Lemonade, a digital insurance firm powered by AI and social impact, has partnered with General Catalyst (GC), a leading venture firm and an early investor in Lemonade, to create Synthetic Agents, a financial structure that unlocks growth without depleting cash.
Under the program, which will commence on July 1, 2023, General Catalyst (through its Customer Value platform) will finance up to 80% of all Lemonade’s CAC, and in return will receive a synthetic ‘commission’ of up to 16% of the stream of premiums they helped finance.
At the same time, once GC has recovered its investment and capped return on any one cohort, the remaining ‘lifetime value’ of the customers from that cohort accrues to Lemonade.
Daniel Schreiber, Lemonade co-CEO and co-founder, commented: “We think the Synthetic Agents program is something of a game changer for Lemonade. Thanks to Synthetic Agents, we believe we will be able to accelerate growth without drawing down our capital reserves or selling more equity. That means generating a significantly larger business, sooner, with more cash in the bank, and with a materially higher return on capital.”
Pranav Singhvi, Managing Director, General Catalyst, and architect of the Customer Value strategy, said: “We believe Lemonade’s Synthetic Agents program gives Lemonade a balance sheet to invest in growth, so it can preserve its own capital for investments in its amazing technology and people.
“We’re big fans of Lemonade, a company that we believe has completely turned insurance upside down and become one of the most intriguing public tech companies. As one of Lemonade’s early backers, being able to help directly support their next stage of growth is exactly what we built our Customer Value strategy for.
In other related news, Lemonade broke a world record by settling an insurance claim within two seconds by using AI and machine learning.
In addition, Lemonade also announced the successful renewal of its reinsurance program, while also forming Lemonade Re and a captive cell to retain some of their risk.
