Coalition, an InsurTech startup focused on cyber insurance and security, disclosed it raised $90 million in new venture financing earlier this year to fuel development of new products and a global expansion.
“We are in the fortunate position that we don’t need to raise funds again for quite some time, if ever, but I expect that it will be more challenging for companies to fundraise in the current environment,” Joshua Motta, Coalition’s founder and CEO, told Carrier Management.
The large Coalition financing is a significant announcement in light of the ongoing COVID-19 pandemic, which was a factor behind the nearly 50 percent drop in venture financing during Q1 2020 compared to the same period in 2019. Experts predicted financings would take place that were already in the pipeline, but the drop in new venture funding beyond that is expected to continue.
Motta said the San Francisco-based company closed its latest funding round just before the city’s shelter-in-place order took place earlier in the spring. The new financing brings Coalition’s total capital raise to $125 million since its late-2017 launch.
Valor Equity Partners led the round, with Felicis Ventures, Greyhound Capital and Coalition’s existing investors also participating.
Coalition is an MGA backed by Swiss Re Corporate Solutions and Argo Group that sells cyber insurance and offers cybersecurity tools to small and midsize businesses. It is licensed to sell insurance nationally. While Coalition did not disclose financials, it said its customer base now surpasses 25,000. Coalition said it employs 106 people presently, 20 of which have been hired since March. Another 100 hires are planned over the next 12 months, Motta said.
The company plans to use its cash infusion to fuel expansion on multiple levels.
An international expansion is part of the plan, starting initially with Canada. Coalition said it is also focused on developing additional insurance products that address a new range of threats technology brings to both tangible and intangible assets. At the same time, the company said it will continue to make available at no cost a number of state-of-the-art cybersecurity tools for small and medium-size businesses. Those tools go along with its usual security and incident response services and “comprehensive cyber insurance to help organizations recover from failures and breaches.”
Opportunity in Tough Times
Motta acknowledged that Coalition is expanding during a tough economic period, but he said that the company is growing at the right time.
“Organizations are now more reliant on technology than they have ever been and are now more in need of solutions to survive catastrophic security failures and data breaches. Yet the scope of many current cyber insurance products is limited to after-the-event reimbursement,” Motta said.
He added that Coalition sees businesses as wanting cyber cover and related products to prevent incidents from happening along with support when loss events take place. The market, he said, is bearing this out even during the pandemic.
“This appears to be playing out as we’ve seen a surge in demand for our offerings in both April and May,” Motta said.
In terms of the current venture investment environment, Motta said that InsurTech startups will still attract investment, even in tough times.
“Great ideas and teams will always find backing in any economic environment, and many of the most innovative and successful technology companies emerged out of the last financial crisis (including my prior company, [web performance and security company] Cloudflare),” Motta said. “Businesses that solve hard problems with sustainable business models will emerge as the winners from the current crisis.”