Like most startups, the founders of unicorn Branch faced some early setbacks.

In a word, the process was “intense,” according to Steve Lekas, co-founder and CEO of the InsurTech, which bundles home and auto insurance based on answers to two questions: name and address.

“Having grown up as a corporate guy, I had no fundraising skillset,” admitted Lekas, a former Allstate and Verisk executive, during a recent Carrier Management interview, noting that he and co-founder Joe Emison tried to raise capital while still employed at other full-time jobs—using nights, weekends and PTOs. “As an executive, you think, ‘I’m on the top of this heap,” he said. “But we got a ton of noes.”

“It took us about 18 months to raise the first $3.5 million to get to building. Then, I put in a 30-day notice at work. We were planning to close the original fundraise on Feb. 12” in 2018. On his last day of work, Feb. 9, a strategic investor, and Branch’s second-largest backer at the time, pulled out.

“That was the first low moment, having just signed the term sheet in December previously,” Lekas reported, noting that the negative would ultimately turn into a positive. Rocket Mortgage would subsequently fill the hole left by the exiting strategic investor, and the home lender and insurance startup would go on to partner on delivering embedded insurance to home buyers.

Continuing the startup timeline, Lekas noted that he and Emison remained the only two employees from February 2018 until March of 2019. “We didn’t hire anyone. We didn’t have a whole deep roster of outside counsel to do our filings…We were doing it ourselves,” he said. The first hire was a friend and prior boss at Allstate, Kelly Fogerty, a 30-year veteran of the industry across a number of companies, primarily Allstate.

With a staff of five, Branch went to market with bundled home and auto insurance in August 2019, launching first in Ohio, and moving to Arizona, Missouri, Illinois and non-coastal Texas by August 2020. “We started from the middle of the U.S. out, optimizing for markets in which the regulatory structure would let you iterate if you missed,” Lekas said. “Especially on the actuarial side, when you’re designing from new, there are a lot of assumptions. It’s more of the art than the science with the little amount of data that you have.”

“We built the ability to go live in four lines of business—home, auto, umbrella and renters—in five states. And we did it with about $2 million of spend.”

In those early days, Branch was operating as a managing general agency although the plan was always to build a full-stack carrier at some point. To start as a carrier, you have to raise enough capital so that you could build a balance sheet from on Day 1. “That’s not the venture model,” Lekas explained.

“We knew we’d have to be a full insurance company because we were going into a cost-competitive market,” he said. “Being an MGA in personal insurance is a further intermediated model than every incumbent. It makes it much more difficult to take cost out when you add five points in,” he explained.

Telling potential paper partners about that plan, however, didn’t help the two co-founders, Lekas said, explaining a delay in going to market. “We almost landed paper, but that deal fell apart in July of 2018. Ultimately, it took us all the way until March of 2019 to sign the fronting company, who also then became an investor and a reinsurer. [We] got to market, and by the time we were launching, we were drafting the paperwork to make the filing for Branch Insurance Exchange, the reciprocal.” (Editor’s Note: SCOR and affiliate General Security National Insurance Company are the reinsurer and paper providers.)

“Up until that point, I’d been doing all of the reading of anything published on reciprocal exchanges for all of time, and consuming it, and then rebuilding it, the way I thought could reintroduce this concept of communal good through insurance,” Lekas reported.

Clearly, Lekas doesn’t get shaken by obstacles or a series of noes. The story of why he entered the insurance industry in the first place is testament to that.

Lekas started pestering anyone he could at Allstate for a job back when the 18-year-old graduated from high school. Having gotten his first computer when he was four, he started building them as a teenager. “At 18, I knew I wanted to work in technology, but the only experience I had was my DIY coding and assembling.”

“I found out that Allstate paid for college and [had] a huge data center within a bike ride to my home…I started applying to Allstate, and they were brushing me off. I had no experience, no degree. I applied every week in person, every week online. And every week, I would call another person I could identify in their HR department. I did this for many months.”

“Eventually, someone in HR said, ‘You know you’re not qualified for this network analyst position that you’re applying for. Why don’t you just take an entry-level position in claims and get your foot in the door?'”

That conversation took place two years after his application process started, and the college sophomore signed on to take first-notice-of-loss information from customers at night while attending school during the day.

“Eventually, I got into small property claims adjusting, and then finally got myself into Allstate’s technology division.”

Curiosity about the business pushed him farther. “I wasn’t going to actually learn anything about insurance running the batch cycles between 11:30 p.m. and 8 in the morning. I just wasn’t close enough to insurance.”

Lekas managed to get into a leadership development program for the underwriting department. “This was a favor to me from their HR people who I was then pestering. In the underwriting leadership development program, I asked 90 percent of the questions because I was dying to know. The underwriting leadership took notice and pulled me into their department.”

From there, Lekas moved into Allstate’s home office, and into product development, product management and strategic roles.

His next set of questions led to the creation of Branch Insurance. The Branch story continues in the related article, “Branch Insurance Sprouting From Roots of Asking Why“