From $200 million valuation to insolvency: Insurtech startup Sproutt heading for bankruptcy
From $200 million valuation to insolvency: Insurtech startup Sproutt heading for bankruptcy
The Israeli startup raised $38 million since its founding in October 2017, but struggled to generate income and turned to the court due to its inability to pay its debts
Israeli insurtech company Sproutt has declared insolvency less than three years after raising funding at a $200 million valuation. Last week, Sproutt submitted a request to the District Court in Tel Aviv to initiate proceedings due to its insolvency and its inability to pay a $2.2 million debt to Bank Leumi.
Sproutt, established in October 2017, raised $38 million over the years and received investments from prominent insurance companies. Harel Insurance owns 4.5% of the company's shares, while Menorah Mitvtachim owns 3.5%.
The deterioration of Sproutt, a digital insurance company specializing in marketing life insurance policies in the U.S., over the past three years is attributed, according to the company, to wrong strategic decisions resulting in heavy expenses and estimated losses of NIS 125 million (approximately $33 million). In addition to the debt to Leumi, the company's cash crunch also stems from debts to suppliers amounting to $740,000 and unpaid salaries for employees.
Sproutt was founded by Yoav Shaham and Itai Brickner, each owning 4.2% of the company. In 2018, Sproutt founded a subsidiary called Aktibo, which centralized the company's activities in the U.S. Most of Sproutt's commercial engagements were conducted through Aktibo, allowing customers to define their lifestyle and reduce future payments based on their healthy lifestyle. However, the system did not generate enough revenue to cover marketing expenses due to several reasons, including minimal economic savings for consumers, a preference for purchasing policies through familiar insurance agents, and the high cost of marketing procedures.
The commercial failure of Aktibo led to a strategic change in 2022, shifting from direct marketing to cooperation with agents and insurance agencies in the U.S. However, the cooperation with insurance agencies proved costly, jeopardizing the company's agreement with Reder Agency. Failure to make payments to Reder Agency may result in the loss of commission rights for Sproutt, as agents could utilize alternative contracts with insurance companies.
The boom in investment in technology companies in 2020 and 2021 affected insurtech companies like Sproutt, but rising interest rates in 2022 and 2023 weighed heavily on insurance stocks and drew investment funds away from companies like Sproutt. Decreased investments, coupled with unsuccessful marketing ventures, led to the insolvency of the insurtech company.
