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Here, we can see the following: • The number of insurance VC deals have increased by ~25% CAGR • Funding for the largest deals increased by 5x to even 10x • Average funding to insurance startups (excluding the top 2 deals) has more than doubled • Number of investors who are willing to put money into insurance startups are growing at ~40% CAGR All of the above means that there are more channels of funding for insurance, as well as signals that investors are confident that the insurance industry can provide higher return, and is more likely to succeed. But what if the larger amount of investment is due to strategic investors (insurance companies) investing to grow their core business, and not due to investing from traditional VCs? Breakdown of Insurtech Investor Types, 2011-2015 100% 11% 14% 13% 10% 16% 80% 60% 40% 20% 0% 2011 2012 2013 2014 2015 Traditional VC Corp Dev This does not seem to be the case as the corporate/strategic investors as a percentage of all insurance venture capital investors have stayed stagnant over 5 years, hovering at ~13% each year. This also means that traditional VCs and corporate VCs are growing at equal, even pace year-on year. © Leo Tech Services Pte Ltd, 2016 3
The bigger implication of this is that interest in the insurance technology space is generated by both “need for innovation” (corporate VCs) and “need for higher returns” (traditional VCs). Now, let’s zoom into the corporate VCs in this space: Insurtech Corporate Investors % Breakdown, 2011-2015 2015 2014 2013 2012 2011 0% 10% 20% 30% 40% 50% 60% 70% Corp. Dev Corp. Dev Strategic/VC Corp. Dev Accelerators We therefore reached the following conclusions: • From 2011-2013, ~50 - ~70% of corporate VCs have chosen to invest through a dedicated separate strategic development VC arm • However, in 2014-2015, ~60% of corporate VCs have chosen to invest instead with their normal in-house corporate development team • In 2015, for the first time, we started to see ~5% of corporate VCs investing through accelerator/incubator labs This means that corporate VCs are deciding to go more and more upstream in the innovation process each year, taking on more risk to nurture startups from even the incubation phase. This is likely due to the realization that to bring external innovation in-house, you cannot just acquire it through a traditional VC investment, which can also stifle startups’ creativity But to really understand Insurtech, we need to look at it more a granular level, at the value chain level. © Leo Tech Services Pte Ltd, 2016 4
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