A company that has built a new approach to the business of extended warranties — providing a cost-effective and efficient way for retailers or brands to offer them; and an easy way for consumers to buy and file claims against them — is today announcing a huge round of funding as it looks to take its business to the next level.
Extend — which aims, in the words of co-founder and CEO Woody Levin, to become the “Apple Care” for everything that’s not an actual Apple product — has raised $260 million, a Series C that values the company at over $1.6 billion.
It plans to use the funding to continue expanding its business. That will include a gradual move into covering more than just extended warranties that kick in after manufacturer or retailer warranties run out; much wider geographical expansion; and more activity to prove out its place at the e-commerce table (if the leap to a $1.6 billion valuation in 27 months of operation isn’t testament enough…).
“Same day delivery, buy-now-pay-later, and other tools: we are now all part of that core e-commerce toolset,” Levin said in an interview. “We have been selling since 2019 but the market is just waking up to this. We’re focused on being transparent and fair with warranties. It’s something they haven’t seen before.”
The company says that in 2020, its first full year of business, it sold 300,000 protection plans, but it is now on track to sell more than 3 million protection plans this year. Customers include Peloton, iRobot, Harman/JBL, Backcountry, Balsam Hill, BlendJet, RealTruck, Traeger Grills and “hundreds” of others, along with a growing number of retailers, too. (Peloton likely makes for some interesting stories…)
The funding, a Series C, is coming from an interesting mix of financial and very strategic investors. It is being led by SoftBank, in the latest investment out of its Vision Fund 2. (Levin said he was pitched directly by Mashayoshi Son: “He immediately understood what we were doing.”)
Existing backers Meritech Capital Partners, PayPal Ventures and GreatPoint Ventures, and new investors insurance giant Nationwide, Tomales Bay Capital, Launchpad Capital, 10X Capital and 40North, also participated.
PayPal is a notable name here: warranties are often sold at the point of sale, and so it makes sense that a payment giant is interested in bringing more tools and conversion levers into the mix. (And given the connection between warranties and insurance, it’s also interesting to remember that Stripe, one of PayPal’s big competitors, in March received a huge funding round with insurance giants participating.)
Meanwhile, recall that SoftBank also is a part-owner of T-Mobile (which sells a lot of gadgets) and an investor in, well, a lot. This gives Extend a possible door into a huge range of places where it might integrate and offer extended warranties and other kinds of protection plans.
The round was oversubscribed and comes just eight months after Extend announced a Series B of $40 million. You could say that Extend very much extended its own conversations with VCs with this latest round.
Extended warranties and protection plans have long been a point of contention for consumers: they sound like peace of mind in theory, but they often feel like frustrating upsell, with the tacit message being that somehow the company accepts that its products won’t last. At the same time, they can be time-consuming, if not downright disappointing, to actually claim against.
Extend is all too aware of the pitfalls of the legacy model and has set out to combat it with more flexible offerings (providing tiers of warranty time with prices attached), clear policies that can be managed in one place for all of your Extend-provided coverage, and quick interactions — by way of a digital assistant called Kaley — to get claims against your policies if the need arises. In the background, it also leverages machine learning and risk analysis to make sure it’s not betting the house on its plans.
This has all played in its favor for now. Retailers are getting less interested in handling warranties in-house, and are turning to outside providers to do the work. Extend saw revenues rise 40x in its first full year of business (2020) — a time when many have been spending more hours at home and possibly more willing to follow through on customer support interactions when they do have problems. The startup says it expects revenues to go up by 400% this year.
Its customers continue to be primarily those who sell directly to consumers, although a few new deals with retailers speaks to some opportunities for a much wider opportunity for those who are looking for more services to offer shoppers around the basic proposition of buying goods, to better compete against the wider range of services that a marketplace like Amazon might offer for those who want them.
“As more consumers shop online, merchants are keen to provide customers with a greater peace of mind when making purchases. We believe Extend is reinventing the extended warranty industry through its leading platform, API solutions, and consumer-first approach,” said Nagraj Kashyap, managing partner at SoftBank Investment Advisers. “We are pleased to work with Woody and the Extend team to support their ambition of providing a better way for consumers to protect the products they love.”