Following our look at why so many startups are building OKR-focused software and why venture capitalists are pouring capital into their efforts, today we’re asking a similar question about insurance marketplace startups.
This month, Insurify raised a $23 million Series A that TechCrunch covered here. And even more recently, Gabi, a competitor, raised $27 million. The two rounds added up to $50 million for the insurance marketplace startup space in less than two weeks.
But there was more to come. Late in the week, Policygenius, another participant in the space, added $100 million to its accounts. With that round, the total venture tally for insurance marketplace startups rose to $150 million for the month of January.
What the hell is going on, and why has so much been invested in the space recently? Let’s try to answer those questions by looking at who competes in the space, how much they have raised individually, and then unpack what has attracted all the fresh capital. Hint: As always, it’s about market size and economics.
Competition
Let’s define our category to forestall emails from readers annoyed that we didn’t pin down our terms. Today, we’re evaluating startups that help consumers find, select and buy insurance. Each startup in the following list has its own twist on the model, but what they share is a focus on helping consumers buy insurance of various stripes, often for less than what they are currently paying.
As with our OKR list, this isn’t exhaustive, but it is close and certainly meets the threshold for directionally illustrative:
- Policygenius: Policygenius has raised more than $150 million to date, making it the most-funded player of the group. Backed by KKR in its most recent round, Policygenius has also raised from Karlin Ventures, Revolution, Susa Ventures and Norwest Venture Partners — quite the list. The company reported $60 million in “annualized revenues” in its funding announcement, helping explain its new, larger round. What does it do? In its own words, Policygenius helps folks “compare and buy insurance online.”
- Insurify: Insurify has now raised a hair less than $30 million across three known rounds. The Boston-area company is backed by Rationalwave Capital Partners, Nationwide Ventures, MassMutual Ventures and, most recently, MTech Capital, along with Viola FinTech. What does it do? It helps consumers “compare insurance quotes all in one place.”
- Gabi: With its recent $27 million round counted, Gabi has raised just over $39 million, putting its venture capital haul in between Policygenius’s own and Insurify’s tally. Canvas Ventures and Mubadala Capital have fueled Gabi, which has a neat focus on customer retention and getting recurring commissions for insurance sales. As for its purpose, it “take[s] the pain out of shopping for insurance” for regular folks.
- Insurance Panda: The dark horse of our group, Insurance Panda hasn’t raised any known capital, but it turns up in searches for competitors of our cohort. IP wants to “make finding the cheapest insurance deals simple and easy,” which seems pretty on-brand for the group. However, its tech stack looks pretty relaxed compared to what other players in its niche are building.
- The Zebra: Returning to the venture-backed contingent, The Zebra has put $63 million together over the years, most recently raising a Series B worth $40 million from Accel. Other investors include Ballast Point Ventures and Silverton Partners. Given that its competition has raised funds lately, who else wants to expect a round from The Zebra before 2020 is done? TechCrunch previously noted that the company is akin to a “Kayak for insurance,” having built a tool where “consumers can more transparently compare quotes and understand how insurance companies determine rates.”
- CoverHound: The second-best funded player in our list, CoverHound has put together $111 million in venture capital since its first seed round back in 2011. The company’s most recent capital announcement, a $58 million event led by Hiscox, came after it raised funds from Ace Limited and RRE Ventures, among others. Notably, CoverHound also works with businesses, but its consumer side wants to let normal people “compare insurance quotes today.” So, it fits.
The list goes on. Goji, a Boston-based player in the space, sold to Seeman Holtz Property & Casualty back in 2018. And EverQuote, yet another player doing similar things, is actually public. What is it worth? Well, after reporting 61 percent revenue growth to $67.1 million in Q3 2019, along with adjusted EBITDA of $3.9 million, improved full-year forecasts and GAAP profits, EverQuote is worth just $945 million, with a trailing price/sales multiple of 4.4x.
So, it is possible to build a billion-dollar company in the space at a reasonable revenue multiple, but it doesn’t appear that companies in this niche are receiving SaaS-like valuations.
Regardless, why are there so many companies in the space? And why are investors writing so many checks? We can cite two reasons from the companies themselves:
- Growth: Remember when we said that Policygenius reached $60 million in annualized revenue? Here’s more, from its release, putting the figure into context: “Since raising its $30 million Series C round in early 2017, Policygenius has grown annualized revenues to $60 million, a 10 times increase.” That sort of expansion (10x in a few years) is the definition of venture-viable expansion. Given that other players are also raising, we can presume decent growth from them as well.
- TAM: The market for insurance premium commissions in the personal market in the United States is worth dozens of billions of dollars each year according to Gabi (told to TechCrunch during a call). That means that there’s huge TAM to chew into.
Growth, and room to grow, is a heady combo for the venture classes, who are always ready to put capital to work in bets that look like sure things.
What’s ahead? Probably more venture rounds, and rising customer acquisition costs. More as we have it.
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