Wefox, the German tech startup, has closed a new funding round from existing investors. The amount of funding will not impress anyone as the company managed to secure $55 million. This can be seen 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 around $4.5 billion is an interesting piece of information. Many startups struggle to raise funding rounds or are forced 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 both internal and external insurance brokers. Unlike its German competitor Getsafe, it does not rely on a direct-to-consumer distribution strategy. This model has developed so well that Wefox now has 4,000 distribution partners.
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 meet with co-founder and CEO Julian Teck (pictured above) to discuss the company’s current strategy. Wefox’s most important source of income remains its distribution business. “In terms of distribution, we’re already winning,” Tiki said.
“We have about 300 insurers that we work with. They’re all the major insurers at P&C [property and casualty], life and health. Then we have our own insurance company. The majority of revenue comes from our distribution business. If you look at the total volume of insurance premiums on the platform, it is about 2 billion euros. 200 million euros from that last year was our own insurance and the rest was third party insurance.”
When it comes to credit facilities, Julian Tech told me they can 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 – by acquiring, merging and developing a promising insurance distribution company.
Refocus on distribution
“18 months ago we saw the world change. Then we made a lot of decisions about fiscal discipline that have now paid off. In the first quarter we were able to double our revenue and double our margins,” Tiki said, comparing the first quarter of 2023 to the first quarter of 2020. 2022.
This is why Wefox’s first-party insurance business has been deprioritized over its distribution business. “We were mainly focused on growing the top line [of Wefox Insurance] – And we stopped that, ”said Tiki. The company is now focusing on markets that it knows well. On the distribution side, the company is currently developing a network of close partners so that they can include insurance products in their offering.
“When you buy a car, you get car insurance on top. When you buy an e-bike, you get e-bike insurance on top. This is very similar to our brokerage business. It lowers our customer acquisition costs for us,” Tech said.
The continued investment in Wefox Insurance continues to benefit the company’s next product. Next year, the company plans to launch its technology stack so other insurers can build insurance products and manage real-time performance and claims handling using APIs. Basically, Wefox wants to become the Amazon Web Services of insurance by playing this platform.
I asked Julian Tech if Wefox became an insurance company with that end goal in mind. This was not the plan at all. When we started, we didn’t have any evidence. We took it day by day and step by step. Insurance is a very difficult and slow moving industry. It’s really too slow to make a difference at scale. When you look at insurance companies, 99% of the business that they actually have — 1% is what they have to fight for primarily.
“There is no urgent need for change. That is why it is not easy to build a new disruptive player in insurance. And I felt we had to understand how distribution works and how insurance works. Every insurance company will need to go digital. There will be an infrastructure company,” he added. digital for insurance companies.
In short, Wefox is streamlining its current activities to reach profitability in all areas (distribution and insurance) as quickly as possible. At the same time, it is exploring this new business platform with the hope that it will become the most important business over time.