May 18, 2023: On Wednesday, German digital insurer Wefox said it raised $110 million of fresh funding from backers, including JPMorgan and Barclays.
The news keeps a vote of confidence for the technology space of insurance at a time when it encounters tough macroeconomic headwinds.
Wefox is a Berlin, Germany-based company focused on personal insurance products like home, motor, and personal liability insurance. Rather than underwriting claims, the company connects its users with brokers and partner insurance firms through an online platform.
Founded in 2015, it competes with U.S. digital insurer Lemonade and German firm GetSafe and established insurance incumbents like Allianz.
Wefox said it raised the fresh funds through debt financing and new equity. Regarding the $110 million total, $55 million is a credit facility from banking giants JPMorgan and Barclays. A further $55 million equity investment was led by Squarepoint Capital, a global investment management company with $75.7 billion in assets under management.
“It’s a recent type of financing for a growth firm,” Julian Teicke, Wefox’s CEO and co-founder, told in an interview. “Risk investors, equity investors, they understand, want to take the risk.”
“Banks don’t, so for them, it was significant to understand our path towards profitability and the maturity of our business,” he added.
The company stated that it maintained its $4.5 billion valuation from a July funding round, somewhat rare in today’s market, with many fintech seeing their valuations slump drastically.
Wefox’s announcement comes as fintech and the technology industry grapples with a harsher economic environment, making raising funding more difficult.
Higher interest rates have seen investors reevaluate growth-oriented tech businesses, with equity markets, particularly fintech, taking a beating. In the public markets, U.S. company Lemonade has seen its shares decrease 23% in the previous 12 months, though the stock is up 13% in 2023.
Layoffs have also plagued the fintech space. On Tuesday, money transfer firm Zepz said it was letting 420 employees go, or 26% of its workforce, in the recent round of redundancies to hit the sector.
The collapse of Silicon Valley Bank, too, has darkened the outlook. The tech-focused lender collapsed after its startup, and venture capital clients fled in a panic because of capitalization concerns.
In the initial quarter of 2023, Wefox saw its earnings almost double yearly. The company expects it will reach profitability by the end of this year.
Despite the broader tech industry’s headwinds, Teicke believes Wefox is “crisis-resistant.”
Thicke also said Wefox had yet to face the same pressures to lay off staff. Instead, it has shifted its priorities; he said, “doubling down on things that work and pausing things that don’t make sense.”