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Lula, a startup which aims to be the ‘Stripe for insurance,’ has raised $35.5 million in a Series B funding round after experiencing a massive surge in customers.
When TechCrunch reported on Lula’s $18 million Series A raise in July of 2021, the company was focused on building an insurance API that aimed to “eliminate the need for companies to build their own insurance infrastructure.” Over time, Lula’s offering has evolved into a broader insurance offering that is designed to help companies reduce insurance premiums and insurance-related expenses for businesses. Lula now offers a range of tools, including risk management, claims management, policy management and access to insurance coverage.
The move appears to have been a smart one for the company, which says its customer base has grown significantly – from 99 businesses in February of 2022 to nearly 4,000 as of July. While Lula declined to reveal hard revenue figures, co-founder and president Michael Vega-Sanz told TechCrunch that monthly revenue has multiplied by 20 times since February 2022.
“The capital is going to get us to profitability in the next couple of quarters,” he said. “We expect to pass $100 million in annual recurring revenue over the next three to four quarters.”
Image Credits: Co-founders Matthew and Michael Vega-Sanz / Mariapaz Forlong / Forlong Photography
Currently, Lula works with car rental, trucking and logistic companies, as well as car sharing platforms. Customers and partners include Kyte, Turo and State National.
In May, the company launched a product for the trucking industry. Historically, truckers have been required to pay for 365 days a year of coverage, even if they are actually on the road for a fraction of the year. Lula touts that its offering gives trucking companies a way to pay for coverage for only when their trucks are actually on the road. Additionally, Lula’s API provides owner-operators with tools to vet drivers, do driver history checks, organize policies and manage claims.
The startup’s massive customer and revenue growth helped Lula increase its valuation by 5x compared to its 2021 raise, according to Vega-Sanz, who started the company in early 2020 with his twin brother, Matthew. He declined to share the exact amount but noted that Lula was able to raise the funds in a matter of weeks.
NextView Ventures and Khosla Ventures co-led the financing, which included participation from Founders Fund, Financial Technology Partners founder and managing partner Steve McLaughlin, Steve Pagliuca, co-chair of Bain Capital and co-owner of the Boston Celtics, and Nextera Energy.
The company plans to use its new capital in part to expand outside of the “wheels” space into industries such as logistics, while also continuing to expand its offerings. One way it plans to broaden its scope is to move into embedded insurance, he said.
Focus on capital efficiency
Vega-Sanz believes the company was able to raise capital fairly quickly, and at a higher valuation, because it worked very hard to be capital efficient over the past two years.
“In late 2021 and early 2022, there was way too much capital out there, and we were reaching the peak of a very bullish market,” he recalls. “We knew we needed to raise a series B but also that the market was likely going to go down significantly.”
So in preparation, the 115-person startup focused on capital efficiency and unit economics “well in advance” of its Series B raise. It was not an easy thing to do, he admits, when other companies were still offering overinflated salaries and exorbitant bonuses. In the end, though, Vega-Sanz thinks Lula was able to still attract quality employees because of its frugal mentality compared to other more lavishly-spending companies.
“When we talk to potential company executives or potential leadership or managers or just software engineers that are accustomed to these extremely high salaries, we don’t necessarily offer them what they’re accustomed to in terms of a compensation package,” Vega-Sanz admits. “And surprisingly, a lot of senior leadership appreciate coming into a company or a business that is not going to have to be in a position to raise capital in 12, 18, or 24 months and potentially take a down round.”
“They seem to really appreciate being part of a business where they don’t have to worry about in a few months if things really hit the fan that we’re going to have to go through company-wide layoffs,” he added.
Lula’s cost-conscious mindset only strengthened the confidence of Lee Hower, a lead and early investor in Lula and founding partner at NextView Ventures.
“I think what Lula is doing in terms of being an insurance-focused software platform and serving a particular kind of customer, there aren’t 20 other companies doing exactly what they’re doing,” he told TechCrunch in an interview. “The tech and software infrastructure for businesses… hasn’t really advanced in decades. So little is focused on building tools that help businesses acquire coverage, better assess their risk manager and utilize their coverage in more effective ways. So, in the same way that you’ve seen multiple public companies building software for carriers and reinsurers, I think, Lula has a great shot at being a software technology provider to businesses as the consumers insurance.”
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