Despite messy IPOs, there’s good reason to be optimistic about insurtech startups

It wasn’t a surprise to learn that former scooter unicorn Bird is pursuing a reverse stock split. The company isn’t treading new ground here — it isn’t the only tech firm that has IPO’d in the past couple of years to consolidate its equity in hopes of keeping its share price above $1 to avoid a delisting. Root Insurance did the same thing last August. As did Hippo, another former insurtech startup.

Root and Hippo were very much part of the trend that saw several consumer-facing insurance startups going public during the last venture boom, as were MetroMile and Lemonade. Since their IPOs, most of these companies’ track records on the public market have been suboptimal, to put it mildly.


The Exchange explores startups, markets and money.

Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.


Valued at around $6.8 billion in its IPO, Root is today worth a mere $67.2 million, per Yahoo Finance. Hippo and MetroMile went the SPAC route, and both saw their values decline precipitously afterward: Hippo is worth $440 million today compared to its post-combination market cap of more than $5 billion, and MetroMile wound up selling to Lemonade for less than $145 million worth of stock in its new parent company.

Not all of this cohort has done poorly, though. Lemonade went public at $29 per share, and its shares are trading at just over $16 today. It’s by far the best performer of the group.

But insurtech has persisted, stubbornly showing a few signs of life despite the carnage. Earlier this year, Duck Creek, which makes enterprise software for insurers, was taken private for $2.6 billion by private equity firm Vista Equity Partners. And, just a few months ago, TechCrunch+ spoke to a half-dozen investors in the insurtech space who shared more than a few thoughts on where tech could profitably intersect with the larger insurance market.

After parsing recent venture data, reexamining venture interest in light of new market conditions and a number of recent funding rounds, we’ve come to the conclusion that the market for insurance-focused startups is actually not moribund. It’s simply smaller and, perhaps, more intelligently focused than before. Let’s examine.

There’s some bulls in this house

First, we should clarify that the investors we talked to haven’t lost interest in insurtech startups, even when this is only one of several categories their funds invest in. “We are still bullish on insurtech and we have been active in 2023,” said Hélène Falchier, a partner at fintech-focused fund Portage, for example.

Yet, the sector hasn’t been spared the devastation caused by the broader downturn. “It’s been a turbulent few months for all tech sectors, including insurtech,” said Stephen Brittain, director and co-founder of Insurtech Gateway.

Amid this turmoil, the embedded insurance subsector is “finally having its moment,” OMERS Ventures’ insurtech lead investor David Wechsler told TechCrunch+. Embedded insurance lets companies sell insurance at the same time as another product or service, and its momentum isn’t entirely new — investors were already bullish about this approach in 2022 — but its advantages make it a good fit for what VCs want to see in 2023.

“Embedded insurance has indeed seen a popularity upswing given its strong advantages: It helps to sell insurance in a cost-efficient way, targeting customers right at the point of sale and improves the customer experience while increasing monetization for merchants,” said Nina Mayer, principal at Earlybird.

These favorable winds for embedded insurance are reflected in recent noteworthy deals. For instance, Bolttech, which raised $196 million at a $1.6 billion valuation, “bills itself as one of the world’s leading embedded insurance providers.” Similarly, Obie, a real estate insurtech that raised $25.5 million this month, emphasizes the fact that its solution is embeddable and distributed through partner proptech companies.

Whether Wefox also reflects this bullishness is open for debate. On one hand, its new funding was raised at a flat valuation compared to its 2022 Series D. On the other hand, $4.5 billion is a huge valuation to maintain in the current economy, which means this isn’t exactly a disaster.

Would Wefox have faced a down round if it were not for the fact that it is building a network of partners who can embed its solutions? We can only speculate, so let’s instead highlight another facet: its focus on profitability.

“Eighteen months ago, we saw that the world was changing. We then took a lot of decisions around financial discipline that have now paid off. We have been able in Q1 to double our revenue and double our margins,” Wefox CEO Julian Teicke said.

From what we’ve heard, investors want to see sustainable growth this year much more than a focus on a particular business model, no matter how hot that model may be. “Insurtech startups that do not offer embedded insurance, and instead provide other innovative solutions, will still attract VC funding this year, especially if they can show cost-efficient and sustainable growth,” Mayer said.

This likely explains why Gravie managed to raise $179 million recently, a substantial amount in any climate. While the company focuses on employer-sponsored health benefit solutions — i.e., it’s a B2B2C company — investors are probably more interested in the fact that it is betting on “smart growth.”

Of course, a handful of funding rounds do not represent overall VC interest — or lack thereof — in insurtech startups. So let’s pair these bullish signs with some aggregate figures from the first quarter and see if we can spy a little good news.

Venture results vs. positive vibes

Few, if any, tech subsectors are doing better than last year thus far in 2023, and insurtech is no exception.

Still, insurtech startups raised around $50 million more in the first quarter of 2023 than they did in the fourth quarter of 2022, according to FT Partners.

That’s not a big gain, but going from $1.106 billion to $1.152 billion is still moving upward. It’s really no small feat, especially when you consider today’s conservative venture market and the mire that public B2C insurtech startups are struggling in.

FT Partners also noted that eight insurtech companies each raised $50 million or more in the first quarter of 2023, compared to six in the final quarter of 2022. Besides explaining how the sector managed to raise more capital, this also shows that investors are still interested in later-stage insurtech startups.

Looking ahead, it’s fair to assume that insurtech won’t see investments being distributed evenly — bringing new tech to better price low-margin consumer insurance products may simply not work. That said, there’s plenty of room for technology to improve the insurance industry as a whole. That could mean big dollars to come.