Global Courant 2023-05-17 15:13:47
Wefox CEO Julian Teicke.
Wefox
German digital insurer Wefox said Wednesday it has raised $110 million in new funding from financiers, among others JPMorgan And Barclays.
The news marks a vote of confidence for the insurance technology sector at a time when it is facing severe macroeconomic headwinds.
related investment news
Wefox is a Berlin, Germany based company that focuses on personal insurance products such as home insurance, auto insurance and personal liability insurance. Instead of accepting claims itself, the company connects its users with brokers and partner insurance companies through an online platform.
Founded in 2015, it competes with US digital insurers Lemonade and the German company GetSafe, as well as established established insurance companies such as Allianz.
Wefox said it raised the new funds through a combination of debt financing and new equity. Of the $110 million total, $55 million is in the form of a credit facility from banking giants JPMorgan and Barclays. A further $55 million equity investment was led by Squarepoint Capital, a global investment management firm with $75.7 billion in assets under management.
“It’s a new type of financing for a growth company,” Julian Teicke, CEO and co-founder of Wefox, told CNBC in an interview. “Risk investors, equity investors, they get it, they want to take risks.”
“Banks don’t usually do that, so it was very important for them to understand our path to profitability and the maturity of our business,” he added.
The company said it maintained its $4.5 billion valuation from a funding round in July — somewhat rare in today’s market, with many fintechs seeing their valuations plummet.
Wefox’s announcement comes as fintech and the technology industry as a whole grapple with a tougher economic environment, making it more difficult to raise funding.
Higher interest rates have led investors to re-evaluate growth-oriented technology companies, taking a beating for equity markets – and fintech in particular. In the public markets, US company Lemonade has seen its shares drop 23% over the past 12 months, though the stock is up 13% so far in 2023.
Layoffs have also plagued the fintech space. On Tuesday, money transfer company Zepz told CNBC it would let go 420 workers, or 26% of its total workforce, in the latest round of layoffs to hit the industry.
The collapse of Silicon Valley Bank has also clouded the outlook. The tech-focused lender collapsed earlier this year after its startup and venture capital clients fled in panic over capitalization concerns.
Despite the headwinds facing the wider tech industry, Teicke says he believes Wefox is “crisis proof”. In the first quarter of 2023, Wefox saw its revenue almost double on an annual basis. The company expects to be profitable by the end of this year.
Teicke also said Wefox has not faced the same pressure to lay off staff. Instead, it has shifted its priorities, he said, “doubling down on things that work and stopping on things that don’t make sense.”
For example, Teicke said Wefox focused on its brokerage partnership model and its so-called “affinity” distribution method, where it sells its insurance software at a subscription price to other companies — for example, an online car dealership that adds car insurance at the point of sale.
The new money will be used to invest in Wefox’s affinity program and technology platform, the company said.
Teicke said Wefox is also investing heavily in artificial intelligence, which has recently become a hot area of technology following the rise of the viral AI chatbot ChatGPT. Wefox mainly uses AI to automate policy applications and customer service.
The company has three tech hubs in Paris, Barcelona and Milan dedicated to AI.
