Hey folks,
So far this year, insurtech startups have raised over $18 billion. Of the cumulative deals struck, 26% of them were seed-stage rounds.
This gives me two thoughts:
- The top of the investment funnel for insurtech startups (seed-stage deals) is full and healthy. It's a bullish sign for early-stage founders. A large number of seed deals show that small-to-midsize funds aren't seeing the insurtech's innovation tap run dry.
- Late-stage investors are more than happy to keep dumping billions into insurtech startups. That's good news for those startups that make it past the seed stage. At the moment, there is no clear cap on what bets late-stage investors are willing to make. As of now, if you have the growth, the team and the product, you'll probably have access to the money.
However, when we put this in the context of Alex Wilhelm's analysis of public insurtech companies, a less positive story emerges. He lays out the performance of four well-known insurtech companies, comparing their 52-week highs (calculated from yesterday’s close):
- Lemonade: -57%
- Root: -76%
- MetroMile: -66%
- Hippo: -47%
Eek.
So why do private investors remain optimistic?
As Alex notes, the companies mentioned have a lot of cash on hand despite their market performance. Although there are drops in share price, no one is hemorrhaging money. The fundamentals appear to be solid.
Finally, the potential for insurtech startups is still insanely large. An innumerable number of inefficiencies riddle the market, which AI and machine learning can help solve.
This is also about the long game.
It would likely be a mistake for private investors to use a public signal over the past year to dictate dollar deployment and valuations. In more normal times, however, I think these results would at least cause a few associates to take pause.
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