Weekly SaaSology β‘ 12.19.21
Disruption in Insurance π, Modern InsurTech Platforms π±, and Exemplifying TAM βοΈ
Canβt believe weβre less than two weeks from 2022 π βTis the season to be SaaSy π
Top Five Investments π
Airtable, a San Francisco-based low-code collaboration platform, raised $735 million at a valuation of $11 billion in a Series F funding led by XN. As a spreadsheet-database hybrid, Airtable helps knowledge workers π¨βπΌ at over 300,000 companies like Netflix and Shopify build apps and workflows.
Found, a weight management platform ποΈ, raised $100 million at a $600 million valuation in Series B funding led by WestCap. It offers personalized coaching, online community, and prescription medication while focusing on body positivity and goal management. On average, it charges $100 per month across plans and has helped members lose ~10% of their weight in six months.
Taxdoo, a Germany-based automated financial compliance platform, raised $64 million at a $350 million valuation in Series B funding led by Tiger Global. It provides more than 1,700 e-commerce marketplaces and merchants with automated sales tax compliance and other accounting tools.
Fresha, a London-based subscription-free business management platform for spas and salons π, raised $52.5 million at a $640 million valuation in Series C extension funding led by General Atlantic. It provides over 60,000 businesses with a single platform to facilitate bookings, point-of-sale, marketing, CRM, loyalty, inventory, and team management. Unlike most vertical SaaS platforms, Fresha relies on transaction and finderβs fees as the primary source of revenue.
Whym, a Los Angeles-based conversational selling platform, raised $4.3 million in seed funding led by Deciens Capital. It allows consumer brands to offer a single-tap checkout experience so customers can pay via Apple or Google pay or even a text message instead of filling long forms and payment details π³.
Top Two Trends βοΈ
Disruption in Insurance π¨βπ»
The insurance industry is witnessing massive disruption across the value chain, including policy creation, underwriting, and claims management. Large insurance carriers are adopting various digital solutions to catch up with other verticals like e-commerce and banking that have embraced digital adoption and raised user expectations of seamless digital experiences. Large insurance companies are implementing AI/ML and integrating with wearables β and IoT to better inform their risk model and embed modern technology into their back-end processes and customer-facing portals. However, large insurance giants lack digitally-native capabilities and agility to adopt tech-enabled solutions. Some carriers still use legacy systems as they fear losing valuable data and disrupting critical processes. US insurance premiums topped $1.27 trillion in 2020, but 90% of these premiums were still sold through agents, so the broader industry is still far from complete digitalization π.
Modern Insurance Platforms π±
There are almost 3,000 startups in the market today that define themselves as digital-first insurance platforms. Over 870 of these insurtech startups have raised funding, and 35 of them have gone public. Millennials and Gen-Zs represent a large proportion of the buyer market, so there is a growing need for end-to-end digitalization π οΈ of the buying process. Compared to most insurers that are yet to fully digitalize their operations and customer experiences, digital-native platforms can easily add new channels, improve accessibility, and monitor policies for their customers. Some leading digital-first platforms include Oscar (health), Lemonade (homeowner and renterβs), Root (auto), and Ladder (life). Platforms like Root use smart car integrations or smartphone tracking to measure driving behavior and price insurance policies π.
While these platforms are much faster than large insurance players in adopting modern capabilities like AI/ML to optimize processes and digital experiences, most of these platforms have incurred net losses since inception as claims often end up higher than the premiums collected. These platforms could also fail to obtain regulatory approvals necessary for expansion into new markets, product offerings, or data collection π. Since most of them fail to reach profitability, there is always a recurring need to raise funding to add features (to remain competitive), satisfy regulatory demands, and meet surplus requirements π.
Startup Spotlight β¨
Founded in 2015, Canopy is a London-based digital renterβs insurance platform with over 32 employees. In addition to eliminating paperwork for all parties, Canopy also helps renters increase credit scores and improve rent affordability while also offering landlords and agents digital tools to speed up application processes and boost income.
VC Topic of the Week π
Last week, we talked about market sizing. It might be helpful to walk through all the steps of calculating TAM for a specific market, so letβs size the market for Canopy using a combination of all the methods: top-down, bottom-up, and the value theory.
Total Addressable Market or TAM represents the total revenue opportunity π° available to a product or service, assuming 100% of the market share is achieved!
The basic equation for calculating TAM is quite simple: Average revenue per user (ARPU) π·οΈ times the total number of potential customers in the target market.
For the sake of simplicity, letβs assume Canopy only sells renterβs insurance in the US:
Sizing the Target Segment: Since Canopy offers renterβs insurance, the total number of renters can be found on the most recent US Census Bureau survey:
# of Renters in the US = 42.9 million π.
Estimating Target Segment Penetration: While the law doesnβt require renters to have insurance, landlords can require tenants to have renterβs insurance π . As per Policy Genius, only 37% of renters, so ~15.87 million have a policy.
Estimating Premium Per Customer: As per Value Penguin, the national average monthly premium π is ~$19 per person, so ~$228 annually. Since Lemonade is a public competitor, we can find their βannualized premium per customerβ in their public filing and use that instead: $254 in Q3 2021 (10-Q).
Calculating TAM: Available Target Segment x Premium Per Customer, so approximately 15.87 million x $254, which equals $4.03 billion, which seems like a very sizeable yet realistic TAM/revenue opportunity in the US.
Rivalβs Market Share: As per its 10-Q, Lemonade recorded ~$346 million of annualized βin force premiumsβ across policies. Since 53% (or $183.4 million) of its premiums come from renterβs insurance, Lemonade practically owns ~16.6% of the current market (our TAM assumptions were very conservative).
Tweet of the Week π¦
Wishing you all a merry Christmas π₯³ and hope to see you again after the holidays!
Feel free to reach out to me by replying to this email or @dhruvcashpoor on Twitter!
This newsletter is intended for informational purposes only. Sources: TechCrunch, Twitter, Giphy, Tenor, Whym, Found, US Census Bureau, Lemonadeβs 10-Q, Value Penguin, Rent