The company wants to bring insurers, brokers and customers together.
(Photo: imago images/Cord)
Dusseldorf, Frankfurt Insurance startup Wefox has raised an additional $55 million from investors seven months after completing a $400 million funding round, according to financial sources. The company’s valuation remained stable at $4.5 billion, as people familiar with the matter told the Handelsblatt.
Formally, the raising of capital is considered an extension of the financing round from the summer of 2022, also known in technical jargon as “second closing”. The money comes from traditional funds, but also from new ones, it said. Wefox declined to comment.
The fact that the Berlin-based insurtech with Swiss roots was able to maintain the rating in the extended round of financing can be seen as a success from the point of view of industry experts. Other fintechs have recently had to accept significant losses in valuation – above all the Swedish payment service provider Klarna, whose valuation fell by 85 percent in a financing round in the summer.
Wefox is currently in a restructuring phase. After co-founder and company boss Julian Teicke had talked about his great growth ambitions for years, he announced a change in strategy in an interview with the Handelsblatt at the turn of the year. Instead of growth at any price, the focus is now on profitability. The profit zone should already be reached this year. Investments that will only pay off in a few years are scrapped.
Teicke’s change of direction is not only due to the generally difficult environment for fintechs. Wefox collected more than 1.3 billion dollars even before the most recent expansion. After these extensive financing rounds, Wefox is under particularly strong pressure to meet investor expectations. Industry watchers say a $4.5 billion valuation is only justified if the company manages to successfully build the announced platform model.
Wefox plans digital marketplace
Similar to large online portals from other industries – for example the online retailer Amazon or holiday apartment broker Airbnb – Wefox wants to create a marketplace under the leadership of ex-Generali manager David Stachon that brings insurers, brokers and customers together.
“Wefox is neither just an insurer nor just a sales company,” emphasized Stachon at the “Handelsblatt Insurance Summit”. This is also so important to him because investors do not rate pure insurers or sales companies as highly as a successful online platform.
However, Wefox still has a long way to go when it comes to implementing the platform idea. In its own estimation, Wefox can only expect significant sales from this platform in the next few years. According to critics, previous activities have made Wefox known, but now the company must also use brand awareness to become the first point of contact for insurance customers on the Internet and to make a profit from it.
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So far, the Wefox business has been essentially based on the classic, conditionally innovative mediation of insurance companies. Wefox sells insurance primarily through its own brokers and has already taken over larger broker portfolios from insurance customers. Most of the turnover, which Teicke puts at 600 million euros for 2022 and which is expected to rise to 900 million euros this year, comes from commissions for the sale of policies.
In addition, Wefox generates premium income via its own digital insurer registered in Liechtenstein. According to Teicke, the premium volume has quadrupled in 2022 to 180 million euros. The insurer’s official solvency report with details on this transaction is not yet available.
In the past, reports of questionable sales methods repeatedly made the rounds. This is how Wefox gave away policies. Sometimes customers even signed contracts without even realizing it. “Finance Forward” and “Capital” recently reported on it.
An insurance expert told Handelsblatt that Wefox had exhausted the gray areas of what was still permitted. At the same time, he emphasized that many start-ups use certain tricks to grow faster. “Fake it till you make it” – in other words: deceive until you make it – is not a common saying in the scene for nothing. The development of the platform is an important step on the way to a functioning business model.
The change in strategy announced by Teicke also has its price. Some employees recently had to leave the company because costly future projects are being scrapped. A Wefox spokesman emphasized that significantly less than ten percent of the workforce was affected. In addition, Wefox continues to hire new people.
According to financial circles, the IPO will remain a long-term focus for Wefox. The capital market environment is currently unfavorable for this.
Last week, Ionos, a company, dared to go public for the first time in months, but the share is still listed below the issue price. According to investment bankers, it is currently particularly difficult for technology stocks to find investors for a new issue, as growth stocks have fallen by an average of a quarter since the reversal in interest rate policy. An IPO by Wefox is therefore considered unlikely this year.
More: Wefox boss Julian Teicke: “The clear focus in 2023 is the black zero”