Clyde raises $14 million Series A to help e-commerce businesses offer extended warranty plans

Published May 11, 2020

Four years ago, Brandon Gell was an architecture student who spent most of his time working on 3D printing modular housing. Now, he’s the founder of Clyde, an extended warranty startup that wants to help small e-commerce businesses offer product protection.

Today, the company announced it has raised a $14 million Series A led by Spark Capital with participation from Crosslink, RRE, Rea Sea Ventures and others.

How do you go from being a product person to the founder of an insurance startup? According to Gell: a stint at a four-person 3D scanner startup in Columbus, Ohio.

Because the team and resources were small, Gell was put in charge of finding an insurance company to work with to protect their expensive end product of scanners.

“I spent six months trying to find a company,” he said. After seeing how seamless it was to work with fintech customer support tools from companies like Stripe, Shopify, Affirm and others, he said it was clear that insurance, and especially the extended warranty space, wasn’t as mature. So he set up an office in his grandma’s New York apartment.

Clyde is a platform that connects small retailers to insurance companies to launch and manage product protection programs.

Using Clyde, customers can access a dashboard and e-commerce apps to manage their protection programs. For example, a user can see how many contracts were sold, how much revenue total those bring and gross profit in real time. It also can see which products are most often purchased with an extended warranty contract.

“It’s a similar type of offering as Affirm or Stripe,” he said. “We give you access to large insurance companies and we enable you to launch the program live on your website or physical point of sale and store wherever you sell.” It has plugins with Shopify, BigCommerce, Salesforce, Magento, Woocommerce, and more so store owners on the site can add Clyde to their small businesses.

Clyde’s most critical metric is that it has an 18% attachment rate on average, which means that 18% of people that go through a Clyde-powered purchasing path end up purchasing extended warranties or protection plans.

The reason businesses care about extended warranty is two-fold. First, insurance benefits the customer experience. Second, insurance purchases are often the highest-margin product that companies sell to their customers. Product protection alone is a $50 billion market. Gell said that Best Buy drives about 2% of its annual revenue from the sale of extended warranties, but that generates more than half of its profit.

Clyde helps small businesses, like a four-person startup in Columbus Ohio, get a bite of this profitable pie. Most e-commerce businesses have to work with Amazon, thus giving a lot of that cash to the big company versus putting it in their own pocket, per Gell. He says that when Amazon sells an extended warranty on a seller’s product, it doesn’t share any revenue with the seller on how the product performs, which prevents a seller from both a stream of revenue and data analytics.

“Our sort of mantra is that the retailers that we work with are basically everybody that’s not Amazon and Walmart,” he said.

Clyde’s goal is different from Upsie, another venture-backed startup focusing on warranties. Upsie is looking to be a direct-to-consumer warranty replacement, while Clyde works on behalf of the retailer and insurance company to connect the two parties.

Closer competitors to the startup include Mulberry and Extend, which were both founded after Clyde and have raised less in venture capital funding. Gell thinks his competitive advantage is partnerships with top insurance companies, and a strong product-focused platform. Clyde’s entire founding team is made up of product people.

Startups right now need to prove that they are viable in both a pre-coronavirus and post-coronavirus world. And Clyde might be exactly in that sweet spot, as it focuses on e-commerce businesses.

The Series A round closed a few weeks ago, before the COVID-19 craziness began, but he said that the pandemic has led to more inbounds and interest than ever before. Gell says it’s a mix of e-commerce being more important than ever, and customer behavior.

“It’s a shift of customers that want to buy online more, but also protect their purchases more than ever,” he said. “Companies are realizing how important it is.”

New cash in hand, Clyde’s growing while its customer-base is looking for new ways to bring in revenue and take care of customers. If the startup can handle the influx of attention and importance right, sticky harmony will follow.

FTC warns companies that void warranties over using third-party services

Published April 11, 2018

The days of reading the small print to see whether a repair or new part for your ailing laptop will void its warranty may be coming to an end. The FTC has officially warned several companies that their policies of ceasing support when a user attempts “non-approved” repairs or servicing are likely illegal.

It’s the sort of thing where if you buy a device or car from a company, they inform you that unless you use approved, often internally branded parts, you’re voiding the warranty and your item will no longer be supported by the company.

The idea is that a company doesn’t want to be on the hook when a user replaces an old, perfectly good stick of RAM with a new, crappy one and then comes crying to them when the computer won’t boot. Or, in a more dire situation, replaces the brakes with some off-brand ones, which then fail and cause an accident. So there’s a reason these restrictions exist.

Unfortunately, they’ve come to encompass far more than these dangerous cases; perhaps you replace the RAM and then the power supply burns out — that’s not your fault, but because you didn’t use approved RAM the company takes no responsibility for the failure. The result is consumers end up having to buy components or servicing at inflated prices from “licensed” or “approved” dealers.

“Provisions that tie warranty coverage to the use of particular products or services harm both consumers who pay more for them as well as the small businesses who offer competing products and services,” explained Thomas Pahl, from the FTC’s Bureau of Consumer Protection, in the announcement.

The agency gave several examples of offending language in customer agreements, blanking out the names of the companies. Ars Technica was quick to connect these with the major companies they correspond to: Hyundai, Nintendo and Sony. Here are the statements the FTC didn’t like, with the company names in bold where they were blank before.

The use of Hyundai parts is required to keep your . . . manufacturer’s warranties and any extended warranties intact.
This warranty shall not apply if this product . . . is used with products not sold or licensed by Nintendo.
This warranty does not apply if this product . . . has had the warranty seal on the PS4 altered, defaced, or removed.

It’s one thing to say, don’t overclock your PS4 or we won’t cover it. It’s quite another to say if the warranty seal has been “defaced” then we won’t cover it.

“Such statements generally are prohibited by the Magnuson-Moss Warranty Act,” the FTC announcement reads, and in addition “may be deceptive under the FTC Act.” The companies have 30 days to modify their policies.

This could be a major win for consumers: more repairs and service locations would be allowed under warranty, and modders of game consoles may be able to indulge their hobby without trying to hide it from the manufacturer. That will depend on the new phrasing of the companies’ policies, but this attention from the FTC will at the very least nudge things in the right direction.