February 21, 2024

Wefox CEO Julian Teicke.

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German digital insurer Wefox said on Wednesday it raised $110 million in new funding from backers, including JPMorgan and barclays bank.

The news marks a vote of confidence in the insurtech sector amid severe macroeconomic headwinds.

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Wefox is a Berlin, Germany-based company that focuses on personal insurance products such as home insurance, auto insurance, and personal liability insurance. Rather than underwriting claims itself, the company connects its users with brokers and partner insurers through an online platform.

Founded in 2015 to compete with US digital insurers and others lemonade and German company GetSafe, as well as established insurers such as Allianz.

Wefox said it raised the new capital through a combination of debt financing and new equity. Of the $110 million total, $55 million came from credit facilities with banking giants JPMorgan and Barclays. Another $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 kind of financing for a growth company,” Julian Teicke, Wefox’s CEO and co-founder, told CNBC in an interview. “Venture investors, equity investors, they understand, they want to take on risk.”

“Banks don’t usually do that, so it’s 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 valuation following a funding round in July — a rarity in today’s market, where valuations for many fintech companies have fallen sharply.

Wefox’s announcement comes as fintech and the broader tech industry grapple with a tougher economic environment and are finding it harder to raise capital.

Equity markets — especially fintech — took a hit as higher interest rates made investors reassess growth-oriented technology companies. On the public market, shares of US company Lemonade have fallen 23% over the past 12 months, though the stock is up 13% so far in 2023.

Layoffs are also plaguing the fintech space. Money transfer company Zepz told CNBC on Tuesday that in the latest round of layoffs, it will lay off 420 employees, or 26% of its workforce.

The collapse of Silicon Valley Bank also dimmed the outlook. The tech-focused lender collapsed earlier this year after its start-up and venture capital clients fled in a panic over capitalization issues.

Despite the headwinds facing the broader tech industry, Teicke said he believed Wefox was “crisis resistant”. In the first quarter of 2023, Wefox’s revenue nearly doubled year-over-year. The company expects to be profitable by the end of the year.

Teicke also said Wefox was not under the same pressure to cut staff. Instead, it has shifted priorities, he said, “doubling down on what works and stopping what doesn’t.”

For example, Teicke said Wefox is focused on its broker partnership model and what it calls an “affinity” distribution method, where it sells its insurance software to other businesses for a subscription fee — an online car dealership, for example, at the point of sale.

The new 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 become a hot tech area of ​​late with the rise of the viral AI chatbot ChatGPT. Wefox primarily uses AI to automate policy applications and customer service.

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