Zebra Hits $100M Run Rate & Profitability

Following a period of significant funding for insurance technology startups at the beginning of the year, and Lemonade’s successful public offering during the summer with a substantial valuation, the considerable investment in Hippo and the anticipated IPO of Root demonstrate that 2020 has been a dynamic year for both startups and established private technology firms concentrating on the insurance sector.

This trend continues with today’s announcement from The Zebra, revealing that the company has achieved an approximate $100 million annualized revenue and, significantly, has become profitable.

TechCrunch last reported on this car and home insurance comparison platform in February, when it secured $38.5 million in Series C funding, ultimately totaling $43.5 million with Accel as the lead investor. We highlighted then that the company was joining “Insurify ($23 million), Gabi ($27 million) and Policygenius ($100 million) in securing new funding this year.”

During its Series C funding round, The Zebra shared key financial data, including $37 million in revenue for 2019 and a $60 million annual revenue run rate around the time of the investment. The company also projected the possibility of doubling in size throughout the current year, exceeding a $100 million run rate by year-end.

Considering this background, let’s examine the company’s more recent results.

A shifting marketplace

The Zebra reported a net revenue of $6 million in May 2020, as stated by the company. This figure increased to approximately $8 million by September. Multiplying $8 million by 12 results in $96 million, which is nearly $100 million. A conversation with The Zebra’s CEO, Keith Melnick, revealed that the company’s September revenue was very close to $8.3 million, positioning it at a $100 million annual run rate.

Considering the precedent set by the $100 million ARR club, which often allows for some flexibility in startup size assessments, it is reasonable to state that The Zebra has achieved a revenue scale of $100 million, even if its final September revenue is slightly below that mark. Based on its current growth trajectory, the company is projected to reach a nine-figure annual revenue pace in October.

Melnick indicated that while the majority of The Zebra’s revenue is not currently recurring, a larger percentage is becoming so. According to the CEO, recurring revenue accounted for roughly 2-5% of The Zebra’s total revenue last year, but has risen to around 10% presently. (Commissions earned from insurance policies that The Zebra directly manages and are subsequently renewed contribute to this recurring revenue stream.)

What fueled the company’s rapid growth in 2020? In part, changes within the insurance market played a role, as insurance networks reliant on in-person sales experienced disruptions due to COVID-19. Insurance marketplaces such as The Zebra were able to provide assistance, facilitating the transition of some offline demand to online channels. Melnick explained this situation to TechCrunch, also noting that his company was able to capitalize on lower-cost advertising inventory when demand decreased in certain areas.

Several factors seem to have contributed to The Zebra’s substantial growth throughout 2020. Our next inquiry focuses on whether other companies operating in the insurtech startup sector have observed comparable acceleration. Further details on this topic will be available shortly.

The company also announced that it is now profitable. Recognizing that the term “profit” can be interpreted differently in 2020, we sought clarification regarding the company’s specific meaning. According to the CEO, the company is currently generating positive net income, which represents the most comprehensive measure of profitability as it encompasses all costs, including non-cash expenses that startups sometimes exclude to present more favorable results.

If other participants in the insurtech space are following similar growth patterns, the investments made in the sector earlier in the year will appear particularly insightful.