Matt Ehrlichman, CEO, Chairman, and Founder of Porch Group Inc.
Matt Ehrlichman is the CEO, Chairman, and Founder of Porch Group Inc.
Prior to founding the company in 2011, Mr. Ehrlichman was Chief Strategy Officer at Active Network, responsible for ~85% of the company’s P&L.
Mr. Ehrlichman joined Active Network in 2007 and helped grow its revenues from ~$65 million in 2006 to ~$420 million and an initial public offering in 2011.
Before joining Active Network, Mr. Ehrlichman was co-founder and CEO at Thriva, which was acquired by Active Network in March 2007 for ~$60 million.
Mr. Ehrlichman built Thriva out of his dorm room at Stanford University, where he received his Bachelor of Science in Entrepreneurial Engineering and Master of Science in Management Science and Engineering.
In 2014, Mr. Ehrlichman was named USA Today’s Inaugural Entrepreneur of the Year.
Homeowners insurance is Mr. Ehrlichman’s new business focus.
“For a lot of the big legacy insurance companies, the strategy is to sell your insurance product and then hope that the customer never talks to you and you don’t talk to that customer.
They hope they don’t ever file a claim.
We want to be better.
We believe there’s an opportunity to be better than simply hoping there’s never communication.
We want to provide this complete solution around their home, around their move, and then ongoing using our tools to help them manage their home.
We believe that homeowners want to be able to maintain their home and if there are key risks with their home, to let them know proactively if there’s a big weather system coming in.
There are some things they can do to make sure their home’s protected, to make that easy for the consumer.
So, it’s a more proactive experience that simply makes managing and owning a home easier at the end of the day.
That’s different.
I’d also say that generally in the homeowners insurance industry, there are a lot of legacy carriers that, given all of the weather trends, that are just saying, “Hey, we want out. We’re not going to take more business in these places.”
And because of the data and the insights we have, and just how the business has been successful, we want to help homeowners and homebuyers, especially those who have maintained their homes well.
That allows us to meet consumers where they are, which is they need protection for their home. We’re here to partner with them.”
Mr. Ehrlichman has just radically altered the homeowners insurance business model of Porch.
“For a number of years, Porch has been the insurance carrier.
What that means is when there are losses, claims, costs, weather events, that we experience, we pay the claims and we experience that volatility.
One thing we’ve been working on for quite some time — years now — is what we’ve accomplished at the start of January, which is to form what’s called in the industry a reciprocal.
You can think about it kind of like a mutual company.
In the insurance industry, a lot of the big insurance carriers, they’re actually owned by the policyholders.
That’s what the reciprocal is.
We don’t own this reciprocal entity.
It’s actually owned by the policyholder members.
We, as of January, become just the manager, the operator of the reciprocal.
So, all the employees stay with Porch Group.
We run the business, make sure its pricing, the claims are handled really well.
But the reciprocal pays for the claims costs when they come up.
The volatility happens there.
And now our business is set up as just very simple, very clean.
We get commissions and fees back from this reciprocal for managing our business.
That will make us an easier business to predict for investors.
It’ll make it a more valuable business over time because we don’t experience the weather volatility.
Now we go and we help grow the reciprocal and our fees just continue to go up as that reciprocal entity grows…We just announced…the first quarter operating under our new go-forward business model as the manager of the reciprocal instead of the carrier itself.
And so, the results that we demonstrated were going to be important no matter what, just so investors could see a proof point for how this business looks going forward.
Great news: The results were exceptional.”
Going forward, Matt Ehrlichman sees a bright future for Porch once interest rates drop.
“We see three broad trends.
First, homeowners and homeowner purchases.
Existing home sales obviously are still sluggish, and we expect that to continue until mortgage rates come down.
We’ve been in this period for a couple of years now and all that means is that there’s pent-up demand.
As soon as rates go down, we expect the volume of home sales to increase.
That helps our business very directly.
Secondly, weather trends would be the other broad trend; weather is and will become worse.
Again, the great thing for us is that doesn’t impair us in a way that it did previously.
In fact, as weather is worse, homeowners insurance premiums will go up, and we will generate higher management fees.
And third, I think, generally homeowners insurance carriers are making sure that the prices and value proposition is set such that they can remain in business.
They can remain healthy and be able to generate the appropriate amount of profit.
That’s important because we want to make sure that we’re aligned with the market on that and the market’s really moved to make the adjustments that it needs, so that the businesses can remain healthy.”
Matt Ehrlichman believes the homeowners insurance business he has created with Porch is more than just a profit and loss statement.
“At the end of the day, I’ve been fortunate to have built some successful companies before Porch.
So, this is my last company.
The whole purpose of building one more company was to try to build a great company.
That’s the word that we talk about.
Build a company that when you look back when you’re old, you’re deeply proud of.
Certainly, that includes building something that’s really big and really valuable, but it also includes building a company that’s a great place to work, building a company that has a deep sense of values and connection between people.
The first thing that you’ll see up on the wall when you go into a Porch office is, “No jerks, no egos.”
We believe that you can be a good human, you can be kind to one another and still go build something great. Right?
That is a really important part of my job: to make sure that we have just exceptional people, that we’re all aligned on where we’re heading.
We’re all connected by this shared set of values that sets us up to just do great work every day, go solve those next problems that are in front of us.”
Read the entire 3,104 word interview with Matt Ehrlichman, the CEO, Chairman, and Founder of Porch Group Inc. (NASDAQ: PRCH) exclusively in the Wall Street Transcript.
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