Marshmallow, a genuinely unusual tech unicorn, rides the insurtech boom

By Eric Johansson

Marshmallow has become the latest insurtech startup to achieve unicorn status after securing a $85m Series B raise at a $1.25bn valuation. The cash injection comes amid an explosion of insurtech funding during the pandemic.

Investors supporting the round included Passion Capital, Investec Bank and Scor. Marshmallow’s billion-plus valuation isn’t the first for the sector: motor insurer Zego claimed its own unicorn bragging rights in March, and these are not the only insurtechs enjoying success of late.

Depending on who you ask, insurtech startups globally secured between $6.2bn and $7.1bn of investment last year. GlobalData’s Technology Intelligence Centre recorded 225 venture financing, private equity, debt offering and equity offering deals in the insurance industry worth a total of $11.2bn in 2020.

Bigger players like Lemonade and Root Insurance have enjoyed successful public debuts over the last year. The industry is expected to grow further in the years to come.

“The digitalisation that goes hand in hand with the insurtech theme will be more essential than ever in a post-pandemic world so it will continue to thrive,” analysts wrote in a recent GlobalData thematic research report on the insurtech industry.

Marshmallow becomes insurtech unicorn

Marshmallow was founded in 2017 by CTO David Goaté, and co-CEOs and twins Alexander and Oliver Kent-Braham. Marshmallow may not be especially unusual as a tech startup which has achieved unicorn status, but it is quite unusual in that the Kent-Braham brothers aren’t white. The company was set up on the back of a chat with a friend in 2015 about why it was so hard for immigrants to get car insurance in the UK.

“Traditional insurers cash in on migrant drivers,” the founders explain on their website. “In fact, traditional insurers cash in on a lot of people. Why? Because they work from a default position of distrust, and judge them based on impersonal and outdated systems. In short, the whole industry is broken. So we started Marshmallow!

“From our humble beginnings of offering affordable car insurance to UK newcomers, we’re now growing fast and thinking big. And we’re more determined than ever to take on the industry and change it for the better – for everyone.”

Like many insurtech startups, Marshmallow attributes its success to “the power of data” that has enabled it to “offer better rates to more people” than incumbent insurers. The digital-first insurer is also one of only two UK insurtechs to be granted a licence by the Financial Conduct Authority, meaning it can sell insurance directly to customers.

Diversity in tech

The tech industry has a problem with diversity. Household names like Google not only struggle to hire people from minority backgrounds, but also fail to retain them. There are also reports of toxic masculinity in the tech sector and incidences of women being sexually harassed.

The British tech sector is no different, as is evident from the lack of diversity among tech founders and investors’ hesitation to bet on diverse leadership teams. Just 1.6% of venture capital funding went to all-non-white founding teams between 2009 and 2019, according to Extend Ventures.

The Kent-Braham twins told Sifted that this lack of diversity has made it more challenging to raise money. Until now, Marshmallow has relied on investment from ethnic-minority investors or funds focused on supporting ethnic minorities.

“The stats that get thrown your way are unbelievable,” said Oliver. One problem, he added, is that “when you’re from certain minorities, you don’t have role models to come and say that they’ve done it”.

Gerard Grech, CEO of Tech Nation, noted: “Marshmallow’s unicorn status highlights yet another tech success story of 2021, hot on the heels of the UK reaching 100 tech unicorns. Marshmallow – having previously joined Tech Nation’s Future Fifty programme – is an excellent example of what can be achieved when given the right tools and networks to thrive, but we must continue to level the playing field for excellent Black founders to scale to their fullest potential. The UK’s tech sector is going from strength to strength, with innovative entrepreneurs such as Oliver and Alexander Kent-Braham cementing our place on the world stage.”