- Accel-backed insurance startup Luko struggled to raise money during the market downturn.
- The French company has cut headcount and put many long-term plans on hold.
- Co-founder Raphael Vullierme said the company turned down many unfavorable term sheets.
French insurance tech startup Luko, backed by VC giants Founders Fund and Accel, is struggling to raise capital for growth and has opted to lay off some staff and shelve a series of long-term plans. did.
Founded in 2018, the Paris-based company is primarily in the home insurance business by using its own AI to sell insurance to homeowners and renters.
The startup last raised funding almost two years ago in December 2020 in a €50 million (approximately $49 million) Series B round. The round valued the business at around €260 million ($253 million), according to a London-based source. To date, Luko has secured approximately $85 million in investor cash.
Luko was set to raise a $100 million Series C this summer, but has struggled with lack of growth funding, the company’s CEO and co-founder Raphael Vullierme told Insider.
Vullierme said the company hoped to raise funding at the end of 2021, but was in the process of finalizing two M&A deals, and the startup didn’t approach the market until April of this year.
Vullierme said the market was changing following a sharp drop in global stock prices in early 2022 at the time Luko asked prospective investors for funding. Burn more cash with a new product, set apart from 2022 dynamics.
European start-up investment fell 38% to $23.7 billion in the second quarter of this year. According to Crunchbase data. Funding for insurance tech start-ups also plummeted by 50% year-on-year in the second quarter to $2.41 billion. According to data from brokerage Gallager Re,
The company received several term sheets, but the deals offered were not on favorable terms. Some of the growth-stage capital trends, including more onerous terms to funding rounds.
“Insurtech will be one of the hottest categories in 2021 and one of the most impacted categories in 2022,” he said. “The majority of insurtech companies have all grown in an unsustainable way using cheap investor money, but now the sector is thriving due to the macroeconomic environment and the particular impact on this category. I am being hit.”
The home insurance startup has been forced to lose employees across its operations in recent months to save cash. About 22 people have left the company in recent months, either at the end of their probationary period or on furlough, according to Vullierme. Luko employs about 240 people. Its LinkedinOther Prominent Insurance Tech Companies Yigo in London and US-based metro mile You can also choose to fire staff.
As part of the company’s realignment, Luco will focus on existing core markets such as France and Germany and suspend plans to expand into other European countries for the time being, Vullierme added. Other changes include reduced spending on innovation as the company’s plans to launch a search engine and marketplace product have been shelved for the time being.
“We founded this business in 2018, so crazy money is not always available. We need to adapt to our environmental and ecosystem ambitions,” he added.
“The hard part is getting excited that 12 months ago was the worst case scenario, but it was important for the company to focus on costs for two years. A mindset that can be brutal at first. have to switch.”
Despite the challenges, Vullierme said the company is still growing well, with about 400,000 policyholders enrolled annually, with 500,000 expected by the end of the year.
Meanwhile, the company is in talks with existing investors about raising money, a source familiar with the matter told Insider.
“While I was getting back to the fundamentals, I made sure I had enough runways to do what I wanted,” said Vullierme. Discussions on a new funding round are believed to be ongoing and have yet to be finalized. Vullierme indicated that something is coming in the future, saying, “We will be announcing something later that will allow us to scale more quickly.”