Friday, October 22, 2021

Inside Marqeta’s fintech mega-IPO – TechCrunch

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Welcome back to The TechCrunch Exchange, a weekly newsletter on startups and markets. It is largely based on the daily column featured in Extra Crunch, but free and made for your weekend reading. Do you want it in your inbox every Saturday? Register here.

Clever? Let’s talk money, startups, and spicy IPO rumors.

A little scheduling note: The Exchange column and newsletter are off next week (6/14 to 6/19), returning to regular 6/21 service after I get some sleep and come up with some new ideas . – Alex

The stock market entered the mostly bullish IPO market earlier this week, noting that Monday.com and Marqeta made some pretty big points in recent days. The unicorn market looks reasonably healthy, in other words, which in itself bodes well for third-quarter liquidity.

But today, instead of taking a bigger picture, I want to focus only on Marqeta’s offering. For fintech companies, the company’s good price and strong share price performance is a positive outcome. But how does the company itself feel about its debut?

To handle that, The Exchange spoke with the company’s founder and CEO, Jason Gardner, after his company listed its initial public offering and went public. To annoy my dear friend and TechCrunch superior Henry Pickavet, we’ll proceed with bullets so we can cover a lot of ground and stay within the word count:

  • Gardner said he spent 34 hours asking questions and answers during Marqeta’s tour. And that he loved it. This detail has little to do with the company’s initial public offering, but does provide a small perspective on the CEO himself. It takes many hours to answer the same 13 questions. I would have gone crazy.
  • Marqeta traded above the range, raising more money than he could have anticipated. According to Gardner, the company will seek inorganic growth (acquisitions), especially in markets outside the United States, as they make sense, except that he has a high level of technological quality; Gardner said he will not buy companies with lower technology, as you would have to rebuild them after buying them. Shadow.
  • Marqeta started talking internally about its IPO 18 months before it happened, which eased the transition to being a public company. I guess Gardner’s point here that going public is a cultural push, as well as an accounting job. Which makes the SPACs seem a bit more arrogant, if I can take the point one step further.
  • What has changed for Gardner as his company has matured and now gone public? His perspective has spread further, from months to years; I guess this will continue as Marqeta expands even more.

Marqeta’s actions are up to another 6% as I write to you on Friday afternoon.

What about Embroker?

As The Exchange reported on Friday morning, the global insurtech market is more than hot in both the United States and Europe. Evidence of the fact is not hard to find, but a good indication of the current insurtech market climate is Embroker’s $ 100 Million Round Earlier in the Week.

Embroker is a San Francisco-based insurtech company that sells commercial insurance. Its products include cyber coverage, business owner coverage, professional liability, and the like. Maybe it’s related to Next Insurance, another insurtech provider with a business focus that recently generated a big round.

The Exchange team, fascinated as we are by insurtech as a larger category, wanted to ask the Embroker team a few questions. Here’s a question and answer session that was conducted via email. Bold via TechCrunch. The questions have been carefully edited for clarity:

From a high level, are the loss ratios offered by the commercial insurance products that Embroker offers better / worse / comparable to what we know in, for example, consumer auto insurance?

Yes, our loss ratios are substantially better than other insurance products, such as auto or homeowners insurance. And our loss rates so far compare favorably with other established commercial carriers for small businesses.

When the company was negotiating the valuation for the new round, did insurtech’s recent IPOs get into the pricing discussion?

Recent insurtech IPOs have provided valuation benchmarks in the public market, which is great for the space in general. But we don’t use them as direct offsets because our loss ratio, retention, and sales and marketing efficiency are substantially better than other insurtechs currently in the public markets.

We found it interesting that Embroker offers “cyber risk insurance”. Given the growing market concerns regarding ransomware, is that product in higher demand than before? Is it as financially lucrative as the company’s other lines of insurance?

Given the recent number of high-profile cyber claims, we expect cyber to be a rapidly growing line of insurance both in terms of demand and in terms of prices. While claims activity is likely to continue to increase, our models for cyber have been effective in pricing risk appropriately and we hope that the investments we are making on our platform will allow us to continue to do so.

Specifically for startups, we currently also bundle technology E&O and cyber insurance as many founders were covered by separate E&O or cyber policies when it came to these emerging threats.

Lastly, we’re curious what the company’s marketing spend has looked like over time – are you finding S&M avenues just as efficient as you did when Embroker was smaller?

While we have increased our marketing spend substantially each year, it has actually been steadily declining as a percentage of revenue as we achieve greater market share within the verticals we are targeting as that drives growth. meaningful organic to us. For example, we currently insure a large enough percentage of all active corporate-backed US companies that many companies simply know they come to us for insurance when they raise funds.

Sure, it’s a lot of words. But inside the block there are key nuggets. That Embroker considers his economy better than what we can see in most public compositions is remarkable; the fact implies that there is a broader economic difference between insurtech companies than the few IPOs we have seen have led us to believe.

And that Embroker has operating leverage, at least when it comes to its S&M spending. That could indicate that the insurtech market is not then crowded to make smart business operations impossible. Surely that terrible turn of events can be solved with a few hundred million more Tiger and his rivals.

Closing today, in the rhythm of the OKR software – more here – Koan reported 82% customer growth this week. For a tough player in a crowded market, that’s a great result. A start-up to see I guess.

Chat with you in about ten days. – Alex

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