A few years ago, unicorn status, given to companies that reached billion-dollar-plus valuations was thought to be a pretty rare find. But then came 2020 and 2021, when the phrase “unicorn” became somewhat obsolete as so many companies were receiving generous valuations. And of course, as we know, 2022 came around and corrected the market, and once again, the status of unicorn regained rarity. Today (Tuesday) the Israeli insurtech company Vesttoo, announced a fundraising round led by Mouro Capital, Santander Bank’s investment arm, and Royal Group (from the Emirate) in which it was valued at over a billion dollars, thus gaining unicorn status. In addition, one of the largest investment banks in the world, Hanaco Ventures, as well as Black River Ventures and Gramercy Ventures, participated in the round.
"The goal is not the valuation"
Vesttoo has developed risk management technology, which allows insurance companies to transfer their insurance risks to the capital market through the use of various financial instruments for investment. The technology is based on the use of AI models of actuarial risk, which are based on various data sources, such as historical data of insurance portfolios and public data such as the formation of inflation in the market or the effects of a global pandemic (as seen in 2022). "After thousands of simulations on historical data, we select the most accurate risk model according to internal criteria. Then we run the selected risk model on the specific insurance portfolio that we want to reinsure, and produce risk forecasts for the development of losses in said portfolio," Liran Grunhaus, VP of Marketing at Vesttoo, explained to us in the past.
Based on these forecasts, Vesttoo can price and structure the reinsurance transactions. "One of the 'treats' of working with data-based products is that it allows us to more easily translate the insurance risks into something that players from the capital market can understand, and something that the credit companies can rate – and this opens up a whole world for institutional investors," Grunhaus added. According to her, most investors are not aware of insurance risks, which have become especially attractive in the days of the pandemic– as interest rates in the market are really low and even sometimes even negative. Grunhaus claims that the financial instrument Vesttoo offers is "A very attractive alternative to traditional fixed income such as various bonds."
The CEO of the company and one of the founders, Yaniv Bertele, explains to Geektime that despite the situation in the market, the company really had no difficulty raising capital: "It took us a bit of time to choose the appropriate partners, but nothing unusual. Our goal is not the valuation itself or 'unicorn' status. Our valuation stems from what we offer to the market and our profitability. We are a profitable company, which provides great value in the markets we operate in, some of which have not changed in 200 years. There is a great demand and need for what we offer, a platform that links two huge markets – the insurance market and the capital market." He said that in recent years the company has grown a lot, moved to profitability in 2021, and is expecting to reach at least $100 million ARR for the coming year.
Vesttoo was founded in 2018 by Yaniv Berteke, Alon Lifshitz and Ben Zickel. The company's offices are located in Tel Aviv. To date, Vesttoo has raised $104 million.