Zynga and LinkedIn Founders Try to Pitch Money-Losing Home Insurance Company to Investors
Posted on 03/05/2021
The homeowners’ insurance market is historically cyclical in nature and is highly regulated. Most insurance data sits with insurance companies, especially claims data. Hippo Enterprises Inc. is a home-insurance startup. Labeled as an insurtech play, Hippo Enterprises agreed to go public through a merger with Reinvent Technology Partners Z, a special purpose acquisition company has Zynga Inc. founder Mark Pincus and LinkedIn co-founder Reid Hoffman as lead directors. The SPAC deal values Hippo Enterprises at US$ 5 billion in enterprise value and Reinvent Technology Partners Z will be renamed Hippo Holdings Inc.
Interestingly, according to its SEC filing, Hippo Enterprises had a net loss of US$ 141.5 million in 2020. The company generated US$ 51.5 million in revenue in 2020, but expects revenue to be US$ 789 million in 2025. With a limited operating history, how many people are familiar with the “Hippo” brand outside of Silicon Valley? For marketing, Hippo Enterprises depends on search engines, content-based online advertising, and other online sources to drive traffic.
In the SPAC documents, it even says, “We have a history of net losses and we may not achieve or maintain profitability in the future.”
Sources of Funding
1. Seller rollover equity: US$ 5,422 million
2. PIPE investment: US$ 550 million
3. Reinvent SPAC cash in trust: US$ 230 million
The PIPE money is coming from Dragoneer Investment Group, Lennar Corporation, and Ribbit Capital. Mutual funds also are investing.
VC Investors
Some of the venture backers of Hippo include Felicis Ventures, Fifth Wall Ventures, and homebuilder Lennar Corporation. Lennar Corporation is a strategic investor in Fifth Wall Ventures. Other investors include Abstract Ventures, Aquiline Technology Growth, Comcast Ventures, GGV Capital, Horizons Ventures, Munich Re Ventures, Pipeline Ventures, RPM Ventures, and Zeev Ventures.
In 2020, Hippo acquired Spinnaker Insurance Co., a property-casualty insurer licensed in 50 states, by using its Series E money. In the Fall of 2020, Hippo raised capital in the form of a convertible note from Mitsui Sumitomo, securing a 3-year reinsurance commitment for 20% of Hippo’s capacity.
