Naked, the SA-based insurance technology (insurtech) platform, which uses artificial intelligence (AI) to offer cover for cars, homes and other valuables, has raised $17m (about R307m) in a third round of funding.
Co-founded by actuaries Alex Thomson, Sumarie Greybe and Ernest North, Naked uses AI and automation that enables customers to do all of their insurance business online — including claims management — a far cry from traditional phone and form-based businesses.
Investors include World Bank unit the International Finance Corp (IFC), German development finance institution DEG, and Naked’s original investors — venture capital firm Yellowwoods and insurance group Hollard.
Thomson talks about the company’s plans for growth and what it takes to raise capital in the current environment.
How will you use the new funds?
Our main focus with this raise is SA. We want to make the platform that we’ve built even better. We’re definitely expanding the team particularly in the areas of machine learning and artificial intelligence.
A lot of what we are doing is already ahead of the market. We think there’s a lot more we can do by changing the way in which insurance is delivered, using data science and AI to improve customer experience.
We aim to build a lot more automation into the system, which is what we think customers want.
We’ve built a strong and growing insurance business. I can’t, unfortunately give you specific numbers, but we’re a good size. We’ve had an extremely good run and have a large customer base that is growing with each day.
In time, we’ll look at other markets, but for now it’s about building an amazing business in this country.
Technology valuations are down. High interest rates mean capital is expensive. What is it like trying to raise funds in this environment?
It should come as no surprise that it is tough fundraising at the moment. There are a lot of start-ups that are finding it heavy going.
Perhaps our business being in a strong position has helped in having a number of keen investors. To be honest, we’ve also probably just had a bit of good luck.
You always have to recognise the role that luck plays in a business like ours.
It is tough. There are a lot of start-ups that are having to rethink their business plans.
We feel extremely fortunate to be in a situation now where we’ve got cash in the bank, quite a good runway and can go forward on a positive footing.
So what should start-ups be focused on to make it through such a tough environment?
It’s not just locally that the fundraising environment is challenging. Raising money internationally is not easy either.
The main thing in a tough economic environment is to focus on sustainability, and to try to get cash positive.
Sequoia [Capital] and many others say that as a start-up you need to get to a place where you don’t need funding in a hurry and should minimise the amount you have to raise.
If you can get to that, then you can keep going, maybe on a slightly slower growth trajectory than you originally had in mind but that at least gives you the ability to survive and get through to what will hopefully be better times in the future.
Why did you decide to take funding from the IFC and DEG?
When we started Naked we always had a slightly altruistic mapping of what we were doing. What we wanted was to make a really positive difference in the country.
A lot of people have got very mixed feelings about insurance, but it does actually play an important role in our society. That’s been our purpose from day one and remains the case.
Organisations like the IFC and DEG are very much aligned with that. They want to see financial services in general — and certainly insurance — play their role. They’re keen to support businesses that are making insurance work better, that are expanding access to insurance and so we’ve seen a lot of alignment around that.
They’re also very much for long-term investors, which is how we see this relationship. In insurance, it takes a long time to become a significant player and a household name
They are here to walk that road with us.
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