Investment Analysis (2) — Coverwallet, Expedia for small business insurance

Investment opportunity analylsis: Coverwallet (https://www.coverwallet.com/)

Description:
Coverwallet is an online enterprise insurance management platform that makes it easy for small businesses to choose and purchase commercial insurance plans.

Funding history: $2 million seed funding in March 2016, unknown pre-money valuation

Investment thesis
· SMB insurance is a billion dollar market ($103Bn direct written premiums in 2013) with strong growth potential and low penetration by technology.
· The founding team has solid backgrounds in consulting as well as product and business development. The advisory board consists of insurance leaders and influential entrepreneurs.
· Competition has not yet become fierce and incumbents are moving slowly towards digital solutions.

Future outlook/Exits
· Precedent transactions suggest positive value appreciation in later rounds if Coverwallet can successfully hit milestones (Next Insurance: $13M of seed funding at $31M pre-money valuation; CoverHound: $33.3 million in Series C at $69.87Mn pre-money valuation)

· Exit strategies:
o Acquisition by insurance broker such as Navion Insurance Associates
o One or two further rounds of VC funding before IPO

Risks/Questions
· Whether the company can control customer acquisition costs (CAC) and retention rate
· Whether the technology-enabled approach can lower expenses in customer services
· Whether the company can maintain strong relationship with insurance companies