Israeli-founded Digital Insurer Lemonade Plans to Raise Up to $286 Million in IPO

Wall Street initial public offering values company at as much as $1.43 billion

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The Lemonade app.
The Lemonade app.Credit: Ofer Vaknin

Digital insurance startup Lemonade, which was started by Israelis Daniel Schreiber and Shai Wininger, said on Thursday it was looking to raise up to $286 million in its U.S. initial public offering, as the IPO market gains momentum.

Lemonade intends to sell 11 million shares in the IPO at a target price range of $23-$26 per share, according to a regulatory filing in New York. The higher end of the range gives the firm a valuation of $1.43 billion. However, at the high range of the valuation Lemonade will be selling shares at nearly 40% less than it did at its last private fundraising in June 2019.

Lemonade’s public listing comes amid a strong appetite for new stock offerings, especially those with an online-focused business against the backdrop of the coronavirus pandemic. Earlier this month, online used car seller Vroom raised $467.5 million in its IPO, and its shares more than doubled in value on debut.

Lemonade, which started in New York in late 2016, is part of a growing number of young companies looking to shake up the insurance sector through a better use of technology. The company says it has digitized the entire insurance process, replacing brokers and paperwork with algorithms and providing policies in as little as 90 seconds and claim payments in three minutes.

Last year, it raised $300 million in a funding round led by Japan’s SoftBank, which also included insurer Allianz, Alphabet’s venture capital arm GV, General Catalyst, OurCrowd and Thrive Capital.

Lemonade co-founders Shai Wininger and Daniel Schreiber.

Lemonade is not just a digital insurer but also employs a different financial model from traditional insurance companies. Instead of earning its profits from the difference between premiums it collects and the claims it pays out – which encourages traditional insurers to avoid paying claims in full if they can – Lemonade takes 25% of all premium income at the outset. The rest is used to pay claims. Lemonade donates any money left after paying claims to charities chosen by its customers.

As a result, Lemonade is registered a benefit corporation, or B Corporation, meaning it has a double mission – to earn a profit for its shareholders like any other ordinary business and to benefit the public, even if it could come at the expense of short-term profits.

In its prospectus, Lemonade said it is targeting clients that traditional insurers don’t, what it calls “next generation customers.”

“While the rest of the industry typically appeals to established consumers with the ‘I switched and I saved’ value proposition, we are largely competing with non-consumption, attracting consumers incumbents want, but doing so years before they are ripe for legacy providers,” the prospectus says.

The company intends to list its shares on the New York Stock Exchange under the symbol LMND.

Goldman Sachs, Morgan Stanley and Barclays are among the IPO underwriters.

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