It was no surprise to learn that former scooter unicorn Bird is pursuing a reverse stock split. The company isn’t breaking new ground here — it’s not the only tech company to go public in recent years to consolidate its equity in the hopes of keeping its share price above $1 to avoid delisting. Root Insurance did the same last August. Just like Hippo, another former insurtech startup.
Root and Hippo were a big part of the trend with several consumer-focused insurance startups going public during the latest venture boom, as were MetroMile and Lemonade. Since their IPOs, the track records of most of these companies in the public market have been suboptimal to say the least.
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Valued at about $6.8 billion at the time of the IPO, Root is worth just $67.2 million today, according to Yahoo Finance. Hippo and MetroMile went the SPAC route and both saw their value fall rapidly thereafter: Hippo is worth $440 million today compared to its post-combination market cap of over $5 billion, and MetroMile sold to Lemonade for less than $145 million. inventory in the new parent company.
Not all of this cohort fared badly, however. Lemonade went public at $29 a share and shares are trading at just over $16 today. It’s by far the best performer in the group.
But insurtech persevered and stubbornly showed some signs of life despite the carnage. Earlier this year, Duck Creek, which makes business software for insurance companies, was taken private for $2.6 billion by private equity firm Vista Equity Partners. And just a few months ago, MinRegion+ spoke to half a dozen investors in the insurtech space who shared more than a few thoughts on where technology could profitably intersect with the larger insurance market.
After analyzing recent company data, re-examining interest in companies in light of new market conditions, and a number of recent funding rounds, we’ve come to the conclusion that the market for insurance-focused startups isn’t actually dying. It’s just smaller and perhaps more intelligently focused than before. Let’s investigate.
There are some bulls in this house
First, we need to clarify that the investors we spoke to have not lost interest in insurtech startups, even if it’s just one of many categories their funds invest in. “We are still bullish on insurtech and we have been active in 2023,” said Hélène Falchier, a partner at fintech-focused fund Portage, for example.
Still, the sector has not been spared the devastation caused by the broader downturn. “It has been a turbulent few months for all tech sectors, including insurtech,” said Stephen Brittain, director and co-founder of Insurtech Gateway.