Insurtech Lemonade looks for sugar in IPO markets. Its biggest expense? Marketing

“Harness technology and social impact to be the world’s most loved insurance company,” Insurtech Lemonade’s Monday filing for an initial public offering reads.

But for a company aiming to disrupt the sleepy insurance industry with machine learning, marketing and sales remains the real bread and butter.

Lemonade, which sells renters’ and homeowners’ insurance, more than doubled its sales and marketing expenses in 2019 to $89.1 million. Its technology development spend, despite also nearly doubling, stood at a mere fraction of that: $9.8 million. 

As a direct-to-consumer brand, Lemonade spent heavily on marketing in a bid to spread its brand’s name, promoting largely through the internet as it sought to compete against incumbents. 

In the filing, the five-year-old startup paints its marketing spend as a metric that has improved over time, adding that its subscription-based model means its marketing spend could have a longer tail. Each dollar spent on marketing translates to $2 of in-force premium.

“Given our subscription-based model, we believe that the lifetime value of our customers is significantly higher than our cost of acquiring them, and our ability to acquire them earlier, at a stage that incumbents struggle to, should pay dividends for decades to come,” the prospectus reads.

We’ll see if investors bite in this environment where they seem hungry for IPOs. The growth numbers are certainly attractive: The company’s revenue grew by nearly threefold to $67.3 million, outpacing the growth of its losses: over double in 2019, to $108.6 million.

But will they bite at a desired valuation? Last valued at $2 billion, Lemonade is backed by SoftBank, Sequoia Capital, Aleph, and General Catalyst. It filed raise $100 million, though the figure is likely a placeholder.

The mega pharma deal that may never be: Over the weekend, Bloomberg reported that British drug giant AstraZeneca had approached California-based Gilead in a deal that would have created the “biggest health care deal on record.” 

As exciting as it all sounds, it seems like a pretty questionable tie up? For starters, the cross-border element of their union harkens back to the scuttled $160 billion deal between Pfizer and Allergan in 2016. Moreover, Gilead investors are pretty pleased with the healthcare company—and don’t need a dramatic strategic shift in the form of M&A to reinvigorate their interest. Even if the duo never progress to marriage though, do expect more tie-ups in healthcare. Read more.

VENTURE DEALS

- PatientPing, a Boston-based healthcare e-notifications platform, raised $60 million in Series C funding. The round was co-led by Andreessen Horowitz, F-Prime Capital, GV, and Transformation Capital.

- HistoSonics, an Ann Arbor, Mich. and Minneapolis, Minn.-based developer of a robotic platform and sonic beam therapy, raised $40 million Series C1 funding. Yonjin Venture led the round and was joined by investors including Varian Medical Systems, Johnson & Johnson Innovation, Venture Investors, Lumira Ventures, and the State of Wisconsin Investment Board.

- Lilium, the Munich-based aviation company, raised $35 million from Baillie Gifford as part of a $275 million round.

- Wahed, a New York-based investment platform geared toward Muslim populations, raised $25 million in funding led by Saudi Aramco Entrepreneurship Ventures. Existing investors BECO and CueBall Capital participated. Read more.

- NFlection Therapeutics, a Wayne, Penn.-based biopharma targeting disease pathways to fight rare disease, raised $20 million in Series A funding from venBio Partners and F-Prime Capital.

- ADDI, a Bogota-based provider of point-of-sale lending for Latin America, raised $15 million in a Series A extension. Quona Capital led the round and was joined by existing investors Andreessen Horowitz and Monashees, and new investors S7 Ventures, Foundation Capital and DST partner Tom Stafford.    

- Concourse Labs, a New York-based automated cloud governance company, raised $15.2 million in Series A funding. ForgePoint Capital led the round and was joined by investors including existing investors 83North and Capri Ventures.

- NYMBUS, a Miami-based financial services platform, raised $12 million in funding. Insight Partners and Vensure Enterprises led the round. 

- Whatifi, a Los Angeles-based interactive movie maker, raised $10 million in funding led by Andreessen Horowitz who was joined by investors including Matrix Partners, David Wells (ex-CFO of Netflix), Ilkka Paananen (Supercell), Max Levchin (Paypal, Affirm), Marc Pincus (Zynga), Michael Birch (Bebo), Taavet Hinrikus (Transferwise), Josh Hannah (Betfair), and Jon McNeill (Tesla, Lyft).

- Ambler, a Paris-based maker of a platform connecting healthcare transporters and institutions, raised €6 million ($6.8 million) in funding. Investors included Bpifrance, Idinvest Partners, Partech and Kima Ventures.

- ClassTag, a New York-based communication platform between teachers and parents, raised $5 million in seed funding. Investors include AlleyCorp, Contour Ventures, Founder Collective, John Martinson, Newark Venture Partners, Smart Hub and TMT Investments. Read more.

- Reveal, a Woodside, Calif.-based startup that deploys AI for national security, announced today raised $2.5 million in seed funding. Defy Partners and 8VC led the round. 

- Silverfin, a Belgian maker of cloud services for accounting firms, raised $30 million in Series B funding. Hg led the round. Read more.

PRIVATE EQUITY

- The Carlyle Group acquired four Mesa mobile home parks for $230 million.

- ECI Software Solutions, a portfolio company of Apax Partners, settled its lawsuit against Prosperity Computer Solutions and agreed to acquire all the assets of Prosperity, a Big Sandy, Texas-based software company serving the lumber and building materials industry. Financial terms weren't disclosed.

- Silversmith Capital Partners invested $49 million in Appfire, a Boston-based provider of apps for software development teams.

- Orion Innovation has acquired Zodiac Systems, a New York-based video service delivery software company. Financial terms weren't disclosed.

- Therma Holdings, backed by Gemspring Capital, acquired Gilbert, a Minneapolis-based provider of mechanical, electrical, plumbing, controls and fire protection services. Financial terms weren't disclosed.

- Kinderhook Industries acquired Paramount Specialty Pharmacy and PharmBlue Holdings, and combined the duo with Avitas/Longs and PharMedQuest to create Avita. Avita is composed of 63 pharmacies total. Financial terms weren't disclosed.

- Brynwood Partners will acquire the North American business of Buitoni pasta, a pasta maker, from Nestlé SA. Read more.

OTHERS

- Starboard acquired a 9.3% stake of Commvault (NASDAQ: CVLT), an enterprise software company.

- PT Indofood CBP Sukses Makmur, owned by Indonesian billionaire Anthoni Salim, plans to acquire Pinehill Co., a producer of instant noodles in Africa and the Middle East for $3 billion. Pinehill Corpora and Steele Lake are the sellers. 

IPOs

-  The AZEK Company, a Chicago-based maker of outdoor living products also known as CPG Newco, plans to raise $625 million in an offering of 31.3 million shares priced between $19 to $21. The company posted revenue of $794.2 million and loss of $19.3 million in the year ending in September. Ares Management and Ontario Teachers Pension Plan back the firm. It plans to list on the NYSE as “AZEK.” Read more.

- Vroom, a New York-based online used car marketplace, plans to raise $468 million in an IPO of 21.3 million shares priced at $22 apiece. It posted revenue of $1.2 billion and losses of $275.7 million in 2019. L Catterton, General Catalyst, and T. Rowe Price back the firm. It plans to list on the Nasdaq as “VRM.” Read more.

- Vaxcyte, a Foster City, Calif.-based biotech developing pneumococcal vaccine, plans to raise $6210 million in an offering of 14 million shares priced between $14 to $16. Abingworth Bioventures, Longitude Venture Partners, and Roche Finance are among the investors. It plans to list on the Nasdaq as “PCVX.” Read more.

- Avidity Biosciences, a La Jolla, Calif.-based biotech developing antibody therapies for muscle disorders, plans to raise $150 million in an offering of 10 million shares priced between $14 to $16. RTW Investments (14.5% pre-offering), Cormorant Asset Management, and Eli Lilly and Company (10.4%) back the firm. It plans to list on the Nasdaq as “RNA.” Read more.

- Generation Bio, a Cambridge, Mass.-based biotech developing gene therapies for rare diseases, plans to raise $126 million by offering 7.6 million shares priced between $16 to $18. Atlas Venture Fund (37% pre-offering), Fidelity Investment (15%) and T. Rowe Price (8.9%) back the firm. It plans to list on the Nasdaq as “GBIO.” Read more.

- JinkeProperties Group Co., listed in Shenzhen, is preparing for an IPO of its property management unit that could raise at least $500 million in Hong Kong. Read more.

F+FS

- Wing closed its third fund with $450 million in commitments. Read more.

- Cathay Capital, in conjunction with Total Carbon Neutrality Ventures and Hubei High Technology Investment Guiding Fund Management, raised $120 million for their Smart Energy Fund.

- HarbourVest Partners raised $288 million for its Harbourvest Adelaide fund. Read more.