The Diff | Byrne Hobart | Substack

Still, becoming a real, regulated insurance carrier meant Lemonade needed more time to launch and more capital to grow. (A carrier typically must maintain cash reserves equal to at least a third of revenue, Sagalow notes.) So far, the capital has flowed—and from some big names. Through 2017, Lemonade raised $180 million in four rounds. In 2019, it ... See more

The biggest risk exists for companies that have raised at high valuations but can’t get to cash flow positive on the money in the bank and thus will need to raise again in the future.

The bearish case is that these businesses are very capital intensive to build, as shown by the large and repeated capital raises, and they’ll need to show a large return to justify that capital. That means operating at scale, and also escaping from the DTC markets into the large employer-driven insurance markets, where the incumbents will remain in... See more