authenticated and via Facebook or sent them a message via Messenger, and you got a follow-up message a couple of days later being like, “Hey, I hope you really enjoyed that beef jerky and here’s 50% off of your next purchase.” Like, that works, right?

Andrew: Right. I see.

Karn: But it doesn’t work when it’s like, “Here’s some beef jerky,” via Messenger.

Andrew: I’ve noticed that too. If it’s like a menu replacing a website, people aren’t eager to go into Facebook Messenger to start shopping. But if I was thinking of it as like messenger marketing, drip marketing where if I see you’re interested in jerky, I might tell you how I’m making this jerky today, tell you the difference between our healthy jerky and other jerky, etc., and then a week later say, “By the way, I made extra jerky at my place this month. I’m going to send it to you for 50% off. You got to buy now.”

Karn: I think just messaging as a platform tends to work better with someone who has familiarity with you or has already transacted with you. It’s just way easier to sell to people who have already bought from me. And Messenger can facilitate that kind of transaction. And this might just be a personal thing. I just find it too spammy if it’s anything other than that.

Andrew: That is a bit of an issue. So what I’m sensing is you got to learn a lot. They basically hired you guys and taught you how to create software fast, how to think about getting customers, what . . . Right?

Karn: No, no. I think we already had those skills. We were valuable to Shopify because we had those skills.

Andrew: Because you knew how to get those customers.

Karn: Yeah.

Andrew: And so what’s an example of how you help them get customers while you were there?

Karn: Yeah. So look, like, I think . . . We weren’t on the growth team, so we weren’t doing that. I mean, we were certainly weighing in on some of the strategies that we’d use to drive top of the funnel, but, like, we were working on apps that eventually evolved into . . . And this was like a couple of iterations and there’s other product managers working on this like Frenzy which is like a drop app, right? So it’s like, “Oh, we’re dropping a sale of like easy boots on this particular corner and there’s a way to grow a following around that and actually get people to interact in real life.”

But I mean, that’s very far from where we started. What we actually tried to do when we were at Shopify was build out something called Popup which was intended to be like a Wish as a competitor because we saw Wish working, and you had basically this entire Shopify product catalog of things that were sold by hundreds of thousands of merchants, and for sure there were in very, very interesting products that were, again, in that impulse price purchase range. And so we built that out and then lo and behold, I mean, on weekends we were still running hackathons because we had the itch. And we knew we wanted to build another mobile product. We knew that . . .

Andrew: When you say, “we,” you mean you and your co-founders while you’re working at Shopify, doing all the software that you just mentioned, experimenting constantly. You were also going home on the weekends and creating your own hackathons just for you.

Karn: Yeah, that’s correct.

Andrew: Your sit down, let’s code something type of thing because you had an itch to be an entrepreneur.

Karn: Yeah, yeah. I mean, the itch was . . . I mean, what we recognized was we built great products and we know how to acquire tons of customers. There are a very finite set of human beings on earth that can actually do that. Let’s be clear, like, both of those things are hard. And we were like, “Okay. Well, we can do this and we can do this right now. It’s temporal. So let’s go do this.” And so we would drive up to Northern Ontario on the weekends and we would have some beers and we would shoot the shit on what we could be doing.

Andrew: Like what? I’ve seen some lists of it. What stands out for you that you remember?

Karn: Yeah. So we tried a bunch of things like we tried stuff in healthcare. We thought about entertainment again. We came up with this crazy idea called [Turn Up 00:35:53] which was like a play on turn up, and that was like a list, like a venues app that allowed college students to list their keggers and their purple Jesus parties locally. So if you were in a college town, you pop it open and you find the kegger that you wanted to attend and you pay and you go. And we eventually thought that we would . . . People do this. They find keggers. And so we would eventually rely on real venues to be able to like, monetize this meaningfully like [inaudible 00:36:21]. And then we just stepped back and we decided, “Hey, this is probably not something we want to build for a very long time.” And we thought up like a lottery app, so [LottoLoop 00:36:30]. This was a . . .

Andrew: Leave at that. I saw that I think in a TechCrunch article, I saw it on a podcast that you were part of. What was that lottery app?

Karn: Yeah. So actually, I mean, we didn’t take it all the way but it was pretty simple. It was like, Natalie’s mom would drive from Toronto to Buffalo whenever the Powerball lottery was above like $600 million, or I think they’re much bigger now but back then it was probably in that range.

Andrew: Okay. I’m with you.

Karn: And we’re like, “Okay. Well, lotteries are money-losing propositions, like, period. You’re just not going to win. Okay. Probabilistically. But also, factor in like the opportunity cost of your time moving from Toronto to . . . like going from Toronto to Buffalo to get these tickets, plus the gas, plus wear and tear on your vehicle. There must be a simpler way to allow foreign nationals to participate in a lottery. And there are actually good examples of this existing. This is a real business and this happens.

But you can hold lottery tickets in trust. Like you can park up in Michigan and buy thousands of these lottery tickets from the vendor and charge a markup and have a simple tool or app that scans in the lottery ticket, you hold in trust for the Russians or the Canadians or whoever are interested in participating. And actually, I think that’s a business. I actually think there should be more efficient lotteries and I think if you want to participate in a lottery, you should just be able to. But again, we stepped back and we were like, “Okay. Is this something that we want to spend another five or six years of our lives working on?” The answer again is, “No,” unless . . .

Andrew: And that was a big . . . By the way, speaking of lottery, it just reminded me. I started a site called We offered the world first billion dollar jackpot, Warren Buffett back it. But it was advertising-based and I wanted to get to subscription-based, so I was thinking, “What could we do to sell lottery tickets without breaking the law and becoming a gambling hall online, which would get me into jail?” And I thought about it, I said, “We continue to let people play for free on our website, but if they want my software to auto-enter them so they never miss a contest and maybe do it several times into my system, that is $10 a month.”

And that’s started kicking in a little bit of money and I ran it by a bunch of lawyers to make sure it was good and . . . It was kicking in a good amount of money. What we were missing was there’s some like element of, “I have to win the lottery,” that’s important. People who want to win the lottery aren’t looking for software to hack the system and give them a chance to win. They’re looking for, “I scratch it off and I get it,” or, “I pick my numbers,” or something. And once you let them pick the numbers, they want to come back and do it again. But still it was kicking off enough money and it was legal. That was pretty good.

Karn: How much did you pay

Andrew: A hundred thousand I think at the time.

Karn: Sounds like a steal.

Andrew: It was a steal. It was a great domain, good also for like, television and people would remember it and go from a radio show and go type it in.

Karn: Do you still owe it or did you sell it Grab?

Andrew: I actually sold it to the company that ended up owning Myspace or that owned Myspace and then they sold it to another company that turned it into a gaming site which is like a standalone game site and then it became something, I go to Indonesia and I see grab is what you use for cabs, so [inaudible 00:39:49] like, experience. How much did you get from your acquihire?

Karn: I mean, it was a sizable pool of RSUs, but that’s like . . . It was fine, like, it was acceptable . . .

Andrew: Did you become a millionaire from that?

Karn: I think, well, given how Shopify’s stock has performed, I think that would have been [inaudible 00:40:12]. It would have been a pretty significant, like, I could have bought . . .

Andrew: And you held on to it.

Karn: Well, we didn’t invest. We lasted like, seven months in Shopify.

Andrew: Oh, you lasted only seven months there? I had your LinkedIn profile and it didn’t even occur to me. That’s how fast you had to go back . . . So then you basically made a little bit of a bonus and that’s it.

Karn: Yeah. Basically, that’s what happened.

Andrew: Why? Did you Indian parents get upset when they hear that?

Karn: Hey, man, it’s hard to . . . I mean, first of all, my Indian parents don’t even know what Shopify does.

Andrew: They know what stock price is.

Karn: They know what stock prices are and so do I. Look, no, I was . . . We had the itch and we were running these hackathons and we came across Cover, like, it was, “Hey, what’s the back of the envelope math in selling an insurance policy? Why are these insurance brokers worth billions of dollars and they’re just broke before they’re even carriers?”

And the reason for it is the economics of the insurance business are incredibly attractive, like a single auto policy in California runs $1,700 per year. The broker is going to make between 12% and 18% of that in perpetuity, right? So you’re spinning off $200 to $300 for single policy per year for product that churns like on a single line basis, like, anywhere from 10% to 15%. So a single policy LTV is thousands of dollars, which is why you see Geico and State Farm bid via AdWords for every combination or permutation of insurance like keywords like, ridiculous numbers. You’re looking at like, $50 to $80 per click with low single digit conversion down a funnel that you can kind of see how . . .

Andrew: But from the beginning, did you think, “We’re going to go after Geico”? No, they locked up that space, but you were thinking, “Maybe there are other products that have the same economics that we can lock into.” The prob . . . Not the problem, but the difference is with cars and motorcycles, you have to buy insurance. With an iPhone, I don’t have to. And so how did you factor that in?

Karn: Yeah. So I mean, the initial premise was like, “Hey, fine.” It wasn’t really much consideration given to which of these lines would become dominant. We were kind of like in this experimental phase. We were like, “Okay, finally. We’ll see what our customers try and buy from us and we’ll double down on stuff that our customers want to buy from us.” I mean, we saw all sorts of crazy things. Like we saw race horses, we got treehouses, we got tanks, we got like . . .

Andrew: You know what? We’re getting into the weeds on it. Let me take a moment and I want to go step by step again on this one. Our second sponsor is a company called Toptal. I guarantee now that you’ve heard them, you’re going to think about them and you’re going to want to use them again in the future. Let me give you an example of how a company has used Toptal to hire developers faster and get better developers and they can get anywhere else.

CSR Limited was and is a construction company. Wait. It’s a global construction supply company, let me be accurate. They were looking for a way to offer . . . they were looking for great developers. They wanted to digitize their supply chain and offer clients new services to improve their visibility. This was a brand new direction for them. They needed to find developers who had a strong sense of ownership who are actually going to be able to develop and still work as a remote team.

They looked around, and you know what you could do. When you’re trying to hire, you ask friends and friends of friends, you go online, you do all these postings, you get software that’s going to help you go through all these postings and find the right company, the right hire, but it takes forever and it’s really tough to find good developers, and said, “You know what? Let’s go into Toptal.

They went to Toptal. Toptal helped them build out an online dashboard for their customers. They were the only ones who were able to help them this way. They were the only ones who were able to help them screen for culture fit in addition to great developer qualifications. As a result of them, CSR was able to save money, help with their brand loyalty and increase their customer retention.

I don’t love that story, I’ll be honest with you. I’ve been hiring writers to improve our stories for my ads because I keep talking about Toptal. I’m reading this now on air with you and I don’t love that story. Here’s what I’m going to tell you guys. If you’re looking to hire developers, everyone’s offering the basic same thing which is how to ask your friends or how to post job “Help Wanted” ads and then go figure out which of all the response is good.

Toptal does the opposite. They get on a call with you, they hear what you need, and then they go to their team of developers and they match you up with the perfect person or team of people. If you want to get started, you can get 80 hours of Toptal developer credit right now if you pay for your first 80 hours in addition to a no-risk trial period. They’re that confident that if they match you, you’re going to love it. They’re not even going to take money out of your pocket if you’re not happy. Go to, top as in top of your head, tal as in talent,

Karn: Hey, man, we’ve used Toptal. They’re legit.

Andrew: You have?

Karn: Yeah, we have.

Andrew: For what?

Karn: I can’t remember. It wasn’t anything core. Like, they were some ancillary stuff that we needed to get done, just needed extra capacity. It was great.

Andrew: I find that that’s what a lot of people do. They don’t go for core, they get extra capacity, and then sometimes they end up with the person continuing to work on an ongoing basis.

All right. The first version that you created in the hackathon couldn’t have been that robust. What did that first version look like?

Karn: It was terrible. So the very first version of Cover was there were a handful of views with a preamble, “Take a picture of something you want to insure,” and led to a camera view, just a typical native camera, right? And so we used our playbook, generally speaking, the one that we’ve built up the compost, to drive ourselves up the rankings. So we end up ranking number one for insurance in Canada where we launched it. We don’t sell in Canada now but we launched in Canada.

Andrew: Wait. So you launched in Canada, very basic thing, you then use everything that you learned about rising up the ranks in the search engine, in the in the App Store search engine, and then you say, “Okay. We can do this in the rest of the country.” And people are using the app to do what?

Karn: Yeah. So they’re downloading the app, they’re authenticating and so we’re capturing some basic information. And then there’s like a screen or two and it says, “Take a picture of something you want to insure.” So people are literally sending us videos of themselves washing their cars to show pride of ownership in their vehicle because they want car insurance.” They’re walking us around their houses documenting their property. We’re getting engagement rings, we’re getting pictures of cats and dogs, and like other body parts.

Andrew: Okay.

Karn: And like, all sorts of crazy thing and we’re like, “Okay. Well, we didn’t think anyone would take an insurance app particularly seriously, but these people are legit trying to get insurance.” And so at this point in time we really didn’t know anything about insurance distribution. All that we wanted to do is prove out that the pipe was big enough and I think the consumer behavior was there. Usually, when you uncover consumer behavior that violates your expectations, like, it takes a little bit further than you would have thought, that’s when you double down because you’ve uncovered something that other people have not uncovered and you can kind of build on top of that.

And so off we went . . . I mean, like, at that point, what I did was I pinged Aaron Harris at Y Combinator and I was like, “Hey, look at all this crazy stuff that’s happening, like, using this toy app that we built.” And so he’s like, “Oh, this is amazing,” and like, making sure that when we’re going to a partner. Aaron doesn’t sound like that.

Andrew: I get it.

Karn: [inaudible 00:47:34]. So like, okay, like, “Come in and interview for the next YC batch.” I mean, we applied. We actually [inaudible 00:47:41]

Andrew: What was your connection to Aaron?

Karn: We got rejected by Y Combinator four times. First time . . .

Andrew: Why?

Karn: I think . . . Look, I don’t think they’re particularly, from a thematic point of view, great with ecommerce businesses, like, I don’t think we have like a great track record of those. And I think generally speaking in around the time that we applied ecommerce businesses weren’t getting funded. And so I think that’s what it was, but we were actually when we applied to YC, we started with like, we have 10,000 active users. The next time it was like 250,000 active users. The time after that it was 400,000 active users. And that inevitably it’s like 1 million. But every single time, I mean, we interviewed three times, we got rejected each time. And I was like, “Okay. Well, I don’t know what I can do to get beyond this. With Cover effectively you know, we got into Y Combinator with a prototype. We didn’t have a business and we didn’t have revenue. We had a concept and we had an underlying business model that made sense, right?

Andrew: At the time the business model was, “People are taking pictures. We’re now going to be like a broker, find insurance company to insure it.”

Karn: Well, it was even further up the funnel than that. We were just trying to prove the size of the top of funnel, and so we acted as lead gen business. We were just selling our leads. And then we quickly realized that, “Hey, most brokerages are terrible. In fact, most carriers are terrible. They’re not going to be interacting with our customers in the manner that we would expect them to.” As soon as we sell a lead, they’re going to get spammed, like, phone calls, emails. And if it’s not that, then it’s going to be this old school broker that works maybe five hours a week that is sitting on this huge book of business, it’s like an annuity business for him and it’s going to take a week or two to get back to a customer that’s looking for instantaneous engagement and instantaneous gratification policy.

Andrew: And so they weren’t representing you well to the people who were taking pictures, so it’s going to be harder to get more photos and more customers.

Karn: Correct.

Andrew: I get why you’d want to go off on your own. What goes into doing that? You need to get licensed, you need to get a lot. You need how much money in the bank per [inaudible 00:49:52]

Karn: Yeah. I mean, we’re primarily a distribution business and we’re starting to underwrite some of our own products and take risks on those. But I mean, it’s capital-light. That’s why the multiples on insurance distribution businesses are so much better than typical carriers.

Andrew: It’s capital-light?

Karn: It’s capital-light, like, I don’t need to hold any capital on reserve because I’m not holding, I’m not taking on any risk. I’m acting as a sophisticated frontline underwriter. A customer comes in through Cover, we’re the ones that . . . The product acts as a [seed 00:50:22], then a filtering mechanism for bad risks. It’s quite simple. I mean, you’re authenticating and you’re asked a couple of insurance-related questions, you’re asked for proof of insurability, the pictures, and video of the thing you want to insure. And then we searched the entire insurance market. We literally have . . . We represent 30 insurance carriers across the country, operate in 49 states. So we’re very competitive.

Andrew: Oh, got it, got it. That’s the part where you become the broker yourself and you begin to go out.

Karn: Yeah, yeah, yeah.

Andrew: And there’s no . . . You don’t need heavy capital for it. What about when you take risk? At what point did you switch to that?

Karn: Yeah. So because we have such a broad coverage or are in this unique position to identify pockets profitability, right? Like, we can say, “Hey, in this particular state for this line of business, we’re competitive for these people. We’re not competitive for these people and we think we can be profitable there.” And so what you’ll see over the course of the next couple of months, we haven’t announced any of this stuff yet, but you’ll see us coming up with bespoke products that you can just buy, right?

Andrew: Like what? You don’t have to give me one that you’re specifically going to publish.

Karn: Well, I mean, we sell auto home, pet, jewelry, electronics, coverage for electronics, just about . . . Like, it could be . . .

Andrew: A home insurance, you guys are backing it? So if something happens and someone steals from my house, the money is coming from you or you’re sending it out like a broker would?

Karn: So the way . . . Okay. So we’re not doing home. But the way that you would end up doing home as like a startup is you’d most likely do it via something called MGA relationships, Managing General Agent. It’s where you source the customer, so you’re identifying the customers that you want to get onto your book, you’re underwriting the customers, you’re designing the insurance product, you’re pricing the insurance product, but you’re selling that risk on to a panel of reinsurers.

So reinsurance is like insurance for insurance, right? And so you pay the reinsurer a premium, some part of the overall premium dollar, and in return, they take on the risk, and they take on a risk because that home insurance risk is just one set of risks amongst a plethora of things that are uncorrelated. And so they can do it that way. But that’s typically speaking how you would do it in a very capital-light way.

I mean, holding balance sheet risk is . . . The profile of capital necessary to do that is a very different venture. You raise the venture to fund operating losses like to grow, whereas the capital that you need to hold your reserve for insurance purpose is regulatory capital, like, it’s pretty safe and you don’t need to raise it from VCs.

Andrew: So then what do you have that other people in the, say, auto insurance space don’t have? I know what Geico has. They have a brand name that’s so well-known that when you mentioned them a few times, people knew what they were. They have a lot of brand equity, so when you see the Geico Gecko, you kind of connect to it. They’re buying and bidding up every Google AdWords them and their competition. When you come in, what’s your advantage that allows you to stand out?

Karn: You know, we’re lucky. We’re lucky that our customers are . . . the average age is 28 and they don’t care about insurance brand as it stands. And so when you go through the entire Cover process, so let’s use a solid example of car insurance. When you make a car insurance request through Cover, all we’re doing is trying to figure out what your profile is, like, “Hey, what’s your occupation? What’s your estimated earnings? What are your exposure is going to look like? Or do own a home? So if you hit somebody with your car, is that person going to go after your house and your savings?”

Andrew: Right.

Karn: So what we’re doing is we’re calibrating the coverage level to the exposure, right? And so for you we’d be like, “Okay. Here’s the exact price and the exact limits that we would suggest for you.” We don’t actually share the brand of the carrier that we’re working with. And it could be Progressive, it could be Travelers, it could Safeco, it could be any one of these insurance companies. All we care about is making sure that your exposures are covered off at the end of the day.

And so inserting a Cover product into that set of carriers is actually trivial. But you’re right. Most insurance companies compete on the back of general awareness. And I think our focus has been primarily to simplify the onboarding experience, to make it super pleasurable, make sure the servicing and modification of an insurance policy as you buy through us is super simple via messaging. So if you look at our reviews, like, we do exactly what we’re saying.

Andrew: That’s exactly . . . If you saw my eyes go down, that’s exactly what I was trying to do, trying to see the reviews. Here’s a weird thing that came up. If I search for Cover in the App Store, you guys don’t come up. If I search for, you guys don’t come up.

Karn: Sorry. You are on the iOS.

Andrew: iOS App Store. If I search for Cover . . .

Karn: Which country are you in?

Andrew: U.S.

Karn: That’s so weird. Hold on.

Andrew: Oh, no, it came up. Oh, I wonder what I did before. I definitely did and now it came up. I got the story for Cover before which includes like how to buy home. Now it’s coming up. I don’t know. That was kind of . . .

Karn: Yeah. Now it’s right there, man.

Andrew: Yeah. Weird. Okay. All right.

Karn: So we’re featured right now and we actually just launched the most recent version of Cover, so you should try it out. It’s pretty nice. I think it’s going to win an Apple Design Award iteration or two.

Andrew: So you do have a lot of reviews. I wanted to see what people were saying. I get it. I like it. I wonder, is it all now App Store? No, it’s not. What are you doing to get people in?

Karn: Yeah. No, actually, it is all App Store. So it’s like, hey, it’s probably ASO. Like if you were to search for insurance on Google Play, for example, we rank one or two in United States in any given day.

Andrew: Because we’re better at App Store optimization.

Karn: And we’re better at building product than just about everyone in insurance. Like, that’s the truth. I mean, and if you think about where we came from ecommerce which is viciously competitive and all of a sudden, we’re building product into a space and then specifically into a channel where there hasn’t been any competition. I mean, we had a head start on day one, right? And so that’s been helpful. But I mean, our differentiators are, we’re fast, we’re cheap, we don’t spam people, we let you make up your mind in and around the purchase decision. We sell all of our policies via in-app messaging and SMS.

Andrew: I’m going to do it. You start all of it with what?

Karn: In-app messaging. We sell up all of our policies via in-app messaging and SMS. Look like . . .

Andrew: I’m actually trying to get like a quote right now because there’s something I want to bring up. I can actually take a picture . . . Can’t I take a picture of the computer that you and I are on it and then I’ll get a check mark that says, “The computer is there”? Did it process it? Does that work?

Karn: Yeah, yeah. So that was actually version two where we use a TensorFlow-based camera, and you could walk around your house and we would identify the individual pieces of property and catalog that are against your homeowner’s policy. I don’t think . . . So for this current version, we were pairing it back because we’re moving to Core ML, so the Apple’s native framework for like computer vision machine learning, and so you’ll that . . .

Andrew: Wow. But I would be able to still scan stuff. You’ll see the sofa. You’ll know this is a sofa.

Karn: Exactly.

Andrew: We’re going to insure it. You tell me how much the sofa is worth, we’ll insure it, is what it is.

Karn: Well, actually, from our perspective, all it really is, it’s a tool for the . . . Like, one, it helps us be sure that the property exists in a given time, place and condition, right? That’s important as part of an underwriting process. But for the customer, it means that when you’re dealing with an adjuster, say, like God forbid your house burns down, you’re no longer babbling back and forth with the adjuster around whether that 4K TV was this one or that one or what have you because insurance companies typically speaking are not in the business of paying out which is why their NPS scores are pretty crap. Right?

And so here we are effectively empowering a customer with proof, that the property exists in a given time, place and condition. And you know how we actually came up with this idea? It was like, insurance brokers of old would ask their customers when they bought, like, home insurance policies to grab their camcorder, pop in a VHS tape, like, walk around the outside of the house, walk around the inside of the house, grab that tape, put it into a safety deposit box. Like, that is literally what they would ask their customers to do.

Andrew: I didn’t realize that that’s what they would do before, putting in a safety deposit box and that way they know until you . . .

Karn: Well, if your house burned down, you don’t want things to go, right? And so, yeah, I mean, they did this and we were like, “Okay. Well, we’re a tech company and we’d probably build something better than that.” And off we went to do that. And so what you’ll see is future versions of Cover will be able to resolve damage on vehicles.

Andrew: But I can’t now use this to just take a picture of my computer and insure my computer. It’s got to be a homeowner’s insurance or a renter’s insurance and the computer is part of that.

Karn: Right.

Andrew: Got it. And essentially, what you’re selling are three different . . . No, it should be four. Car insurance, homeowner’s insurance, renter’s insurance, and pet insurance, which I don’t see in the app right now.

Karn: Yeah. So this version you’re going to see really shortly it has pet jewelry. And we usually have a section called “Surprise Us,” which is where we see people throwing in all sorts of crazy stuff.

Andrew: And that’s how you get a sense of “What else should we be doing?”

Karn: Yeah.

Andrew: Can I insure my feet. I got to run all around the world. I’m a little worried. I remember how I used to see Lloyds of London would insure somebody’s arms or their breasts or something or their legs. Does that happen?

Karn: Well, I mean, is there an opportunity for some sort of economic loss if you were to . . .

Andrew: There is.

Karn: I’d guess. All right. Like, yeah.

Andrew: Yeah. But the economic gain for me running around the world is pretty minimal. It’s . . .

Karn: Right.

Andrew: No.

Karn: Yeah. No, I mean, it’s supposed to be downside protection, right? So if there is actual downside, I think you probably get up all.

Andrew: Are we thinking that way? Like, how can we get more media by insuring something crazy?

Karn: Yeah. I know. I mean, you actually do see some of these articles that pop up like Lloyds of London, like, insured J.Lo’s legs or Taylor Swift’s butt or something like that. I mean, those are interesting. Those are the exception, not the rule. Like, typical people do not . . . Like, normal people don’t care about these types of things.

Andrew: Why are you doing this interview with me? What’s in it for you? I’m looking to try to get a sense of maybe you’re getting traffic from a bunch of podcasters. No. You did get some from TechCrunch. That’s big. YC List seems to have sent you some traffic.

Karn: Yeah, we’ve been on . . .

Andrew: The majority of traffic is coming from Google.

Karn: Yeah. I mean, we’ve . . . Yeah, it’s true. I mean, we’re pretty good . . . we’re starting to get good at SEO, so that’s good. And the reason for that is actually, it’s a lead up to us launching So I bought this very expensive domain because I wanted to market [inaudible 01:00:56]

Andrew: How much?

Karn: Stupidly expensive. It was 750K.

Andrew: Wow. All right. And it’s a perfect fit for you. I get it.

Karn: Well, look, like, I actually got a lot of flak on Hacker News and we have, like, a YC community for doing something like this because it’s, like, antithetical and being a scrappy startup as you aptly described very early on. I think the reason for it is this. I have a very, very good understanding of what the underlying economic model of my business is. I know that right now I have to be very surgical. We talked a little bit about how we are, about acquiring customers at a reasonable cost and building up a decent sized book of business. But I also know that Cover at some point or another is going to be competing on general awareness like Geico and State Farm. We’re going to be writing millions of new policies a year that’s inevitably going to happen.

Well, discoverability and name recall matters at that point. So if you have a $2,000 LTV for a customer, minor variations in conversion rates have huge outcomes when . . . and is large. And so if that’s actually the context for the buy. It was like, “Okay. Well, I know discoverability matters. I know that I’m probably going to get the cheapest it’s ever going to be.” If we announced our series A or our series B, it’s going to be much more expensive and we think this is probably a brand or the brand that we want to build around, something that we can be proud of but also the economics, a couple thousand policies in make sense. It’s fairly trivial for something like if you think . . . think of it in the context of how much premium you would be writing.

Andrew: So then what’s the goal of being here? I like how methodical you are. You even thought through that name. What’s the advantage of being here? Is this like an SEO play to be here? Is this something else?

Karn: No, no. I mean, I actually like legit . . .

Andrew: It’s great for me. I just want to . . .

Karn: . . . I enjoy having these conversations. No. I mean, I think, it’s cool to share our story. That’s certainly an opportunity for me to talk about that. Sometimes it’s an opportunity for me to get that outside of my own head and like, be a little creative and be asked questions that are [inaudible 01:03:14] and I appreciate you doing that. Yeah. I mean, how else would I be spending my Wednesday evening in Greensboro, North Carolina.

Andrew: You’d be enjoying the hotel room and just be away.

Karn: After meeting with reinsurers.

Andrew: Is that what you were doing? Meeting with reinsurers?

Karn: Yeah, actually.

Andrew: And then you get into the hotel room and they . . . Can you turn the camera around? Can I get a sense of how much you’re spending on a hotel room? Let’s see if you’re yet at luxury suite.

Karn: No, no. This is, like, a Hyatt Place. It’s like $79 a night. I don’t ball out.

Andrew: Oh, that’s a very good price. You make your bed? Is your bed . . . No, of course, the bed is made up. When I’m in hotels, I have to make the bed even before I leave the room. Everything has to be put away. I know what it is. I want everything organized when I’m away.

Karn: Yeah. You know, there’s a recent trip to New York that I took to meet with one of our investors and, like, they balled out. They own a building on Fifth Avenue. They invited me to this super fancy party. And I was only there for something like 18 hours. So I flew from San Francisco to New York. And I was like, “Well, I don’t want to pay $500 for a hotel room.” And so I got . . . And I kid you not, I mean, this is like harking back to when I was in college, I got a spot in a shared Airbnb room with like four other people, like one of those quads that costs like $80 a night. And I was fine with it. I mean, I was like, “Okay.” It was maybe a little hot and sweaty, but I dealt. I slept like four hours and I was back on the flight and that’s what it is. So, I mean, you shouldn’t do that. In retrospect, like, that’s just dumb given . . .

Andrew: Because?

Karn: It’s dumb because it’s like I probably should have put a better price on what my comfort and my ability to function is.

Andrew: Yeah.

Karn: So like, if you’re in a room with four other like backpackers and you’re sleeping for four hours, you’re probably not going to get that much done the next day, right?

Andrew: And the shower is never going to be as free [inaudible 01:05:17]

Karn: And like, you described the economic value of the work that you’re actually doing the next day that the math isn’t really working.

Andrew: You want to know something. So when I go to conferences, I rent the nicest fucking luxury hotel room that I can get, the suite, because I want to have a bunch of people come in and so you justify that the numbers absolutely pay off. But the nights that I’m in these rooms I am so much more inspired, so much like more productive for being in that environment that I wonder if it just be worth it just for that. There’s something about that, like the room that you’re talking about it’s good.

Karn: I mean, I had a suite like once. I was a managing consultant so I have a whole bunch of points and like I use rigorously. I’m pretty frugal when it comes to stuff that I spend for myself.

Andrew: All right. Here’s what I learned. Number one, most insurance websites, they’re actually not the worst, but they’re not great. Like Geico does have an app that works, but it doesn’t work the way that I do and I don’t know how to put my finger on it. And somehow your app does. It’s little things. Number one.

Number two thing that I learned was when you were going back in time and evaluating cutting your hair, which would have been really tough for me, I had long hair when I was a kid just because I was into heavy metal, cutting it was really tough. I like your attitude about it, which is, no, it is all compost. It may not be the same exact thing that grows from this compost, but something is going to grow better because the compost is there. I really love the way that you put that.

I like how you went against this industry that is really, really full of money and you came at it from a very techie point of view, like, “How do we do better App Store optimization? How do we create a cleaner, simpler app?” That type of thing was really inspiring to see. And I liked what you learned from Shopify and what you brought into Shopify about doing like this . . . How would you call your marketing approach, the idea that Shopify would create these add-on services that you basically would need before you need Shopify as a way of getting you into Shopify?

Karn: Yeah, yeah. They call it pre-commerce, we call it pre-insurance.

Andrew: Pre-insurance and pre-commerce and pre-marketing sounds like a great avenue to go down. I love the example that you had for it. All right. For anyone who wants to go check out your website, hey, get this, it’s really super easy. I’m a horrible speller, even I could spell it, And I think I know what I did in the App Store. I did Cover and then said “You want the story,” so I said, “Yes, I want the story,” and then all I got was a story. All right. So for anyone who wants to go check him out.

And I want to thank my two sponsors to make this interview happened. First, for hosting your website right. Really, don’t overthink it guys, And if you ever had a bad experience with them, email me and my team, We always want to know about it, but we’ve been watching this, people are just producing good websites and moving on., number one.

Number two, if you need to hire developer like I did or Karn did and so many other people who listened to Mixergy . . . Karn, it must be a lot, which is why they keep every year asking if they could buy every single ad we have. It’s working for them, it will work for you, go to

And finally, if my foot does not . . . I’m going to the doctor soon. I’m got to go check it out. I’m going to be running a marathon on every single continent all over the world. North America, South America, Europe, whatever else there is, I’m going to be running a marathon there, interviewing entrepreneurs along the way. If you want to see my progress and get on calls from with me about like, what your goal is, what my goal is throughout the year, I want this to be the best year we’ve ever had, go check out and you’ll get to jump on calls with me. Karn, thanks so much for doing this. I really liked talking to you.

Karn: Yeah, man. This was awesome. Thanks so much for listening. I appreciate it.

Andrew: Thank you. Thanks. Bye, everyone.

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