An insurtech IPO


October 27, 2020

PLUS: The Gap’s turnaround plan.
October 27, 2020
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Inspire Brands — which owns Arby’s, Buffalo Wild Wings, and Jimmy John’s — is in talks to take Dunkin’ Brands (which includes Baskin-Robbins) private in a multibillion-dollar deal.

Even more newsworthy: Dunkin’ apparently dropped “Donuts” from its name in 2019 to increase its focus on beverages? Why dafuq didn’t anyone tell us this?

The Big Idea
bear gif

What Root’s IPO says about the future — and potential ills — of personalized insurance

Today’s a big day for insurtech (AKA “insurance tech”), which ranks with “Brangelina” as one of the least likable portmanteaus out there.

Root — an auto insurer that has raised $500m+ — is slated for an IPO at a valuation of $6B+.

It’s the 2nd big insurtech IPO of 2020 (Lemon went public in July) and shines a light on what the future of insurance might look like.

The company’s beef with traditional insurance

In his analysis of Root, finance writer Marc Rubinstein highlights that the insurance industry rests on 2 pillars:

  • Law of large numbers: Accurately predicting claims is easier with a larger (rather than smaller) book of business — all things equal.
  • Risk pooling: The insurance model relies on a larger group of people paying premiums (but not filing claims) to cover claims that do get filed (and result in large payouts).

Root’s S-1 filing essentially says that this mode of insurance is unfair to good drivers that have to pay high premiums to cover riskier customers.

Root’s motto is simple: ‘Better drivers deserve better rates’

The way the company delivers this service is equally simple. A user downloads the Root app, which tracks 200 factors including:

  • Standard details (age, gender, ZIP code)
  • More advanced analysis (braking frequency, turning speeds, phone usage while driving)

The insurer crunches these numbers and can offer relatively cheaper policies for those who drive like Miss Daisy.

Per Rubinstein, this personalized pricing is indeed “fairer, as Root highlights… [and] can influence behavior positively.”

But… there’s always a but

Quoting the book Weapons of Math Destruction, Rubinstein shows how potentially damaging Root’s insurance model can be.

Instead of balancing society’s risks, personalized pricing can “pinpoint those who appear the riskiest customers and then either drive their rates to the stratosphere or, where legal, deny them coverage.”

If companies like Lemon and Root are indeed the future of insurtech, we’ll have much more complex issues to deal with than an unappealing portmanteau.

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Snippets
  • Zuck is coming… oft late but always with a splash, Facebook is entering cloud gaming. Games will be free to play in existing FB apps.
  • Twilio on a roll…coming off its splashy acquisition of Segment, the company’s revenue jumped +52% YoY for Q3.
  • SAP wants a mulligan after its stock tanked 20%+ following a brutal Q3 earnings report for the German software giant.
  • Miss concerts? Hang in there — Hubilo brings virtual events to a device near you.
  • A school for ants?! Maybe down the road; for now researchers at Leiden University have created the world’s smallest boat — a cell-sized tugboat using a 3D printer.
 
I hope this finds you well
Cameo

How Cameo is breaking into the B2B market

Celebrity shouts are coming to a business call near you.

Last week, the personalized celeb video app Cameo announced its first B2B partnership: Users of the Sendoso platform will now be able to send messages from the likes of Michael Rapaport and Jaime Camil to customers and prospects.

Cameo’s multi-pronged B2B attack

Cameo’s chief business officer Arthur Leopold told The Hustle that the Sendoso announcement is consistent with the firm’s mission “to create the most personalized and authentic fan connections on earth.”

As a result of these efforts, “democratization of celebrity access has occurred.”

In the B2B space, Cameo has 2 other offerings in addition to the Sendoso partnership: 

  • Promo Cameo: Talent can be booked to endorse brands. “Let’s say a normal Snoop Dogg greeting is $900,” says Leopold. “For $7.5k, he’ll do a shoutout for a local car dealership or pizza joint.”
  • Brand Partnerships: Full campaigns that Cameo helps manage. For instance, Activision hired gaming personality Captain Price to do 400 fan shoutouts for a new game release.

Can there be too much of a good thing?

As in, will the value of a Snoop Dogg shoutout diminish if everyone gets a shoutout?

Leopold doesn’t think so: “Think of Justin Bieber. His image is everywhere. But if he walks down the street, he’ll still get mobbed by people to take a photo.”

As unabashed fans of “Jimmy from Linkedin,” we’re rooting for any and all innovations in the B2B messaging space.

Check out (very) related coverage:

  • The Hustle’s favorite Cameo ever
  • The best Cameo videos from our readers
  • An unofficial guide to Cameo’s top-earning stars
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Life’s a Twitch
Trash can

In a shady move, Twitch mass-deleted countless hours of streaming videos

If you’re even a moderately successful Twitch streamer, you’ve done the following:

  • Put in time to hone your craft
  • Turned a hobby into a steady income
  • Built up a fan base and back catalog of content
  • Spent hours explaining to Aunt Joy what you do for a living

For many, all of this hard work recently disappeared at the flip of a switch.

What happened?

Last week, Twitch surprised streamers across its platform with a widely distributed notification that it had removed content suspected of copyright infringement.

The streamers — a collection of creators with clips ranging from gaming to makeup tutorials — were alleged to have violated the Digital Millennium Copyright Act (DMCA).

The 1998 law “criminalizes the production and dissemination of technology, devices, or services” that are protected with copyrights.

Streamers were using background music without permission

This charge comes from the wet blanket known as the Recording Industry Association of America (RIAA).

The distributors (e.g., Twitch) are absolved of liability as long as they respond to the complaints quickly. Under the DMCA, anyone accused of copyright infringement is allowed the chance to appeal, but Twitch denied its creators the opportunity to do so.

Per one popular streamer: “Their solution to DMCA is for creators to delete their life’s work. This is pure, gross negligence.”

(Official footage of Twitch dealing with the DMCA issue 👇👇👇)

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Gap Years
Kanye West

The Gap’s turnaround plan includes a lot of athleisure (and Kanye)

Do you remember the first time you bought some Gap khaki pants?

Well, cherish those memories: Per the bankruptcy newsletter Petition, the $8B retailer plans to shut down 350 Gap and Banana Republic stores (30% of all locations) by the end of 2023.

This is part of a broader turnaround plan announced last week that will refocus efforts on fast-growing brands and ecommerce.

There’s a new growth engine in town

In recognition that athleisure pants are 500x more comfortable than khakis or jeans for the WFH life, Gap wants to prioritize its Lululemon competitor, Athleta.

While the brand is responsible for only ~10% of Gap’s $16B revenue, the plan is to open 100 new Athleta stores over the next few years.

Also: The Kanye x Gap partnership could be huge

During his recent 3-hour roller coaster of a podcast with Joe Rogan, Kanye West said The Gap was the “Apple of apparel.” 

Steve Jobs, of course, famously returned to Apple and flipped its fortune around in the mid-’90s. Could Yeezy do the same for Gap?

West — who told Rogan that he stole khaki pants as a teen — has already had a big impact: The Gap’s stock is up ~2x since announcing its partnership with the artist in June.

The halcyon days of khakis may yet survive.

(PS. Kanye name-dropped 70+ people in the podcast. Here’s a list.)

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