Wefox, the German insurtech startup, has closed a new round of funding from existing investors. The financing amount will not impress anyone as the company raised $55 million. This can be considered an extension of the $400 million Series D round, as Wefox managed to maintain the same $4.5 billion valuation.
However, the fact that Wefox is still valued at $4.5 billion is an interesting tidbit. Many startups struggle to secure funding rounds or have to downgrade their valuation. In addition to this traditional equity investment, Wefox also secured $55 million in a revolving credit facility from JP Morgan and Barclays.
As a reminder, Wefox sells insurance products through internal and external insurance brokers. Unlike its German rival Get safe, it does not rely on a direct-to-consumer distribution strategy. This model scales extremely well, as Wefox now has 4,000 distribution partners.
More recently, Wefox launched its own insurance company – Wefox Insurance. In this way, the company can design and sell its own insurance products without relying on third-party insurance companies.
I spoke with the company’s co-founder and CEO Julian Teicke (pictured above) to discuss the company’s current strategy. Wefox’s main source of income remains its distribution activities. “On the distribution side, we are already profitable,” said Teicke.
“We have about 300 insurance companies that we work with. It’s all the major insurance companies in P&C [property and casualty], life and health. Then we have our own insurance company. Most of the turnover comes from our distribution activities. If you look at the total volume of insurance premiums on the platform, that is about 2 billion euros. 200 million euros of that was our own insurance last year and the rest was liability insurance,” he added.
As for the credit facility, Julian Teicke told me that it could be used for acquisitions, for example. Wefox is currently active in six European markets (Germany, Switzerland, Austria, Italy, Poland and the Netherlands). It plans to expand into new markets such as France, Spain or the UK by acquiring, integrating and developing a promising insurance distribution business.
Refocusing on distribution
“18 months ago we saw that the world was changing. We then made many decisions about financial discipline that are now paying off. We were able to double our turnover and double our margins in the first quarter,” said Teicke. He compares Q1 2023 with Q1 2022.
That is why Wefox’s first-party insurance business has not been prioritized compared to its distribution business. “We were mainly focused on growing turnover [of Wefox Insurance] — and we stopped doing that,” Teicke said. The company is now focusing on markets it knows very well. On the distribution side, the company is currently developing a network of affinity partners so that they can embed insurance products in their offerings.
“When you buy a car, you get car insurance on top. When you buy an e-bike, you get e-bike insurance on top. That is comparable to our brokerage. It lowers customer acquisition costs for us,” Teicke said.
The continued investment in Wefox Insurance will continue to benefit the company’s next product. Next year, the company plans to release its technology stack to allow other insurance companies to create insurance products, manage performance in real time, and handle claims using APIs. Essentially, Wefox wants to become the Amazon Web Services of insurance with this platform game.
I asked Julian Teicke if Wefox became an insurance company with this end goal in mind. “It wasn’t the plan at all. When we started, we had no idea. We just took it day by day and step by step. Insurance is such a difficult industry and it moves so slowly. It’s so slow to really make a difference at scale. If you look at insurance companies, they already have 99% of the business – 1% is what they really have to fight for,” he said.
“There is no urgency to change. And that’s why it’s not easy to build a new disruptive player in insurance. And I thought we needed to understand how distribution works, how insurance works. Every insurer will have to go digital. There will be a digital infrastructure company for insurance companies,” he added.
In short, Wefox is streamlining its existing activities to become profitable as quickly as possible in all areas (distribution and insurance). At the same time, it is exploring this new platform business in the hope that it will become the main business over time.
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