i3 - September/October 2017 - 29

Who's Backing Lemonade's
Growth Trajectory?
Lemonade is backed by some heavy-hitting insurance and
tech names among its financial backers, insurance backstop
providers and key team members.
Venture Capital
Lemonade has raised $60 million in three
finance rounds:
* $13 million seed investment by
Aleph and Sequoia in late 2015
* $13 million from XL Innovate and
existing investors, and
* $34 million from General Catalyst,
GV (formerly Google Ventures)
Thrive, Tusk Ventures and existing investors. German based Allianz has also made
an investment in Lemonade.

DEMOGRAPHIC DRIVERS

In its first quarter of business, 75 percent
of Lemonade's customers were 25-34
year olds. This is not a demographic that
traditional insurance companies have
targeted, for reasons previously mentioned. In fact, the average age for first
time homebuyers in the U.S. is 33.
Young tenants have limited income,
and are therefore price sensitive in their

Key Team Members
Team members include former
president of product at AIG, a former
chief underwriting officer, a former
senior vice president of claims and
AIG's head of financial planning and
analysis of property and casualty.

14.3K

6K
Total Investment $

of policies sold every 10 weeks. Revenue is
growing even faster as the company is
attracting more homeowners, translating
into significantly higher premiums.
However, many people don't understand
exponential growth. If Lemonade were to
continue doubling its policies in force
every 10 weeks, after 16 more doublings
(160 weeks) it would be larger than the
entire current U.S. homeowner's insurance industry.
This exponential growth can only be
achieved by moving insurance from being
reliant on agents and paperwork into one
that is built on bots and tech notes, says
Peter Diamandis, the founder of the
XPrize and one of Lemonade's founding
board members.
Based on its annualized run rate of policies and average premium, at the end of its
first year of operations, Lemonade will be
selling $23 million worth of policies a year.
But at the moment, Lemonade is a tiny
drop in the bucket compared to the $42.6
billion that traditional U.S. property and
casualty insurers collected in 2016.

Insurance
Warren Buffet's Berkshire
Hathaway is providing backstops
for Lemonade's coverage.

2.23K
716

263
Sept 2016

Oct 2016

Nov 2016

Dec 2016

Jan 2017

Feb 2017

Mar 2017

Apr 2017

May 2017

SOURCE: Lemonade

initial insurance purchase. They are also driven by their values. Lemonade
is different than other insurance companies. It takes a 20 percent fee of
every premium dollar. The remainder pays for claims and any funds left
over at the end of the year are donated to charities and not-for-profits, as
directed by policyholders. The company is the first ever B Corp certified
insurance firm in the world.
Millennials care about their communities and the state of the world.
They want to deal with organizations that share their values. So Lemonade's
focus on giving back to the community not only attracts value conscious
millennials, but also builds trust - something traditional insurance
firms are lacking.
Financial services are one of the least trusted industries by consumers,
according to the 2017 Edelman Trust Barometer. And among financial
services, only 53 percent of the public trust the insurance industry, making
it the second least trusted. The experience consumers have with insurance
companies becomes antagonistic once they file a claim.
Edelman's top three pieces of advice to the insurance sector are: 1) solve
customer pain points; 2) invest in smarter technology to serve digital natives;
and 3) focus on social purpose. Edelman's advice seems to be exactly what
Lemonade is doing. And so better prepare for the revolution.
Jim Harris is the author of Blindsided, which focuses on disruptive innovation.
You can follow him on Twitter @JimHarris or email him at jim@jimharris.com
SEPTEMBER/OCTOBER 2017

29
http://www.Twitter.com/JimHarris
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