Should we be worried about insurtech valuations?

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Hello everyone, I hope you had a lovely week. I turned 32 after experiencing sleep-destroying heartburn. So, a little good and a little bad. But that didn’t stop the markets. Nope. Not a bit. Which means we have a lot to talk about, including falling insurtech stocks and what the situation might mean for startups, and a raft of IPOs. This will be fun!

Before we get into the nitty-gritty of our chats with newly public companies Kaltura, Couchbase and Enovix, let’s talk insurtech.

In the last year or so we’ve seen a number of insurtech startups go public, including Root (auto insurance), Metromile (car insurance), and Lemonade (rental insurance). Here’s a quick digest of how their performance looks today:

  • Root: $7.72 per share, 71.4% down from its $27 per share IPO price.
  • Metromile: $7.26 per share, down 64.4% from its post-combination highs.
  • Lemonade: $86.97 per share, up 199.9% from its IPO price of $29 per share.

Recall that Root and Metromile began to trade after Lemonade, so their declines are not over a longer time horizon, but a shorter interval. Which makes the situation all the more interesting.

What’s going on? Well, two of the three insurtech public offerings (SPACs, IPOs, etc.) are sharply underwater. That doesn’t bode incredibly well for Hippo, which is pursuing its own SPAC-led combination that should be wrapping up in short order. The huge declines don’t seem bullish for insurtech startups, who will have to answer private-market investor doubts concerning their value.

Does Lemonade’s strong post-IPO performance allay concerns? It’s tricky. The company has been busy expanding into new markets, including auto insurance. The company did take a somewhat material hit from the Texas freeze earlier this year — per its most recent earnings report — but past those two data points it’s not entirely clear what the company is doing that the other two are not. But investors are stoked about Lemonade, and not Root and Metromile. Figuring out why that’s the case, and why their startup is more Lemonade than the other two, is going to be key for the many insurtech startups still scaling toward their own IPOs.

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