Insurance Covid-Cast: Insurtech 100 special - Lemonade CEO Daniel Scheiber talks AI, European expansion and IPOs

The CEO and co-founder of Lemonade has declared younger initial public offerings better for the long-term viability of new technology businesses because it prevents them getting stuck in a state of ‘protracted adolescence,’ comforted by the ‘cocoon’ of private equity.

Refusing to be drawn on the specifics of reports that his business postponed its IPO earlier this year, Daniel Schreiber told Insurance Covid-Cast: “I have not ever commented on our future [in terms of] funding or IPO and I am not going to do that now. But I am pre-disposed, without telling you anything about Lemonade - but sharing my thinking about this [subject], that younger IPOs are good.

“I look at the class of 2019 [which included Lyft, Pinterest, Slack and Uber] and see how the dynamics have evolved in the tech industry and this is nothing to do with insurtech. The delay of IPOs has not been good for anybody, whether investors or the companies themselves. In the late 1990s companies Amazon, Google - and Microsoft [further] back in the day - when they went public they were like four years old.

“And ten years later 14 years old was the average so there has been a steady, protracted adolescence – a delayed adolescence if you like – and while with humans that is not a wonderful thing, I am not sure it helps with the long-term development and health of [technology] companies either.”

Speaking to Infopro Digital content director Jonathan Swift and Sonr CEO Matt Connolly during episode 19, Schreiber added: “Now that has been fuelled by an abundance of capital. You can raise huge amounts of money at better valuation than in the public market so it is very tempting to remain in the cocoon.

“But if you think about building something for the next 20 years, and if you ask not what will be nicer better and cheaper for the next 12 months, but what is best platform to build an enduring valuable business that will stand the test of time? I do think that gravitates in favour of taking your pain early and growing in that [public] environment.”

“In general some of these companies that did go public in 2019 did all their growth in the private market, they then moved to the public markets at a fairly mature stage and investors did not approve of that.

“You lose the power that Amazon and others had that went early enough to reward investors, which allowed them to go back to the markets for more capital to fund more growth and that created a virtuous circle that has propelled those companies for decades.

“So for all those reasons I am predisposed to look favourably on a younger rather than older IPO.”

Using what he described as “rough and ready numbers,” Schreiber said that Lemonade presently has 800 000 policyholders and $150m in gross written premium. The full stack insurtech, which was founded in New York in 2015, launched in Germany in July 2019 and Holland at the beginning of April.

Asked about the wider competitive landscape he added: “I have been a little bit surprised, with mixed feelings, not to see more full stack insurtech companies particularly in the US. I understand there are regulatory hurdles and knowing what it takes to get there I have respect for the challenges.

“But if you had asked me x years ago would we see much more fierce competition from [digital insurance] companies that understand the power of building this from scratch I would have been sure the answer would be yes.

“And as I look around the landscape today there are some great insurtech companies out there, but I would have expected more; I would have expected more to do the full vertical integration rather than [be a] managing general agent, or fronting for other legacy insurance companies.

“This is a vast industry with so many opportunities to add value in so many ways but that aspect of it has been a surprise to me. There are still so many opportunities out there. Insurance remains the largest disruptable industry and given that is the case I am surprised more people have not flocked to try and take a run at it.”

Lemonade was ranked the number one business in the Insurtech 100 compiled by Sonr for Post.

Stay tuned for more insurtech podcasts over the next two weeks, with an episode focused on start-ups that insure “wheels” tomorrow involving By Miles, Cuvva, Inshur and Laka.

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