Stable Raises $46.5M to Manage Commodity Price Volatility

Stable Secures $46.5 Million in Series A Funding to Mitigate Commodity Price Risk

Stable, an insurtech company focused on reducing business risks associated with fluctuating commodity prices, has announced the successful completion of a $46.5 million Series A funding round. The investment was spearheaded by Greycroft.

Investment Details and Background

The financing round also saw participation from Notion Capital, Anthemis, Continental Grain, and existing investors Syngenta and Ascot. This brings the total funding secured by the Chicago-based startup, founded in 2016, to approximately $50 million.

Anthemis previously led a $3.5 million seed round in early 2020. Notably, Stable was also recognized as a finalist in TechCrunch’s Startup Battlefield competition in 2019.

The Founder's Vision

Richard Counsell, the founder of Stable, brings a unique perspective to the industry. As the son of a farmer and a former trader, he witnessed firsthand the detrimental effects of commodity price volatility.

His objective with Stable is to empower “millions of businesses exposed to volatile commodity prices” by providing a straightforward and effective risk management solution.

Addressing a Critical Need in the Commodity Market

Stable aims to provide businesses, particularly within the expansive $8 trillion food and farming sector, with insurance options to safeguard against potential commodity price fluctuations.

The company is projecting to achieve $500 million in annual premium within three years of its launch, a trajectory that Greycroft Partner Ian Sigalow suggests could position it as “the fastest growing insurtech ever.”

A Modern Approach to a Centuries-Old Problem

Counsell established Stable recognizing the limited innovation within the industry since the establishment of the Chicago Board of Trade in 1848, which was initially designed to offer financial certainty to buyers and sellers of crops.

“I aimed to develop a platform that integrates contemporary tools, such as machine learning (AI), user-friendly design, and a client-centric approach, to revitalize our industry’s core principles and remain relevant for businesses facing genuine risk,” he stated. “With the ease of trading shares on platforms like Robinhood, why should managing commodity risk feel like requiring an advanced degree?”

Parametric Platform and Index-Based Protection

Stable’s parametric platform features over 5,000 third-party indexes from 70 countries. These indexes enable businesses to acquire policies protecting against unexpected price increases or decreases.

Clients can select a specific index to tailor a contract to their needs. Payouts are automated and are based on the chosen index, minimizing basis risk.

Simplifying Risk Transfer with Indexes

Stable utilizes indexes to streamline the risk transfer process. Instead of calculating exact losses, the company employs an index as a proxy.

“The stronger the correlation between the index and a company’s actual risk, the more effective the protection,” Counsell explained. “That’s why we offer 5,000+ indexes – to create index-based contracts that are highly precise and accurately reflect the client’s real risk.”

Automated Claims and Efficiency

A key benefit of using an index, he added, is the complete automation of claims. Since all terms are pre-agreed upon and referenced to the selected index, a traditional claims process is unnecessary.

“For example, if an index is currently at $100 and a food buyer anticipates losses if it reaches $120, Stable can provide coverage for that scenario.”

Stable charges a premium and then issues a payout if the index exceeds $120.

“Our payment compensates for the client’s lost income and provides the financial stability they seek,” Counsell said.

Challenges in Standardizing Agricultural Commodities

Agricultural commodities, due to their perishable nature and varying grades and sizes, are “very hard” to standardize and trade on exchanges, Counsell noted.

“Consequently, only 8% of commodities are traded on exchanges like the CME (Chicago Mercantile Exchange), making it difficult to purchase risk management products such as futures or options contracts without significant basis risk.”

Untraded Commodity Exposures and the Need for Hedging Solutions

According to Counsell, over $5 trillion of untraded commodity exposures within the agrifood industry are currently self-insured. Businesses seeking to protect their risk, rather than trade or speculate, may find traditional hedging methods complex, risky, or intimidating.

“We’ve leveraged sophisticated machine learning to determine the price of that risk – the index rising or falling – a process that took us three and a half years. We run approximately 62 trillion simulations daily to manage this and identify a price that is fair for both clients and capital providers.”

The Impact of COVID-19 on Risk Awareness

The COVID-19 pandemic caused significant disruptions to the food supply chain, increasing awareness of potential risks among manufacturers and producers, Counsell stated.

As an example, if a smoothie maker sells its product to a grocery chain for $1 per can and mangoes (constituting up to 50% of the cost) experience price fluctuations, Stable can cover any increase exceeding 20%.

“This provides greater certainty about the future, whether for producers or buyers,” Counsell said.

Expansion and Future Plans

Stable maintains operations in Chicago, Austin, New York City, and London. The new capital will be used to expand its North American sales and marketing teams and to recruit data scientists, particularly in New York and London.

Having received regulatory approval earlier this year, Stable is now collaborating with numerous large food businesses in the U.S., as well as farming organizations seeking protection against future price declines.

Looking ahead, Stable intends to expand into other sectors, including packaging, construction/timber, and energy, and geographically to Central and South America. Counsell believes the company’s ability to serve both commodity producers and consumers positions it for success “in tractors as well as treasury departments.”

A Regulated Insurance Business

The 50-person company operates as a regulated insurance business, partnering with “A-rated” re-insurers to manage the risk.

“We are a technology platform. Our role is to identify businesses in need of assistance, price the risk, manage their portfolio, reinsure all of that risk, and pass on that risk,” Counsell explained.

Stable generates revenue by functioning as a broker, charging a fixed commission for the business it directs to its re-insurers.

Insurer Confidence in Stable’s Potential

Anthemis’ Ruth Foxe Blader highlighted the rarity of investing in “a truly new product” as a key reason for her interest in Stable.

“Stable is not merely an improved solution; it represents a completely innovative approach to protecting against price movements in untraded commodities. Bespoke commodity price insurance was unavailable before Stable’s launch this year.”

Blader added that Stable leverages “an enormous” amount of index data to create “simple” protection products for clients exposed to commodity price volatility.

“While the individual models are relatively straightforward and therefore insurable, the sheer data science and machine learning capabilities within each Stable product were unimaginable even a few years ago. The result is a simple, perfectly tailored commodity price insurance.”

Greycroft’s Perspective on the Market Opportunity

Greycroft’s Sigalow was impressed by Counsell’s “unique perspective” on the crop insurance market.

“He has assembled an exceptional team of data scientists and subject matter experts, and we believe this market could generate hundreds of billions in premium annually. It also aligns well with Greycroft’s other insurance investments, such as Bright Health, Branch Insurance, and Pie Insurance.”

When asked about comparable offerings, Sigalow stated he was unaware of any.

“I haven’t encountered this before in my career,” he told TechCrunch. “However, when we spoke with customers, they confirmed that there were no substitutes and it represented a completely untapped market.”