A Cincinnati startup has added millions in new funding to its coffers, news that caps a year of triple-digit revenue growth for the firm and a newly opened second office in the Midwest.
Blue Ash, Ohio-based insurtech Coterie announced March 19 it had raised $27 million in a Series B+ round. The raise, the Cincinnati region's largest so far in 2024, included backing from Hiscox, a Bermuda-based specialty small business insurance company – and a new investor – as well as previous funders Intact Ventures, based in Toronto; Weatherford Capital, a private investment firm with offices in Tampa, Florida, and Dallas; and RPM Ventures, headquartered in Ann Arbor, Michigan, among others.
The round brings the company’s total funding to more than $102 million. Coterie currently ranks as the region’s ninth best-funded startup, a list topped by unicorns Enable Injections, 80 Acres Farms and Astronomer.
David McFarland, CEO of Coterie, told me the company is keeping its valuation close to the vest. “We are not a unicorn, but we aspire to be one someday,” he said.
The company was able to maintain investor confidence despite a turbulent financial market. Coterie reported a developed ultimate loss ratio – a ratio of incurred losses to earned premiums after taking into account all adjustments and developments – of less than 60% for eight straight quarters (a lower loss ratio means the insurer is paying out less in claims relative to the premiums it’s collecting). It also reported 200% revenue growth in 2023.
“It was an up and down (fundraising process), but we were approached by a number of VCs, private equity and strategics, and we had many repeat investors participate,” McFarland said. “We ultimately put together a very good deal for everyone, and this raise enables us to get to cash flow positive, which we're aiming to be by the beginning of 2025.”
Solving a pain point for insurance agents
Coterie, founded in 2018, uses tech and data to deliver simpler and faster insurance products to small businesses, contractors and gig workers. It's an MGA, or managing general agent, meaning it acts like a broker or agent on behalf of an insurer. Coterie’s platform boasts a submission-to-bind experience – or the time it takes for a customer to submit an application or request for a quote to when the policy is bound or officially issued – of less than one minute.
McFarland said the manual process of quoting business coverage has long been a pain point for independent agents. Coterie aims to solve that.
In addition to Hiscox, Coterie’s model also has attracted investment from two other large commercial insurance firms, including the Hartford.
“These firms, they see the same thing we see,” McFarland said. “This is a large market that's underserved, and they recognize that Coterie has a significant competitive advantage with respect to data, technology and distribution.”
A new Wisconsin office
The new funding will allow Coterie to accelerate plans to expand its insurance offerings – McFarland said that could include additions like cyber and EPLI, or employment practices liability. The company is also looking to make product enhancements, add more innovative programs and streamline customer service.
Currently, Coterie is a team of 150. That's down from its peak in 2022, when the company cut 20% of its staff amid an overall industry downturn. It doesn’t plan on adding to its headcount in a big way, but the company recently opened a new office in Wisconsin in Appleton, which has its second-largest concentration of employees.
McFarland has previous ties to the city, located about 30 miles outside Green Bay.
“It’s another great insurance, Midwest town,” he said. “A lot of the team I worked with at my prior company here joined Coterie as well as a few others. And we like the Midwest in general. It has a lot of insurance horsepower.”
McFarland said the aforementioned rollouts are the largest focus for 2024. Coterie also is evaluating a few opportunities with Hiscox. The company, part of Hiscox Group, which is listed on the London Stock Exchange, provides general liability, professional liability, business owner policy and cybersecurity insurance to companies in the architecture and engineering, health and wellness, consulting and artisan subcontracting industries.
The partnership could grow, he added, although Coterie is not considering any M&A moves at the moment.
“We really just want to continue to increase the value we bring to our distribution partners and the policyholders,” McFarland said. “(The fundraise) was nice validation both from inside and outside that we're headed in the right direction.”
