Marshmallow co-founders Alexander and Oliver Kent-Braham.
LONDON – Billion dollar startups are hardly a rarity anymore. Data company CB Insights lists more than 800 private technology companies around the world valued at $ 1 billion or more.
But Marshmallow, a London-based digital insurance platform, is as rare as they come. Founded in 2017 by multiracial identical twins Oliver and Alexander Kent-Braham, it is the first black-owned company in the UK to achieve coveted “unicorn” status.
“We were quite surprised by this fact,” Marshmallow CEO Oliver Kent-Braham told CNBC in an interview.
It reflects a persistent lack of diversity in the technology industry. In the UK, only 1.6% of venture capital funding went to purely ethnic founding teams between 2009 and 2019, while only 0.2% of funding went to black entrepreneurs, according to Extend Ventures.
Kent-Braham believes the venture capital mindset is to blame. Many tech investors ignore cold emails and only endorse founders they know through peers, he said.
“VCs really have to be a bit broader,” the 29-year-old entrepreneur told CNBC.
“The number of times a VC said, ‘I wouldn’t reply to cold emails because you should be able to hurry up and introduce me.’ It’s a lot easier to hurry up and introduce yourself when you’ve gone to your university and know a lot of people who know you. “
Kent-Braham’s Marshmallow company raised $ 85 million in a round of funding valued at $ 1.25 billion. The cash came exclusively from existing investors, including Passion Capital, an early investor in the digital bank Monzo, as well as the South African bank Investec and the French reinsurer Scor.
The Kent Braham brothers still control most of the business after the recent round of investments. The couple founded Marshmallow with software engineer David Goaté, with whom they had previously worked at the London start-up Yoti.
Insurance is going digital
Marshmallow is a purely digital insurance provider. The company began offering auto insurance primarily to expats, who, it is said, are often faced with higher fees from traditional insurers.
Authorized by the UK’s Financial Conduct Authority, the company touts its use of machine learning to adapt policies for customers as a key advantage over established companies in the industry such as Admiral and Axa.
“We’re trying to use more data than our competitors to insure people and then digitize everything,” said Kent-Braham. “We need to hire about half the people our competitors have to hire to support customers. We believe we are really well positioned to gain market share.”
With more than 100,000 registered customers, Marshmallow plans to bring more products to market and expand across Europe.
The insurance technology or insurtech market has seen a surge in investment this year after the Covid-19 pandemic accelerated a shift in consumer behavior towards online services.
Zego, a UK commercial auto insurer focused on the gig economy, raised $ 150 million in March on a valuation of $ 1.1 billion. Wefox, a German insurance start-up, bagged $ 650 million in an investment round in June and valued the company at $ 3 billion.
Marshmallow’s fundraising also underscores the surge of capital that has recently flowed into the European tech industry. European tech companies have already raised more money this year than they did in all of 2020.