Sequoia Invests $13 Million In A Seed Round For Lemonade, Which Is Looking To Transform Insurance

In one of the largest seed investments in the firm’s history, Sequoia Capital is committing to a $13 million round for Lemonade, a company that’s looking to bring the idea of peer-to-peer personal insurance to the U.S.

There is perhaps no industry more universally reviled than the insurance industry and Lemonade’s co-founders, Shai Wininger (a co-founder of the jobs marketplace Fiverr) and Daniel Schreiber (the former president of Powermat), view that as a perfect opportunity to come into the U.S. with a potentially disruptive business.

They’re not the first company to bring the notion of peer-to-peer payments to insurance. London-based Guevara, which offers peer-to-peer car insurance, and Friendsurance, a Berlin-based company selling peer-based personal and casualty insurance, have both come to market with variations on the theme of bringing concepts of the sharing economy to insurance.

And while Lemonade chief executive Daniel Schreiber is mum on the types of products his company will offer, the business models Friendsurance and Guevara are pursuing may offer some hints for what’s to come from Lemonade.

Both companies allow policy owners to form small groups, Premiums are paid into a cash-back pool which allows members of the group to get money back at the end of the year (if they don’t file any insurance claims).

It’s one way to solve the moral hazard that’s at the heart of how insurers make money, and why they’re so detestable to the general public.

Since insurers use non-payment of claims as a profit center, the scales are weighted for the insurers to screw their customers out of contracts from the beginning. It’s this issue that Lemonade and its European counterparts are aiming to change.

“We are building an insurance company fully vertically integrated from the ground up to rethink some of the building blocks of the industry,” says Schreiber (no relation).

Based in New York, the company currently has 15 people on staff, including, Schreiber assured me, some titans of the insurance industry that he just. couldn’t. talk. about.

Schreiber and Wininger began working together about a year-or-so ago through the introduction of a mutual friend.

The company cites estimates that the property and casualty insurance industry generates $1 trillion of gross margins annually, and those numbers are hard for investors to ignore.

“It is very unusual for a company to receive $13 million in an initial round of funding,” said Haim Sadger, Partner at Sequoia Capital, in a statement. “But it is rarer still to find such accomplished founders tackling such a sizable industry… We’re bettingLemonade will transform the insurance landscape beyond recognition. It is one to watch.”