Renters’ deposit insurance startup Canopy recently gained a £1.2m investment from Direct Line Group. Insurance Times spoke to Canopy founder and chief executive, Tahir Farooqui

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Canopy chief executive Tahir Farooqui is no stranger to renting. In a 17-year career with EY, Accenture and KPMG, Farooqui has rented all over the globe.

“What was common in these experiences was having to rent everywhere and put a deposit down,” says Farooqui.

Perhaps, then, it is no surprise that the consultant-turned-entrepreneur came up with the idea for deposit-free renters’ insurance.

Farooqui was renting in Amsterdam when he had the brainwave, partly inspired by his brother’s struggle to pay for accommodation after graduating.

“I am a complete outsider to the property market. I thought: what is the role of insurance? It’s to protect. None of us drives around with £30k cash, £40k cash in our car boot. We buy car insurance.”

Farooqui continues, “How do you finance that six to eight weeks deposit each time you move? You’ve also got six weeks for your existing property, six weeks for your next property, four weeks advance rent, plus other costs. You’re on baked beans on toast for the next six to eight weeks.”

Canopy is more than a business to Farooqui; he sees himself as solving a very real “worldwide” problem.

As Farooqui points out, average UK rents have increased by 20% while wages have risen just 5%. It is a problem that hits people where it hurts: in their pockets.

Farooqui believes Canopy can lay the “foundations to an ecosystem” that will benefit and connect agents, renters, landlord and employers.

It may be a big boast, but Farooqui has put his money where his mouth is. The ex-KPMG man quit a “cushy job” with a six-figure salary to fund the startup. At times, he was reliant on the charity of friends.

“I put my own £120,000 into the business and there were two times where someone got me a train ticket for four weeks. A friend paid my rent for a couple of months,” Farooqui recalls.

“But I loved it and I love it. I love what I’m doing. It’s not about money, it’s about making an impact. For me, that impact is when I think about my brother or other renters, the way the system is structured is just so unfair sometimes. That is what I am trying to change. If I can contribute to that, that’s what Canopy is about.”

What inspired him to take the plunge?

“I guess entrepreneurship has always been in my blood,” Farooqui says. He remembers living in Dubai as a child, where he witnessed two of his father’s businesses fail in the 1970s and 1980s.

“For two years we didn’t go to school,” Farooqui remembers. “It was tough.”

“However,” Farooqui smiles, “the third company went really well. He never gave up. So that entrepreneurship was always in the back of my head.”

How can Canopy fix the rental market?

The rental market has a “poor structure”, says Farooqui.

The startup founder seems almost boggled at the system: “You’ve just paid £65 to be investigated. I can’t think of another industry where you pay £65 to be investigated. They go away, do their referencing, then tell you you’ve passed or failed. You have no information on your own personal data.”

Meanwhile, Farooqui explains, agents can accrue money on renters’ deposits and there is a lot of potential for abuse in the current system.

“What Canopy does is empower you [the renter],” Farooqui proclaims.

Farooqui’s solution is to offer renters the option of paying an insurance premium to cover their deposit, rather than a lump sum.

He sees Canopy as “LinkedIn for renters”. Users have a “trust score”, based on a risk profile which is two thirds their Experian credit history and one third their renter behaviour.

“It’s about incentivising the renter to behave in a certain way that will allow them access to better properties and better insurance,” Farooqui explains. If a renter looks after a property, then their premium should drop when they move.

Encouraging good behaviour goes both ways: “Some landlords have a habit of saying ‘I’m going to monetise that cash deposit when someone moves out.’”

However, Canopy would discourage this by keeping tabs on landlord behaviour.

Users – there are currently 1200 – will be able to pay their rent through the app. Farooqui aims to offer extra tailored insurance products based on user behaviour and data.

Canopy was originally called InsureStreet, so why did Farooqui decide to rebrand?

“The vision for Canopy is to go global. It used to be called InsureStreet, which is still the business name. It was very limiting. As much as we are trying to make the insurance industry sexy and relevant and ‘appy’ for millennials (a word that’s overused), insurance is not the thing you think of except every two years when you are renewing your car insurance. Canopy is doing much more than insurance”.

Was it hard to raise capital and get partners?

Others are recognising that the rental market is burgeoning; Canopy boasts some big-name partners. It recently gained a £1.2m investment from Direct Line Group (DLG), which bought a 15% equity stake. It is working with estate agent Hamptons, and Quintain, Atlas and Get Living.

It was “very challenging” to get investors. Farooqui found Brexit a frustrating hurdle: “We have just pulled out of our biggest trading market. You need clarity and regulation. Uncertainty causes investors to fret about it. The fundraising has been not easy and, certainly, Brexit has made it harder.”

How have things changed for Canopy since DLG came on board?

“A lot of the policies were written after DLG came on board. The app was live from March, but we have done business from September because these big-name property companies wanted to make sure they were working with a company that is well funded and is backed by names they recognise. Having DLG and Experian gives us that brand equity that we were missing. As we look to go global, I think those two names will help us,” says Farooqui.

Does Farooqui see any competition posing a threat to Canopy?

Farooqui is confident that Canopy is unique: “I am sure there will be copycats, but right now the way we are structuring and building our ecosystem, there is no one else doing this. Including in the US market.

“US firm Jetty [renters insurance provider] raised $5m on the back of a piece of paper – that was an idea – in a seed round. I raised half a million. We’ve got Get Living, Quintain and others on our platform and we have just raised under £3m. Jetty has just raised £11m and they are doing half of what I’m doing.”

Is that frustrating?

“It is definitely frustrating because we want to go pan-European,” he acknowledges, “That being said, I am so grateful to all the partners who have got on board because, without them, we would not be here. Without DLG, we would not be here. It’s tough, but it is not impossible. It’s not meant to be easy. As much as I hate saying that.”

If Farooqui could have given himself one piece of advice before starting Canopy, what would it be?

“Take your time picking the right people. You could have the best idea in the world, but if you do not have the right people on the journey who have bought into your vision and your passion, you will be there by yourself. That is one of the biggest things I’ve learnt. I’ve had to let people go, exactly for that reason. Some people have joined and I’m sure they are great, but they are not a good fit for Canopy. So take your time building a team.”

The team has recently grown to 15 people. Recent hires include ex-Hiscox head of marketing Will Abbott and Tim Sutton from DLG’s digital team.

Farooqui suggests that there is a major challenge to attracting the right talent.

It goes back to Brexit,” he explains, “It used to be that we used to fight for talent in a pan-European market. Now we must fight for talent in a very small market,” he explains. “For example, we use emerging tech and it is very expensive because Aviva, Axa and others are also looking for the same talent, so it is quite tough. But, we are getting there.”

What is Farooqui’s attitude towards recent suggestions, such as by Guidewire chief executive Marcus Ryu, that there could be an “insurtech bubble”?

Farooqui is slightly critical of the insurtech phenomenon, complaining that there is too much emphasis on buzzwords and not enough on adding value.

“There is definitely a lot of hype, especially around blockchain and AI. The way we think about Canopy is very simple: Is what we are doing going to add value to the end customer? And the end customer to me is not AI and blockchain. The end customer to me is, as a renter, do you save money? Do you get access to better properties? Do you get rewarded if you do the right things? If you are looking after a landlord’s property when you check out, do we reward you?”

He continues, “It’s thinking about the incentives and adding value to all parties. The way I think about Canopy is: We are a marketplace, where our absolute focus is going to be building, you know, delighting your customers through an amazing digital experience. That’s why I don’t get bogged down in: ’Is it AI, is it insurtech?’, ’You must present at more events!’ The focus is on more execution, less drama.”

What is in the pipeline for 2018?

“The focus for 2018 is to execute and establish Canopy as a strong brand in the UK market. Once we have our foundations in place, we will look to expand beyond the UK.”

The verdict is out on where Canopy will be expanding next, but Farooqui believes it will be Germany or the US. He has an upcoming meeting with a property mogul in Germany. In Q2 he will be flying out to the US. He also claims to have demand from Finland, Sweden and Norway. First, however, he would like to shake off the cold he picked up while walking in a London park last weekend.

PwC are already using Canopy on a trial basis, while Farooqui hopes to announce another big-name deal in the near future.

In less than two years, Farooqui has managed to secure DLG’s backing. It sounds like it will be another busy year for the consultant-turned-start-up-founder.