Not many entrepreneurs get lucky with their first project. But so far that seems to be the case for Sebastián Valin, the founder of ComparaOnline.com, an Internet start-up for which, in just three years, he has raised some US$5 million in seed and venture capital.
Fresh from studying structural civil engineering at the Los Andes University in Santiago – “where entrepreneurship wasn’t on the syllabus” – Valin knew the traditional career path of a well-paid job in a large company wasn’t for him and, instead, wanted to start his own business. The problem was he didn’t have a project.
The answer came when, already eyeing insurance as a possible field, he decided to help a younger brother insure his new car and set about tracking down the different options and their respective prices. In that process, he discovered two things.
First, getting the information wasn’t easy. “I spent a week making phone calls and often had the feeling I wasn’t getting all I needed to know,” he recalls. “In many cases, I was offered just one option but with no way of knowing whether it was the best one for me or the interests of the person I was speaking to.”
With an engineer’s approach, he compiled an Excel spreadsheet with the results, but then came the second problem – struggling through the mass of information to compare the alternatives. There were, moreover, huge differences in price even for the same product, depending on whether it was being sold by a bank, a retail store, a broker or the insurance company itself.
What Valin did in that spreadsheet is much what ComparaOnline now does for consumers in Chile and, soon, Brazil. It doesn’t actually sell car insurance – or any of the other financial and telecommunications services into which it has since diversified – but it does allow users to compare prices simply, quickly and free-of-charge and, when they do buy a product, takes a cut from the seller.
“In the markets where we operate, there is typically asymmetry in access to information and we help to make them more transparent,” points out Valin. Indeed, in order to ensure its impartiality, the company charges sellers a fixed fee for each product so that it has no reason to favor one over another.
Valin declines to reveal the company’s sales but does say that its website receives some 250,000 unique visitors each month and, in its three years in operation, has provided around 1 million quotes. And, with a 90-strong workforce, its smart offices in Santiago’s Providencia district are a far cry from the warehouse of a family friend where he set up his first solitary office.
Challenges and adjustments
But it has not all been plain sailing. The first challenge, says Valin, was to overcome his fear of failure. “I’d done well at university, had a lot to lose… and didn’t want to seem to be opting out,” he recalls.
There were also some reality checks along the way. “When I hit on the idea of a car insurance comparison service, I thought I was a genius… until I realized there were plenty of them in other countries.”
Before launching ComparaOnline, he spent a month in Spain and England visiting companies like the UK’s uSwitch. “I learned a lot because, at that stage, I didn’t really understand how the business worked and how it made money.”
Back in Chile, one of the key challenges was to persuade insurance companies to sign up with ComparaOnline. “It wasn’t easy,” admits Valin, “but it helped that we only charge them for something real – a sale – not just for clicks or visits.”
It was usually smaller companies, with a lower profile, that joined first. Today, however, the insurance companies quoting on the site include large players such as Chilena Consolidada, BCI Seguros and Consorcio.
But, about eight months into the company’s operations, Valin found that its sales just weren’t growing. That was partly because its business model wasn’t quite right for Chile.
One problem was that – like the companies Valin had seen in the UK – it didn’t initially have its own call center and was relying on the insurance companies to follow up on quotes. “They weren’t doing a very good job,” says Valin, “so we had to adjust the model to do it ourselves.”
By comparison, raising capital was easy, he says. In the company’s first round, obtained on the basis of a 24-month business plan he wrote with the help of a textbook – “we weren’t taught that at university” – he raised an impressive 400 million pesos (some US$800,000) from family and friends. He was, he admits, lucky in having access to a network with those resources.
That round took the company through to breakeven on just car insurance. The same partners then put in more capital to allow it to expand into other products such as travel insurance, consumer finance and telecommunications services.
But its first institutional round of financing came only recently with the entry – for an undisclosed amount – of Kaszek Ventures, an Argentine venture capital company formed by Hernán Kazah, co-founder of MercadoLibre – Latin America’s eBay – and Nicolás Szekasy, its former CFO. That investment, Kaszek’s first in Chile, will be used to finance ComparaOnline’s expansion to Brazil where it has already opened an office in São Paulo.
The choice of Brazil as its next market was “a very complex decision and probably the most important strategic decision we have taken,” says Valin. Some of the insurers that ComparaOnline works with in Chile are also in Brazil but, apart from the market’s size, there is also the difference that – unlike Chile when it started there – it will have competitors.
“There’s lots of competition,” admits Valin, “but they’re all newer than we are and still learning.”
ComparaOnline’s subsequent step will probably be a much easier Colombia but, although Valin is cautious about the details, its plans don’t stop there. Eventually, he hopes to see the start-up he launched when he was just 24 years old emerge as the leading regional player in its field.
Ruth Bradley is a freelance journalist based in Santiago and a former editor of bUSiness CHILE.