8 investors weigh in on the state of insurtech in Q3 2022

Insurtech companies have been among the biggest victims of the public market sell-off, especially those that went public in 2021. Notably, Metromile saw its valuation decline over 85% and was subsequently acquired by peer Lemonade, and it hasn’t been alone in losing a lot of value and being eyed by peers and incumbents.

All this M&A activity and repricing in the public insurtech cohort left us wondering about their private peers: Are the same trends at play and to what extent?

Investors across North America and Europe agreed that while insurtech has suffered as investors sought out more profitable sectors, the sector is still alive and thriving. “I do not believe the insurtech market to be dead, because it is still a multibillion-dollar market,” Hélène Falchier, partner at Portage Ventures, told TechCrunch.

“Short term, it might be more difficult to raise at valuations we have seen before the public market adjustment, but with a strong business model and an experienced management team that understands the market and growth KPIs, it is possible,” she said.


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While leagues behind fintech as a whole, insurtech startups have still attracted a significant amount of investment over the last few years — $43 billion between 2016 and 2022, according to a recent report. That level of interest can’t have vanished entirely, but there will definitely be winners and losers.

David Wechsler, a principal at OMERS Ventures, is clear that some private insurtechs will struggle to raise their next round of funding, but the downturn is not as bad as the doomers and gloomers make it out to be.

“We are simply seeing a reality check happen,” he said. “If the last round was done at too high of a valuation, the market will force it back in line. Unfortunately, there are many companies that should not have raised as much as they did, or perhaps don’t have sustainable business models. These companies will struggle to survive.”

In the absence of easy funding, the insurtech private market seems ripe for M&A, several investors pointed out. “As insurtech valuations have become more realistic, many companies are probing, looking for M&A opportunities,” Wechsler said. “I believe the next 12 to 18 months will have lots of interesting deals really invigorating the ecosystem and creating a lot more excitement for investors to come back in and at the correct prices.”

This leaves us with questions: What seals the fate of private insurtech startups these days? Have some approaches entirely fallen out of favor? Which avenues enjoy new tailwinds?

To take the pulse of all things insurtech, we spoke with:


Martha Notaras, general partner, Brewer Lane Ventures

The public-market insurtech sell-off has clearly trickled down to private deal-making. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?

The decline in valuations of the first batch of insurtech IPOs has changed the rules: Investors are more focused on proof of sales traction and time to profitability. Late-stage insurtech funding is now a lot more variable — everyone won’t get a trophy, as they did in 2021.

But good companies with strong leaders who are converting revenue to a path to profitability are continuing to get funded at mutually acceptable valuations.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

If startups are focused primarily on a trade sale, they need to be disciplined about how much capital they raise in order to deliver a good outcome for all.

VC return expectations might deliver valuations that a founder perceives as too low. That might mean some insurtechs could go for alternative funding sources that are less sensitive to exit valuations, including strategic investors, who are looking to gain non-monetary rewards as well as investment returns.

Regardless of what founders aspire to, not every startup gets to IPO even in the best times. And not all trade sales are at disappointing prices, as Adobe just showed with the Figma deal.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies or private equity funds?

These two sets of buyers are solving for different use cases, so both are likely acquirers of different insurtechs.

Smart legacy insurance companies are looking for insurtechs that have great technology but not enough customers or premium volume to get the most value out of the technology. The legacy insurance companies will look to leverage technology that they wished they had created across premiums that they already know how to sell.

For later-stage insurtechs that raised a subsequent amount of money at a high valuation, an M&A exit is unlikely without a price cut. Clarisse Lam, associate, New Alpha Asset Management

PE funds will look for insurtechs that can keep growing and can benefit from the classic PE approach of leveraging operations and bolting on other acquisitions.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

The mantra in 2022 is definitely “how and when can you get to profitability,” in contrast to 2021’s approach of “if you’re not growing the top line by over 5x, you’re not really trying.” DTC insurtechs with high CAC [customer acquisition cost] and no proprietary source of leads have a tougher time finding investors today.

I have always liked B2B insurtechs with recurring revenue models, and now other investors are focusing on these opportunities as well. But startups still need to make sure they are focused on markets that can deliver substantial revenue growth in order to achieve the profits that are now required.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

There are several MGAs and technology-driven, full-stack insurance carriers that have built impressive premium bases, including in newer risk categories like cyber. Venture investors have recently become more selective about investing in MGAs before they achieve scale. This caution reflects current public-market trading, as investors project forward to exit.

[Editor’s note: As David Wechsler previously noted in a guest post, “a managing general agent (MGA) is a hybrid between an insurance agency (policy sales) and insurance carrier (underwriting and assumption of the risk).”]

I see investor enthusiasm for B2B insurtechs with a recurring revenue model. Many of these startups are delivering efficiency and cost savings to traditional insurers, and those existing insurers have become more receptive to bringing in startups to solve difficult operating problems.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

In emerging markets, insurtech is following the path of fintech, where we are seeing fast followers of models that have worked elsewhere. The pace of innovation and funding outside of the U.S. has picked up significantly in the past three years.

Historically, European insurtechs have had less access to funding than U.S. startups. I am starting to see insurtechs that started in Europe are targeting problems that are relevant regardless of geography. Some of these are getting impressive traction.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

The reality of falling back to pre-COVID levels brings up a really good point: 18 months of rising valuations does not represent sustainable reality. So the doom and gloom overstates the issue.

That said, deals have slowed, and insurtechs that have raised in this environment are either stars or have adjusted their valuation expectations to the new rules in the market. The other factor that is constraining external fundraising is existing investors providing bridge financing either in the form of convertible notes or round extensions.

In some cases, this is postponing the inevitable. But the positive view is that the startup’s existing investors have faith in the vision and want to extend the runway until new investors get excited by the company’s prospects.

Deals are taking longer in 2022 because investors are doing more thoughtful due diligence. I am no longer hearing stories of startups getting term sheets following a 30-minute conversation. Our team is a proponent of value-add due diligence, seeking to ask questions that not only inform the investor but also reframe the situation, providing new perspectives and insight for the operating team as well. This year feels like a time when investors are embracing due diligence, and I think the resulting investments will be a lot stronger as a result.

How do you feel about insurtech companies innovating beyond technology?

We have certainly moved beyond Insurtech 1.0, where it was enough to digitize an insurance transaction with an improved customer interface. Now, insurtechs are looking to use technology not only to distribute insurance more effectively but to change the product and the risk profile of the product. This feels like the natural path of evolution, and it’s why the insurtechs today are even more compelling investments than the pioneers.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

You’ve hit on an area I am particularly interested in — the intersection of climate and insurtech. Yes, I have seen some innovations on climate. Insurtechs are offering parametric insurance, which can make difficult risks insurable. Others are tracking climate risk and finding ways to neutralize climate risk that are not just cosmetic, like carbon offsets.

I hope to see more insurtechs addressing these truly hard problems. Today’s combination of technology, very granular data and access to processing power create the conditions for some strong startups. Insurtechs are going to have to be part of this effort; existing insurers have the will to change, but I think insurtechs will deliver the actual solutions.

Are you open to cold pitches? How can founders reach you?

Sure. All investors pass on more investments than they make, but I’ll do my best to respond quickly and thoughtfully. Reach me at martha@brewerlane.com.

David Wechsler, principal, OMERS Ventures

The public-market insurtech sell-off has clearly trickled down to private deal-making. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?  

Yes, I suspect that in the public eye, earlier- and later-stage valuations will continue to decrease. However, this may be simply a product of deals working through the system. In other words, many of these deals are done or well underway and are yet to be announced. Strong companies that raised at realistic valuations over the past one to two years will not feel as great of an impact. There will even be up rounds.

We are simply seeing a reality check happen. If the last round was done at too high of a valuation, the market will force it back in line. Unfortunately, there are many companies that should not have raised as much as they did, or perhaps don’t have sustainable business models. These companies will struggle to survive.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

Absolutely. Selling a business can be a great outcome for both entrepreneurs and investors. However, the absolute dollars paid tend to be less than an IPO. As such, entrepreneurs need to raise capital accordingly.

If your business plan requires a tremendous amount of capital, you are limiting the number of potential acquirers. Entrepreneurs need to be thoughtful in showing how a capital-efficient model can result in building a business that is attractive to acquirers and paint a realistic picture of who those acquirers might be.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies or private equity funds?

“Insurtech” is a broad category and refers not only to next-gen insurers, but also vendors of tools and technology for the insurance ecosystem. Potential acquirers include not only traditional insurance carriers and private equity funds, you also have tech vendors looking to go deeper into the insurance market.

The growing interest and value of “embedded” insurance may bring non-traditional companies into the acquisition arena as well. And as insurtech valuations have become more realistic, many companies are probing, looking for M&A opportunities.

I believe the next 12 to 18 months will have lots of interesting deals really invigorating the ecosystem and creating a lot more excitement for investors to come back in and at the correct prices.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

All areas of the insurtech market are seeing a higher level of scrutiny. Insurtech investing is still very much alive, but there is a deeper understanding of the complexity of the market.

MGAs have been impacted the most. It’s been around for more than 150 years, but the MGA model only felt revolutionary when the tech world started embracing it in 2016/2017. But entrepreneurs quickly learned that the margin profile looked nothing like SaaS.

Instead of working with what they had, many MGAs focused more on gaining a point of margin here and there. Many also chose to take on risk (starting a captive or carrier) to improve their margin profile. But this takes a lot of capital and a level of expertise that can add tremendous overhead to the model.

Many successful MGAs have been sold or gone public at fantastic multiples. These businesses built highly efficient acquisition/servicing engines and focused on profitability as they scaled. This discipline is needed in the MGA model. MGAs who recognize this and are demonstrating their ability to grow a book while maintaining profitability will find funding.

Technology vendors, too, are faced with the reality that sales cycles are long and large players in the ecosystem have a lot of inertia to change. Sometimes, tech entrepreneurs fall in love with their solution and do not realize some features are nice-to-have versus need-to-have. Sales demonstrate the value of a solution. Long-term engagement and account growth are evidence of a need-to-have solution.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

I do not think any category of insurtech is either “hot” or “dead,” but all deals are getting more scrutiny. Many investors who got into insurtech simply because it was growing fast have left. Those who remain are passionate about the opportunities in the market and industry.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

My focus is currently exclusive to North American markets.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

The transaction volume is well below pre-COVID levels — likely back to 2018/2019.

How do you feel about insurtech companies innovating beyond technology?

This is great — new entrants have new ideas, and they should be celebrated. But be aware that the insurance industry is highly regulated and slow to move. Ideation to market adoption can take many, many years. Traditional venture capital may not have the patience — most VCs have requirements for timing on returns.

Product innovation might be best if it’s incremental, as it will experience less overhead than a completely new approach in the market. I am a huge fan of disruption, but starting with “transformation” may be a more thoughtful approach to this large and slow-moving industry.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

The entire ecosystem is seeing economic impact from catastrophic losses due to weather events and recognizes that we, as an industry, must act. It’s now an accepted fact that the old models of forecasting loss are incorrect due to the significant impact from weather. This is leading to lots of opportunities for innovation around underwriting and modeling. Many of the largest players are becoming proactive in their efforts to help provide a solution.

Are you open to cold pitches? How can founders reach you?

Yes, I am open to cold pitches. But please take your time and do your homework. Do not assume all VCs just invest in everything. We have parameters often listed on our websites about the types of investing we do and the corresponding stages of a company’s lifecycle.

Do your research, ensure you are contacting the right VCs, and be clear about why you think you should be considered. For instance, I invest in insurtech only, Series A to C. You should be able to evidence product-market fit before approaching me for investment. That said, I am always happy to provide feedback/advice at any stage/sector. Email me at dwechsler@omersventures.com.

By the way, the same goes for LinkedIn. Please explain why you want to connect and why I should be interested. A sentence or two showing that you took the time to learn about my focus goes a very long way.

Stephen Brittain and Rob Lumley, directors and co-founders, Insurtech Gateway

The public-market insurtech sell-off has clearly trickled down to private deal-making. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?

Lumley: There has been a drop in valuations, but it is not related to the insurtech sell-off. Interest rates are the problem for investment today. It’s the affordability of debt. That said, any business with a clear sight to profitability will still raise well.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

Lumley: Our portfolio companies are normally product businesses. They are much more likely to be acquired by another product business or stay as a standalone profit-making business than to IPO.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

Brittain: We have had particular challenges in the peer-to-peer space. The wonderful thing about these models is that they can massively reduce operational costs and pass that along to customers. Incumbents clearly do not like this and have applied pressure across the market to restrict their adoption.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

Lumley: The first wave of VCs chased traction as a metric without understanding the risk side of the business. Insurers are wary of traction, particularly if the model hasn’t been proven.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

Brittain: We’ve seen a lot more insurtech proposals from emerging markets and they have a common theme: Overcoming the challenge of low penetration and low trust in insurance. So they focus on trust and distribution rather than refining and optimizing processes.

Ironically, climate founders are coming from developed countries, but it’s the emerging markets that are most directly impacted by the effect of climate change.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

Brittain: Our only view of this is through our deal flow, and we’ve actually seen an increase in early-stage deals, which is up over 20% on the previous 12 months. This uplift has been driven by outbound deal sourcing.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

Brittain: The insurance sector is already one of the biggest actors in the climate space and has been for hundreds of years. Many of the largest insurers have dedicated teams focused on extreme weather and disaster risks.

What’s interesting is how both historical risk datasets and insurance distribution are being adapted by impact innovators to create new prevention and recovery models. They are reframing the risk data power of a trillion-dollar industry to now prevent disasters through early warnings, anticipatory action and by accelerating recovery time.

There are similar developments in the low-carbon space, where impact innovators are successfully increasing the adoption of low-carbon systems. They are designing out the risks associated with new social behaviors and technologies like home sharing, car sharing and cargo/freight sharing so that the wider audience feels safe to participate.

I think the real challenge is for TechCrunch readers to engage with the new potential of insurtech. It’s just not insurance as you know it, and it has created a new toolkit for impact innovators to work at scale.

Are you open to cold pitches? How can founders reach you?

Yes please, head to insurtechgateway.com to get in touch.

Florian Graillot, founding partner, Astorya.vc

The public-market insurtech sell-off has clearly trickled down to private deal-making. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?  

For sure, later-stage rounds have been drying up since the market downturn: There were only five deals over €25 million announced since the end of Q1 in Europe! It seems difficult to do worse. It’s rather a question of how long the market will be tight for mega-rounds.

Another way to measure this is to look at insurtech unicorns in Europe (there are eight right now). Only Alan and Wefox have announced a round so far this year, and it’s been over 12 months since most insurtechs announced their last rounds, which used to be their pace of fundraising announcements.

Hence the move to reduce costs as a way to delay the cash wall and buy additional time ahead of the next round (with better KPIs and hopefully a smoother VC market).

Insurtech IPOs don’t seem to be on the cards for 2022. Does it make it OK for founders to say when they’re fundraising that they are hoping for their company to be acquired?

I believe we are facing a valuation moment rather than a value moment. I mean, just like how not every insurtech was a unicorn last year, not all of them are worth zero today.

From an M&A perspective, it’s a matter of price versus positioning. If you are solving a real pain point as an enterprise software company, tech providers or insurers might be interested in acquiring you.

For DTC players offering personal or commercial insurance policies, if you’ve cracked the online acquisition challenge, you are worth something, and corporates might be interested in you to boost their own internal initiatives.

It sounds like we are back to the basics, and it also applies to VC investments — startups with clear positioning are still able to raise money and even at a pace comparable to what we saw over the last three years.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies or private equity funds?

In the current environment, we first see many M&A initiatives among insurtech startups themselves. This makes sense and could be a way to join forces toward achieving more significant KPIs, especially as VC money is drying up.

Beyond that trend, we see PE funds are always curious about insurtech, though they’re clearly looking for players on a profitable path (if not already). Hence, they’re focusing on tech for insurance players so far (see +Simple’s PE deal earlier this year for its tech for SME insurance brokers).

Finally, tech players might have a great opportunity to acquire additional solutions either to expand their coverage of the value chain, to expand to new markets at lower costs or to add new logos to their customer pipelines.

Insurers, on the other hand, seem to stay away from insurtech M&As so far, but lower valuations might be an opportunity to acquire portfolio and, most of all, digital customer journeys for reasonable prices.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

B2C startups — usually called “neo-insurers” — are clearly suffering in the current market not only because their public comparables are down dramatically but also because new questions arise.

As their growth is down due to lower capacity for marketing spending, investors are looking at other components of their revenue streams, including their capacity to price policies in a sustainable way (basically, will the premium cover the cost of claims?).

That might be why we see more players embracing the ‘embedded insurance’ wave, which is buzzy nowadays, though slightly different than lead generation B2C players usually deliver.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

Unlike neo-insurers, enterprise software companies are gaining new momentum. First, because they have a clearer business model: SaaS players are comparable between industries, unlike B2C insurtech, where e.g., MGAs and full-stack players have different unit economics despite selling the same product. In addition, companies with an existing customer base usually have multiyear contracts.

Finally, (re)insurers are clearly in need of technology, as their digitization is still behind other industries (starting with banks or other financial services). If this has not been the hottest trend in VC investment — only two of the eight insurtech unicorns are doing enterprise software — we see growing interest from investors nowadays.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

I focus on the European market so I won’t comment more broadly.

In Europe, after the first wave of mainly B2C players, the second wave of startups focusing on SMEs and the more recent one around enterprise software, we see momentum in insurtech players getting closer to the insurance core engine: products and underwriting.

In terms of investment, €700 million was invested in insurtech in Europe during the first half of 2022, while close to $5 billion was invested worldwide.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

Well, in the European insurtech scene, it depends on how you define “activity.” If you look at the money raised in the first eight months of the year, there is indeed a huge drop of 35% from the same period last year.

But if you consider the number of deals announced, it’s up! There were 6% more deals inked over that period than a year before. So if you do the math, smaller and early-stage investments remained hot. This makes sense considering how young the insurtech scene is, even compared to fintech, for instance, and how insurers still have a lot of room to improve their digitization.

How do you feel about insurtech companies innovating beyond technology?

I’d say that the first wave of insurtech — mainly B2C players targeting commoditized markets like car, home or pet insurance — were rather focusing on offering a new user experience. It was not only a matter of technology (usually leveraging an online subscription process), but rather addressing the customers’ needs with a great product.

And that’s clearly visible on the app stores, where insurtech players are way above their peers in terms of ratings. In addition, several have made “ecosystems” a reality in the insurance industry by offering additional services, such as prevention or adjacent tools, beyond just taking care of the claims.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

Climate tech is clearly gaining momentum. After the first wave of horizontal players, we’re seeing more and more use cases in the banking space. More recently, a few startups have addressed that challenge with an insurance-specific focus.

However, I believe we are still in the very early days of climate tech x insurtech. On top of this move, parametric insurance has always been applied to weather damages. Even if most startups in that space are still young (in Europe), that is the major use case of that way of doing insurance.

Are you open to cold pitches? How can founders reach you?

Happy to get in touch with European insurtech founders, even ahead of a round, either on social networks (Twitter or LinkedIn) despite too much spam or by email.

Anything else you’d like to comment on?

I’d add one last word about business lines, as we see more and more insurtech startups targeting “new risks” (i.e., risks with limited historical data, if any, that are surging).

This is a very exciting opportunity, as it’s a clear path for insurtech-insurer partnerships, where the former provide their agility to access and leverage new datasets, while the latter bring their capacity to carry risks.

Clarisse Lam, associate, New Alpha Asset Management

The public-market insurtech sell-off has clearly trickled down to private deal-making. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?

Overall, the environment for late-stage tech investing has definitely slowed down, and insurtech is not immune to that. With the current downturn and associated uncertainty, many companies are cutting costs to preserve runway and avoid fundraising.

Because of this, I think we’ll see a decrease in the number of insurtech deals over the coming quarters, along with a decrease in valuation. The public market vastly overinflated the valuation of insurtechs last year, and the industry took the hardest hit when the market shifted. As prices have been recalibrated, late-stage investors are being more cautious about the industry.

However, it is still early to say if we’ve hit rock bottom, or if the correction is still happening. I do think this represents a great opportunity for investors to enter the market at sound valuations.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

It is still fair for founders to say so. Early-stage companies still have a long way to go before exit, and market conditions will change by then. This shouldn’t impact the vision they have for the company for the next five to 10 years.

For later-stage insurtechs that raised a subsequent amount of money at a high valuation, an M&A exit is unlikely without a price cut. Founders should adjust their valuation expectations, especially if they are operating on a more capital-intensive business model.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies or private equity funds?

The current environment is not conducive to an exit to PE funds but rather to legacy insurance companies. The repricing represents a great opportunity for incumbents to make strategic acquisitions and accelerate their digital transformation. This may actually be a great moment for insurtechs to nurture their relationship with incumbents to work on synergies and potential trade sales.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

I think insurtech startups that are operating on a capital-intensive business model will struggle more to raise in our current environment. These are typically full-stack insurers or B2C neo-brokers with high acquisition costs that have attracted billions in investment over the past few years.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

Embedded insurance is taking off. The embedded model makes even more sense in an industry where “insurance is sold, not bought.” A number of players have emerged in the field, most targeting the ballooning gig economy, but embedded insurance can be applied to so many more verticals like recruitment or mass retail. The sector has already attracted millions in investor money, and it will continue to do so as the value of embedded insurance is unlocked across all markets.

Insurance is still a very under-digitized industry. There is a big market opportunity for B2B SaaS players to drive innovation across the value chain (e.g., by improving claims processing, risk management, underwriting, pricing). Incumbents are still early in their digital transformation, and there’s a strong need for insurtech to address this.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

I’m mainly focused on Europe so I’m afraid I don’t have enough insights on emerging markets to give my opinion.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

The early stage hasn’t changed much. Great companies with strong founding teams are still getting funded at high valuations. There are many seed deals being done in European insurtech right now.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

The climate crisis is a huge challenge to be addressed by the insurance industry overall. Insurers need to rethink their models — with climate change, it’s harder to count on traditional models and past experience to predict the future. Billions are being lost as a result of natural disasters, and there’s a need for incumbents to address this.

Are you open to cold pitches? How can founders reach you?

Yes! If you want to have a chat, you can reach me on Twitter, LinkedIn or by email.

Is there anything we didn’t ask about that you want to comment on?

Insurance is a market that is poorly understood by some generalist investors who applied the wrong framework to assess insurtech startups.

Insurtech is a very specific market with its own characteristics. You can’t have healthy growth if you can’t manage the foundations: Providing the right insurance coverage, at the right price, for the right customer profile.

Hélène Falchier, partner, Portage Ventures

The public-market insurtech sell-off has clearly trickled down to private deal-making. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?

I do not believe the insurtech market to be dead, because it is still a multibillion-dollar market. Short term, it might be more difficult to raise at valuations we have seen before the public market adjustment, but with a strong business model and an experienced management team that understands the market and growth KPIs, it is possible.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

There are multiple options, and further consolidation in the sector is one of them. If you have a break-even business in insurtech, you can be among the acquirers and benefit from the market consolidation.

External growth should be on the agenda of insurtech boards this year.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies or private equity funds?

Most of the market is back to M&A, and private equity does have a place in insurtech. I think we will see more “tame unicorns” — unicorns with an incumbent as the main shareholder.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

It is unclear if VCs still have an interest in full-stack insurance companies, as it is a very technical business. This is an industry where you don’t know the cost of goods sold at the time they are sold. If this is managed well, it is a really interesting business but very complex and heavily regulated.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

Traditional brokerages are gaining traction because of the classic business model, where going digital can help bring a lot of scalability.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

Each country has different insurance models. What stays consistent is that everyone wants to be covered against risks. In Europe, there are more compulsory insurance policies but also more competition to distribute these products.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

Yes, [they’re falling back to pre-COVID levels]. We are seeing fewer new insurtechs now, but the new businesses we do see are built by experienced entrepreneurs with strong backgrounds in insurance.

How do you feel about insurtech companies innovating beyond technology?

I hope to see more innovation in terms of the product itself, specifically with the use of blockchain and new protocols.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

Insurance can have a real social impact. When you think about providing the right cover against life risks to people, it is not so easy. Climate change is a complex problem where insurance can play a role, but cannot make a difference.

This is a long-term risk in an environment of rising interest rates, where traditional players with a strong balance sheet are the best partners to support their customers. Insurtechs can help them build better solutions but cannot support these risks.

Are you open to cold pitches?

Yes, always! Especially from female founders.

Adam Blumencranz, partner, Distributed Ventures

The public-market insurtech sell-off has clearly trickled down to private deal-making. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?

Through the current market volatility, valuations may continue to fall as the market tries to reset. Ultimately, we think the volume of insurtech investment will pick back up as companies continue to show progress focusing on profitability, unit economics and long-term sustainability.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when they’re fundraising that they are hoping their company will be acquired?

I absolutely think that fundraising founders can say that they are hoping for their company to be acquired. We have always paid close attention to realistic exit expectations, but now more than ever, it’s important that founders are grounded even at the earliest stages.

The reality is, most companies will not go public. Thinking strategically from the jump about potential acquirers will help position the company for success.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies or private equity funds?

Legacy insurance incumbents such as carriers, brokers and technology companies are the most likely to acquire insurtech startups. Most insurtech businesses aren’t profitable, which makes them less interesting to private equity funds, but they do have strategic value to incumbents.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

Managing general agents (MGAs) are still in vogue, so to speak, but investors are asking more informed questions related to profitability. I believe it’s not necessarily lower investment interest; I just think there’s more attention being paid to profitability than ever before.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

The easiest to scale in the industry would be MGAs, because there’s very little change management associated with either a broker or DTC distribution model. This is the reason investors aren’t completely running for the hills.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

Developed markets in Europe are understandably years ahead of the technology in emerging markets. Emerging markets are still very much focused on direct brands, whereas more attention within developed markets has shifted to enabling incumbents.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

While there’s been some slowdown, we’re still seeing significant activity in the early stage of insurtech deals, which is the lifecycle stage where our fund is most active. It’s even safe to say that the industry has returned to pre-COVID levels.

How do you feel about insurtech companies innovating beyond technology?

Technology is one piece of the insurtech puzzle, and so I remain very optimistic. There’s a lot that companies can and are doing related to core insurance products and further innovation.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

The insurtech sector is trying to do its part in mitigating the climate crisis. I’m very confident the industry will positively and significantly impact the climate crisis. I foreshadow it will most likely be a combination of insurtech and incumbents, and I’d bet on the industry in making strides.

Are you open to cold pitches? How can founders reach you?

100%. We are currently open to those relating to the P&C sector and those around that. Later down the line, we will likely start looking into the life insurance sector. I’m available via email.