This debut might make clear Lemonade’s IPO and valuation
In the course of the week’s information cycle one specific little bit of reporting slipped underneath our radar: Root Insurance is tipped by Reuters to be prepping an IPO that might worth the neo-insurance supplier at round $6 billion.
Coming after two 2020 insurtech IPOs, Root’s steps in the direction of the general public markets will not be shocking. However they’re excellent news all the identical for a variety of insurance coverage startups which have raised numerous capital and can ultimately want to organize their very own debuts in the event that they don’t discover a bigger company residence.
Programming word: The Alternate column is off beginning tomorrow by subsequent week. The publication will exit as all the time on Saturdays. I’m taking per week to sit down and do nothing.
The Root IPO may also assist make clear Lemonade’s personal public providing and ensuing valuation. Lemonade’s debut brought a strong price to the rental-focused insurance provider, resulting in a extra buoyant angle in the direction of the valuation of its class of startups. Extra exactly, the general public value assigned to Lemonade when it floated was, no bullshit, very bullish.
If Root can repeat the feat it might forged a heat gentle on the yet-private gamers in its area of interest that can have their eyes pinned to the flotation. Names like MetroMile and Hippo could possibly be subsequent if Root’s IPO goes properly.
However, first, does Root make sense at a $6 billion valuation? We are able to do some digging on that this morning, utilizing Lemonade’s present-day valuation to get a deal with on the determine. Let’s go!
Root’s valuation in a Lemonade world
Earlier than we get into the numbers, keep in mind that we’re going to check apples and oranges at present, and that we’ll have to make use of some dated numbers as properly. That mentioned, we will nonetheless get someplace about what Root could possibly be price. So, roll with me however don’t take each quantity as engraved onto an obelisk.
Again in July of this 12 months, within the wake of the Lemonade IPO and Hippo’s newest funding spherical, a $150 million investment at a $1.5 billion post-money valuation, we began to do some math. Lemonade’s valuation was much richer than Hippos’ when you look at their multiples, which received us enthusiastic about non-public and public neo-insurance supplier valuations: why was Lemonade price a lot greater than its friends per greenback of written premium?
To raised perceive the scenario, we dug up some 2019 information on the greenback worth of gross written premium Hippo and Lemonade wrote and located new valuation multiples for them primarily based on these numbers. Lemonade was price 28.4x its Q1 annualized gross written premium, whereas Hippo was price simply 5.6x its personal.
Then we additionally discovered Root and MetroMile gross written premium numbers for 2019, which allowed us to calculate their own effective valuations (albeit utilizing dated numbers).
As earlier than after we discovered that Hippo’s non-public valuation appeared gentle in comparison with Lemonade’s public valuation after we contrasted their valuation/gross written premium a number of, we found that MetroMile and Root additionally appeared low-cost. Very low-cost.