Functional Finance – a US software platform that integrates and automates data and reporting functions for insurance companies – has raised US$8m in seed capital to get it off the ground.
But what exactly is the new startup, and who are the entrepreneurs behind it?
Founded in 2021, the San Francisco-based insurtech startup has developed “an API-driven embedded solution” that gives insurance companies better oversight of their money flow. The platform integrates easily into existing platforms and partners, giving them an automated and seamless connection. Possibilities include billing and invoicing, premium collection, financing, reconciliation, payables processing, reporting and integration back to the general ledger.
The firm has now raised US$8m in seed capital and an additional US$2m in SAFE notes for future equity investments. The fundraise was led by venture capital firm New Enterprise Associates (NEA), Walkabout Ventures and Altai Ventures with further participation from C.V. Starr Insurance and other backers.
Who are the founders behind Functional Finance?
Melgiri previously co-founded CoverWallet, an insurtech which aims to simplify insurance for small businesses. She started that company in 2015 alongside Iñaki Berenguer and served as Chief Operating Officer, before the two co-founders led the startup through an acquisition by insurance giant Aon, which completed at the beginning of 2020. Melgiri will now surely be looking to replicate that success – this time, at the helm of Functional Finance.
DeGangi, meanwhile, is an experienced professional with a background in software engineering. Having previously been a Product Manager for eBay and an Engineer at Hunch, DeGangi co-founded Renew Health in 2016 with a mission of changing the flawed prescription drug market.
The two experienced founders are joined in Functional Finance’s leadership team by Jim Ermilio, former President at CoverWallet who will now serve in the same position at the insurtech startup. Ermilio has prior experience working alongside CEO Melgiri, and will bolster the ranks at the growing software firm.
What have they said about Functional Finance’s seed round?
Rush Melgiri says: "At my last startup, I realised firsthand that spreadsheets and emails are terribly inefficient, error-prone and costly ways for the insurance industry to manage their payables and receivables. You can build fast-growing businesses and take payments online but reconciling that on the backend is often overlooked and deprioritised, leaving it to intensive manual labour.
“There was a tremendous opportunity to create an automated technology solution that will make the industry move faster, and the experience should be more efficient and positive for clients and customers."
Rick Yang, Partner and Head of Technology Investing at NEA, adds: "The Functional Finance team has created a breakthrough technology that we believe will drive positive experiences and outcomes for the insurance industry, which has historically lagged in adoption of new technologies. Rashmi, Tony and the Functional Finance team bring valuable experience and a deep understanding of industry-specific opportunities, and we are thrilled to partner with them to modernise insurance data and reporting."
The company is aiming to provide a single view of an insurer’s financials – unlike other software solutions, which aim to improve just one aspect of financial management. The system is built flexibly to adapt to different lines of insurance, and can be integrated easily into a client business from the beginning of its lifecycle.
As such, Functional Finance appears to have secured the buy-in of well-known insurtech operators, even at this early stage of the company’s growth. Dan Abrahamsen, CEO of Cover Whale, says: "We are excited to announce our partnership with Functional Finance to provide a new and improved invoicing and payment experience for our customers. Cover Whale has grown to a US$300m+ gross written premium run rate quickly and Functional Finance will allow us to continue that trajectory while keeping our internal expense ratios best in class and making things easier and faster for our producer network."
Please also take a look at our upcoming virtual event, InsurTech LIVE, coming on 18-19 October 2023.
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