They’re burning cash at $100+ million per year. They have $300 million in venture capital/debt and plan to raise another $100 million in an IPO? Does this seem sound to anyone?
This is how companies that Soft Bank invests in usually work. Other companies funded by Soft Bank include Uber and We Work. Soft Bank over funds companies during their early stages to achieve rapid (but unsustainable) growth without any focus on profitability. The problems with this funding strategy usually become most obvious around the time the company launches its IPO. All of these companies (Lemonade, Uber, etc.) will likely be out of business in a few years once Soft Bank’s $100 billion investment fund runs out.
I think the goal is to get as much premium volume as possible and then become acquired. Once they reach a reasonable market penetration they will likely be attractive to one of the many insurers that seem to love these tech plays. They will be bought as much for the technology as for the market share. And that’s really the payoff that they have been striving for since day one. That’s the business model of its serial entrepreneur founders. Will they get there before Chapter 7 without an AM Best rating? Who knows? Is it a good investment despite warts and all? I’ll probably sit on the sidelines.
They want it for the data, but it will come at a very high price. What they fail to understand or knowledge is loss ratio. Loss ratio from online sales have always been higher and even worse is, they don’t underwrite like traditional companies do. These investors will be subsidizing the loss ratios as well as a very high client acquisition cost in exchange for growth. Between the cost of both of those, I doubt the data will be worth that much, most especially since data does not have a long shelf life. Nobody in their right mind from the insurance industry will invest in this and those not from the industry, they probably have no clue that the downside is likely much greater than the upside risk.
They receive a lot of publicity from this publication considering their size and profitability. Their are probably a few small regional companies that offer a better chance of long term performance.
They’re burning cash at $100+ million per year. They have $300 million in venture capital/debt and plan to raise another $100 million in an IPO? Does this seem sound to anyone?
This is how companies that Soft Bank invests in usually work. Other companies funded by Soft Bank include Uber and We Work. Soft Bank over funds companies during their early stages to achieve rapid (but unsustainable) growth without any focus on profitability. The problems with this funding strategy usually become most obvious around the time the company launches its IPO. All of these companies (Lemonade, Uber, etc.) will likely be out of business in a few years once Soft Bank’s $100 billion investment fund runs out.
String along as many investors as possible to milk it, pay 7 figure salaries and then bring in the chapter 7 attorneys.
I think the goal is to get as much premium volume as possible and then become acquired. Once they reach a reasonable market penetration they will likely be attractive to one of the many insurers that seem to love these tech plays. They will be bought as much for the technology as for the market share. And that’s really the payoff that they have been striving for since day one. That’s the business model of its serial entrepreneur founders. Will they get there before Chapter 7 without an AM Best rating? Who knows? Is it a good investment despite warts and all? I’ll probably sit on the sidelines.
They want it for the data, but it will come at a very high price. What they fail to understand or knowledge is loss ratio. Loss ratio from online sales have always been higher and even worse is, they don’t underwrite like traditional companies do. These investors will be subsidizing the loss ratios as well as a very high client acquisition cost in exchange for growth. Between the cost of both of those, I doubt the data will be worth that much, most especially since data does not have a long shelf life. Nobody in their right mind from the insurance industry will invest in this and those not from the industry, they probably have no clue that the downside is likely much greater than the upside risk.
They receive a lot of publicity from this publication considering their size and profitability. Their are probably a few small regional companies that offer a better chance of long term performance.