German digital insurer Wefox said on Wednesday it has raised $110 million in fresh funding from backers including JPMorgan and Barclays.
The news marks a vote of confidence for the insurance technology space at a time when it faces harsh macroeconomic headwinds.
Wefox is a Berlin, Germany-based company that focuses on personal insurance products, such as home insurance, motor insurance and personal liability insurance. Instead of underwriting claims themselves, the company connects its users with brokers and partner insurance companies through an online platform.
Founded in 2015, it competes with the likes of US digital insurer Lemonade and German firm GetSafe, as well as established insurance companies such as Allianz.
Wefox said it raised the new funds through a combination of debt financing and fresh equity. Of the total of $110 million, $55 million is in the form of a credit facility from banking giants JPMorgan and Barclays. A further $55 million equity investment was led by Squarepoint Capital, a global investment management firm with $75.7 billion in assets under management.
“It’s a new type of financing for a growth company,” Julian Teicke, CEO and co-founder of Wefox, said in an interview to CNBC. “Venture investors, equity investors, they understand, they want to take risk.”
“Banks typically don’t, so for them it was really important to understand our path to profitability and the maturity of our business,” he added.
The company said it maintained its $4.5 billion valuation from a July funding round — something rare in today’s market, with many fintechs seeing their valuations plummet.
Wefox’s announcement comes as fintech and the technology sector as a whole struggle with a tougher economic environment, finding it harder to raise funding.
Higher interest rates have seen investors reevaluate growth-focused tech companies, with stock markets – and fintech in particular – taking a hit. On the public markets, US company Lemonade has seen its shares fall 23% over the past 12 months, although the stock is up 13% year to date in 2023.
Layoffs have also plagued the fintech space. On Tuesday, money transfer company Zepz told CNBC it was letting go 420 employees, or 16% of its total workforce, in the latest round of layoffs to hit the industry.
The collapse of Silicon Valley Bank has also darkened the outlook. The tech-focused lender collapsed earlier this year after its startup and venture capital clients fled in panic over capitalization concerns.
Despite the headwinds for the wider tech industry, Teicke says he believes Wefox is “crisis-proof”. In the first quarter of 2023, Wefox saw its revenue nearly double year-over-year. The company expects to reach profitability by the end of this year.
Teicke also said that Wefox does not face the same pressure to lay off staff. Instead, it has shifted its priorities, he said, “doubling down on things that work and stopping things that don’t make sense.”
For example, Teicke said Wefox focused on its partnership model of broker and its so-called “affinity” method of distribution, where it sells its insurance software to other companies for a subscription fee – for example, an online car dealer that adds car insurance at the point of sale.
The new funds will go towards investing 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 area of tech following the rise of viral AI chatbot ChatGPT. Wefox mainly uses AI to automate policy applications and customer service.
The company has three technical hubs in Paris, Barcelona and Milan dedicated to AI.