Pie Insurance, a Washington, D.C.-based startup offering workers’ compensation insurance to small businesses, announced this morning that it has closed on a $127 million in new financing.
Gallatin Point Capital joined Pie’s existing backers in the capital raise. Those investors include Greycroft, SVB Capital, Aspect Ventures, Elefund and Sirius International Insurance Group Ltd.
The investment is structured a bit differently than a traditional funding round.
The new financing includes $27 million “to support the continued growth and expansion” of Pie Insurance’s automated offering to small business owners. It represents the second tranche of a Series B. The first tranche, a $45 million raise led by SVB Capital, was announced in February 2019.
The remaining $100 million equity capital commitment will go toward the creation of a new holding company that will purchase licensed insurance companies. (We’ll get into that more later.) Gallatin Point Capital led that portion of the financing, which also included participation from Sirius.
The total new investment brings Pie’s total raised to $188 million since its 2017 inception, according to Crunchbase data.
The company began selling its insurance policies in March 2018. In the first quarter of 2020, it wrote nearly $19 million in premiums, up 150 percent from just under $7.5 million during the same period in 2019, according to co-founder and CEO John Swigart.
Pie had a “meaningful amount of money” on its balance sheet at the time of the raise, according to Swigart. But it added on to make sure it had enough runway into 2022 and “get on the other side of COVID,” he said.
“We wanted to be able to confidently continue to build out the business, add to the team, and do the strategic things that are important to us without having to worry about fundraising in an uncertain COVID world,” Swigart told me.
Pie, which also has an office in Denver, offers workers’ comp coverage in 34 states and the District of Columbia. It plans to continue to expand across the nation to serve more small businesses, either directly or through their agents. It currently has about 165 employees.
Its customer base includes a range of small businesses including trades, contractors, landscapers, janitors, auto shops and restaurants, Swigart said. Pie sells its insurance directly through its website and also through thousands of independent insurance agents.
“The distribution channel in the industry is not the broken part,” Swigart told Crunchbase News. “We think it’s the insurance company side that’s really ripe for disruption.”
As mentioned above, part of the goal with its new capital is to form a new affiliated company, Pie Carrier Holdings — which will be majority owned by Gallatin Point Capital — to create and purchase licensed insurance companies.
Pie Carrier Holdings will own the licensed insurance companies that Pie will use to issue a portion of its insurance policies. Sirius Group is also investing directly in Pie Carrier Holdings and will continue to issue insurance policies offered by Pie.
“What businesses like ours need is access to balance sheets to be able to write the insurance,” Swigart said. “We want to start capitalizing on our own insurance company that we are forming, and transition to taking some of our own risk.”
That transition will be “multiyear,” he added.
Meanwhile, Greycroft co-founder and partner Ian Sigalow told me via email that his firm was impressed by how Pie Insurance has “managed to continue growing premium in excess of 100 percent annually, in spite of a difficult market environment.”
“Pie was the first company to offer workers’ compensation insurance that could be purchased online, and the company continues to innovate as the fastest and most data-driven insurer in the market,” he added.