When insurance company MetroMill went public through a special purpose acquisition company (SPAC) in February last year, it was valued at more than $1 billion. A year and five months later, Lemon bought the company for less than $145 million.
As the markets turned earlier this year, the insurer quickly left the playbooks of most general investors, as did Metromile and its undervalued peers. However, the sector is very much alive, and the valuation “correction” of these companies presents an opportunity for those with cash left over on their balance sheets, investors told TechCrunch.
“Just as not every insurtech was a unicorn last year, not all are zero today,” said Florian Graillot, co-founder at Astorya.vc.
The insurance market has been through a tough time this past year, so we caught up with eight active investors on the scene to get a read on what’s brewing as the markets recalibrate how much insurance startups are worth.
We’re broadening our lens by looking for more — and more — investors in TechCrunch’s surveys, where we ask top experts about the challenges facing the industry.
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“From an M&A point of view, it’s a matter of price and positioning,” Graillot said. “If you’re solving a real pain point as an enterprise software company, technology providers or insurers may want to contact you. For DTC players offering personal or commercial insurance policies, you have value if you solve the online shopping challenge, and corporates may want you to boost their own internal initiatives.”
The players involved in these deals can also go beyond the usual suspects. On the one hand, private equity funds are not interested in companies that do not have a clear path to profitability. On the other hand, “the increasing demand and value of covered insurance may bring non-traditional companies into the acquisition arena,” said David Wechsler, principal at Omer Ventures.
Many of the buyers, however, are likely to be companies involved in insurance themselves – either insurers acquiring some of their peers or former players. Clarisse Lam, associate at New Alpha Asset Management, explains: “The replacement represents a significant opportunity for existing buyers to make strategic acquisitions and accelerate digital transformation. This can be a really good time for insurance professionals to coordinate their relationships with authorities and work on business sales.
VC money is certainly drying up for some, such as the unit economics of neo-insurers under scrutiny. But the demand for other insurance business models is increasing.
“I see investor enthusiasm for B2B securities with a recurring revenue model,” Marta Notaras, general partner at Beer Lane Ventures, told TechCrunch. “Many of these startups are bringing efficiencies and cost savings to traditional insurers, and those existing insurers have become more receptive to bringing startups to solve difficult operational problems.”
Read the full survey To understand where venture capitalists focused on insurance technology are placing their bets, how they like them, and where they expect startups to innovate next.
