Next Insurance is happy to remain private, for now
Guy Goldstein (pictured), the company’s CEO and co-founder, remains tentative about when Next Insurance will go through with an initial public offering.
“We are currently primarily focused on operations,” Goldstein said. “We are going to IPO at some point.”
There are other clues that could suggest an IPO is happening soon. Next, a company based in Palo Alto, Calif., has raised $881 million in multiple rounds since its inception in 2016, and now employs nearly 1,000 employees at multiple locations in the United States and Tel Aviv, Israel. Other digital insurers, including Lemonade and Root, have hit the public markets with far less enterprise scale and venture capital funds raised.
At the same time, the IPO market is slowing due to falling yields and stock market volatility, Bloomberg reported in December. There has also been a pause in reverse mergers or special purpose acquisition company transactions, where a public shell company acquires a startup, allowing it to access public markets in an alternative way. Next has a lot to gain right now by staying private, Goldstein said.
“There is still a huge opportunity for Next to continue to grow and execute. We continue to grow extremely rapidly,” Goldstein said. “We have enough capital to operate like a private company. It’s here that [we’re] deploy all our energy.
Goldstein declined to comment on Lemonade and Root’s respective decisions to launch their IPOs earlier in their respective developments. He insisted, however, that start-ups need to consider basic fundamentals before pulling the trigger on the public market.
“It’s important to grow and show that you actually have a market and can acquire customers,” Goldstein said. He said Next is achieving appropriate scale, using tools such as artificial intelligence and machine learning in its digital systems.
“It’s a way to work at scale and it takes time,” Goldstein said.
There is also less pressure to hit the public markets in the current environment, he added.
“I don’t think there’s any urgency today to go public,” Goldstein said. “As long as you are well capitalized, investors are in no rush to get returns [so] businesses stay private longer.
Rapid growth and adaptation
Originally launched as an MGA, Next shifted gears after a few years to become a full-stack carrier. Goldstein said the company has an ambitious goal: to become the largest insurer for small businesses in the United States.
In terms of scaling, Next notes that it achieved a gross written premium rate of $650 million in 2021, triple the previous year. It claims to now have a customer base of over 300,000 small businesses and a valuation of $4 billion after a recent venture capital raise of $250 million.
Next now operates in all 50 states either as a carrier or an MGA as its regulatory transition to a full carrier continues. Its nearly 1,000 employees are spread across Austin, Texas, Tel Aviv, Palo Alto, Waltham, Mass., and Rochester, NY Hiring continues in areas including data science, engineering, and marketing.
Gouneva, the company’s latest high-level hire, will focus on driving Next’s financial operations and scaling its performance/management functions to help it achieve sustainable growth. His predecessor, Michelle Cheung, will serve as the company’s first chief executive and will focus on leading Next’s legal, human and operational functions.
Initially, Next was all-digital, focusing on selling cover through an online process that takes 10 minutes or less and provides access to live insurance certificates. The company says its AI and machine learning help simplify the buying process, resulting in up to 30% lower costs compared to traditional policies.
Next works with direct channels or integrated channels. It partners with Intuit QuickBooks, for example, to allow QuickBooks users to get a personalized quote and purchase general liability, professional liability, and workers’ compensation directly from their QuickBooks account. It has also partnered with Amazon to help sellers on the platform obtain general liability coverage. As Next evolved into a comprehensive insurer, it also began to embrace the use of more traditional insurance agents. Next acquired AP Intego in 2021, a digital insurance agency focused on the small business insurance space.
Goldstein insists that many business customers wonder why agents are still needed, but he embraces the idea that a significant portion of the market remains accessible to agents.
“There are a lot of companies that want to use an agent to buy [coverage] and are doing it today, so it’s important for us to be there,” Goldstein said. “Otherwise they can’t get [coverage] and we want [it] to access all small businesses.
Goldstein continues to expect the market to become primarily digital, but, he said, the process could take much longer than originally anticipated.
“The market is moving toward more direct and fewer agents, but that transition could take 20 years, and maybe, you know, some customers will still want to use an agent,” Goldstein said. “We will be both.”