JPMorgan, Barclays back insurance startup Wefox with $55 million loan

JPMorgan, Barclays back insurance startup Wefox with $55 million loan

Wefox CEO Julian Teicke.


German digital insurer Wefox announced on Wednesday that it had raised $110 million in new funding from backers JP Morgan And Barclays.

The news represents a vote of confidence in the insurance technology industry at a time when it is facing severe macroeconomic headwinds.

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Wefox is a Berlin-based company that focuses on personal insurance products such as home insurance, vehicle insurance and personal liability insurance. Instead of insuring claims itself, the company connects its users to brokers and partner insurance companies via an online platform.

Founded in 2015, the company competes with companies such as US digital insurers lemonade and the German company GetSafe as well as established insurance companies such as alliance.

Wefox said it raised the new funds through a combination of debt financing and fresh equity. Of the $110 million total, $55 million is a credit facility from banking giants JPMorgan and Barclays. Another equity investment of $55 million was led by Squarepoint Capital, a global investment management firm with $75.7 billion in assets under management.

“It’s a new type of funding for a growth company,” Julian Teicke, CEO and co-founder of Wefox, said in an interview with CNBC. “Venture investors, equity investors, they understand they want to take risks.”

“Banks don’t typically do that, so it was really important for them to understand our path to profitability and the maturity of our business,” he added.

The company said it maintained its $4.5 billion worth from a funding round in July — a bit rare in today’s market, with many fintechs’ valuations plummeting.

Wefox’s announcement comes at a time when fintech and the technology industry at large are grappling with a tougher economic environment and finding funding more difficult.

Higher interest rates have prompted investors to reassess growth-oriented tech companies, with equity markets – and fintech in particular – coming under pressure. On the public markets, US company Lemonade has seen its shares fall 23% over the past 12 months, despite the fact that the stock is up 13% so far in 2023.

Layoffs have also hit the fintech space. On Tuesday, money transfer company Zepz told CNBC that it would lay off 420 employees, or 26% of its total workforce, as part of the industry’s latest round of layoffs.

The collapse of Silicon Valley Bank has also clouded the outlook. The tech lender collapsed earlier this year after its startup and venture capital clients fled in a panic over capital concerns.

Despite the headwinds the entire tech industry is facing, Teicke believes Wefox is “crisis resilient.” In the first quarter of 2023, Wefox was able to almost double its sales compared to the previous year. The company expects to be profitable by the end of this year.

Teicke also said Wefox didn’t face the same pressure to lay off employees. Instead, it has shifted its priorities, he said: “We’re focusing more on things that work and stopping things that don’t make sense.”

Teicke, for example, said Wefox is focused on its broker partnership model and its so-called “affinity” sales method, in which it sells its insurance software to other companies for a subscription fee — say, an online car dealership that adds car insurance to the point of sale.

The fresh funds will be used to invest in Wefox’s affinity program and technology platform, the company said.

Teicke said Wefox is also investing heavily in artificial intelligence, which has recently become a hot tech space following the rise of viral AI chatbot ChatGPT. Wefox primarily uses AI to automate policy requests and customer service.

The company has three technology centers in Paris, Barcelona and Milan dedicated to AI.