Lemonade Turns to Synthetic Agents to Finance Growth

June 29, 2023

Powered by General Catalyst, Lemonade’s Synthetic Agents program seeks to close the cash-flow gap and unlock cash-friendly scaling

Lemonade (NYSE: LMND), the digital insurance company powered by AI and social impact, announced it has partnered with General Catalyst (GC), a leading venture firm and an early investor in Lemonade, to create Synthetic Agents, a novel financial structure that unlocks growth without depleting cash.

Lemonade enjoys strong unit economics - investments in customer acquisition (CAC) are typically repaid three times over - but the initial CAC payback can take a couple of years. This ‘cash flow gap’ means that many opportunities for profitable growth are passed on, pending payback from prior acquisitions.

Insurers often turn to independent agents to solve this cash flow gap. Though agents do deliver CAC-free customers (among other benefits), the costs are nevertheless considerable: agents ‘own the customer,’ and receive a lifelong commission, siphoning off much of the potential stream of gross profit. Synthetic Agents were designed to deliver the cash flow benefits of independent agents, but without forfeiting the customer relationship, and without ceding much of the gross profit for the lifetime of the customer.

Under the program, which will commence on July 1, 2023, General Catalyst (through its Customer Value platform) will finance up to 80% of all Lemonade’s CAC, and in return will receive a synthetic ‘commission’ of up to 16% of the stream of premiums they helped finance. Once GC has recovered their investment and capped return on any one cohort, the remaining ‘lifetime value’ of the customers from that cohort accrues to Lemonade, entirely and forever.

“We think the Synthetic Agents program is something of a game changer for Lemonade,” said Daniel Schreiber, Lemonade co-CEO and co-founder. “Thanks to Synthetic Agents, we believe we will be able to accelerate growth without drawing down our capital reserves or selling more equity. That means generating a significantly larger business, sooner, with more cash in the bank, and with a materially higher return on capital.”

“We believe Lemonade’s Synthetic Agents program gives Lemonade a balance sheet to invest in growth, so it can preserve its own capital for investments in its amazing technology and people,” said Pranav Singhvi, Managing Director, General Catalyst, and architect of the Customer Value strategy. “We’re big fans of Lemonade, a company that we believe has completely turned insurance upside down and become one of the most intriguing public tech companies. As one of Lemonade’s early backers, being able to help directly support their next stage of growth is exactly what we built our Customer Value strategy for.”

For more details on the overall vision and anticipated benefits of the Synthetic Agents program, read more here, on our Lemonade blog, which can also be accessed through our website, www.lemonade.com/blog.

Read here to learn more about the Customer Value strategy by General Catalyst.

Lemonade’s financial expectations for Q2 and for the full year 2023, as communicated in the Q1 ‘23 Lemonade Letter to Shareholders, remain unchanged.

About Lemonade

Lemonade offers renters, homeowners, car, pet, and life insurance. Powered by artificial intelligence and social impact, Lemonade’s full stack insurance carriers in the US and the EU replace brokers and bureaucracy with bots and machine learning, aiming for zero paperwork and instant everything. A Certified B-Corp, Lemonade gives unused premiums to nonprofits selected by its community, during its annual Giveback. Lemonade is currently available in the United States, Germany, the Netherlands, France, and the UK, and continues to expand globally.

Follow @lemonade_inc on Twitter for updates.


This Press Release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact contained in this Press Release, including without limitation statements regarding the anticipated benefits of the Synthetic Agents program and expectations regarding its impact on our capital structure, the expected future results of operations and financial position, and our ability to effectively manage the growth of our business are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements expressed or implied to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to the following: our history of losses and the fact that we may not achieve or maintain profitability in the future; our ability to retain and expand our customer base; risks related to the "Lemonade" brand; risks related to denial of claims or our failure to accurately and timely pay claims; our ability to attain greater value from each user; risks related to the novelty of our business model; risks related to our Giveback; risks related to our limited operating history and our ability to evaluate our current business performance, implement our business model, and our future prospects; our ability to manage our growth effectively; the intense competition in the segments of the insurance industry in which we operate; risks related to reinsurance, including the availability of reinsurance at current levels and prices and counterparty risk; our ability to maintain our risk-based capital at the required levels; our ability to expand our product offerings; risks related to the operation and confidentiality of our proprietary artificial intelligence algorithms and proprietary technology; new legislation or legal requirements which may affect how we communicate with our customers; risks related to our reliance on artificial intelligence, telematics, mobile technology and our digital platforms to collect data that we evaluate in pricing and underwriting our insurance policies, managing claims and customer support, and improving business processes, and any legal or regulatory requirements that prohibit or restrict our ability to collect or use this data; our reliance on search engines, social media platforms, digital app stores, content-based online advertising and other online sources to attract consumers to our website and our online app; our ability to raise additional capital to grow our business; risks related to security incidents or real or perceived errors, failures or bugs in our systems, website or app; risks related to examinations by our primary state insurance regulators and examinations or investigations by other states in which we are licensed to operate; risks related to our collection and use of customer information and other data, and our ability to protect such information and comply with data privacy and security laws and regulations; our ability to underwrite risks accurately and charge competitive yet profitable rates to our customers; risks related to our ability to generate revenues from new products; risks related to our expansion within the United States and any future international expansion strategy; risks related to combining the businesses of Lemonade and Metromile and the potential failure to realize the anticipated benefits of the mergers; risks related to the historically cyclical nature of the insurance business; risks related to extensive insurance industry regulations; risks related to severe weather events and other catastrophes, including the effects of climate change and global pandemics which are inherently unpredictable; climate risks, including risks associated with disruptions caused by the transition to a low-carbon economy; risks related to increasing scrutiny, actions and changing expectations from investors, clients, regulators and our employees with respect to environmental, social and governance matters; risks related to fluctuations in our results of operations on a quarterly and annual basis; risks related to utilizing customer and third party data for pricing and underwriting our insurance policies; risks related to limitations in the analytical models used to assess and predict our exposure to catastrophe losses; risks related to potential losses that could be greater than our loss and loss adjustment expense reserves; risks related to the minimum capital and surplus requirements that our insurance subsidiaries are required to have; risks related to assessments and other surcharges from state guaranty funds, and mandatory state insurance facilities; risks related to our status and obligations as a public benefit corporation; risks related to significant shareholders and their ability to influence the outcome of important transactions, including a change in control; and risks related to our operations in Israel and the current political, economic, and military environment.

These and other important factors described under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on March 3, 2023 and in our other and subsequent filings with the SEC, could cause actual results to differ materially from those indicated by the forward-looking statements made in this Press Release. Any such forward-looking statements represent management’s beliefs as of the date of this Press Release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.

Yael Wissner-Levy

Source: Lemonade