Wefox gains $4.5bn valuation in face of insurtech sell-off

Germany’s wefox has sealed a fresh round of funds in a deal that lifts its valuation to $4.5bn from $3bn last year, with the insurance start-up saying it is going “all in” against a souring backdrop for the sector.

The funding round comes just a week after Coalition, a privately held US cyber insurer, secured a beefed-up $5bn valuation in its latest fundraising.

The rise in valuation for the two companies — and their return to tap investors after fundraising deals just last year — is all the more notable after a brutal reckoning for insurance start-ups, or insurtechs.

High-profile publicly traded groups have lost billions of dollars in value, forcing some into cost-cutting mode. Private markets have also slowed down markedly.

Wefox, which was founded in 2015, operates a platform model that connects insurers via a network of agents to more than 2mn customers.

Its $400mn round follows a $650mn fundraising last year. Comprising equity and debt, the latest round was led by Mubadala, the Abu Dhabi sovereign investment fund that first invested in the start-up three years ago. Other investors including Omers Ventures, an arm of the Canadian pension fund, also participated.

Julian Teicke, wefox founder and chief executive, said it would use the funds to expand more aggressively at a time when souring conditions force direct-to-consumer insurers to pull back. “Many of the market players are now holding back and we can go all in,” he added.

The rising valuation, he argued, vindicates a decision to operate through intermediaries, meaning wefox does not have the big upfront costs of rival insurtechs that sell directly to consumers.

“When we started, back then everyone said that we are betting on the past [but] it has turned out to be the right decision and is putting us now in a good place,” he added.

Where some insurtechs are cutting staff to protect margins, wefox has taken its own staff base from 550 last year to 1,300 today, and is targeting $600mn revenue this year, from $320mn in 2021.

Following a deal with Germany’s Allianz to underwrite policies in the UK, Coalition revealed last week it had secured $250mn of funding from groups including Allianz’s tech investment arm. The fundraising propelled Coalition’s valuation to $5bn, from $3.5bn last year, again fuelled by fast-growing revenues.

Funding deals by insurtechs, as with other growth companies, slowed at the start of this year. The $2.2bn raised in the first quarter was the lowest total since the second quarter of 2020, according to data from reinsurance broker Gallagher Re.

Andrew Johnston, the broker’s global head of insurtech, said the sector was experiencing a bit of a “wake-up call”.

“We’ve seen big lay-offs, we’ve seen people reducing their growth expectations,” he said. This had focused investors’ minds more closely on proved revenue growth, he argued, adding: “Some winners are starting to show themselves.”