Propeller, a Philadelphia-based insurance tech startup, has raised a $6.4 million seed round after experiencing 300% growth in the past year and eyeing the same number in 2023.
The company was founded by two insurance industry veterans who saw an opportunity to corner a portion of the market that can feel "archaic" and has largely been ignored by fintech startups. Its focus is on the surety business, which is a $7 billion industry, said Aaron Steffey, who launched the firm with his cousin Chris Kolger in 2020, just prior to the Covid-19 pandemic. Through Propeller, they're looking to breathe new life into that sector of insurance by way of automation, and the industry is starting to take notice.
Though specific investors were not disclosed, Steffey said the majority of the seed round funding came from those in the industry, including large insurance wholesalers and carriers, agents and brokers from across the country.
"It definitely helps validate us that all of these are entities that know insurance really well," he said.
Both Steffey and Kolger have ample experience in the field. Steffey all but grew up in the insurance industry thanks to his family owning Steffey Insurance Agency, which offers home, auto and commercial insurance and has offices in Indianapolis, Cincinnati and Philadelphia. Kolger came from insurance giant Chubb Corp. to help found Propeller and its focus on surety.
Surety bonds are posted by contractors to guarantee that they will perform the contract work and are often used on federal, state and local construction projects. They can also be used on other business contracts.
Steffey recalled thinking that "this much-maligned product segment called surety really could use some automation and could use some technology involved," and set about streamlining the process to "make it way easier on the agents."
Propeller's platform allows agents and customers to quote, pay and receive their bonds in minutes. The platform creates a uniform resource locator, or URL, for agencies to use that aggregates different markets and makes the bond issuance process nearly instantaneous. Traditionally it can take days to get a bond, depending on the paperwork.
To build out that automation, the company tapped Axe Group, an Australian firm that creates digital insurance products.
Propeller takes commission for every bond purchased on the platform.
Since launch, Propeller has grown from two employees to 25 and to thousands of bond transactions per month. It also grew gross written premium 300% in 2022 and is projecting it will grow another 300% this year. Steffey said that amounts to about $1 million per month in gross written premium, noting that that and bond transactions are the primary metrics to measure business in the industry. He hopes to be at about $3 million in gross written premium per month by the end of the year.
Though quick growth can often lead startups to eye different verticals, Propeller is concentrated on surety. It wants to have a "stronghold" and be "the name" in the industry, Steffey said.
"We kind of made a wholesale decision that we're going to focus solely on surety and being as dominant and as good and efficient at surety as we can," Steffey said.
