Insurance technology startup Lemonade raised a $33.1 million Series B funding round the company announced Monday morning, led by General Catalyst with money also coming from GV (formerly Google Ventures), Thrive Capital, and Tusk Ventures.
“We believe in replacing brokers and paperwork with bots and machine learning, and we now have the backing to unleash this formula across new products and geographies,” Lemonade CEO and Co-founder Daniel Schreiber asserted in a press release.
The round brings their total haul to $60 million according to the company. Lemonade raised a sizable $13 million seed round just under a year ago, and announced bringing in XL Innovate this past August as a Series A investor valued at around $14 million. Now Lemonade’s 11 investors including returning backers XL, Aleph, and Sequoia Capital have come together to more than double their raised capital according to an SEC filing.
Lemonade’s press release actually claims a $34 million round, though that seems to round up the number they reported to the SEC. The announcement also includes news the company received a license to operate in New York in mid-September, subsequently filing for a license in California (though they do not note when they would receive an answer to their application). They launched in New York within weeks of receiving the license.
The new round shows how significant the insurtech industry really grown in the past year. Nearly three months after Lemonade’s initial announcement about their seed, Israeli competitor Next Insurance raised a comparable $13 million seed.
Apparently breaking into insurance is more costly than building a clever piece of software and requires the capital to back it up. Alongside Lemonade’s $60 million raised over the last year, there have been rounds all over the world for startups like Embroker’s $12.2 million Series A, Friendsurance’s $15 million, Toronto-based LEAGUE’s $25 million, Switzerland’s FinanceFox’s $28 million Series A, and several others.
Lemonade Co-founder and President Shai Wininger recongizes the difficulty and high costs of breaking into the insurance industry, telling panelists at Geektime’s annual conference two weeks ago that, “If you ask the entrepreneurs what they want to do next it’s usually not ‘I want to do insurance. I want to deal with regulation and raise a shitload of money.’”
“For a startup to come in, you have to start everything from the beginning,” he continued. “I think that’s why it was so hard to break in because you had so many people in the business already.”
Lemonade also uses bots to chat with customers and facilitate transactions instantly, a model embraced by Trov for their system. Wininger told the audience two weeks ago that not only could their technology register a new claim holder for a policy in under five minutes, but also pay out claims in the same period of time. That type of speed runs laps around current wait times for claim approvals and is seen as a substantial threat to established insurance companies by people in the tech sector.
“We look for companies that have the potential to radically improve customer experience, and we saw that clearly in Lemonade. They are harnessing a compelling mix of behavioural economics, artificial intelligence, and great design,” said Tom Hulme, GV general partner. “Lemonade’s full-stack approach gives it flexibility to keep iterating on that customer experience, and to expand fast in 2017.”
What that expansion might entail is not clear, but it will likely mean applying for operation licenses in more US states.