Shares of Lemonade (LMND) are popping 130% following its debut on the New York Stock Exchange. The insurance tech company had the makings of a hot IPO. Now investors are proving that promise true.
We are living in a rare time. Many sectors of the economy are being completely disrupted by data and digital technologies. Transformative strategies connect consumers directly with services, often cutting out layers of bureaucracy and costs.
Founders Daniel Schreiber and Shai Wininger knew they were onto something big in 2015. They built Lemonade with the mission of reimagining what insurance could be with a digital substrate. They knew emergent technologies, like big data analytics and artificial intelligence, could deliver services faster and cheaper.
Less than a decade later, Lemonade offers renters and homeowners in the United States, Germany and the Netherlands actionable insurance quotes in about 3 minutes. Claims, usually least admired part of the insurance business, can be paid out in as little as 3 seconds. Three seconds.
Immediacy is attracting millennials, an often underserved insurance market. According to the S-1 filing, 70% of Lemonade customers fall within that demographic. However, the bigger touchstone is social responsibility. The digital insurer is gushing with it.
From the beginning Lemonade has made giving back part of its business model. When customers sign up, they get to choose what charitable causes they would like to support. The company then makes annual contributions to those charities based on leftover, residual premiums.
Since the program began in 2017, Lemonade has donated $800,000. During 2019 alone, the New York firm gave away $600,000 to 26 non-profits.
The idea puts Lemonade firmly into the Socially Responsible Investing category, the hottest sector in the investment world.
Investors have been willing to pay way up for SRI companies. Tesla immediately comes to mind.
Sure, Lemonade is no Tesla. The company had only $67 million in sales during 2019, with no profits. However, that doesn’t mean the stock will be a dud.
If you were lucky enough to get a share allotment, congrats. For everyone else, we’ll keep an eye out for a better entry level.