The 3 Must-Have Types of Capital almost Every InsurTech Startup Needs
If you're an InsurTech founder, understanding these three types of capital is crucial. Over 1,000 startups in the insurance industry are competing for funding, but many don’t realize that success requires more than just securing money—it requires the right types of capital. Let’s dive into the three must-have forms of capital every InsurTech startup needs to survive and thrive.
1. Investment Capital
Investment capital lays the groundwork for your startup. Unless you’ve bootstrapped your way to profitability, seed and venture capital are vital sources of funding.
Why do you need it?
Startups in the InsurTech space often lack the operating history or size to access public markets or traditional bank loans. Investment capital provides the resources to establish operations and scale effectively.
💡 Tip: Many incumbent insurers act as seed or venture capital investors, offering funding to startups with promising potential.
2. Working Capital
Working capital is the fuel that keeps your operations running smoothly. It’s essential for covering daily expenses like:
Payroll and bills
Preparatory work for projects
Product development
Customer acquisition in B2C and B2B markets
This type of capital ensures your venture maintains momentum while building innovative solutions.
💡 Did You Know?
Incumbent insurers often support startups by providing commission payments, project compensation, or funding within the scope of Proof of Concept (PoC) initiatives.
3. Underwriting Capital
Underwriting capital, also known as underwriting capacity, is critical for startups developing insurance products or innovative business models. This type of capital enables startups to finance potential claims and indemnify policyholders, building trust with customers.
💡 Key Insight:
Underwriting capital is uniquely provided by primary and re-insurers, making partnerships with these entities a strategic necessity for InsurTech startups.
The Takeaway
In summary, almost every InsurTech startup needs three key types of capital to thrive:
Investment Capital: To set up operations and drive growth.
Working Capital: To cover ongoing expenses, PoC initiatives, and customer acquisition.
Underwriting Capital: To manage potential claims and indemnify policyholders.
Final Thought:
Incumbent insurers can provide all three types of capital, but underwriting capital is solely the domain of primary and re-insurers. With the right mix, your startup can build a foundation for lasting success.