Mark Linen had already figured out the hard part: In 2019, he quit his job as a truck driver to start a bakery in Houston, Texas. But Brotha Bakes, his new business, founded that November, needed insurance coverage. That’s when he came across Next Insurance.
“Based on the pricing, and for me, personally, the ease of the website was the thing that kind of got me,” Linen tells Fortune. Later, he was featured in Next’s “built by business” national advertising campaign.
Linen, whose mason jar-ensconced treats include Reddie Murphy red velvet cake and Mariah Carrot carrot cake, remains pleased with the decision. “I had to change the policy when I moved into this commercial space that I am in now, and I was able to do it all online in a couple minutes, so that was one of the things that did it for me,” he says.
Mark Linen, founder of Brotha Bakes bakery in Houston, Texas, is a Next Insurance customer. His shop sells baked goods in mason jars.
Thanks to entrepreneurs like Linen, Next Insurance grew at rapid clip through 2020, despite the ravages of the coronavirus pandemic. The six-year-old insurance-tech startup, based in Palo Alto, Calif., last year chalked up $200 million in gross written premiums, industry parlance for the total revenue it expects to receive from customers over the lifetime of their policies, before payouts to reinsurers. The figure doubles the company’s expected, long-term revenue run rate from the year-prior estimate.
That’s not the only business metric that’s doubling at Next. On Wednesday, the company said it plans to announce that it’s raised $250 million in new venture capital funding. The deal doubles the company’s private valuation to $4 billion a mere six months after its last fundraising.
A recovery in the making
Guy Goldstein, Next’s cofounder and chief executive, says 2021 is already poised to be a better year for business than last year. That holds true not just for Next, but for the more than 200,000 customers and counting across the U.S., to whom the company’s fortunes are tied.
“We absolutely see a rebound,” says Goldstein of the COVID-19 bounce-back. He cites increased activity across the restaurant and retail sector as leading indicators of a recovery in the making.
Pictured here are Next Insurance’s cofounders: Guy Goldstein, CEO (center); Alon Huri, chief growth research officer (right); and Nissim Tapiro, chief technology officer (left).
The lead investors in Next’s latest financing round expect the economic uptick to continue too. As more mom-and-pop shops get back in gear, the investors are particularly excited about the opportunity presented by “embedded financial services,” a fancy way of saying plugging one’s financial products into other software.
“We can see this very strongly in Asia with companies like AliPay and WeChat, they provide their customers with insurance, which is embedded in their systems,” says Gil Arazi, who led the Next deal for FinTLV, a Tel Aviv-based venture capital fund that backs so-called insuretech startups.
Next is following the Chinese “fintech” playbook. The number of places small businesses can find its offerings is expanding. Earlier this month, Next bought AP Intego, a digital insurance agency that has tight integrations with other small business-serving companies, such as Intuit, Gusto, Square, and Toast.
Small business ‘sex appeal‘
Often, the small business segment that is Next’s specialty gets overlooked.
Big insurers tend to favor big businesses and individuals, so “small businesses kind of get stuck somewhere in between, the no man’s land,” says Michael Brown, an investor at Boston-based Battery Ventures who co-led the Next deal alongside FinTLV.
Many of the biggest small-business insurers, such as State Farm, have less than 6% market share in the U.S., so the market is highly fragmented, Brown notes. Meanwhile, “a lot of the time and attention and I’ll say sex appeal is on the personal lines,” meaning insurance that covers individuals’ death, injury, or property losses, he says.
Brown points to buzzier companies, such as Hippo, Lemonade, and MetroMile, that have greater name recognition, partly because they cater to the consumer-focused category. But “I think there’s as much, if not more interest, or more interesting opportunities, on the commercial lines,” where companies like Next focus, he adds.
With the latest cash injection, Next plans to go big on marketing campaigns, like the one that featured Linen and his baked goods. “We have an ambition to be the Geico of small business in the United States,” says Goldstein, who sold his last company, Check, to Intuit for $360 million in 2014.
“You don’t become Geico by sitting in the basement and being quiet,” Goldstein says. “You need to do a lot of advertisement and a lot of marketing and spend a lot for customers to know about you.”
