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In preparation of @Lemonade_Inc's IPO, a motley crew of writers and investors dug into the company's S-1.
thegeneralist.substack.com/p/the-s-1-club…
Amazing working with @ByrneHobart @daveambrose @fkpxls @jon_hale @tanayj @mengxilu on this!
/Thread
In preparation of @Lemonade_Inc's IPO, a motley crew of writers and investors dug into the company's S-1.
thegeneralist.substack.com/p/the-s-1-club…
Amazing working with @ByrneHobart @daveambrose @fkpxls @jon_hale @tanayj @mengxilu on this!
/Thread
Before we dig in, qq. How do folks feel about Lemonade? Assuming opening price of $24.50, you are...?
1. TL;DR
This is a SoftBank business. Revenue and premiums have scaled fast. So has marketing spend.
The big question: can they grow *beyond* renters' insurance and capture share in higher value product lines?
This is a SoftBank business. Revenue and premiums have scaled fast. So has marketing spend.
The big question: can they grow *beyond* renters' insurance and capture share in higher value product lines?
2. Insurance by the numbers
- $5T global market
- 11% of US GDP
- 12 of the Fortune 100
- Employs 2.69MM domestic
- $5T global market
- 11% of US GDP
- 12 of the Fortune 100
- Employs 2.69MM domestic
3. Reasons @WarrenBuffett loves the industry
- Price in solid margins
- Great cashflow profile
- Make money off the float
- Price in solid margins
- Great cashflow profile
- Make money off the float
4. Market
Massive, sleepy, fragmented, analog.
In homeowners' insurance, 93% is still sold by agents. Not to say online insurance isn't sufficiently large. Already a $31B industry in the US.
Lemonade's share is still small compared to @Allstate and @StateFarm.
Massive, sleepy, fragmented, analog.
In homeowners' insurance, 93% is still sold by agents. Not to say online insurance isn't sufficiently large. Already a $31B industry in the US.
Lemonade's share is still small compared to @Allstate and @StateFarm.
5. Lemonade's history
Started in 2015 when @daschreiber decided to leave @powermat and wake up a sleeping giant. Added @shai_wininger shortly afterwards.
(How can 2 of the most interesting execs both have less than 10K followers? 👈👈)
Started in 2015 when @daschreiber decided to leave @powermat and wake up a sleeping giant. Added @shai_wininger shortly afterwards.
(How can 2 of the most interesting execs both have less than 10K followers? 👈👈)
6. Management team
I tipped my hand in the last tweet. But this is a baller team. Extremely talent communicators in an opaque market. And great paid marketing chops from @shai_wininger's time founding @fiverr.
Also, employees seem to really respect leadership. Per @Glassdoor.
I tipped my hand in the last tweet. But this is a baller team. Extremely talent communicators in an opaque market. And great paid marketing chops from @shai_wininger's time founding @fiverr.
Also, employees seem to really respect leadership. Per @Glassdoor.
7. Team+
Beyond founders, there are some skilled operators.
- Tim Bixby, CFO (f'mly @Shutterstock)
- John Peters, CIO (f'mly @LibertyMutual)
- Jorge Espinel, Chief BD Officer (@Spotify)
This last role is v interesting. Worth watching what Espinel does over the coming Qs.
Beyond founders, there are some skilled operators.
- Tim Bixby, CFO (f'mly @Shutterstock)
- John Peters, CIO (f'mly @LibertyMutual)
- Jorge Espinel, Chief BD Officer (@Spotify)
This last role is v interesting. Worth watching what Espinel does over the coming Qs.
8. Trivia
The company holds the world-record for paying an insurance claim. It took "AI Jim" 3 seconds.
lemonade.com/blog/lemonade-…
The company holds the world-record for paying an insurance claim. It took "AI Jim" 3 seconds.
lemonade.com/blog/lemonade-…
9. Trivia+
Lemonade got into a spat w @TMobile who threatened to sue for using magenta.
Response from @daschrieber:
"𝗬𝗼𝘂’𝗿𝗲 𝘁𝗮𝗹𝗸𝗶𝗻𝗴 𝗮𝗯𝗼𝘂𝘁 𝗼𝗻𝗲 𝗼𝗳 𝘁𝗵𝗲 𝘁𝗵𝗿𝗲𝗲 𝗶𝗻𝗸 𝗰𝗮𝗿𝘁𝗿𝗶𝗱𝗴𝗲𝘀 𝗶𝗻 𝗲𝘃𝗲𝗿𝘆 𝗽𝗿𝗶𝗻𝘁𝗲𝗿 𝗶𝗻 𝘁𝗵𝗲 𝘄𝗼𝗿𝗹𝗱..." 😂
Lemonade got into a spat w @TMobile who threatened to sue for using magenta.
Response from @daschrieber:
"𝗬𝗼𝘂’𝗿𝗲 𝘁𝗮𝗹𝗸𝗶𝗻𝗴 𝗮𝗯𝗼𝘂𝘁 𝗼𝗻𝗲 𝗼𝗳 𝘁𝗵𝗲 𝘁𝗵𝗿𝗲𝗲 𝗶𝗻𝗸 𝗰𝗮𝗿𝘁𝗿𝗶𝗱𝗴𝗲𝘀 𝗶𝗻 𝗲𝘃𝗲𝗿𝘆 𝗽𝗿𝗶𝗻𝘁𝗲𝗿 𝗶𝗻 𝘁𝗵𝗲 𝘄𝗼𝗿𝗹𝗱..." 😂
10. Product
If you've used Lemonade, you'll know its slick and easy to use. Key differentiation is that UX + use of AI/ML. The behavioral economics of the "Giveback" program is also important. They've got @danariely to thank for that...
If you've used Lemonade, you'll know its slick and easy to use. Key differentiation is that UX + use of AI/ML. The behavioral economics of the "Giveback" program is also important. They've got @danariely to thank for that...
11. Product lines
Right now, it's just renters' and homeowners' insurance. That's a pretty limited slate, especially given the consumer desire to bundle.
Over time, Lemonade wants to level-up into different spaces. Pet care is apparently coming in 2020.
Right now, it's just renters' and homeowners' insurance. That's a pretty limited slate, especially given the consumer desire to bundle.
Over time, Lemonade wants to level-up into different spaces. Pet care is apparently coming in 2020.
12. Unit economics
The reason product expansion matters? LTV : CAC. As it stands, we estimate a ratio of 1.26. Retention is part of the problem.
Marketing efficiency is improving, but for things to get really interesting, LMND needs customers to buy higher-value premiums.
The reason product expansion matters? LTV : CAC. As it stands, we estimate a ratio of 1.26. Retention is part of the problem.
Marketing efficiency is improving, but for things to get really interesting, LMND needs customers to buy higher-value premiums.
*13. A quick aside on Lemonade's model*
Using reinsurance is nothing new. But Lemonade takes it to another level. They hand off 75% of premiums, eliminating risk.
By doing so, they can keep less cash on hand, and limit gross margin volatility.
Using reinsurance is nothing new. But Lemonade takes it to another level. They hand off 75% of premiums, eliminating risk.
By doing so, they can keep less cash on hand, and limit gross margin volatility.
14. Financial highlights
Three questions to ask:
- Is growth sustainable?
- Is there a path to profitability?
- Is the underlying business model working?
Our take? Yes. Yes. And...kind of.
Three questions to ask:
- Is growth sustainable?
- Is there a path to profitability?
- Is the underlying business model working?
Our take? Yes. Yes. And...kind of.
15. Financial highlights+
- Growth is great. It seems sustainable bc while premiums are up +138% YoY, gross loss is down 296 % pts.
- Premiums are growing per customer. Nice. S&M + G&A costs are definitely high, but there's reason to believe these will taper down over time
- Growth is great. It seems sustainable bc while premiums are up +138% YoY, gross loss is down 296 % pts.
- Premiums are growing per customer. Nice. S&M + G&A costs are definitely high, but there's reason to believe these will taper down over time
16. Concerns...
Remember that LTV: CAC ratio? The way to solve that is selling more expensive premiums to customers over time.
LMND wants to capture users as they "graduate" to homeowners' insurance. That hasn't happened yet...
Only 9.8% of home policies are ex-rental
Remember that LTV: CAC ratio? The way to solve that is selling more expensive premiums to customers over time.
LMND wants to capture users as they "graduate" to homeowners' insurance. That hasn't happened yet...
Only 9.8% of home policies are ex-rental
17. SOFTBANK!!
Masa casts a long shadow. When you look at LMND's financing history, @SoftBank's fingerprints are all over it.
Of $480MM raised, 87.5% came from SB.
@daveambrose @ByrneHobart @jon_hale @fkpxls and I shared our takes on this fact, referencing @chamath.
Masa casts a long shadow. When you look at LMND's financing history, @SoftBank's fingerprints are all over it.
Of $480MM raised, 87.5% came from SB.
@daveambrose @ByrneHobart @jon_hale @fkpxls and I shared our takes on this fact, referencing @chamath.
18. Why now?
Why not? The markets are friendly towards emerging growth co's (@vroomcars @ZoomInfo) and other insurtech plays are doing well (@SelectQuoteIns)
Plus, Lemonade's actually done well, despite #covid19.
Why not? The markets are friendly towards emerging growth co's (@vroomcars @ZoomInfo) and other insurtech plays are doing well (@SelectQuoteIns)
Plus, Lemonade's actually done well, despite #covid19.
19. Thoughts from smart ppl...
"𝐈’𝐝 𝐜𝐨𝐧𝐬𝐢𝐝𝐞𝐫 𝐦𝐲𝐬𝐞𝐥𝐟 𝐚 𝐜𝐚𝐫𝐞𝐟𝐮𝐥 𝐛𝐮𝐥𝐥...[𝐁𝐮𝐭 𝐋𝐌𝐍𝐃] 𝐧𝐞𝐞𝐝𝐬 𝐭𝐨 𝐬𝐭𝐚𝐫𝐭 𝐚𝐜𝐪𝐮𝐢𝐫𝐢𝐧𝐠 𝐭𝐡𝐞 𝟒𝟎+ 𝐜𝐫𝐨𝐰𝐝 𝐬𝐨𝐨𝐧." @BUSlNESSBARISTA
"𝐈’𝐝 𝐜𝐨𝐧𝐬𝐢𝐝𝐞𝐫 𝐦𝐲𝐬𝐞𝐥𝐟 𝐚 𝐜𝐚𝐫𝐞𝐟𝐮𝐥 𝐛𝐮𝐥𝐥...[𝐁𝐮𝐭 𝐋𝐌𝐍𝐃] 𝐧𝐞𝐞𝐝𝐬 𝐭𝐨 𝐬𝐭𝐚𝐫𝐭 𝐚𝐜𝐪𝐮𝐢𝐫𝐢𝐧𝐠 𝐭𝐡𝐞 𝟒𝟎+ 𝐜𝐫𝐨𝐰𝐝 𝐬𝐨𝐨𝐧." @BUSlNESSBARISTA
20. Thoughts from smart ppl+
"𝐓𝐡𝐞 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐢𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐢𝐬 𝐠𝐨𝐢𝐧𝐠 𝐭𝐨 𝐛𝐞 𝐰𝐞𝐚𝐤𝐞𝐧𝐞𝐝...𝐚𝐧𝐝 𝐡𝐞𝐫𝐞 𝐜𝐨𝐦𝐞𝐬 𝐭𝐡𝐢𝐬 𝐟𝐢𝐬𝐭 𝐨𝐟 𝐬𝐭𝐨𝐧𝐞 𝐜𝐚𝐥𝐥𝐞𝐝 𝐋𝐞𝐦𝐨𝐧𝐚𝐝𝐞." @profgalloway
"𝐓𝐡𝐞 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐢𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐢𝐬 𝐠𝐨𝐢𝐧𝐠 𝐭𝐨 𝐛𝐞 𝐰𝐞𝐚𝐤𝐞𝐧𝐞𝐝...𝐚𝐧𝐝 𝐡𝐞𝐫𝐞 𝐜𝐨𝐦𝐞𝐬 𝐭𝐡𝐢𝐬 𝐟𝐢𝐬𝐭 𝐨𝐟 𝐬𝐭𝐨𝐧𝐞 𝐜𝐚𝐥𝐥𝐞𝐝 𝐋𝐞𝐦𝐨𝐧𝐚𝐝𝐞." @profgalloway
21. Net/net
Fast-growth in a sleepy industry. A business model that's improving. And a talented executive team. There's a lot to like here.
The biggest concerns are weak graduation rate, and the related LTV : CAC ratio.
Fast-growth in a sleepy industry. A business model that's improving. And a talented executive team. There's a lot to like here.
The biggest concerns are weak graduation rate, and the related LTV : CAC ratio.
Do I dare try another poll? Let's go for it. In 1 month, Lemonade will trade at...
Last thing...
There are so many awesome biz writers/podcasters out there. Thx for sharing amazing work + inspiring me to be better.
@BUSlNESSBARISTA
@packyM
@adam_keesling
@dburben
@nbt
@aashaysanghvi_
@TurnerNovak
@jamesbeshara
@lennysan
👉👉 Check out their stuff!
There are so many awesome biz writers/podcasters out there. Thx for sharing amazing work + inspiring me to be better.
@BUSlNESSBARISTA
@packyM
@adam_keesling
@dburben
@nbt
@aashaysanghvi_
@TurnerNovak
@jamesbeshara
@lennysan
👉👉 Check out their stuff!
