Insurtech Startups: Undervalued Gems or Overhyped Ventures?
The Valuation Gap in Insurtech
The insurtech sector has been buzzing with activity, especially after Hippo’s recent \(150 million funding round at a \)1.5 billion valuation. This raises an intriguing question: Are many insurtech startups currently undervalued compared to their public market counterparts?
Hippo vs. Lemonade: A Tale of Two Valuations
- Hippo: Valued at 5.6x its trailing twelve months’ gross written premium (GWP) of $270 million.
- Lemonade: Trading at a staggering 28.4x its Q1 2020 annualized GWP after its recent IPO.
This stark contrast highlights a significant valuation gap between private and public insurtech companies.
Comparing Key Players
Using Hippo’s and Lemonade’s valuation multiples, we can estimate how other major insurtech startups might be valued:
Root Insurance
- 2019 Written Premium: $451.1 million
- Valuation at Lemonade’s Multiple: $12.8 billion
- Valuation at Hippo’s Multiple: $2.5 billion
- Last Private Valuation (Aug 2019): $3.65 billion
MetroMile
- 2019 Written Premium: $103.3 million
- Valuation at Lemonade’s Multiple: $2.9 billion
- Valuation at Hippo’s Multiple: $578.5 million
- Last Private Valuation (Jul 2018): $540 million
The Big Question: Who’s Right?
The analysis reveals two distinct scenarios:
- Lemonade’s Premium Multiple: Makes all comparable insurtech startups appear dramatically undervalued.
- Hippo’s More Conservative Multiple: Suggests valuations are reasonable, with Root being slightly more expensive.
Key Considerations:
- Private markets may be more cautious than public investors
- Growth rates and operating expenses could justify valuation differences
- The IPO effect may be inflating public market valuations
Final Thoughts
While the numbers suggest many insurtech startups could be undervalued relative to Lemonade, the truth likely lies somewhere in between. As the sector continues to evolve, these valuation gaps may narrow, presenting interesting opportunities for investors and entrepreneurs alike.
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