The insurtech hopes to ’accelerate growth without drawing down capital reserve’
Insurtech Lemonade has teamed up with venture firm General Catalysis to create a financial structure that unlocks growth without depleting cash.
Called Synthetic Agents, Lemonade said the new programme aims to close the cash gap flow and unlock cash friendly scaling.
“Synthetic Agents were designed to deliver the cash flow benefits of independent agents, but without forfeiting the customer relationship and without ceding much of the gross profit for the lifetime of the customer,” the insurtech said in a statement yesterday (29 June 2023).
It explained that investments in customer acquisition were typically repaid three times over, but initial payback could take as long as a couple of years.
This causes a cash flow gap, meaning some opportunities for profitable growth are passed on pending payback from prior acquisitions.
Daniel Schreiber, Lemonade co-chief executive and co-founder, said that the programme was “something of a game changer for Lemonade”.
“Thanks to Synthetic Agents, we believe we will be able to accelerate growth without drawing down our capital reserves or selling more equity,” he added.
“That means generating a significantly larger business sooner, with more cash in the bank and with a materially higher return on capital.”
How it works
The programme, which will launch on 1 July 2023, will see General Catalyst finance up to 80% of all Lemonade’s customer acquisitions.
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In return, it will receive a synthetic commission of up to 16% of premiums they helped finance.
Pranav Singhvi, managing director, General Catalyst, and architect of the customer value strategy, added: “We believe Lemonade’s Synthetic Agents programme gives Lemonade a balance sheet to invest in growth, so it can preserve its own capital for investments in its amazing technology and people.
“We’re big fans of Lemonade, a company that we believe has completely turned insurance upside down and become one of the most intriguing public tech companies.
”As one of Lemonade’s early backers, being able to help directly support their next stage of growth is exactly what we built our customer value strategy for.”
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