The Uncertain Future of Wefox: Mubadala’s Internal Dispute
Mubadala, the Abu Dhabi sovereign wealth fund, is in disputes over whether to support once high-flying German insurtech Wefox or strike a deal with The Ardonagh Group, one of the world’s largest independent brokers.
It seems the Mubadala board is currently split on delivering Wefox with a new spate of rescue financing or offering its investment areas in Wefox to Ardonagh, with the insurtech’s core assets valued at €550m (US$587m).
Ardonagh’s proposal values Wefox’s non-tech assets at €350m (US$373m) up-front, with another €200m (US$213m) in earn-out payments dependent on Wefox hitting certain targets.
Just two years ago, Wefox’s valuation sat at US$4.5bn, and was one of the most richly valued startups in Europe, period, for the last decade.
The rapid fall of Wefox
Founded in 2015, Wefox rapidly expanded its platform, which connected insurers with customers via a wide-ranging network of agents.
It was in 2022 when a Mubadala-led investment round saw Wefox’s valuation reach US$4.5bn, and many of its core assets could now be sold for US$587m.
It’s worth noting that Wefox has received investment from other sources, including Chrysalis and LGT Group.
Since its 2022 boom, Wefox has faced difficulties, much like many other startups that were recipients of cheap funding that have now had to face far tighter financial conditions, while making a profit to see good the large investments it has received.
According to the Financial Times, Wefox has faced steep costs from its insurance carrier unit as it has continued to burn through cash amid economic headwinds.
It is not the only insurtech to suffer, many startups have seen valuations plummet in public markets.
It was clear all was not well when CEO and Co-founder, Julian Teicke, stepped down from his role to be replaced by Mark Hartigan in recent times.
Now, Wefox is in talks to sell key elements of the business to Ardonagh, which is itself backed by the Abu Dhabi Investment Authority, making it a direct Mubadala competitor.
Wefox’s founders and its early investors are opposed to this deal with Ardonagh, as it would put them at risk of losing their entire investment in the insurtech.
As such, Wefox executives are pushing for a new funding round from Mubadala, leading to some deep considerations taking place at the Abu Dhabi sovereign wealth fund.
What would a deal mean for the future of Wefox?
Should the Mubadala proposed deal conclude, as opposed to additional funding being pumped into Wefox, it would essentially split the insurtech in half.
The core company, as mentioned, would go to Ardonagh, while a separate firm consisting of Wefox’s tech platform and Swiss business would be set up and owned by its founders and early investors.
Today, Wefox operates in eight countries with more than 2 million customers. This could all be about to change, though.
Per Bloomberg, proposals on the future of Wefox are likely to be heard at an extraordinary meeting on June 28.
While early investors stand to lose significant capital, new investors from Wefox’s 2022 funding round could be set to double their investments thanks to contractual causes baked into the funding round.
Once a leading, high-flying insurtech startup, if one thing is clear, it’s that the future of Wefox is far from certain.
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