When it comes to transforming business operations, artificial intelligence holds a lot of promise across many industries. Today, a startup that has been an early mover in the area of applying AI, and specifically computer vision, to the world of insurance is announcing a round of growth funding to continue expanding its business. Tractable — which has built computer vision and related AI to carry out remote assessments of damage to property and cars — has picked up a further $65 million in funding.
SoftBank Vision Fund 2 is leading this round, a Series E, with previous backers Insight Partners and Georgian also participating.
Tractable currently processes some $7 billion in claims annually through its platform, partnering with insurance giants like Aviva, Geico and Admiral and others. It will be using the funding both to continue growing that existing business; but also to invest deeper into one of its biggest markets, Japan; and to incorporate more of the latest advances in AI to expand its services from insurance assessments into repairs, maintenance and sales of the items it scans.
“Breakthroughs in generative visual AI will allow us to generate synthetic visual data that can accelerate the AI feedback loop when users point out improvement areas for our AI,” CEO and founder Alex Dalyac said in an interview over email. “Breakthroughs in Large Language Models, conversational AI and multi-modal AI open up the possibility for an expert AI that can not only assess your car and home, but also converse and advise you on the best way to repair, protect or sell your two most valuable assets.”
He also added that property appraisals for natural disaster recovery have “taken off in Japan,” with 10x year-on-year volume growth expected this year, along with 10x year-on-year volume growth in its automotive aftermarket vertical — which is where parts distributors and repairers are using Tractable to speed up processes “due to pandemic recovery-induced labor and parts shortages.”
All of that diversification could not come sooner. In the years since it launched, a number of competitors and alternatives have emerged to provide consumers and insurance adjusters with tools to facilitate remote assessments. Uveye, ProovStation, Ravin, Claims Genius, Innovation Group and many others build technology to assess vehicles and more.
When Tractable last raised money — $60 million in the heady days of mid-2021 — it did so at a valuation of $1 billion.
Today, however, Dalyac would not confirm what the company’s current valuation is, pointing out that although there has indeed been a pull back from late-stage growth rounds (thereby giving more bargaining power to investors), “there has also been a major acceleration of VC investment in AI,” (thereby creating a more competitive process that might help keep valuations robust).
SoftBank is worth noting as a lead investor for a couple of reasons. The company has been significantly less active in VC in the last 18 months, following a particularly tumultuous period in which a lot of its previous investments — made at high valuations and at a very rapid pace — led to major write-downs for the firm. (Its most recent annual results, two months ago in May, showed an eye-watering loss of $32 billion on those valuation write-downs.) Unsurprisingly, its name has been coming up a lot less frequently — making its appearance here today all the more interesting.
“We are excited to work with Alex, Razvan and team, who have been the forerunners of applying AI computer vision to bring efficiency into the insurance claims management process via applying AI computer vision,” said Nahoko Hoshino, investment director for SoftBank Investment Advisers, in a statement. “As strong believers in AI technology, we see huge potential for the technology to scale globally, embedding AI adoption into other verticals through exploring new use cases. Tractable already has strong traction in auto, whereas property is the exciting new opportunity that is ripe for disruption.”
Looking ahead, its interest in Tractable appears to be grounded in a little more practicality than perhaps some of those past investments. Japan is a big market for insurance — both car and property — with a very digital-first consumer base enthusiastic about all things AI and robotics. All that, coupled with the fact of what Dalyac described as “a pressing need to automate in the face of a shrinking and aging population,” made Japan into Tractable’s biggest market — a title that it now shares with the U.S., Dalyac said.
This deal therefore “opens up strategic opportunities for collaboration with SoftBank,” he said. “There is no doubt that SoftBank’s relationships can help Tractable further its reach into the complexities of Japan’s enterprise ecosystem. Now that the investment has come together, we will be able to start exploring strategic commercial opportunities.”
As for what those opportunities might be, the country remains the world’s largest automotive manufacturer, and it sounds like Dalyac sees an opportunity to integrate Tractable earlier into the fabric of vehicles and across more of their lifecycle, not just appearing on an app when there’s been an accident to assess damages.
“Tractable’s technology can be leveraged to repair, protect and recycle vehicles with greater speed and accuracy,” he said. “Damage and repair analytics can also serve as manufacturing quality feedback insights from the road.”
The company remains unprofitable, Dalyac said, but he’s also frank in describing why that is the case for Tractable, and so many others:
“Due to 10 years of low interest rates and a massive supply of VC, VC-backed company operators have been told for the last 10 years to focus on growth irrespective of losses. Perhaps in part because losses require more VC injection? This has encouraged a culture of investors, operators and employees viewing profitability as nothing but a nuisance, preferably avoided.
“Now that profitability is suddenly a must, the transition can be brutal. Cost cutting is unpopular, can be very disruptive to those affected, and requires stomach to undergo,” he continued. “But it does feel like the tech sector has entered a ‘sink or swim’ period. The interest rate environment is really testing the VC-backed sector’s ability to be profitable.” He said that profit is the “strategic goal towards which we have made substantial progress.” And given the SaaS margins of the business remaining strong, he said Tractable is “nearly there on EBITDA breakeven.”