wefox, the German insurtech startup, has closed a new round of funding from existing investors. The amount of funding won’t impress anyone, as the company managed to get $55 million. This could be considered as an extension of the $400 million Series D round, as Wefox managed to maintain the same $4.5 billion valuation.
However, the fact that Wefox is still valued at $4.5 billion is an interesting tidbit. 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 internal and external insurance brokers. Unlike its German rival be safe, is not based 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 company: Wefox Insurance. In 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 income remains its distribution business. “On the distribution side, we are already profitable,” Teicke said.
“We have around 300 insurance companies that we work with. It’s all the big insurance companies in P&C [property and casualty], life and health. So, we have our own insurer. Most of the revenue comes from our distribution business. If we look at the total volume of insurance premiums on the platform, it is around 2 billion euros. Of that last year, 200 million euros were own insurance and the rest third-party insurance ”, he added.
When it comes to the credit line, Julian Teicke told me that it could be used for acquisitions, for example. Wefox currently operates in six European markets (Germany, Switzerland, Austria, Italy, Poland and the Netherlands). It plans to expand into new markets, such as France, Spain or the United Kingdom, acquiring a promising insurance distribution business, integrating and developing it.
Refocus on distribution
“18 months ago we saw that the world was changing. We then made many decisions around financial discipline that have now paid off. We have been able in the first quarter to double our revenue and double our margins,” Teicke said. He is comparing the first quarter of 2023 with the first quarter of 2022.
That is why Wefox’s own insurance business has lost priority compared to the distribution business. “We mainly focused on growing the top line [of Wefox Insurance] – and we stopped it,” Teicke said. The company now focuses on markets it knows very well. On the distribution side, the company is currently developing a network of like-minded partners so they can incorporate insurance products into their offerings.
“When you buy a car, you also get auto insurance. When you buy an electric bike, you also get electric bike insurance. That’s very similar to our brokerage business. It lowers customer acquisition costs for us,” Teicke said.
The ongoing investment in Wefox Insurance will continue to be useful for the company’s next product. Next year, the company plans to release its technology stack so other insurance companies can build insurance products, manage performance in real time, and handle claims using APIs. Essentially, Wefox wants to become the Amazon Web Services for sure with this gaming platform.
I asked Julian Teicke if Wefox became an insurance company with this ultimate goal in mind. “It wasn’t the plan at all. When we started, we had no idea. We just take it day by day and step by step. Insurance is such a difficult industry and it moves very slowly. It’s very slow to really make a difference at scale. When you look at insurance companies, 99% of the business they already have, the 1% is what they basically have to fight for,” he said.
“There is no urgency to change. And that is why it is not easy to build a new disruptive player in insurance. And I felt that we have to understand how distribution works, how insurance works. All insurers will need to go digital. There will be a digital infrastructure company for insurers,” he added.
In short, Wefox is optimizing its existing activities to reach profitability in all areas (distribution and insurance) as quickly as possible. At the same time, it is exploring this new platform business in the hope that it will become the more important business over time.
