The Investor Corner provides insight relevant to creating opportunities by recognizing the approach of Venture Capital (VC). With a greater understanding, startups, early-stage, and growth-driven businesses can mitigate risks to advance potential rewards. One of the most significant mistakes is believing VCs seek only good ideas. However, there is more to the story as they pursue good managers who understand risk and have the means to secure a return on investment with the ability to scale.
Summary of Insights
(1) Insurtech sector to encounter obstacles
The Insurtech industry is experiencing a slowing in the adoption of innovative technologies that drive companies into cost savings, efficiency, and productivity across the insurance value chain. Meanwhile, with the increase in competition, COVID-19, and additional factors that have motivated innovation in the sector, many analysts acknowledge that venture funding for insurance companies will soon slow for the foreseeable future.
After much research and evaluation, Insurtech companies are continually reviewed as overpriced in the private markets. Regarding private markets, Insurtech has experienced a shortfall of 40% over the past 12 months.
Because of the first-quarter results, Insurtech companies on a global scale raised $2.6 billion across “154” Venture Capitalist (VC) deals, representing a 13% quarter-over-quarter decline in deal value, reflecting a critical reduction of invested capital that began in the 3-quarter, 2020.
During the past quarter, the median pre-money valuation for VC-backed, late-stage Insurtech companies dropped 61.9% to $68.5 million.
Top InsurTech Startups to Watch
Y A S Micro Insurance
(2) Encryption Innovation (EI)
We recently uncovered that EI innovation in today’s market drives startup growth. Historically EI creates large enterprises, and with the moderate increase in cloud computing, we will probably witness a quantum and artificial intelligence yield the same. Consequentially, the outcome may breed a new generation of vendors’ dedication to securing the internet.
Our latest research signifies the commercialization and mainstream adoption relevant to materializing encryption protocols, underlying authentication, expanding emerging encryption protocols’ commercialization, and mainstream adoption, highlighting authentication, quantum-safe cryptography, and privacy-improved computing.
While developing products in these spaces should be considered an opportunity for startups as a positive venture to form and commercialize the most advanced breakthroughs as spinoffs from large companies.
The venture movement significantly suggests that commercialization of the FIDO2 standard (both in mobile and desktop) environments indicates innovation initiatives in public-key encryption producing ultimately large companies.
FIDO2 quantum-safe cryptography will probably achieve mainstream adoption in two years, while privacy-improved computing suggests more development time.
(3) Market correction seeks Series A and seed Startups.
After months of resilience to market disruption, Series A (first significant round of venture capital financing) and seed deals uncover considerable pricing pressure. Applying valuations for outstanding Series A deals which continue to decline by 57% over recent months, according to Cendana Capital, which invests in numerous prominent seed funds. The outcome will indeed reveal that seed-stage startups will probably experience valuation declines.
VC organizations are beginning to demand “more” companies develop robust revenue streams before requesting a Series A invitation. Changes to the market often come quickly and unannounced; however, trends can often be slow-to-show in a comprehensive dataset. Often deal-by-deal, without being necessarily reliable, remains the criminating evidence that offers investors insight when committing to a strategic investment. Likewise, VCs have recently adopted a conservative approach to early-stage deals while the situation has become more selective, targeting startups with substantial revenue targets compared to the past expectations.
Last year at this time, the Series A deals were relevant to raising approximately $20 million during a post-money valuation of $120 million. That round size and valuation most recently confirmed a shortfall of roughly $10 million and $50 million respectively. The outcome for founders suggests a concentration of increasing stakes in the companies they own.
Stay tune as there is "More" to come!