By
Temitope Olatunji
April 16th, 2024
Despite the troubled tech space, German InsurTech firm Wefox recently raised $110 million in debt financing and fresh equity funding.
On Wednesday, May 17, insurance technology startup Wefox announced $110 million in funding from investors, including JPMorgan (NYSE: JPM) and Barclays (LSE: BARC). According to Wefox, the American and British banking giants contributed half of the total funding via a revolving credit facility. The remaining $55 million came from an equity investment spearheaded by investment management platform Squarepoint Capital.
The latest funding round also saw Wefox retain its $4.5 billion market capitalization from its previous fundraiser. Most importantly, the news reflects backer confidence in the insurance technology space amid macroeconomic constraints.
In a media session, Wefox CEO and co-founder Julian Teicke exposited on the InsurTech platform’s latest funding structure, saying:
“It’s a new type of financing for a growth company. Risk investors, equity investors, they understand, they want to take risks.”
Underscoring the unconventionality of combining debt financing with fresh equity from various financial companies amid uncertain times, Teicke added:
“Banks typically do not [want to take risks], so for them, it was really important to understand our path towards profitability and the maturity of our business.”
“I consider borrowed capital as the next step in our evolution because it’s a lot cheaper. Our goal is that we’re self-sufficient in our core businesses, and we’re well on the road to this,” said the chief executive of the Berlin-based company.
Latest Wefox Funding Retains Company’s Valuation and Underpins Strong Position amid Macroeconomic Headwinds
The company’s maintenance of its $4.5 billion valuation from last July is a rarity nowadays, with several valuations plunging drastically. Besides, with surging inflation, steep interest rates, and a looming global recession, many companies find it difficult to raise funding.
Leading insurance-oriented firms like the US Lemonade have plunged drastically in the past twelve months. However, it is worth noting that Lemonade has pared some of its losses so far in 2023 and is up 13%.
In a bid to ensure survival within the tech space, several companies have resorted to layoffs. For instance, yesterday, money transfer firm Zepz announced plans to downsize its total workforce by 16%, affecting 420 employees.
Despite prevailing macroeconomic headwinds in the broader tech space, Teicke believes Wefox is “crisis-resistant”. In the first quarter of the year, the German InsurTech startup experienced a double increase in revenue on a year-over-year (YoY) basis. As a result, Wefox expects to attain profitability by the end of 2023.
Teicke also pointed out that Wefox’s strong financial position is reflected in the fact that it is not under pressure to reduce its headcount. Instead, the CEO explained that the Berlin company changed its operational approach, prioritizing “things that work” while discontinuing “things that don’t make sense”.
For example, Teicke said one of Wefox’s primary focuses is its broker partnership model, with the proceeds going toward the company’s technology platform. The CEO added that Wefox is investing substantially in artificial intelligence (AI).
Wefox operates three tech hubs dedicated to AI development in Paris, Barcelona, and Milan.