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UK’s Marshmallow raises $85M on a $1.25B valuation for its more inclusive, big-data take on car insurance
Marshmallow — a U.K.-based car insurance provider that has made a name for itself in the market by providing a new approach to car insurance aimed at using a wider set of data points and clever algorithms to net a more diverse set of customers and provide more competitive rates — is announcing a milestone today in its life as a startup, as well as in the bigger U.K. tech world.
The London company — co-founded by identical twins Oliver and Alexander Kent-Braham and David Goaté — has raised $85 million in a new round of funding. The Series B valuation is significant on two counts: it catapults Marshmallow to a “unicorn” valuation above $1 billion — specifically, $1.25 billion; and Marshmallow itself becomes one of a very small group of U.K. startups founded by Black people — Oliver and Alexander — to reach that figure.
(To be clear, Marshmallow describes itself as “the first UK unicorn to be founded by individuals that are Black or have Black heritage”, although I can think of at least one that preceded it: WorldRemit, which last month rebranded to Zepz, and is currently valued at $5 billion; co-founder and chairman Ismail Ahmed has been described as the most influential Black Briton.)
Regardless of whether Marshmallow is the first or one of the first, given the dearth of diversity in the U.K. technology industry, in particular in the upper ranks of it, it’s a notable detail worth pointing out, even as I hope that one day it will be less of a rarity.
Meanwhile, Marshmallow’s novel, big-data approach and successful traction in the market speak for themselves. When we covered the company’s most recent funding round before this — a $30 million raise in November 2020 — the startup was valued at $310 million. Now less than a year later, Marshmallow’s valuation has nearly quadrupled, and it has passed 100,000 policies sold in its home country, growing 100% over the last six months.
The plan now, Oliver told me in an interview, will be to deepen its relationships with customers, in part by providing more engagement to make them better drivers, but also potentially selling more services to them, too.
In this, the startup will be tapping into a new approach that other insurtech startups are taking as they rethink traditional insurance models, much like YuLife is positioning its life insurance products within a bigger wellness and personal improvement business. Currently, the average age of Marshmallow’s customers is 20 to 40, Oliver said — and there are thoughts of potentially new products aimed at even younger users. That means there is long-term value in improving loyalty and keeping those customers for many years to come.
Alongside that, Marshmallow will also use the funding to inch closer to its plan to expand to markets outside of the U.K. — a strategy that has been in the works for a while. Marshmallow talked up international expansion in its last round but has yet to announce which markets it will seek to tackle first.
Insurance — and in particular insurance startups — are often thought of together with fintech startups, not least because the two industries have a lot in common: they both operate in areas of assessing and mitigating risk and fraud; they are in many cases discretionary investments on the part of the customers; and they are both highly regulated and require watertight data protection for their users.
Perhaps because so much of the hard work is the same for both, it’s not uncommon to see services built to serve both sectors (FintechOS and Shift Technology being two examples), for fintech companies to dabble in insurance services, and so on.
But in reality, insurance — and specifically car insurance — has seen a massive impact from COVID-19 unique to that industry. Separate reports from EY and the Association of British Insurers noted that 2020 actually saw a lift for many car insurance companies: lockdowns meant that fewer people were driving, and therefore fewer were getting into accidents and making fewer claims.
2021, however, has been a different story: new pricing rules being put into place will likely see a number of providers tip into the red for the year. And the Chartered Insurance Institute points out that it will also be worth watching to see how the low use of cars in one year will impact use going forward: some car owners, especially in urban areas where keeping a car is expensive, will inevitably start to question whether they need to own and insure a car at all.
All of this, ironically, actually plays into the hand of a company like Marshmallow, which is providing a more flexible approach to customers who might otherwise be rejected by more traditional companies, or might be priced out of offerings from them. Interestingly, while neobanks have definitely spurred more traditional institutions to try to update their products to compete, the same hasn’t really happened in insurance — not yet, at least.
“We started with the idea of the power of data and using a wider range of resources [than incumbents], and using that in our pricing led us to be able to offer better rates to more people,” Oliver said, but that hasn’t led to Marshmallow seeing sharper competition from older incumbents. “They are big companies and stuck in their ways. These companies have been around for decades, some for centuries. Change is not happening quickly.”
That leaves a big opportunity for companies like Marshmallow and other newer players like Lemonade, Hippo and Jerry (not an insurance startup per se but also dabbling in the space), and a big opening for investors to back new ideas in an industry estimated to be worth $5 trillion.
“The traction the team has achieved demonstrates the demand for a new kind of insurance provider, one that focuses more on consumer experience and uses the latest technology and data to give fair prices,” said Eileen Burbidge, a partner at Passion Capital, in a statement. “We’ve been proud to support the team’s ambitions since the start, and now look forward to its next chapter in Europe as it continues its mission to change the industry for the better.”
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Extra Crunch roundup: Finding GTM, China’s edtech clampdown and how to define growth
Early-stage startups tend to claim that their go-to-market strategy is fully operational. In reality, GTM is a stark numbers game, and even with a solid plan in place, it can be easily foiled by common problems like turf battles and poor communication.
Finding GTM fit is a milestone for any startup that includes everything from expanding the engineering team to launching your first media buy. But how do you know when you’ve reached that magic moment?
“You have to consider three metrics: gross churn rate, the magic number and gross margin,” says Tae Hea Nahm, co-founder and managing director of Storm Ventures.
High churn means customers aren’t delighted, low gross margins mean poor unit economics, and that so-called magic number?
“You can calculate it by taking new ARR divided by your marketing and sales spending,” Nahm writes. “But keep in mind that the magic number is a lagging indicator, and it may take you a few quarters to see a positive result.”
Full Extra Crunch articles are only available to members.
Use discount code ECFriday to save 20% off a one- or two-year subscription.
If you are methodical in your approach to building a larger customer base, it is not difficult to foster steady growth.
Marketers who shift with whichever way the wind is blowing — or blindly follow someone else’s idea of best practices — are less likely to be successful.
“The not-so-secret secret here is that the key to great retention is really simple,” said growth expert Susan Su recently at TechCrunch Early Stage: Marketing and Fundraising. “It is building a product that solves a real and especially persistent problem for people.”
In conversation with Managing Editor Eric Eldon, Su delved into several issues, including tips on how founders should discuss growth with investors, and her methods for developing a sample qualitative growth model.
“I firmly believe that every founder should try their hand at growth,” said Su.
Thanks very much for reading Extra Crunch this week!
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
How we built an AI unicorn in 6 years
Image Credits: Lucas Knappe/EyeEm (opens in a new window)/ Getty Images
Few startups go to market with the exact product their founders first envisioned.
Today, Tractable is known for developing tech that allows drivers to upload photos of their vehicles after a collision so its AI can assess the damage. Its first paying customer, however, used Tractable to inspect plastic pipe welds.
And as fate would have it, that customer also fired them just as the founders were raising their first round.
“We struck gold with car insurance,” says co-founder Alex Dalyac, as it was “a huge and inefficient market in desperate need of modernization.”
In an Extra Crunch guest post, he shares several takeaways from the last six years spent scaling a unicorn that have value for founders of all stripes. Step one?
“Search for complementary co-founders who will become your best friends,” advises Dalyac.
The European VC market is so hot it may skip its summer holiday
Image Credits: Nigel Sussman (opens in a new window)
Alex Wilhelm and Anna Heim continued their exploration of the scorching global VC market, this time taking a look at Europe.
For perspective, they analyzed data from Dealroom and spoke to four VCs about the continent’s investment climate:
- Diana Koziarska, SMOK Ventures
- Vinoth Jayakumar, Draper Esprit
- Simon Schmincke, Creandum
- Javier Santiso, Mundi Ventures
“There’s little indication that what we’ve seen thus far from Europe in 2021 will slow in Q3 or Q4,” Alex and Anna write.
“Even though Europe has a reputation for lengthy summer vacations, investors don’t expect much — if any — slowdown to come in Europe during this sun-drenched quarter.”
Startups and investors are turning to micromobility subscriptions
Image Credits: Bryce Durbin
“Amid the chaos of the COVID-19 pandemic and the murky path to profitability for shared electric micromobility, an increasing number of companies have turned to subscriptions,” Rebecca Bellan writes in a roundup about the future of micromobility.
“It’s a business model that some founders and investors argue hits the profit center sweet spot — an approach that appeals to customers who are wary of sharing as well as paying upfront to own a scooter or e-bike, all while minimizing overhead costs and depreciation of assets.”
What Robinhood’s warnings about crypto trading say about Coinbase’s near-term future
Image Credits: Nigel Sussman (opens in a new window)
After noting that Robinhood anticipates a decline in revenue in the third quarter as a result of slowing crypto trading, Alex Wilhelm got to thinking about what that forecast means for Coinbase.
“The now-public unicorn has lived through crypto ups and crypto downs,” he writes. “A decline in consumer interest in the next few months or quarters is not a huge deal, assuming one keeps a long enough perspective and the crypto-infused future that its fans expect comes to pass.”
But will it?
Dear Sophie: Should we look to Canada to retain international talent?
Image Credits: Bryce Durbin/TechCrunch
Dear Sophie,
I handle people ops as a consultant at several different tech startups. Many have employees on OPT or STEM OPT who didn’t get selected in this year’s H-1B lottery.
The companies want to retain these individuals, but they’re running out of options. Some companies will try again in next year’s H-1B lottery, even though they face long odds, particularly if the H-1B lottery becomes a wage-based selection process next year.
Others are looking into O-1A visas, but find that many employees don’t yet have the experience to meet the qualifications. Should we look at Canada?
— Specialist in Silicon Valley
Silicon Valley comms expert Caryn Marooney shares how to nail the narrative
Image Credits: MediaNews Group/Bay Area News via Getty Images (opens in a new window)/ Getty Images (Image has been modified)
Caryn Marooney, a Silicon Valley communications professional turned venture capitalist, spoke extensively on storytelling at TechCrunch Early Stage: Marketing and Fundraising.
Throughout her time in Silicon Valley, she helped companies like Salesforce, Amazon, Facebook and more launch products and sharpen their messaging. In 2019, she left Facebook, where she was VP of technology communication, and joined Coatue Management as a general partner.
Marooney uses the acronym RIBS to describe her basic strategy for startup messaging: Relevance, Inevitability, Believability and keeping it Simple.
Canada’s startup market booms alongside hot global VC investment
Image Credits: Nigel Sussman (opens in a new window)
For The Exchange, Alex Wilhelm and Anna Heim looked at Canada’s VC market in the first half of 2021, and if you’ve been reading their work, you know what’s coming.
Canada, like the rest of the globe, was absolutely scorching in the first half.
“Canada’s venture capital results now rival those of the entire Latin American region, with exits and mega-deals coming in roughly on par in the second quarter, and a similar number of total venture capital rounds in the period,” they write.
“That caught our attention.”
Greylock’s Mike Duboe explains how to define growth and build your team
With more venture funding flowing into the startup ecosystem than ever before, there’s never been a better time to be a growth expert.
At TechCrunch Early Stage: Marketing and Fundraising earlier this month, Greylock Partners’ Mike Duboe dug into a number of lessons and pieces of wisdom he’s picked up leading growth at a number of high-growth startups, including StitchFix. His advice spanned hiring, structure and analysis, with plenty of recommendations for where growth teams should be focusing their attention and resources.
Last-mile delivery in Latin America is ready to take off
Image Credits: Erlon Silva/TRI Digital (opens in a new window) / Getty Images
Thanks to sprawling fulfillment centers, seamless logistics networks and ubiquitous internet access, consumers in many regions can now order groceries and a new set of cookware during breakfast and reasonably expect everything to arrive in time for dinner.
In Latin America, a lack of technology infrastructure makes delivery operations complex, and these supply chains are often managed with spreadsheets, paper and pen.
Algorithms that manage delivery routes or automatically dispatch drivers “are almost unheard of in the Latin America retail logistics sector,” says Bob Ma, an investor at WIND Ventures.
But thanks to growing consumer demand and expanding investment in last-mile delivery startups, Ma says the region is at a turning point.
Since Latin America’s middle class has grown 50% in the last decade and e-commerce constitutes just 6% of all retail, several unicorns have emerged in recent years, with more waiting in the wings.
China’s expected edtech clampdown may chill a key startup sector
Image Credits: Nigel Sussman (opens in a new window)
China’s edtech industry is estimated to be worth $100 billion, but its leaders are reportedly considering a plan that would require these firms to operate as non-profits.
“When it comes to control, the Chinese government doesn’t mind wiping out a few dozen billion dollars in market cap here and there,” writes Alex Wilhelm in this morning’s edition of The Exchange.
“That’s not a great system.”
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By Miles, the UK pay-by-mile car insurance app, adds ‘connected car’ policy for Tesla drivers
By Miles, the U.K. pay-by-mile car insurance provider, is launching a “connected car” insurance policy specifically for Tesla drivers.
The new insurance product pulls real-time mileage information directly from a car owner’s Tesla account and uses the distance they have driven to price their insurance each month. It claims to be the first car insurance policy to take data from a car without the need for a “black box” or aftermarket device.
The new policy — created in partnership with digital insurer La Parisienne Assurances (backed by Swiss Re) — offers lower-mileage Tesla owners in the U.K. (those who drive less than 7,000 miles a year) the opportunity to save significantly on their annual car insurance, according to By Miles.
More broadly, the insurtech company says it is bucking the trend of car insurance not keeping pace with changes in technology, including the move to connected and electric cars. It cites industry figures that suggest one in 10 new cars sold in the U.K. are now electric.
James Blackham, co-founder of By Miles, says the insurance industry needs to “catch up and launch policies as smart as the cars themselves.”
To activate the pay-per-mile Tesla policy, drivers simply connect their Tesla with their By Miles account, with no need to install a separate so-called “black box.” Via the By Miles app, they are then able to instantly see the cost of each day’s miles and pay for what they’ve driven monthly.
The new policy also claims to provide electric-first policy coverage, including covering items often not included on insurance policies as standard, such as “damage or theft of charging cables and accessories as well as electric car batteries.”
Meanwhile, in other ways, the By Miles connected car policy isn’t so much of a deviation from the company’s existing By Miles coverage. It first launched a pay-by-mile policy in July 2018 enabled by its “Miles Tracker” device that plugs into your car to count mileage, and now claims more than 10,000 policyholders.
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Cuvva raises £15M Series A to launch flexible monthly car insurance
Cuvva, the app-based insurance provider that began life offering pay-as-you-go driving cover but has since expanded to also sell travel insurance, has raised £15 million in Series A funding.
Backing comes from RTP Global, Breega and Digital Horizon, joining existing investors LocalGlobe, Techstars Ventures, Tekton and Seedcamp. A number of angels also joined the round, including Dominic Burke, the CEO of Jardine Lloyd Thompson, and Faisal Galaria, the former chief strategy and investments officer of GoCompare.
Launched in 2016 when founder Freddy Macnamara (pictured) become frustrated he couldn’t let others drive his car intermittently because of lack of insurance cover, Cuvva was an early pioneer of pay-as-you-go car insurance.
The idea, which was easier explained than done, was to make it possible to insure a car only when it was being driven, and therefore be cheaper for low-mileage drivers, and, via an app and access to the DVLA database, make it easier to on-board new drivers for pay-as-you-drive cover.
The insurtech still offers hourly car insurance, but its product line has since been expanded to daily covery, as well as a product specifically aimed at learner drivers. In addition, Cuvva entered the travel insurance space, no doubt spotting overlap with its presumably younger, millennial demographic.
To that end, Cuvva says it will use the new capital to launch a new pay-monthly motor product in early 2020 that it says could cut average annual bills for car owners “significantly.” It will do this by cutting out various middle people, including brokers and comparison websites, which it says charge insurers about £70 on each policy sold.
“Unlike legacy insurers, Cuvva will not charge a fee to spread payments over the year and it will not penalise loyal customers with dual pricing,” says the startup. Cuvva also says it will offer the same savings, whether you are signing up as a new customer or are a returning customer, and won’t charge admin fees to alter personal details registered with your policy.
Cue canned statement from Macnamara: “I started Cuvva when I couldn’t find flexible insurance to help me share my car. Four years on from launch we are still discovering how big the problem we are solving really is. We’re now selling 3% of all UK motor insurance policies but we’ve got so much further to go. Cuvva is going to be the place where you buy all your insurance, all through our mobile app.”
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The future of car ownership: Cars-as-a-service
Car shoppers now have several new options to avoid long-term debt and commitments. Automakers and startups alike are increasingly offering services that give buyers new opportunities and greater flexibility around owning and using vehicles.
Cars-as-a-Service
In the first part of this feature, we explored the different startups attempting to change car buying. But not everyone wants to buy a car. After all, a vehicle traditionally loses its value at a dramatic rate.
Some startups are attempting to reinvent car ownership rather than car buying.
Don’t buy, lease
My favorite car blog Jalopnik said it best: “Cars Sales Could Be Heading Straight Into the Toilet.” Citing a Bloomberg report, the site explains automakers may have had the worst first half for new-vehicle retail sales since 2013. Car sales are tanking, but people still need cars.
Companies like Fair are offering new types of leases combining a traditional auto financing option with modern conveniences. Even car makers are looking at different ways to move vehicles from dealer lots.
Fair was founded in 2016 by an all-star team made up of automotive, retail and banking executives including Scott Painter, former founder and CEO of TrueCar.
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Gabi gets $9.5M to help car and home owners find better insurance once it’s available
If you own a car or home, one of the biggest challenges you’ll face is finding the right insurance plan that’ll cover everything you need and save you some money — but those plans are always changing, and consumers are getting stuck footing a bill they don’t necessarily need, according to Hanno Fichtner. That’s why he started Gabi. Read More
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Metromile Launches Per-Mile Car Insurance That Could Save Californians 40%
Plug Metromile’s free gizmo into your car and you can stop overpaying for car insurance if you’re amongst the 70% of people who drive under 10,000 miles a year. Today Metromile expands its per-mile car insurance to California following success disrupting traditional insurance in Oregon, Washington, and Illinois. It’s also revamping its free app that can tell you if something… Read More
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