8 investors weigh in on the state of insurtech in Q3 2022 • TechCrunch

Insurtech companies have been among the biggest victims of the public market selloff, especially those that went public in 2021. Notably, Metromile saw its valuation decline over 85% and was subsequently acquired by peer Lemonade, and it hasn’t been alone in losing a lot of value and being eyed by peers and incumbents.

All this M&A activity and repricing in the public insurtech cohort left us wondering about their private peers: Are the same trends at play, and to what extent?


Investors across North America and Europe agreed that while insurtech has suffered as investors sought out more profitable sectors, the sector is still alive and thriving. “I do not believe the insurtech market to be dead, because it is still a multi-billion-dollar market,” Hélène Falchier, partner at Portage Ventures, told TechCrunch.

“Short term, it might be more difficult to raise at valuations we have seen before the public market adjustment, but with a strong business model and an experienced management team that understands the market and growth KPIs, it is possible,” she said.


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While leagues behind fintech as a whole, insurtech startups have still attracted a significant amount of investment over the last few years — $43 billion between 2016 and , according to a recent report. That level of interest can’t have vanished entirely, but there will definitely be winners and losers.

David Wechsler, a principal at OMERS Ventures, is clear that some private insurtechs will struggle to raise their next round of funding, but the downturn is not as bad as the doomers and gloomers make it out to be.

“We are simply seeing a reality check happen,” he said. “If the last round was done at too high of a valuation, the market will force it back in line. Unfortunately, there are many companies that should not have raised as much as they did, or perhaps don’t have sustainable business models. These companies will struggle to survive.”

In the absence of easy funding, the insurtech private market seems ripe for M&A, several investors pointed out. “As insurtech valuations have become more realistic, many companies are probing, looking for M&A opportunities,” Wechsler said. “I believe the next 12 to 18 months will have lots of interesting deals really invigorating the ecosystem and creating a lot more excitement for investors to come back in, and at the correct prices.”

This leaves us with questions: What seals the fate of private insurtech startups these days? Have some approaches entirely fallen out of favor? Which avenues enjoy new tailwinds?

To take the pulse of all things insurtech, we spoke with:

  • Martha Notaras, general partner, Brewer Lane Ventures
  • David Wechsler, principal, OMERS Ventures
  • Stephen Brittain and Rob Lumley, directors and co-founders, Insurtech Gateway
  • Florian Graillot, founding partner, Astorya.vc
  • Clarisse Lam, associate, New Alpha Asset Management
  • Hélène Falchier, partner, Portage Ventures
  • Adam Blumencranz, partner, Distributed Ventures

Martha Notaras, general partner, Brewer Lane Ventures

The public-market insurtech selloff has clearly trickled down to private dealmaking. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?

The decline in valuations of the first batch of insurtech IPOs has changed the rules: Investors are more focused on proof of sales traction and time to profitability. Late-stage insurtech funding is now a lot more variable – everyone won’t get a trophy, as they did in 2021.

But good companies with strong leaders who are converting revenue to a path to profitability are continuing to get funded at mutually acceptable valuations.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

If startups are focused primarily on a trade sale, they need to be disciplined about how much capital they raise in order to deliver a good outcome for all.

VC return expectations might deliver valuations that a founder perceives as too low. That might mean some insurtechs could go for alternative funding sources that are less sensitive to exit valuations, including strategic investors, who are looking to gain non-monetary rewards as well as investment returns.

Regardless of what founders aspire to, not every startup gets to IPO even in the best times. And not all trade sales are at disappointing prices, as Adobe just showed with the Figma deal.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies, or private equity funds?

These two sets of buyers are solving for different use cases, so both are likely acquirers of different insurtechs.

Smart legacy insurance companies are looking for insurtechs that have great technology, but not enough customers or premium volume to get the most value out of the technology. The legacy insurance companies will look to leverage technology that they wished they had created, across premiums that they already know how to sell.

For later-stage insurtechs that raised a subsequent amount of money at a high valuation, an M&A exit is unlikely without a price cut. Clarisse Lam, associate, New Alpha Asset Management

PE funds will look for insurtechs that can keep growing and can benefit from the classic PE approach of leveraging operations and bolting on other acquisitions.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

The mantra in 2022 is definitely “how and when can you get to profitability,” in contrast to 2021’s approach of “if you’re not growing the top line by over 5x, you’re not really trying.” DTC insurtechs with high CAC [customer acquisition cost] and no proprietary source of leads have a tougher time finding investors today.

I have always liked B2B insurtechs with recurring revenue models, and now other investors are focusing on these opportunities as well. But startups still need to make sure they are focused on markets that can deliver substantial revenue growth in order to achieve the profits that are now required.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

There are several MGAs and technology-driven, full-stack insurance carriers that have built impressive premium bases, including in newer risk categories like cyber. Venture investors have recently become more selective about investing in MGAs before they achieve scale. This caution reflects current public-market trading, as investors project forward to exit.

[Editor’s note: As David Wechsler previously noted in a guest post, “a managing general agent (MGA) is a hybrid between an insurance agency (policy sales) and insurance carrier (underwriting and assumption of the risk).”]

I see investor enthusiasm for B2B insurtechs with a recurring revenue model. Many of these startups are delivering efficiency and cost savings to traditional insurers, and those existing insurers have become more receptive to bringing in startups to solve difficult operating problems.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

In emerging markets, insurtech is following the path of fintech, where we are seeing fast followers of models that have worked elsewhere. The pace of innovation and funding outside of the U.S. has picked up significantly in the past three years.

Historically, European insurtechs have had less access to funding than U.S. startups. I am starting to see insurtechs that started in Europe are targeting problems that are relevant regardless of geography. Some of these are getting impressive traction.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

The reality of falling back to pre-COVID levels brings up a really good point: 18 months of rising valuations does not represent sustainable reality. So the doom and gloom overstates the issue.

That said, deals have slowed, and insurtechs that have raised in this environment are either stars, or have adjusted their valuation expectations to the new rules in the market. The other factor that is constraining external fundraising is existing investors providing bridge financing, either in the form of convertible notes or round extensions.

In some cases, this is postponing the inevitable. But the positive view is that the startup’s existing investors have faith in the vision and want to extend the runway until new investors get excited by the company’s prospects.

Deals are taking longer in 2022 because investors are doing more thoughtful due diligence. I am no longer hearing stories of startups getting term sheets following a 30-minute conversation. Our team is a proponent of value-add due diligence, seeking to ask questions that not only inform the investor, but also reframe the situation, providing new perspectives and insight for the operating team as well. This year feels like a time when investors are embracing due diligence, and I think the resulting investments will be a lot stronger as a result.

How do you feel about insurtech companies innovating beyond technology?

We have certainly moved beyond Insurtech 1.0, where it was enough to digitize an insurance transaction with an improved customer interface. Now, insurtechs are looking to use technology not only to distribute insurance more effectively, but to change the product and the risk profile of the product. This feels like the natural path of evolution, and it’s why the insurtechs today are even more compelling investments than the pioneers.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

You’ve hit on an area I am particularly interested in – the intersection of climate and insurtech. Yes, I have seen some innovations on climate. Insurtechs are offering parametric insurance, which can make difficult risks insurable. Others are tracking climate risk, and finding ways to neutralize climate risk that are not just cosmetic, like carbon offsets.

I hope to see more insurtechs addressing these truly hard problems. Today’s combination of technology, very granular data and access to processing power create the conditions for some strong startups. Insurtechs are going to have to be part of this effort; existing insurers have the will to change, but I think insurtechs will deliver the actual solutions.

Are you open to cold pitches? How can founders reach you?

Sure. All investors pass on more investments than they make, but I’ll do my best to respond quickly and thoughtfully. Reach me at martha@brewerlane.com.

David Wechsler, principal, OMERS Ventures

The public-market insurtech selloff has clearly trickled down to private dealmaking. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?  

Yes, I suspect that in the public eye, earlier- and later-stage valuations will continue to decrease. However, this may be simply a product of deals working through the system. In other words, many of these deals are done or well underway and are yet to be announced. Strong companies that raised at realistic valuations over the past one to two years will not feel as great of an impact. There will even be up rounds.

We are simply seeing a reality check happen. If the last round was done at too high of a valuation, the market will force it back in line. Unfortunately, there are many companies that should not have raised as much as they did, or perhaps don’t have sustainable business models. These companies will struggle to survive.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

Absolutely. Selling a business can be a great outcome for both entrepreneurs and investors. However, the absolute dollars paid tend to be less than an IPO. As such, entrepreneurs need to raise capital accordingly.

If your business plan requires a tremendous amount of capital, you are limiting the number of potential acquirers. Entrepreneurs need to be thoughtful in showing how a capital-efficient model can result in building a business that is attractive to acquirers, and paint a realistic picture of who those acquirers might be.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies, or private equity funds?

“Insurtech” is a broad category and refers not only to next-gen insurers, but also vendors of tools and technology for the insurance ecosystem. Potential acquirers include not only traditional insurance carriers and private equity funds, you also have tech vendors looking to go deeper into the insurance market.