Bought By Many to enter new markets after largest UK insurtech raise of $98m

Steven Mendel, Bought By Many

Pet insurance specialist Bought By Many has secured $98m (£78.4m) in growth equity investment led by FTV Capital, having agreed terms sheets with the US growth equity investment firm and five other potential investors prior to Covid-19 lockdown.

BBM plans to use the money to grow in its existing markets the UK and Sweden as well as enter new geographies and bolster its technology. The business insures over 200,000 pets in the UK, an increase of more than 150% over the last year, and in January reported has a gross written premium run rate over $100m per annum.

Steven Mendel, pictured, CEO and co-founder of BBM (pictured), told Post: “We had two massive advantages [in getting this deal done now] in that term sheets were signed before anyone had heard of Covid-19 and so we had got to [a decent] stage. And secondly the fact that BBM continues to perform incredibly well, even during this lock down scenario. And I think if this business had not been performing so strongly we would have found it much harder than we did to do this.”

He added one of the key factors behind choosing FTV was its ability to connect it with its Global Partner Network, a network of industry executives from some of the world’s leading financial institutions including AIG, Aon, Axa, Bank of America, Barclays, BNP Paribas, Credit Suisse, HSBC, Liberty Mutual, Mastercard, Morgan Stanley, UBS, Visa and Wells Fargo.

“We were in the very fortunate position of having term sheets with six different players and we picked FTV partly because it has this GPN and the skill set and experience they can bring to bear. From the outset we have said that when somebody invests in us they have to bring more than just money, but experience and knowledge and access to skills we need to build this business. And FTV is no different.”

Expansion

Asked about new markets Mendel added: “We launched into Sweden in October 2019 having done a beta test a few months earlier and that has been very successful for us [BBM now claims to insure thousands of cats and dogs there]. So this will allow further expansion there. And then thinking further about our geographic footprint, where do we go next and what lessons can we take from the Sweden experience into other countries?”

Pressed on where that might be he added: “The pet insurance market globally looks very different from other insurance marketplaces. Sweden is the most sophisticated pet insurance market in the world, it was where pet insurance was invented. And penetration rates there are 60%. Penetration rates in the UK are about 30%, so half where Sweden is and you can track the trajectory in that the UK as to where Sweden was 10 years ago so we expect penetration rates to follow that path.

“Then if we look at other countries penetration rates are much lower so it is about looking at it with a pet insurance lens – which is very different t if you were in the motor, home or travel space – and that [brings us to] places like Japan and Australia. The US oddly has very low penetration rates.”

BBM acquired the software development agency, Cotidia last year to bolster its team of developers, its second acquisition after Sussex-based pet specialist broker Brooks Braithwaite in 2015, and Mendel was adamant that it would not go on a spending spree with this investment, but rather look at potential strategic bolt on opportunities: “I am a big believer in not raising money to do acquisitions, so the acquisitions we have done were all about getting somewhere that was important for us, and not the acquisition itself. It was about getting somewhere quicker.” 

Partners

BBM presently has capacity with Munich Re – which has the “lion’s share” according to Mendel - and Allianz, with a third major underwriter poised to join very shortly.

“In the next few months we will announce a new additional larger player, and that that has nothing to do with this funding round, but you will see us announce a new partner that is not in the traditional insurtech backing space,” he commented.

Mike Vostrizansky of FTV Capital, added: “BBM’s genuine, relentless customer-first focus truly sets them apart from their competition. Their differentiated value proposition — through breadth of product, quality of coverage, and fast and efficient claims processing — has always put customers at the centre of everything they do, as evidenced by their high net promoter scores.

“Additionally, the company’s consumer-friendly technology and high-quality team have allowed the company to rapidly enhance its offering with market-leading features like digital vet appointments, fully digital claims, direct settlement with vets, and other easy-to-use features.”

 Vostrizansky will join the company’s board on completion and Luisa Barile, BBM’s chief financial officer, will become a director shortly after. Both will join new board chair Jim Sutcliffe who was recruited in early 2020. 

Brad Bernstein, managing partner of FTV Capital, concluded: “FTV is very impressed by the strong growth and product traction of BBM in the UK and Sweden. Our growth equity investment in the company is a reflection of our enthusiasm for BBM’s excellent market potential and the strength of the leadership team.

“The close of this significant growth equity investment marks a new chapter for BBM, and we are excited to be a part of the company’s journey and continued success. We see further potential for growth and expansion, and we look forward to working alongside leadership to hit many more milestones in the future.”

Insurtech investment

BBM’s Series C raise with FTV Capital, is the biggest single raise yet by a UK-based insurtech. The business added the Series C raise included follow-on from existing investors including  Commerz Ventures, which led the Series B raise in 2018, and Munich and Octopus Ventures, who were involved in the £7.5m Series A raise in October 2016. In total Bought By Many has now raised $126.2m. The biggest previous raises by UK insurtechs were $42m (£33.52m) by Zego and £25m by Cytora, both Series B raises in 2019.

Earlier this week Willis Towers Watson reported insurtech investment worldwide during quarter one (which saw almost the same amount of money raised in its first three days as was then subsequently raised in its final three weeks), totalled $912m.  According to its latest insurtech briefing report WTW addeed the deal count, at 96, was up 28% over quarter four 2019, and 10% more than the first quarter of that year.

It explained this represented the highest number of investment rounds by transactional volume ever recorded but overall total funding was down by 54% reflecting in part far fewer ‘mega-deals’ ($100m-plus deals) taking place in the year so far. In 2019, multiple unicorn-making rounds supported eight out of the ten insurtech firms valued at over a $1bn, WTW continued, giving five of them this status in the process. This most recent quarter, however, included no unicorn making rounds and only observed one mega-round — the $100m Series D issue by Policy Genius.

Cytora recruit two senior execs

In other news AI specialist Cytora expanded its executive team by recruiting Juan de Castro as chief commercial and operating officer, and Dr Liuben Siarov as chief data scientist, from Hiscox and German full stack insurtech Coya respectively. 

De Castro was chief operating officer at Hiscox and led the digital transformation of the insurer, having joined in 2014. Previously, he was a senior manager at McKinsey’s Silicon Valley office, where he led growth strategy and operational improvement engagements for Fortune 100 companies. 

“Cytora is the pioneer in commercial insurance platforms, enabled by unique technology and data models,” he said. “I couldn’t be more excited to join such a great team, driving the commercial strategy and development of the business through marketing, sales, customer service and operations as we expand into new geographies.“

“We’re delighted to welcome both Juan and Liuben to the team at a really exciting time for Cytora,” said Richard Hartley, CEO at Cytora. “As we look to grow into new markets and expand our technology offering, their breadth of experience and industry knowledge is set to propel us - and our customers - to the next level.” 

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