Wefoxthe German insurtech startup, has closed a new funding round from existing investors. The funding amount isn’t going to impress anyone as the company managed to secure $55 million. This could be considered as an extension of the $400 million Series D round as Wefox managed to maintain the same valuation of $4.5 billion.
The fact that Wefox is still valued at $4.5 billion is an interesting tidbit though. Many startups are struggling to raise funding rounds or have to lower their valuation. In addition to this traditional equity investment, Wefox also secured $55 million in a revolving credit facility from JP Morgan and Barclays.
As a reminder, Wefox sells insurance products through in-house and external insurance brokers. Unlike its German rival Getsafeit doesn’t rely on a direct-to-consumer distribution strategy. This model has scaled extremely well as Wefox now has 4,000 distribution partners.
More recently Wefox launched its own insurance carrier — Wefox Insurance. This way, the company can design and sell its own insurance products without relying on third-party insurance companies.
I caught up with the company’s co-founder and CEO Julian Teicke (pictured above) to discuss the company’s current strategy. Wefox’s most important source of revenue remains its distribution business. “On the distribution side, we’re already profitable,” Teicke said.
“We have around 300 insurance companies that we work with. It’s all of the big insurance companies in P&C (property and casualty), life and health. Then, we have our own insurer. The majority of the revenue comes from our distribution business. If you look at the total volume of the insurance premiums on the platform, it’s around €2 billion. €200 million of that last year was our own insurance and the rest was third-party insurance,” he added.
When it comes to the credit facility, Julian Teicke told me that it could be used for acquisitions, for instance. Wefox currently operates in six European markets (Germany, Switzerland, Austria, Italy, Poland and Netherlands). It plans to expand to new markets — such as France, Spain or the U.K. — by acquiring a promising insurance distribution business, integrating it and developing it.
Refocusing on distribution
“18 months ago we saw that the world was changing. We then took a lot of decisions around financial discipline that have now paid off. We have been able in Q1 to double our revenue and double our margins,” Teicke said. He’s comparing Q1 2023 versus Q1 2022.
That’s why Wefox’s first-party insurance business has been deprioritized compared to the distribution business. “We were mainly focused on growing the top line (of Wefox Insurance) — and we stopped that,” Teicke said. The company now focuses on markets that it knows really well. On the distribution side, the company is currently developing a network of affinity partners so that they can embed insurance products in their offerings.
“When you buy a car, you get a car insurance on top. When you buy an e-bike, you get an e-bike insurance on top. That’s very similar to our brokerage business. It decreases the customer acquisition costs for us,” Teicke said.
The on-going investment in Wefox Insurance is still going to be useful for the company’s next product. Next year, the company plans to release its technology stack so that other insurance companies can create insurance products, manage the performance in real time and handle claims using APIs. Essentially, Wefox wants to become the Amazon Web Services of insurance with this platform play.
I asked Julian Teicke whether Wefox became an insurance carrier with this end goal in mind. “It was not the plan at all. When we started, we had no clue. We just took it day by day and step by step. Insurance is such a difficult industry and it’s so slow moving. It’s so slow to really make a difference at scale. When you look at insurance companies, 99% of the business they already have — 1% is what they basically have to fight for,” he said.
“There’s no urgency to change. And that’s why it’s not easy to build a new disruptive player in insurance. And I felt that we have to understand how distribution works, how insurance works. Every insurer will need to become digital. There will be a digital infrastructure company for insurance companies,” he added.
In short, Wefox is streamlining its existing activities to reach profitability across all areas (distribution and insurance) as quickly as possible. At the same time, it is exploring this new platform business with the hope that it will become the most important business over time.