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Brazilian Insurtech Justos raised US$5.9M to extend its runway to more than 30 months

April 24, 2023
Por
Brazil Journal
Brazil Journal
Notícias sobre empresas brasileiras, mercado financeiro, investimentos em ações, Bolsa de Valores, startups, empreendedorismo e tecnologia.
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Souls of Society
In October 2021, amid the venture capital boom, Justos raised one of the largest Series A's in Latin America, putting R$200 million in the till.
Contenido para Usuarios 🔒

A year and a half later, the auto insurance insurtech is raising another US$5.5 million in a funding round led by a major reinsurer, which has put up more than 90% of the total but prefers to remain anonymous.

The remaining $500,000 came from MSR Capital, a manager from Israel.

Dhaval Chadha, the CEO and co-founder of Justos, told Brazil Journal that the new round is a bridge of sorts, and that the valuation will be set based on the startup's next funding round.

The round was done now because the reinsurer had won a call option at the time of the Justos Series A - which it was unable to participate in due to lack of space - and decided to exercise the call now.

With the R$30 million that is coming in, Justos will extend its runway to more than 30 months. According to Dhaval, the startup does not intend to reach breakeven before the end of this period. The idea is to continue investing in growth to raise a strong Series B - preferably without a downround (a round with lower valuation than the previous round).

Justos says that its differential is to offer auto insurance with a more driver-friendly pricing. The startup uses machine learning to create models that can predict claims and, as a result, charges an individualized value for each driver.

The startup sells its insurance on a monthly payment basis. According to how the driver drove during the month, he can get a discount on the next monthly payment.

Since it began operations in January 2022, Justos has gained "thousands of customers" and its claims ratio is slightly above the average of the top 10 incumbents, partly because the startup's premium is more competitive, partly "because we're still learning," Dhaval said.

In addition, assertive pricing depends on machine learning modeling, which needs to be trained with real claims. "Since we have had few claims for now, it takes time for us to train the models well," said the founder.

He admits that Justos is running lower growth than anticipated when it made Series A - not least because expectations were high to justify the valuation at the time. "We're at lower growth but much healthier than we had projected, and on a pretty comfortable runway," he said.

Last August, Justos also obtained an insurer license within Susep's sandbox. For now, however, it continues to operate in the Managing General Agent model (or MGA, in which a partner insurer provides the balance sheet) for much of its portfolio. According to Dhaval, less than 10% of the insurance issued by Justos is being done with its own balance sheet.

"We are testing it first," he said. "The sandbox also has several limitations, regarding the value of the car and some coverage, for example."
Las opiniones compartidas y expresadas por los analistas son libres e independientes, y de ellas son responsables sus autores. No reflejan ni comprometen el pensamiento u opinión de Latam Fintech Hub, por lo cual no pueden ser interpretadas como recomendaciones emitidas por la platafomra. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista sobre el ecosistema Fintech.

A year and a half later, the auto insurance insurtech is raising another US$5.5 million in a funding round led by a major reinsurer, which has put up more than 90% of the total but prefers to remain anonymous.

The remaining $500,000 came from MSR Capital, a manager from Israel.

Dhaval Chadha, the CEO and co-founder of Justos, told Brazil Journal that the new round is a bridge of sorts, and that the valuation will be set based on the startup's next funding round.

The round was done now because the reinsurer had won a call option at the time of the Justos Series A - which it was unable to participate in due to lack of space - and decided to exercise the call now.

With the R$30 million that is coming in, Justos will extend its runway to more than 30 months. According to Dhaval, the startup does not intend to reach breakeven before the end of this period. The idea is to continue investing in growth to raise a strong Series B - preferably without a downround (a round with lower valuation than the previous round).

Justos says that its differential is to offer auto insurance with a more driver-friendly pricing. The startup uses machine learning to create models that can predict claims and, as a result, charges an individualized value for each driver.

The startup sells its insurance on a monthly payment basis. According to how the driver drove during the month, he can get a discount on the next monthly payment.

Since it began operations in January 2022, Justos has gained "thousands of customers" and its claims ratio is slightly above the average of the top 10 incumbents, partly because the startup's premium is more competitive, partly "because we're still learning," Dhaval said.

In addition, assertive pricing depends on machine learning modeling, which needs to be trained with real claims. "Since we have had few claims for now, it takes time for us to train the models well," said the founder.

He admits that Justos is running lower growth than anticipated when it made Series A - not least because expectations were high to justify the valuation at the time. "We're at lower growth but much healthier than we had projected, and on a pretty comfortable runway," he said.

Last August, Justos also obtained an insurer license within Susep's sandbox. For now, however, it continues to operate in the Managing General Agent model (or MGA, in which a partner insurer provides the balance sheet) for much of its portfolio. According to Dhaval, less than 10% of the insurance issued by Justos is being done with its own balance sheet.

"We are testing it first," he said. "The sandbox also has several limitations, regarding the value of the car and some coverage, for example."
Las opiniones compartidas y expresadas por los analistas son libres e independientes, y solamente sus autores son responsables de ellas. No reflejan ni comprometen el pensamiento o la opinión del equipo de Latam Fintech Hub y, por lo tanto, no pueden interpretarse como recomendaciones emitidas por la plataforma. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista en el ecosistema Fintech.

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