Extend Secures $40M to Revolutionize Extended Warranties
Supplemental warranties – offerings that lengthen the standard product guarantee, providing increased reassurance should a purchased item malfunction – have consistently been a component of the sales process for significant purchases from major retailers. Currently, a developing company is announcing a substantial funding infusion to broaden access to this concept, utilizing APIs to enable even the smallest retailers to provide extended warranties on even the most affordable products.
Extend, collaborating with businesses such as Peloton, iRobot, Harman / JBL, Advance Auto Parts, Traeger Grills, BlendJet, SoClean, 1More, August Home, Balsam Hill, NewAir, Evolve Skateboards, and approximately 150 others to develop and manage extended warranties for their products, has secured $40 million in a Series B funding round.
Woody Levin, the company’s CEO and founder, explained in an interview that his goal is to eliminate obstacles for smaller merchants (particularly those operating directly to consumers) in offering extended warranties, and for customers, to dispel the negative perceptions surrounding the idea, which some view as exploiting anxieties and lacking genuine value.
“Extended warranties have unfortunately carried a negative reputation for too long,” he stated. “Our aim is to deliver a more refined experience. We envision Extend becoming the equivalent of AppleCare, but for all products.”
Levin – an experienced entrepreneur who has previously sold several startups – noted that the company currently manages over $27 billion in products eligible for warranty coverage.
Reflecting its ambitions, Extend has attracted investment from leading venture capital firms. This funding round is spearheaded by Meritech Capital – known for its investments in companies like Facebook, Salesforce, and Tableau – with participation from PayPal Ventures, as well as existing investors Great Point Ventures and Shah Capital Partners.
PayPal’s involvement is particularly noteworthy, as it is a prominent provider of online payment solutions for merchants and consistently seeks technologies that enhance conversion rates, especially in the current environment where e-commerce has surged due to social distancing, creating a more competitive marketplace.
“Merchants of all sizes stand to gain from extended warranties, but their implementation and upkeep have historically been too complicated for many businesses,” said Jay Ganatra, Partner at PayPal Ventures, in a release. “Extend aligns with PayPal’s dedication to equipping merchants with user-friendly tools to strengthen their customer relationships. Furthermore, Extend’s conversational chatbot has significantly improved the customer experience. We are pleased to invest in Extend as it continues to reshape this industry.”
To date, Extend has raised a total of $56 million, but the company has not disclosed its valuation.
Extended warranties are fundamentally about offering buyers greater reassurance, such as the peace of mind provided by AppleCare for expensive iPhones, protecting against costly repairs or replacement. However, from a seller’s perspective, they can be instrumental in finalizing a sale.
In recent years, merchants have increasingly recognized this benefit and are applying extended warranties to a wider range of products, not just the most expensive ones.
“The majority of merchants have been benefiting from this added peace of mind,” Levin explained. “Amazon, for example, offers extended warranties on backpacks costing as little as $40, because offering an extended warranty increases the likelihood of a purchase.”
Beyond simply advertising the option, extended warranties represent a substantial $130 billion market in 2019, experiencing annual growth of approximately 7.4%.
Historically, the main challenge has been the prevalence of older, established warranty providers who primarily serve larger retailers. Levin pointed out that companies like SquareTrade and Asurion focus on the “top 1% of companies,” neglecting smaller businesses. “These are established companies with a focus on individual integrations,” he said.
Extend has adopted a contemporary approach by developing an API that seamlessly integrates into any e-commerce platform or checkout process (and also works with solutions like Affirm that are also focused on innovation). These plans can range in cost from as little as $19.99 to considerably more for one- or two-year coverage.
Extend collaborates with insurance underwriters like AIG to provide the financial backing for the warranties. Customers can submit claims by speaking with a representative, or utilize a 24/7 automated chatbot for immediate assistance. Levin stated that approximately 98% of claims are handled through the chatbot, named Kayley.
These claims are processed efficiently and with minimal inconvenience: because they are linked to online transactions, customers are not required to retain receipts, as Extend automatically tracks purchase information. Typically, customers receive credits to repurchase the original product or a comparable item at the same point of sale.
“Meritech consistently seeks to partner with companies that are redefining their respective industries, and Extend is doing just that with its platform,” said Alex Clayton, General Partner at Meritech Capital, in a statement. “Extend is addressing a significant gap in the e-commerce infrastructure by simplifying the process for merchants to offer extended warranties and protection plans, and delivering a smooth customer experience from beginning to end. We are excited to support Extend’s future endeavors.”
Given the scale of this funding round and the caliber of its investors, Extend has considerable momentum, but it is not alone in recognizing this opportunity. Earlier this year, Clyde secured $14 million for its extended warranty solutions, and True-backed Upsie is also developing a platform to offer warranties directly to consumers, bypassing retailers.
