Why I decided to invest in Lemonade
A position I started for 2021 and want to keep for long
Market & Moat
Lemonade is an insurance company that uses artificial intelligence and other technologies to make the insurance process simpler, more efficient, and more profitable.
Using AI to define price-demand is sufficiently appealing. From a macro perspective, I see this artificial intelligence playing a role similar to what Loft does in the real estate segment, and what The Trade Desk does in the Marketing & Ads industry.
I didn’t dig into the technical details yet, but overall what they’re likely doing is using AI to gather data, consolidate and analyze information to test the price elasticity.
From one side, this intelligence might enable Lemonade to make more money by:
- Not stressing the price beyond the consumer’s financial capacity.
- Increasing the demand and market share with affordable and appealing entry plans.
In theory, this is sufficient to sustain a profit margin growing slowly over time, while Lemonade fights for market share in a 5-trillion dollar global market. They’re holding a tiny fraction of it right now, 0.003%.
Once they have a good market share, they will likely have more bargain power and tiny price changes will produce a scale effect. Pretty much the same strategy followed by subscription plans — remember Netflix?
Execution
Unconventional leadership
Daniel Schreiber, Lemonade’s CEO, has graduated in law. An intriguing start point as we most see people from finances, economics, engineering, sales, and technology assuming such prestigious positions in most companies.
I see this as a good indicator: an appealing combination of knowledge areas that can boost growth. That’s the diversity we want to see: different backgrounds building up innovative approaches.
So Schreiber started his career working as an attorney, then left to start his own company, which lasted for 6 years. Totally skin in the game when still young and inexperienced. A bold man has always my respect.
Later Daniel was leading the business development at M-Systems, the company that invented the USB flash drive, back in 1995. A key achievement for them:
- M-Systems was an Israeli company, totally out of the mainstream US-tech companies.
- They changed the user experience of the whole industry. At that time, we used to use the less versatile CD-ROM — and I personally remember still using more floppy disks at that time.
M-Systems was later acquired by SanDisk, which is well-known for its cost-efficient products these days. Daniel assumed 3 VP positions in 4 years at SanDisk, then moved to become the president of Powermat at Israel.
Presumably, personal needs taking effect to make him move back to his country instead of assuming global positions. I don’t really know.
In any case, he’s the CEO at Lemonade and it seems he is pretty much well covered with capabilities, results, and experience to push this company forward.
A founder with a positive track record
Shai Wininger is one of the co-founders of Lemonade, being now the Chief Operations Officer (COO) at the company. His LinkedIn profile shows he’s also the president of the company, and I don’t know how this fits with the CEO position.
The amazing track record from Shai: he was also the co-founder of Fiverr, and he stayed there for 11.5 years.
Shai’s pitch on his profile is:
“I have a true passion for product design, hacking, UX and building iconic brands. Founded several companies over the past 28 years, failed in most, succeeded in some, enjoyed every step of the way.”
Totally skin in the game. I honestly like this spirit of falling several times, and keep pushing forward until success comes.
Actually, I don’t believe in any other path.
Organizational structure
One curious aspect that got my attention was the fact that Lemonade has a VP of Growth, instead of the usual VP of Marketing & Sales.
The organizational structure qualitatively translates their focus on Growth rather than purely on Marketing & Sales. Of course, Marketing & Sales are likely underneath this structure.
Talking about the VP, Tamir Jerby has an extensive background: ranging from mentoring startups in Google and Microsoft programs up to helping three companies in the process of becoming public: Conduite, Fiverr, and Lemonade.
I’m already in. And the day I saw it going up by +27% in one day made me regret not having more.
That happens!
This article is for informational purposes only and reflects only my personal opinion. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
