The investment landscape for insurtech startups is off to a hot start in Q2 2021. Since the end of the first quarter, we’ve seen several players in the broad startup category announce new capital, including Clearcover, Alan, Next Insurance and The Zebra.
But, as anyone who’s familiar with startups that offer insurance-related products and services knows, the sector is enough of a mixed bag that one needs to segment down to get clarity on how constituent companies are performing. So while Clearcover’s $200 million round from last week, Next Insurance’s $250 million round from the first of the month and Alan’s $220 million round from yesterday are interesting, this morning we’re going to focus a bit more on The Zebra’s side of the insurtech house.
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The Exchange divides insurtech startups into three categories: neoinsurance providers, insurtech marketplaces and insurtech enablers. (You can see why we need to segment the insurtech genre!)
Briefly, neoinsurance providers are companies like Root, Metromile and Next Insurance, which use technology to underwrite and sell insurance in an updated manner; these companies also often have optimized mobile experiences.
Marketplaces like The Zebra, Gabi, Insurify and others provide a way for consumers to better identify their insurance options. And, finally, there are companies like AgentSync, which fit neatly into our third category of firms that help other companies in the insurance business digitize their operations or otherwise modernize.
Insurtech marketplaces came back into our view when The Zebra put together a $150 million Series D earlier this month and released a host of metrics regarding its growth, and Insurify dropped the news that it is partnering with Toyota.
This morning, let’s discuss insurtech’s 2020 as a whole, peek at some preliminary 2021 venture data and then dive deep into what we’ve collected regarding growth among insurtech marketplace players. The Exchange has data and other details from The Zebra, Insurify, Wefox and more.
Covering longitudinal progress of specific startup categories is one of our favorite things to do. So, please, walk with us!
2020 to today
PitchBook data regarding the insurtech category in 2020 underscores how large the startup niche has grown. Per the data company, $18.3 billion was spent last year on insurtech startups across venture capital, private equity and M&A activity. That was a billion dollars under its 2019 result, but given the pandemic’s onset, 2020’s final result is somewhat impressive — who expected insurance investing to hold up during an unprecedented global catastrophe?
This year is proving lucrative for the insurtech market, at least from a venture capital perspective. Normally I’d make a joke about how unprofitable some neoinsurance providers are at this juncture, but because our focus is elsewhere, bringing up the fact that, say, Lemonade’s adjusted losses in the final quarter of 2020 were around 150% of its revenue is kind of irrelevant. So we won’t!
A brief look at some preliminary data from PitchBook underscores the general durability of venture interest in insurtech companies. Looking only at insurtech startups headquartered in the United States that raised venture capital thus far in 2021, PitchBook counts around 150 deals worth roughly $4.5 billion. Last year’s totals were 439 rounds worth $7.4 billion, using the same search criteria.
We’re heading for a record in the insurtech world generally, as we are in other categories. And The Exchange understands why, to a degree: Startups in the category are generally growing rapidly. Kin Insurance, a neoinsurance player based in Chicago, announced this week that it had “surpassed $100 million in annual recurring premium after just 21 months as a carrier.” That’s swift, even if we presume that the company is still figuring out its underwriting model.
Then there’s Wefox, a European neoinsurance provider flipping the D2C model on its head, choosing to work with agents in a few markets rather than using purely digital channels. The company had revenues of more than €100 million in 2020 at a 43% loss ratio, it told The Exchange. That’s rather good. Its overall cost ratio was 56% last year, which implies that its economics might be sorted far before it goes public.
For now, let’s focus on the insurtech marketplace group and chat about The Zebra’s recent results and some recent performance data from Insurify.
Insurtech marketplaces grow like mad
The Exchange first covered insurtech marketplaces in early 2020, revisiting the topic throughout the year. Our focus has not been unrewarded. The Zebra, a U.S.-based player, had a pretty darn good 2020, for example, so we’ve been focusing on an area of the venture market that could produce some outsize wins.
The Zebra grew its 2019 revenues of $37 million to $79 million in 2020, with the company claiming that it has also reached a $150 million run rate, implying that it cleared $12.5 million in March top line. Even more, it said that its “monetization unit economics continue to rise 100% year over year,” which we take to mean that however The Zebra calculates its contribution margin, that number has been moving in the right direction. (The Zebra has raised more than a quarter-billion dollars in its life, making it a huge recipient of venture capital interest.)
So, rapid growth from the striped startup and improving economics. Who else?
Insurify competes with The Zebra and other insurtech marketplaces and is currently growing like a weed. In addition to recently landing a deal with Toyota, which Insurify CEO Snejina Zacharia discussed with The Exchange this week, her company has posted impressive recent growth. (Insurify has raised just tens of millions of outside capital, for reference.)
While Insurify is a bit more coy with hard numbers than The Zebra, it still disclosed to The Exchange that thus far in 2021 it has scaled to more than 2.5x its December revenue run rate. Put another way: It has already done a year’s good startup growth in just over one quarter. And that result came after Insurify grew by 2.5x last year, per an earlier interview with Zacharia to chat about her company.
Even more fun, Zacharia is focused on keeping her company at or near profitability — which we read as likely free cash flow positivity, a startup-friendly method of keeping track of when a young company can self-fund — so all that growth she disclosed is not coming on the back of a huge firehose of spend.
Insurify writer Tanveen Vohra stressed to The Exchange over the course of several phone calls how her company keeps sales costs low through organic customer acquisition, which her team works on. Per Insurify’s CEO, some 49% of customers come to the company via organic or other free sources. Not bad!
Given the growth both companies have seen, it’s hard not to imagine that others in their market are also doing well. That should mean, a la the recent round raised by The Zebra, that we should see a fertile market for more rounds in the space, likely all in the eight- and nine-figure vicinity.
All of insurtech, it seems, is intent on keeping our attention. Neoinsurance player Hippo is still going public via a SPAC, and AgentSync, which works in the insurtech enablement space via its API-powered service, can’t stop raising capital as it keeps growing. Throw in a hot start from insurtech marketplaces, and you could carve out a full-time beat on just these companies.
More when one of them next raises a huge round or files.
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