Root Insurance Co. has been valued at $1 billion after raising $100 million, the largest funding round for a Central Ohio startup in the 2000s.
Tiger Global Management, a New York City firm, led the Series D round on the heels of Root raising $51 million this spring.
The digital auto insurer is in 20 states and is aiming to go nationwide by the end of 2019. The financing will help speed hiring of engineers, actuaries, claims adjusters and customer support staff.
“This additional capital will allow us to accelerate our strategy to transform the car insurance world and reinvent a broken industry from the ground up," co-founder and CEO Alex Timm said in a statement.
Root expects to surpass 550 employees over the next five years. The company, now at 140 employees, is moving in November to the 80 on the Commons mixed-use building nearing completion alongside downtown's Columbus Commons.
"We sold our first policy in June 2016," co-founder and Chief Technology Officer Dan Manges told me after the announcement. "To reach a billion-dollar valuation in that time frame is truly remarkable."
Root joins CoverMyMeds as Central Ohio's billion-dollar "unicorns." The prescription management software company was acquired by McKesson Corp. last year for $1.3 billion. No other tech firm has raised so much venture capital in the region since SubmitOrder's cumulative $400 million in the 1990s.
Also participating in this round are previous investors Redpoint Ventures, Ribbit Capital and Scale Venture Partners, all of which are based in the San Francisco and Silicon Valley region. Past investors also include Silicon Valley Bank Capital Partners and Columbus-based Drive Capital LLC, the first to invest three years ago.
Root sold $3.2 million in direct premiums in just the first three months of this year, up from $33,000 in the same period last year as it was getting started, according to reports filed with the Ohio Department of Insurance. It had $1.7 million in premiums for all of 2017. So far the biggest chunk of business is in Ohio, Texas and Arizona.
As a startup, it's still incurring underwriting losses, largely from non-claims operating expenses. Past loans and investment rounds have built up its capital reserves, so this round was not needed for reserves.
Investors expect Root to take a sizable chunk of the $250 billion auto insurance industry by digitizing and automating many functions. Root is sold and serviced via its app, which measures driving habits – members have to pass a monitoring period to prove their safe drivers before they can even sign up.
"This industry is ripe for change, and we are excited to invest in a team that has the expertise, vision, and momentum to deliver real results," Lee Fixel, a partner in Tiger Global, said in a statement.
Timm started working in his family's insurance business as a teenager. Manges also was founding chief technology officer of Braintree, an online payments company that PayPal acquired five years ago for $800 million.
The investment is expected to close in the fourth quarter pending regulatory approval.
Tiger Global's investments have included household names like LinkedIn and Spotify. Earlier this year it had big wins when portfolio companies Flipkart and Glassdoor were acquired, TechCrunch reported.