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Vouch raises $45M led by YC Continuity for business insurance that targets startups

By Ingrid Lunden

“Move fast and break things” is a term we usually associate with Facebook (at least, until 2014) and the general startup ethos of being disruptive. Now in true entrepreneurial fashion, the phrase is finding itself as the center of — what else — a startup idea, which today is announcing a sizeable Series B as it gains traction.

Vouch, which offers business insurance specifically targeting startups, is today announcing a Series B of $45 million, led by Y Combinator’s Continuity Fund. The company was part of YC cohort that presented this past August, and between then and now it appears to have also raised a Series A of $24 million, with this Series B actually also closing back in September (I’m guessing the delay in timing was to coincide the news with the expansion of its service to California). PitchBook data indicates that Vouch’s valuation has also ramped up rapidly: it’s currently at $210 million. (Previous investors in the company include Ribbit Capital, SVB Financial Group, Y Combinator, Index Ventures, and 500 Startups, with the total raised to date now at $70 million.)

The company — not to be confused with the tutoring network Vouch, nor the ‘social network for loans’ Vouch — will be using the money that it will use to continue expanding its product and to bring the service to more geographies.

In addition to now launching in its newest region of California, today, it’s also live in Oregon, Utah, Colorado, Illinois, Indiana, Ohio, Wisconsin and Michigan. Today’s move is a key one, considering Silicon Valley is at the heart of the tech world, and therefore startups, and therefore fertile ground for acquiring new customers.

(It seems that although Vouch itself is based in San Francisco, it delayed a California launch in part to test out the product in smaller markets before hitting the big time: California, it notes, accounts for 50% of the whole business insurance market in the US, and California startups alone spend $44 billion annually on it.)

When Vouch launched at YC, founder Sam Hodges (who had been one of the original co-founders of Funding Circle, the business lending platform that went public in London) described the platform’s mission as a way of mitigating risks because sometimes “bad things happen to good startups.”

The company’s insurance covers all the tricky things that can befall young businesses in what is a very volatile market. (Common wisdom says that most fail, some have put the figure as high as 90%.)

That includes general liability (which includes damage to rented premises, personal or advertising injury, and related areas), business liability, management liability, fiduciary liability, cyber and crime coverage, rented and non-owned auto insurance and more. (Health or workers’ compensation are not included.) The products start at $200/year, which Vouch says undercuts most of what is already on the market. Munich Re backs the policies.

“Vouch helps founders manage the risks associated with starting up a new company, so they can focus on creating and growing businesses that change the world. We believe that’s a purpose worth pursuing,” said Hodges in a statement. “As an entrepreneur, I’ve spent most of my career building companies at the intersection of technology and financial services. I know first-hand that along the journey of building and growing a business, teams will face numerous high-stakes challenges. Vouch is here to support entrepreneurs and mitigate those challenges from the beginning, leaving more room for growth.”

Y Combinator has always had a soft spot for startups that built services for startups, and this is no exception. It makes perfect sense as a follow-on investment for Continuity, which has also backed Brex, Gusto, Instacart, LendUp, and Stripe. In this sense, it becomes a strategic investor, not unlike Silicon Valley Bank (which tells startups that do business with it that Vouch is its preferred insurance provider).

“Y Combinator and Vouch share a common goal – giving founders the support they need to build successful, innovative companies,” said Anu Hariharan, Partner at Y Combinator Continuity, in a statement. “Vouch is built specifically for startups, so founders have the peace of mind that their business is covered. This platform is fundamental to the startup community, as it enables founders to focus on growing their companies — which is why we were bullish on leading the Series B.”

Luko raises $22 million to improve home insurance

By Romain Dillet

French startup Luko has raised a $22 million Series A round led by Accel (€20 million). Founders Fund and Speedinvest are also participating in today’s funding round.

When you rent a place in France, you have to provide a certificate to your landlord saying that you are covered with a home insurance product. And, of course, you might want to insure your place if you own it.

While the market is huge, legacy insurance companies still dominate it. That’s why Luko wants to shake things up in three different ways.

First, it’s hard to sign up to home insurance in France. It usually involves a lot of emails, a printer, some signatures, etc. It can quickly add up if you want to change your coverage level or add some options.

As expected, Luko’s signup process is pretty straightforward. You fill out a form on the company’s website and you get an insurance certificate minutes later.

Luko partners with La Parisienne Assurances to issue insurance contracts. So far, 15,000 people have signed up to Luko.

Second, if there’s some water damage or a fire, it can take a lot of time to get it fixed. Worse, if somebody breaks into your place, you’re not going to get your money back that quickly.

Luko wants to speed things up. You can make a claim via chat, over the phone or with a video call using the mobile app. The company tries its best to detect fraud and pay a claim as quickly as possible. Luko also recently announced an integration with Lydia, a popular peer-to-peer payment app in France, so that your payment is instant.

Third, Luko has a bold vision to make home insurance even more effective. The startup wants to detect issues before it’s too late. For instance, you could imagine receiving a water meter from Luko to detect leaks, or a door sensor to detect when somebody is trying to get in. We’ll find out if people actually want to put connected objects everywhere.

Finally, Luko has partnered with a handful of nonprofits to redistribute some of its revenue — it has received the BCorp certification. The startup makes revenue by taking a flat fee on your monthly subscription. If there’s money left at the end of the year, Luko donates it to charities. Investors signed a pledge so that Luko doesn’t trade this model for growth.

Where top VCs are investing in fintech

By Arman Tabatabai

Over the past several years, ‘fintech’ has quietly become the unsung darling of venture.

A rapidly swelling pool of new startups is taking aim at the large incumbent institutions, complex processes and outdated unfriendly interfaces that mar billion dollar financial services verticals, such as insurtech, consumer lending, personal finance, or otherwise.  

In just the past summer, the startup community saw a multitude of hundred-million dollar fintech fundraises. In 2018, fintech companies were the source of close to 1,300 venture deals worth over $15 billion in North America and Europe alone according to data from Pitchbook. Over the same period, KPMG estimates that over $52 billion in investment pour into fintech initiatives globally. 

With the non-stop stream of venture capital flowing into the never-ending list of spaces that fall under the ‘fintech’ umbrella, we asked 12 leading fintech VCs who work at firms that span early to growth stages to share where they see the most opportunity and how they see the market evolving over the long-term.

The participants touched on a number of key trends in the space, including rapid innovation in fintech infrastructure, fintech companies embedding themselves in specific verticals and platforms, rebundling and unbundling of financial services offerings, the rise of challenger banks and the state of fintech valuations into 2020.

Charles Birnbaum, Partner, Bessemer Venture Partners

The great ‘rebundling’ of fintech innovation is in full swing. The emerging consumer leaders in fintech — Chime, SoFi, Robinhood, Credit Karma, and Bessemer portfolio company Betterment — are moving quickly to increase their share of wallet with their valuable customers and become a one-stop-shop for people’s financial lives.

In 2020, we anticipate continued entrepreneurial activity and investor enthusiasm around the infrastructure and middleware layers within the fintech ecosystem that are enabling further rebundling and a rapid convergence of product themes and business models across the consumer fintech landscape.

Many players now look like potential challenger bank models more akin to what we have seen unfold in Europe the past few years. Within consumer fintech, we at Bessemer are more focused on demographically-specific product offerings that tap into underserved themes, whether that be the financial problems facing the aging population in the US or new models to serve the underbanked or underserved population of consumers and small businesses.

Ian Sigalow, Co-founder & Partner, Greycroft

What trends are you most excited in fintech from an investing perspective? 

I suspect that many enterprise software companies become fintech companies over time — collecting payments on behalf of customers and growing revenues as your customers grow. We have seen this trend in many industries over the past few years. Business owners generally prefer a model that moves IT expenditures from Operating Expenses into Cost of Goods Sold, because they can increase prices and pass their entire budget onto the customer.

On the consumer side, we have already made investments in branchless banking, insurance (auto, home, health, workers comp), cross-border payments, alternative investments, loyalty cards/services, and roboadvisor services. The companies we funded are already a few years old, and I think we will have some interesting follow-on activity there over the next few years. We have been picking spots where we think we have an unfair competitive advantage.

Our fintech portfolio is also more global than other sectors we invest in. This is because there are opportunities to achieve billion dollar outcomes in fintech, even in countries that are much smaller than the United States. That is not true in many other sectors.

We have also seen trends emerge in the US and move abroad. As an example we seeded Flutterwave, which is similar to Stripe, and they have expanded across Africa. We were also the lead investor in Yeahka, which is similar to Square in China. These products are heavily localized —tin for instance Yeahka is the largest processor of QR code payments in the world, but QR code payments are not popular in the US yet.

How much time are you spending on fintech right now? Is the market under-heated, over-heated, or just right?

Fintech is about a quarter of my time right now. We continue to see interesting new ideas and the valuations have been more or less consistent over time. The broader market doesn’t impact us very much because we tend to have a 10 year holding period.

Are there startups that you wish you would see in the industry but don’t?

Next Insurance raises $250M from Munich Re, becomes a unicorn

By Manish Singh

Next Insurance, a three-year-old U.S.-based firm that sells insurance products to small businesses, has become the latest unicorn in the nation after bagging $250 million in a new financing round, the startup said today.

Germany-based Munich Re, one of the world’s largest reinsurers, alone funded Next Insurance’s Series C round, the two said in a statement. The new financing round valued the three-year-old startup, which has raised $381 million to date, at more than $1 billion, the startup said.

Guy Goldstein, co-founder and chief executive of Next Insurance, said the startup will use the fresh capital to build new products and expand its customer initiatives. Next Insurance offers a wide-range of insurance coverage to more than 1,000 unique types of business. It has amassed over 70,000 customers in the U.S., the only market where it currently operates.

Next Insurance aims to become a one-stop insurance shop for micro and small business insurance needs. Its insurance plans and products are designed to cater to the business sectors that are often overlooked by more general insurers.

The startup offers a number of insurance products, including general liability, which covers a number of accidents at work, including property damage and physical injury; professional liability, which covers business owners from accusations of professional mistakes; and commercial auto, which pays for damage caused by or to your business vehicle.

As TechCrunch’s Steve O’Hear explained earlier, small business owners often rely on price comparison websites to figure out what kind of coverage they need and where to buy it, though that means the plans they get don’t always cover all their needs. The other option is to use a broker, but that also adds another middle person.

In a statement, Joachim Wenning, chairman of the Board of Management at Munich Re, said the new investment will help Munich Re expand its footprint in the U.S.’s insurance market of small and medium-sized commercial customers.

“Next Insurance will benefit from our expertise in primary insurance and reinsurance. This investment emphasizes Munich Re’s commitment to be the leading provider of digital insurance solutions,” added Wenning.

Next Insurance, of course, isn’t the only player attempting to address the insurance needs of small and micro-sized businesses. It competes with a handful of startups, including Lemonade, which raised $300 million in April this year, and Root Insurance, which sells car insurance and raised $100 million last year.

DeadHappy, the UK pay-as-you-go life insurance provider, raises £4M Series A

By Steve O'Hear

DeadHappy, a U.K.-based insurtech startup that wants to offer more flexible life insurance and remove the taboo surrounding death, has raised £4 million in Series A funding. Backing comes from e.ventures, alongside the company’s seed investor Octopus Ventures.

Founded in 2017, DeadHappy claims to be the U.K.’s “first fully digital pay-as-you-go life insurance provider.” It offers flexible life insurance policies that are designed to be “cheaper, easier and better” than existing traditional providers. This includes pricing insurance based on your current circumstances and the option to add (or remove) further coverage on a rolling basis.

More broadly, the startup is developing what it calls its “Deathwish” platform, which is something akin to a will. The idea is that you can specify how you wish any future insurance payout to be used, such as paying off your mortgage. And there are also plans to incorporate other wishes not related to finances.

“Our vision is to change attitudes to death and we are tackling that in a number of ways,” DeadHappy co-founder Phil Zeidler tells me. “Despite death being the one certainty humans face, it remains for many a taboo subject, and the failure to talk about it and plan for it is both counterintuitive and leads to significant further trauma at the most difficult of times for family and loved ones.”

Currently the Deathwish platform offers financially motivated Deathwishes, but the longer-term plan is to enable practical Deathwishes, such as making sure your funeral is the way you want it, and what Zeidler calls emotionally motivated Deathwishes.

The idea is to help offer a way to help loved ones “achieve something meaningful in their lives, whether that’s learning how to play the drums or funding an expedition to the Amazon,” he explains.

“Crucially, customers can share these Deathwishes as they choose, which is a practical tool to ensure their wishes are clear and understood. Our platform acts as a catalyst for opening a conversation with loved ones and a place to share recorded video messages and stories.”

Meanwhile, DeadHappy says it will use the new funding for future growth by further building the technology and capabilities of its Deathwish platform. It also plans to expand its product and partnership offerings to major financial service distributors.

Root Insurance valuation hits $3.65 billion in latest round led by DST Global and Coatue

By Kirsten Korosec

Root Insurance,  lang="EN">an Ohio-based car insurance startup that uses smartphone technology to understand individual driver behavior, said Monday it has raised $350 million on a $3.65 billion valuation in a Series E funding round. 

The amount of the round was reported last month by Axios, citing anonymous sources. This official announcement fills in the remaining details, including that DST Global and Coatue Management led the funding round. Existing investors Drive Capital, Redpoint Ventures, Ribbit Capital, Scale Venture Partners and Tiger Global Management all participated in this round, along with several new investors, according to the company.

The car insurance company, founded in 2015, has now raised $523 million with an additional $100 million in debt financing. The funding will be used to scale up in the 29 U.S. states where it currently operates and expand into new markets. The additional capital will also be used to develop new product lines, Root said.

The company said last year it planned to be in all 50 states and Washington, D.C. by the end of 2019. 

“Root is transforming auto insurance, the largest property and casualty insurance market in the U.S., by leveraging technology and data to offer consumers lower prices, transparency, and fairness,” Tom Stafford, managing partner of DST Global, said in a statement.

Root provides car insurance to drivers. The company has differentiated itself by using individual driver behavior along with other factors to determine the premium customers pay.

Drivers download the Rootmobile app and take a test drive that typically lasts two or three weeks. Root provides a quote that rewards good driving behavior and allows customers to switch their insurance policy. Customers can purchase and manage their policy through the app.

Root has said its approach allows good drivers to save more than 50% on their policies compared to traditional insurance carriers. The company uses AI algorithms to adjust risk and sometimes provide discounts. For example, a vehicle with an advanced driver assistance system that it deems improves safety might receive further discounts.

The company’s business model has attracted customers. Root wrote more than $187 million in insurance premiums in the first six months of 2019, 824% growth over the same period in 2018.

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