Sequoia Capital, one of the best known venture capital firms in Silicon Valley, has invested in many notable startups—including Apple, Google, PayPal, and, more recently, Stripe and Instagram. Now, the firm is part of a $13 million seed round (alongside Aleph Ventures) in Lemonade, a peer-to-peer startup focused on the traditionally sleepy property insurance industry that launched in April.
Venture capitalists interested in the burgeoning world of fintech are bullish on insurance, mainly because the industry is still so antiquated. For Sequoia Capital, the investment in Lemonade marks one of the largest seed rounds in the firm’s history. Seed rounds are reserved for startups in their earliest stages, typically those still developing their products and services.
“It is very unusual for a company to receive $13 million in an initial round of funding,” said Haim Sadger, a partner at Sequoia Capital, in a statement. “But it is rarer still to find such accomplished founders tackling such a sizable industry with such a compelling solution.”
New York City-based startup was co-founded by CEO Daniel Schrieber and Shai Wininger. Schreiber was previously the president of Powermat, a wireless charging company, and an executive at Sandisk before that. Wininger was a co-founder of Fiverr.com, a marketplace startup that helps users find people to carry out tasks, and has raised $110 million in funding.
Peer-to-peer technology is at the heart of companies like Uber and Airbnb, allowing users to trade goods, services, and even capital. While there are some startups using the peer-to-peer model in insurance, there aren’t many due to the highly regulated and complex nature of the industry, which has scared off entrepreneurs in the past.
Schreiber told Quartz that the company hopes to launch its platform in the first half of 2016. And while he said Lemonade won’t let people buy and sell insurance directly, he didn’t offer specifics on how it would work. Another insurance startup, London-based Guevara, lets car owners pool their insurance premiums into small groups, and if the premiums aren’t paid out by the end of the year, the group gets to use the remaining money to offset costs next year.
Schreiber said there’s a fundamental problem with insurance, because insurers make their money by rejecting claims, which doesn’t benefit the customer, he told Quartz. “You can’t just slap an app on the existing architecture, you have to go back to basics,” starting with the business model.