Vouch Raises $90M, Valued at $550M - Startup Insurance News

Vouch Secures $90 Million in Funding to Expand Startup Insurance Services

Vouch, a company specializing in business insurance for startups and rapidly expanding businesses, has recently announced the successful completion of a $90 million funding round.

Funding Details and Company Valuation

This substantial investment was distributed across two separate funding phases. A $60 million Series C round, jointly led by SVB Capital – a subsidiary of Silicon Valley Bank – and Ribbit Capital, brought the company’s valuation to $550 million. Additionally, a previously undisclosed $30 million Series B1 round was spearheaded by Redpoint Ventures.

Since its establishment in 2018, San Francisco-based Vouch has accumulated a total of $160 million in funding. Key investors also include Allegis Group, Sound Ventures, and SiriusPoint.

Addressing a Gap in the Insurance Market

While numerous insurance technology companies cater to individual consumers, a comparatively smaller number focus on providing services to businesses, particularly startups. Vouch positions itself as a novel insurance platform, offering startups fully digital and customized coverage that can be activated in a matter of minutes.

Significant Growth and Client Base

Over the past year, Vouch has experienced considerable growth. Although specific revenue figures were not disclosed, the company reported a sevenfold increase in its customer base year-over-year. Currently, Vouch safeguards over $5.7 billion in risk through thousands of active policies.

Today, Vouch serves more than 1,600 clients, including prominent names like Pipe, Middesk, Neighbor, and Routable. Furthermore, the company is designated as the preferred business insurance provider for clients of Silicon Valley Bank, Brex, Carta, and WeWork. Y Combinator also directs its portfolio companies to Vouch for their insurance needs.

Understanding the Startup Ecosystem

According to Vouch’s co-founder and CEO, Sam Hodges, the company’s success in attracting high-profile startup clients demonstrates a deep understanding of the unique challenges and requirements within the startup environment.

“Our core responsibility is to provide support to startup founders where they are, and to offer the flexibility they need as they navigate evolving laws, regulations, and the changing physical and virtual landscapes of their businesses,” Hodges stated.

Adapting to the Pandemic and Emerging Risks

Like many businesses, Vouch adjusted its operational model during the pandemic to address the new and evolving risks faced by companies. A notable shift observed was the increasing distribution of startup teams. Prior to the pandemic, approximately 30% of teams operated remotely; this figure has since risen to over 53%.

In response, Vouch expanded its insurance coverage options to accommodate this “new normal.”

New Products and Expanded Underwriting

Vouch’s new suite of proprietary products and services designed for startups includes work-from-anywhere coverage, enhanced cyber insurance, and embedded insurance solutions. The company has also broadened its underwriting capabilities to serve startups at all stages of growth, from early-stage ventures to more established companies.

The work-from-anywhere coverage, specifically, addresses the rise in remote work, providing up to $500,000 in coverage per incident and extending to company-owned property regardless of its location.

Unique Carrier Ownership

Hodges emphasized a key differentiator for Vouch: it is currently the only business insurance provider for startups that operates its own insurance carrier, meaning the company directly backs its own policies.

“This control over policy development and underwriting allows us to deliver superior coverage and a more streamlined experience for our clients,” he explained.

Founding and Core Principles

Vouch was co-founded three years ago by Sam Hodges and Travis Hedge, stemming from their firsthand experience with the difficulties companies face in securing necessary business insurance.

The company’s primary goal is to simplify the onboarding process for new customers and to tailor coverage as precisely as possible, considering each company’s specific activities, customer base, growth stage, and risk tolerance.

“A typical client can obtain a quote and activate coverage online in less than 10 minutes, without the need for phone calls or paperwork,” Hodges shared with TechCrunch. “Vouch also offers unique coverage features specifically designed for startups, such as a cap table coverage feature within our directors and officers insurance.”

Individualized Risk Assessment

Vouch evaluates each startup’s insurance needs on a case-by-case basis, Hodges added.

For instance, the company assesses whether an e-commerce business handles sensitive client data. If the volume of sensitive data is limited, a lower cyber insurance coverage limit may be appropriate, resulting in lower policy costs.

Conversely, a startup preparing to raise capital might require increased investment in directors and officers insurance to protect against potential disputes.

Future Plans and Expansion

Looking forward, Hodges stated that the new funding will be allocated to continued investment in technical infrastructure, expansion of product offerings, increased hiring, and the development of embedded insurance solutions for its partners.

Within the next 12 months, Vouch aims to enable all of its partners’ customers to purchase Vouch insurance directly through their websites. The company’s headcount has more than doubled, growing from 55 employees in September 2020 to 125 currently, and Hodges anticipates continued growth.

Alignment with the Innovation Economy

Greg Becker, president and CEO of SVB Financial Group, highlighted the alignment between Vouch’s mission and SVB’s shared objective of “empowering the innovation economy.”

“Vouch is actively contributing to this goal by helping startups and tech innovators mitigate their risks as they grow,” Becker stated via email. “We are proud to co-lead Vouch’s latest funding round, providing startups with access to the insurance they need as they expand their teams, increase their customer base, and secure further funding.”