This Week in Coverager (6/12/2020)

Shefi, Avi and Nick discussed the Lemonade IPO.

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Transcript

Nick
And we're live This Week in Coverager for the week of May, June, July, June????

Shefi
It's never gonna get old.

Nick
It's not it's really June 12. So it's the week of June 5, June 6, something like that. And I am live in podcasting headquarters in Naples, Florida. We have, of course, are my co hosts for This Week in Coverager Shefi in New York City, Avi in a hideout, in a safehouse somewhere in Maine eating lobsters. Good morning to you.

Shefi & Avi
Good morning.

Nick
So, for this particular week, there's absolutely no doubt what the story is going to be. Lemonade filed for its IPO. I think this was expected. Although there are a lot of stories around the IPO and what their intentions were and whether they were looking for an exit and what Softbank's say in this was and what their intentions are. So...crazy week, when it comes with everything that was going on and the Lemonade IPO, but a big deal. Right?

Avi
A big deal.

Shefi
Yeah.

Nick
comments?

Avi
You know, I'd be interested to hear, you know what you have to say and Shefi I'd be interested to hear what you have to say we may not agree on all of the things, which is fine. But it's interesting. It's very interesting. And, you know, you can't just, you know, Lemonade has results. They're not coming in with nothing. You can argue if it's good or bad, but they have a big customer base. Considering you know, the time they've been in business whether how much they spent or not, we'll get into that. But it's a big story. It's a serious company. And let's see what we think about it.

Nick
Yeah. Well, it's interesting because I wrote an article 3 and a half years ago called Don't Believe the Hype. I think people misunderstood it because I'm on Twitter when Lemonade filed everyone was tagging me saying hey Nick, "what do you think?" wanting me to like come down with my my hammer, my Thor hammer on them. But people are picking up that article because people are starting to research Lemonade, my article's has a lot of SEO, so Google places it pretty highly on it from the beginning, right. I thought the don't believe the hype was more about Daniel Schreiber's and the Co-founding teams'...it seemed as though they were it was more hype and what they were trying to pump and I didn't see the business model in it. It was peer to peer...the whole charitable element. I didn't buy it. People were talking about this is going to be the new Uber of insurance. So don't believe the hype was not these, this won't work, or this isn't a good idea. It was just more of these...it's like when an insurer tech comes in and starts throwing out blockchain and AI and just throwing out these terms to get attention. That's what that smelled like to me. So that was the don't believe the hype. It was clear early on, Avi, I thought, I think you're correct. Like the quote, The founding team is highly skilled. They know what levers to push, they push those levers, they knew exactly what they needed to do. In my opinion, though, the only major advance that they made was in user interaction. Other than that, it's, they're commodity. And it's going to be for me, it's gonna be really, really hard for them to justify that valuation, selling a commodity. And there, It seems as though they're, they're expanding into other commodities. So I'm not sure whether their technology is going to give them enough lift to overcome the commodification, because the numbers are clear, they have numbers. They're not great. They're growing rapidly. And in insurance growing rapidly in the commodity space doesn't really work out well. I think in this case, I'm going to struggle to justify the valuation unless there's something else that I'm not seeing. Shefi...

Shefi
Um, so first thought that that came to mind is out there romanticizing insurance. That's how I that was a sentiment I got when I was reading, obviously the paper right or talking about love or talking about fun or talking about making insurance playful and that may read well to somebody from outside of insurance. And it may be the case when we're talking about 90% of their customers not switching from a different carrier. So first time Insurance experience. But there is that saying that you know, you marry first for love, then money, then companionship. So that's the whole premise of Lemonade. They're talking about growing with their customers because right now the average premium is $150 per year, right? For at least for the renter, which seems to be the majority or the bulk of their business. And they're talking about adding pet which wasn't new. I saw Lemonade life agency which that was something new to me, right expanding into life, which I would I would assume, in my mind, not as easy, fun and playful, is kind of a more serious line of business with a lot of different connotations. Not an easy sell obviously, this is not where AI Maya AI Jim will show their strength. So here's the challenge, right, the challenges. We have a certain demographic that's less than 35 years old or 75% of their book, I believe. And then a very low premium. So they're scaled, but you know, profits are limited. The other issue which you mentioned in terms of technology, is that sorry, guys, always allergies. The other issue is they need to be in a space where the risk is somewhat more predictable than others. And I know we're talking about insurance. But if you think of Technology and Training, AI and machine learning that comes into play, it's kind of you know, pet insurance and renter's insurance...that makes a lot of sense, because you can control a bulk of the claims or the customer service. If they know something that they could have thought or could put in their presentation was we could expand to general liability, professional liability, right? That's closer than somebody going and buying life insurance after the age of 35. Thinking of their their demographic, but they know that that that line of business is so challenging In terms of how fragmented it is, and how harder it would be for them to automate, so their strength is also their weakness because they can only grow in products where they can lend their technology. Because, for them, it's really all about whatever is it is that they're doing they need to be very efficient at it. Now, to me, they're still a company of over 300 people, not all claims are, are there are parts of their claims process that are being handled with external vendors, which, which was a limit when they work while they're talking about it, about it in a limit in a limiting way when they're when they're considering expanding to, you know, globally, right in Europe. I think expanding to Europe was a big mistake because it isn't easily scalable, outside of the US and even within US. You're talking mostly about California, New York, Texas, right so that they are feeling like they're in 75 percent of the market, right? So they understand they can't just be renters. Not a lot of talk about home insurance. I think with home it was about 10,000 and above condo owners. And to me that they're talking about the graduation right, like the graduation element of customers. Meanwhile, in the numbers, only about 1200 or so graduated from being a renter to having a home insurance with Lemonade. So the how are you going to, you know, we don't know for certainty that that element, it's actually going to work for them, because the minute the pricing is going to go up, right. Right now we're talking about $150 on average, who's to say that the customer continues their love affair with Lemonade and doesn't shop around then that the marketing doesn't have to increase because you have to put an emphasis on retention, right. So it's a big question mark. There was not a lot of discussion, about retention or anything like that. I mean to say, Okay, I can see this happening. I think this is the risk or this is the question mark. But aside from that, obviously, they do have I think I will call this scale in terms of the amount of customer base that they achieve. Bobby, what do you think?

Avi
So, you know, to your point, we talked about the graduation, and that's something that the wrote about I believe, in late 2018, kind of saying, Well, here, we told your strategy. This is why we focused on renters. We were looking for that graduation. So from reading from there is one I want to read two paragraphs. Our business model is premised on the expectation that a significant number of our users that are renters, will continue to retain coverage with us as they move from being renters to homeowners. Currently, however, given our limited operating history, substantially all of our current homeowner users, or new users, who are not previously renters with us, so that's point 1.2 for example, our user base is made up primarily of renters and we have very few instances of those renters becoming homeowners a key element of our business model. So if you are a millennial and if you claim to understand millennial and that's what lemonade talks about millennials Gen Z, then you know that the chance of millennials becoming homeowners in the near future is very slight. I mean, we don't have any money. COVID-19 is making it difficult to become a homeowner. People are saying, oh, people are moving out of the city and someone said, well, where are they going to get the downpayment to buy a home?

Nick
Yeah, where are they gonna get the downpayment in the city? The cities are the least affordable places to live, not only just not the downpayment, they can, like most people can't afford to buy a home in a city. So those two statements on the one obvious seem conflicting.

Avi
Yes, conflict. thing and again, if we when we when I read that I said I mean that's to say is pretty stupid to say that that's your strategy to wait for renters to become homeowners you're gonna go bankrupt. Lemonade has enough money in the bank not for 10 years from now, you know so you know Yeah, go ahead.

Nick
No I the plus the so that this was I think a mistake I made was I thought that renter's insurance and homeowners insurance were a lot closer together and it's strategy, and it's not homeowners insurance is actually much more complex in that, yes, the premiums are bigger, but the but the risks are also much, much bigger, as well. And it requires a lot more reinsurance support. So, Joe, MSN from branch insurance and I had a conversation about this. And I thought I thought that Lemonade going into home would be more difficult because they only have a demo tech rating. They don't have an SMP rating. So I thought a lot of lenders would not allow them to go in. Joe told me that that's not the case that lenders are allowed to accept demo tech. So that makes that makes that transition that you talked about, I'll be even more disappointing. I thought that I thought their inability to get into the homeowners market was a lender driven driven thing. And now that it's it's potentially not a lender dirt driven thing. I'm scratching my head saying, Well, why aren't they getting into that market more aggressively? What's, what's the scoop? Is that Is it pricing? There's nothing really about that. And it could be you know, branch insurance that chosen bundles auto and homeowners together. Maybe there's a sophistication It doesn't matter if you're a millennial, that's, you know, more urban oriented once you are ready to buy a house and you have a car, maybe some children, maybe the risk Hello Oculus changes in your head and you're just like, Okay, well, they're cute. That's cute. I, you know, I appreciate what they're doing. But I'm going with statefarm because they're going to bundle everything together or branch insurance, they're going to bundle everything together, and I'll feel safer about it. Am I wrong?

Avi
So, you know, it's exactly when when they talk in their f1, they say we haven't seen much competition on the renter side, you know, insurance companies after us. But for the homeowners, yes, they say, there's a lot of competition and customers may value other things. For example, they might think that cheap is not good. Or they will get other services like bundling. And it is a big deal. You know, my father in law last week this week actually came in and said, Hey, have a look at my state farm IP. He bought a car. And you know, he used State Farm. So they in the app, they added his car to his homeowners insurance. And he showed me the app and it showed the agent and the email and the phone number isn't what a great app. And I said, You know what, let me show you Lemonade. Let me show you my app. And I showed him my app. And you know, different people value different things. And I want to take you to another thing, and this is why we're talking today. You asked why. So you played video games, I assume in your past, right, but Shefi did not. So let me let me ask you this. Do you remember that kid that used to play with that always had that one trick and he kept on doing it again and again and again? Anyone? lemonade, that's lemonade. So reading again from the swan. And this is current, approximately 61% of our gross reading premium for the three months ended March 31 2020. originated from customers in California, New York, and Texas. They are still putting renters as their top product. That's their trick. And you know, now it comes to the strategy. You know, we like to talk about that. numbers and look at their loss ratio and how much they spend on marketing and all that. I think Lemonade and I said this all the time, and we called their IPO a year ago in April, it was we said, Get ready for another pink roadshow, like lift alternative metrics. What they did was very smart. Because they kind of they went in, and they said, Look, investors, look at what we accomplished. But look at the potential. Look at the potential of the graduation from renters to homeowners look at the potential of offering more products and they say maybe life maybe pets, maybe auto, they don't say what they say. Well, we introduced that. They want to show the potential there in the serious competition with Root and I feel personally what Lemonade, that Root is what Lyft did to Ober if you followed Lyft and Uber a little bit, you know, while Uber was having regulators episode them down in countries while they were having rallies or While they were having cases where drivers killed passengers Lyft was staying in the US. They went all the way for their international expansion all the way they went to Canada. That was the furthest they went. They Uber the Uber Eats Uber fright. Uber autonomous. Yes. While Uber was settling in court with live on dusky, the guy that came in from way mo with all that lift was then getting into the autonomous. So Lyft waited, waited, waited. They went for an IPO before Uber IPO was fantastic. Uber went for an IPO, looking for a valuation of 120 billion. The IPO was very bad. So that's what I think Lemonade is doing. They were always You said you know what to post what buttons to push. They read the market. Well, they came in now the question is Will investors understand clearly not they don't know insurance like you do or like Shefi does. They're going to see well look at the potential and you talked about Mistake launching in Germany, it wasn't a mistake. It was a checkmark or global. We have that potential. They are licensed to

Shefi
write insurance and 40. Wait, wait. Since when I was checking boxes on a list the right thing to do?

Avi
Well for investors think it is.

Shefi
But that's okay.

Avi
But that's the game. That's the name of the game. It's not. They're not here because they really don't have appearances.

Shefi
Yeah, it was always like one trick pony.

Avi
It was always like that. Yeah, but

that's the name of the game.

Nick
I agree with Avi. It's no slight...investors, I think the lemonade was able to get higher and higher valuations because of the co founders. They the investors knew the co founders will figure this out and they will make us more money. I don't think the investors were necessarily buying into I'm going to put my money in here and these guys are going to revolutionize insurance and it's going to be 100 billion dollar company. I think they were thinking the cofounders know how to do this. The risk is low because these guys are skilled. They're they're skilled business people that know how to check boxes off, pull levers. Hey, hey, look over here. Don't look at the losses look over here. type of thing and it worked. They're highly skilled. these are these are high, you know, high quality people, they will exit out there'll be new ownership, and then they will do it again in some other industry. Am I am cynical?

Shefi
No. Well,

Nick
okay, though. Shefi. Go Go. Yeah. Let's debate this.

Shefi
No. So I think I think they expanded globally because they really wanted to exit as fast as they can from insurance. I don't think they entered the industry because they want to build a really long lasting career here. So I get that but I think all it showed was that insurance has borders They're not as successful or they don't even, they don't even try to be honestly successful in Europe, right? And then there was this whole lawsuit that didn't even become a lawsuit with one. So a lot of noise are really good at riding the noise. And let's be frank, they're there. You know, Steve customers were insurance professionals. You know, I used to talk to people that say, they would work for an insurance company, and we bought lemonade, because we wanted to see what this is about. And I bought Lemonade, because I wanted to see what this is about was so easy to do that because $5 renter's insurance, and maybe it's a little bit higher, right? Because they changed the default limit to write this. This is also

Avi
just that's another topic to talk about

Shefi
And I don't want to I don't want this discussion to be Oh, you know, the, the founders are brilliant, or, you know, maybe the founders are well connected, or, you know, get into the soft bank, because who knows, that's just one element that we're not going to change that kind of world. But if you you know, here's another thing, right that probably they didn't have that as a checkbox, but they still checked that box when they realized that there there are still distribution. That's where the struggle is that I mean, at this point, Lemonade is is paying commission to GEICO Insurance Agency for distributing their renter's insurance product in some states, they don't go to say how many states and I look at not necessarily what they say. But what what they don't say. And when they listed their competition. I didn't see reference to auto insurance. I don't think they're planning to get info on auto insurance. So this is where people shop.

Avi
They had a graph, they had a graph where they showed again, hard thing that they did, but they show

Shefi
so what was my point about Geico? Oh, they meant they they excluded Geico from the competitors that they've made

Avi
and Progressive.

Shefi
Okay, go and Progressive right. Interesting, right? They're competing with a lot more than they are willing to say which they kind of alluded to. And the question is, is liberty and obviously we all remember Liberty Mutual $5. Now they're working under certainly brand. So if we were to say what disruption is right? disruption is when you can offer something for a lot less. But the minute Lemonade offer $5 renter's insurance, there were other copycats offering $5 renter's insurance, and if they're going right, so that Yeah, there you go. And then 30% is really kind of automated AI, Maya AI. Jim, there's a lot that you know, that involves customer support by the other portion of the business. So they're, they're still limited. You know, obviously two thumbs up for creating a brand that that resonates with first time insurance buyers. And then and I and I don't say that I'm not cynical at all about this. I purchased Lemonade insurance. And I also think that there's an element of data that they have that others don't just Because they're built digitally. So knowing how, you know if people linger on an app, just reduce the application, right? And claims, I'm told that, you know, they can see how many times somebody upload a claim before you actually submit the video. So they can, they can detect fraud. So there are elements of that. And that would be improved. broader lease, and I think I do think the IPO will be a success, just because you do have people like, you know, Professor Galloway, that's going to say, oh, insurance is ripe for disruption. That's all he knows, because he doesn't understand the details on the complexities of building an insurance company or what goes into reinsurance or if they can actually scale so the world outside of insurance, they have a different different picture of how we do things. And I don't think that you succeed, you necessarily need all that insurance knowledge, but you need to, to acquire it as you go forward.

Nick
I don't think I don't think a lot of the folks that are are either buying into the message? Or are just outsiders and don't understand how complex insurances when when Lemonade decided to make the move to Germany, to me, it was a giant head scratcher. Right? Because they hadn't dominated the US yet. And there was I saw nothing that said that they would. The issue I had was insurance at the end of the day interview, if we can get more Buffett on, we should have a conversation with him sometime. Insurance is a capital game. It's it's, at the end of the day, you need a significant amount of capital in reserve to be able to back the claims along with reinsurance a move to Germany. To me struck me as like, these guys are making them it's more message than actual business, because that doesn't make any sense. Their capital is precious. right by them going to Germany. They're taking very, very Expensive capital and putting it into euro bonds or German bonds or boons, whatever you're going to call them sitting there not doing anything waiting for the first policy to be sold. And I'm scratching my head saying, You haven't even milked out everything you can milk out in the United States, and now you're shifting capital to another entity to support business in some other part of the world that you don't really understand it strategically that to me, that didn't make any sense whatsoever. And it became like more of a business message and I don't think investors understand it. Honestly, I don't think they care to understand it, like how much of a waste of capital that they're that's going on in the background, how much reinjure like, it basically comes down to this because the capital is so spread thin, Lemonade is not necessarily going to be able to execute on what they're going to need to execute on, because they're going to be so dependent on reinsurers to backstop Their entire operation and pure the the homeowner company, the reciprocal. That's here in the United States. their annual report, the buck Mueller, Russ buck Mueller that runs pure is very brilliant. And in his annual report, he had better KPIs to him. He was basically telling his investors, you want to know how successful they are? Let's track this KPI. How much reinsurance as a percentage of our premium Do we need, that number should go down every single year. That's how you know we're being successful. The more we can, the more we can extract ourselves from full reinsurance support. The more control we have, the more money we will make. And in Lemonade, it's the opposite, right? Like it's, they're, they're, they're going by spreading themselves too thin. They're going to be more reinsurance support. They're not going to be able to extricate themselves. From that, and ultimately it's going to be the reinsurers it's going to kind of control their destiny and not themselves. That's my problem.

Avi
You know, I think the the germ of the point, and this is something Schreiber mentioned that they kind of hit like the glass ceiling in terms of renters, like they really dominated the renter's insurance market, which from his numbers is only 10% of the homeowners market so it's not as big in general but they have they always talked about how they have in New York I believe was 10% market share something like that. They cannot operate in Idaho. There's no you know, many renters there. So for me going to Germany was also want to say global, but also, there's a lot of millennials in Germany that rent. The problem was, and that's something we wrote about. Lemonade in Germany does not mean eliminate. You know, that's a big problem. Yeah, they don't drink lemonade. They drink beer. It's a different culture. a different mindset. And you really have to take things into account. And always there's the thing where, oh, it's an American company and just like Americans love to buy American made. Germans like to buy German made, and there's all the tech people that Oh, yeah, it's cool to be with an American company. But again, Lemonade, they're very smart. And they, they did the right things. And we talked about champion talked about the, the default limits. And their s one, they say, the median age of the network, the median net worth of an adult American under the age of 35, is about $11,000. Last time I checked, when you went to get a quote from Lemonade, the default limit was 50,000. In the beginning, it was 10,000. And that gave you $5. Now it's 50,000. So that's their way to increase prices without increasing rates. That's their way to upsell without increasing rates because you know, the image is very important. And the other thing is, I want to talk a little bit about the marketing They spent 89 million I believe in sales and marketing, I believe it was 76 in advertising or 79, something like that. They talked about how their strategy is to delight customers because delightful customers fuel growth. So if you're happy you go tell your friend. Apparently that did not work. Because they had to spend almost double their marketing spend to double their user base customer base. So where's that, you know, the virality of the product that they like to talk about, or friends tell their friends? And that's the problem with insurance. And I always said, and I'll say it again. It's insurance, no one cares. And and and I think they reached their limit with millennials, but the renter's it would be interesting to see the pet the pet could significantly you know, help them increase their revenue, but they're gonna have been a big problem and I'll tell you why. They can't rely just like they rely on property managers, buildings for their partnerships. There's Trupanion that already is dominating that space. So they're going to have to go to that millennial, that pet owner and say, listen, you're going to have to go to your beds, and you're going to tell you, but whatever you recommend, I'm not going to buy I'm going to go with Lemonade. So you're going to have to put that millennial in an awkward place to say to the vet, I'm sorry, I'm not taking your recommendation, the Lemonade saying their pet insurance is better. So it's going to be a tough sell. It's definitely the great product for them. But But it wasn't the plan. The plan was to come with as much potential as possible as little damage as possible to this IPO. And I also predict that it will be great success. It's going to be very bad news for Root when they go for their IPO. Hmm interesting

Nick
Shefi I think are the strikes is something that I think that's what stood out to me when I went through the last one was the losses. But specifically like it It seems as though they've gotten the loss ratio under control. So for every dollar of premium, the actual claims dollar is beneath the premium. So the premium is covering the actual losses. But too obvious point, customer acquisition is increasing doubled. I do think they increase they increase their customer base by while the premium grew by a third by by three x. So took double, they doubled the marketing budget, and they increase their premium by three x, which is a guess, okay. But when you add the marketing and sales, the customer acquisition costs to the loss ratio, the combined ratio is like still very, very, very, very high and obvious point. I'm not sure they're going to be able to dramatically lower that.

Avi
No, and this is the problem with a low end product like you still have to pay an engineer, whatever that salary 150 $200,000 a year he does the same work. So Root engineering, the Lemonade engineer, technically they do the same work, but the premium Root engineer can generate because it's auto insurance is significantly higher than renter's insurance and, and that's where I always felt the problem with Lemonade was that, you know, but but again, that problem on the other hand, we're able to generate more policyholders so they could say tomorrow look, we built our customer base. We are now going to introduce a more expensive product.

Shefi
Yeah. So the the product is average it's renter's insurance. So filings isn't all that different maybe with the insurance or I'm going to introduce something revolutionary but I doubt it aside maybe from the zero deductible. I don't think that's revolutionary, but so average product, good business model. I think still the issue is they have to get the Average premium to go up. They're talking about what 50 they're talking about going to 600 they don't have 10 years. I don't I don't see that I think they need to do something sooner. And that's why. So if you remember last year, they did our general catalyst partner came to Lemonade and he was working with them for a period of nine months. Obviously, they're not going to confirm this but my understanding is that they are they they were talking about potential potentially acquiring companies and what that what what that strategy could look like for Lemonade. They didn't mention anything about going beyond insurance, which strikes me odd or they just want to keep the cards to themselves, right. It will make sense for them to I think, to do something outside of the, of what we're describing because what we were we are describing they've created this landscape that works really, really well for the this type of customer that they got, but they need to go beyond that. It's really Really it's that simple I didn't think be the filing offered anything else revolutionary

Avi
I yeah, I think he got it's like a game of saying hey, look at our great potential that's what they're selling the great potential and that's it but but I said this I think last week and I feel bad for Root in a way because really Lemonade they weren't sweating you know I'm sure they weren't very hard to get to where they you know are but they didn't get dirty look at the claims of rules look at the reviews. They went into homeowners renters auto they went to the enterprise product eliminate kept their cool, you know, and they, they knew what they were doing. They again, they had that one trick, you know, the video game and they kept on pushing those buttons and they went forward. And that was their strategy and I think you know, that didn't go According to plan a lot of their things Germany was out according to plan. And, but at the end of the day, they made the most out of it. I think they're brilliant for going for an IPO at a time like this before Root because again, if Root would have went in with their premiums with their enterprise product with the homeowners, and they wouldn't be able to show the bundling, and how pricing per customer decreases when they bundle and things like that. And they'll talk about their technology and how they're going to be like Progressive when they grow up. That would have hurt Lemonade, but Lemonade, beat them to the punch, and and then we'll see what happens next, you know, because once you go public, there's less pressure on you. So yes, you may be replaced, you know, the board will say, Get the hell out. We want a new CEO or something like that. But you made your share, and you gave your investors the money back, which I think you know, there's a lot of pressure on that. But we'll see what happens the day after the IPO.

Nick
So Shefi What do you think? The whole potentially rumors that SoftBank kind of pushed this to an IPO because of their struggles and they're looking to liquefy a little bit and make, you know, try to take advantage of the market as it as is. You think this is eliminate decision? Do you think that SoftBank has some influence in it?

Shefi
Um, I don't know. I don't want to comment on something that no, I don't, I don't know.

Nick
Any opinion of

Shefi
we, I mean, we all have an opinion about SoftBank and it it's typically negative. SoftBank likes to play startups as well. So I think it wasn't, you know, startup played, we work just as much as we work played SoftBank, right. So, there are two sides to every story. Lemonade has been well, we felt like the IPO is coming for a while. I think the minute that Lemonade didn't Get acquired immediately by folks like Allianz or oxa. You know, they knew that they had to create a roadmap. And so it kind of makes sense. Everquote went IPO Select, Quote, went to IPO, I think Lemonade is good at the core. So in terms of what they're offering in terms of competing against, firstly, for first time insurance buyers, I think that's good with technology. That's great. Okay, so what's next?

Avi
I think they have, you know, the from if I'm not mistaken, 274 million, something like that. In the bank, they need to either, you know, get more funding, which I doubt, someone at this time would have invested in the valuation that they got with the SoftBank funding. So an IPO is a great way to give, you know, some money back to SoftBank and their shareholders so they didn't have much time like they needed to make up a decision because again, time is running out and they have a lot of expenses. A lot of losses. So they had to make a decision and I think IPO gives them the best potential.

Nick
Yeah. Before we end, another small caveat, the the money that they raised, that's not runway money. The money that they raised is capital that has to support the business, they can't spend that. So I think time was running out, you think they needed, they were going to continuously need financing to support those losses, because the the business itself was not profitable. So cash flow coming in was not going to be enough to kind of cover their expenses. I was going it could have potentially caused the rating problem, which would have been absolutely disastrous for them if they've had any kind of negative review on their rating. That would have been disastrous. So I'm going to

Shefi
make you know I just said last comment about the the consumer reviews piece because I mentioned this Last time Lemonade doesn't have Facebook reviews turned on I can't it's hard to find Google reviews turned on and then the filings they mentioned clear assurance and that brings them really high but some of these are just anonymized or reviews where you can't tie a the the review to an actual person, though I do think you know, they're not brave enough. I remember a period where Facebook reviews were on and they weren't all magnificent right there was there were comments about we'd like to have a phone call when we want to have a phone call and not just chat with bots, I think by now, people that are coming to Lemonade understand a proposition and what they're about. So they're getting the customer that values these things like obviously will value different things. But you know, that the reviews and insurance for the most part, nobody's really going out there and putting all the honest sometimes hurtful reviews around claims for everybody to To watch and see. Yep, still insurance guy that's still insurance. This is specifically renter's insurance, but Phil insurance.

Nick
So there's the music. Um, this is a lively conversation. I don't think this is gonna be the last time we're going to talk about this. So should be fun to see how this plays out should be fun to see the implications of this across the industry to other companies. And we

Shefi
don't have any time they mentioned the word fun, and they're filing

Nick
how many

Shefi
237 Wow, yeah, but they mentioned claims more than that. So at least they know where to focus on. How did you count that? I was just I kept my reading fun, fun and a few times playful and I said What is this? What am I reading?

Nick
It came up 200 times.

Avi
Are you sure it's not also part of a "fundamental" because they kept on seeing how their technology mental Okay, so a lot as well.

Shefi
That's what I want you to read.

Nick
Okay, well, not the last time we're going to talk about this. So, Avi, Shefi. Happy Friday. happy weekend to you.

Avi
Happy weekend, Friday.

Nick
Everyone at home, continue to stay safe. We are not over. We are not over the pandemic. So continue to play it safe, wash your hands, be a good citizen, and all of that. So until next week. This is This Week in Coverager. Bye, everyone.