May 23, 2022

Cybercrime is on the rise, and today an insurance startup that has built an AI-based risk management platform is announcing a major funding round to capitalize on the opportunity. Cowbell Cyber, a full-stack insurance company that provides cyber insurance to small and medium-sized businesses, has closed a $100 million Series B it will use to continue investing in its data science and risk engineering, as well as technology, claims management, expanding your Cowbell reinsurance business and expanding your go-to-market channels.

The Pleasanton-based company, which currently operates only in the US market, did not disclose its estimate of how many customers it has today or what its current earnings are. But Jack Cudale, founder and CEO, told me that the number of policyholders is expected to triple to 35,000-40,000 clients over the next 12 months (meaning you’ll have around 17,000-20,000 clients now) (revenue equivalent) has grown 40 times to $200 million this year, which is still a very young market with less than 10% of the country’s small businesses currently using cyber insurance.

“We think the first wave of cyber insurance growth was strong but limited,” he said, but he believes the broad themes in the market have been game-changing for both potential clients and companies like him. “The threat landscape has changed significantly. Covid-19 has expanded the attack surface and [even] The Russian invasion of Ukraine has greatly expanded it.” However, this is because new hacks and growing malware injection efforts due to this conflict inevitably bring more malicious tools to the market, not to mention more active participants looking for opportunities.

In addition, this is an age-old problem of small and medium-sized businesses. They are largely overlooked compared to large enterprises, so there are plenty of opportunities for anyone who wants to build solutions specifically for them. “The acquisition of cyber insurance is a more challenging prospect for small and medium businesses compared to large companies,” he said.

The company’s approach is attractive because it underpins big data analytics, the idea of ​​”technology” in the “insurtech” category, and also touches on a broader trend that I have seen among insurance companies in general, where they are focused on providing prevention tools to reduce risk as they involve connecting customers and engaging them in a regular premium payment cycle.

Kudale told me that the backbone of Caubell’s system is a large-scale data collection operation that she works with in the US. Monitors approximately 71% of the companies in the market, or 23 million companies, with approximately 1,000 data to identify key trends in SMB usage and behavior. numbers. This, in turn, flows into a broader algorithmic scoring platform, which he called the Cowbell factor. In addition, it provides monitoring analysis to evaluate the individual risk profiles of its individual clients.

“They are continuous when you follow both the company and the market as a whole,” he said. This is different from other types of business insurance, which are typically based on third-party published industry risk guidelines combined with employee numbers and turnover. “This is normal for any other type of insurance, but not for cyber risks. You have to evaluate each company based on its strengths.”

This data is used not only to determine the company’s premiums, but also to guide the company on its practices and policies and how to improve them. (However, this is no different when life insurance companies still focus on wellbeing, or even when home insurers provide advice on home safety and charge users more when the home does not invest in better security systems.)

Kudale acknowledges that this approach in some ways puts the company closer to cybersecurity than insurance, although the company also sells products to about 45 different cybersecurity vendors due to its market approach. (That makes a lot of sense when you consider how Apple will sell Apple Care with its hardware, for example.) They sell products through a channel network of 14,000 brokers. He said Cowbell has no plans to license its technology or label its product for sale through other commercial insurance providers.

Cowbell predicts that by 2030 “permanent premiums” for cyber insurance in the US will be $100 billion – a figure that will cover both large enterprises and small and medium businesses, which is one of the reasons for the interest of investors.

Matthew Jones, Managing Director of Anthemis Group, said in a statement: “Through its unique approach to cyber risk mitigation and ongoing partnerships with cyber security service providers, Cowbell Cyber ​​has established itself as a leader in cyber insurance for small and medium businesses.” “The company has had great results so far and we are thrilled to be part of their next chapter. We look forward to the innovation they will continue to bring to the cyber insurance market.” Jones joined the board for this round.

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