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June 22, 2020

3 questions for Lemonade’s IPO

While we await a fresh IPO filing from heavily backed insurtech startup Lemonade, let’s talk a little more about its public offering.

Since our first dig into its S-1 filing, TechCrunch has spoken to a number of investors and operators in Lemonade’s space to find out if our initial read was off — were we being too generous or too kind to Lemonade after reading its somewhat complex financial results?

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The short answer is not really, though there are some positive notes and themes worth highlighting. This morning, let’s ask three questions about Lemonade’s IPO filing that will help us understand what’s ahead for the SoftBank-backed unicorn.

Three questions

1. How quickly can Lemonade accelerate its rental insurance graduation rate?

On the theme of things that bode well for Lemonade is its ability to “graduate” customers from low-cost rental insurance to more lucrative products.

In its S-1 filing, Lemonade noted this fact early on. After stating that a “an entry-level $60 a year [rental] policy [corresponds] to $10,000 of possessions,” the company said that as its customers age, they tend to buy more insurance and sometimes swap rental plans for homeowner policies. Moving from the former to the latter is graduating in the company’s parlance.

If many customers moved from rental insurance to homeowner insurance while keeping Lemonade as their provider, the company could do very well, as illustrated by this section of its SEC filing:

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