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"We're skeptical of Lemonade's IPO because the company has no material product or value proposition advantage—it's another AI-backed, loss-making fintech with a popgun marketing budget that targets millennials. Additionally, the cost to scale is tremendous, and the road is only going to get harder," said Hugh Tallents, senior partner at New York-based management consulting firm cg42.
Lemonade declined to comment, citing the "quiet period" companies are required to follow after filing IPO plans.
Plenty of Competition
Tallents said many of Lemonade's competitors are already moving toward AI-friendly millennials as the InsurTech has or have incorporated AI into their business. That's a dynamic that makes it hard for Lemonade to succeed, he said.
"It's much easier for major players to copy Lemonade's technology than it is for Lemonade to build a strong distribution network and generate brand awareness. This is where Lemonade is going to struggle. It takes a lot of continued investment in marketing to reach new customers and be the loudest voice in a crowded field," Tallents said. "To put it in perspective, Lemonade spent $19 million last year on marketing and was racking up losses. GEICO spent more than three-times the amount that Lemonade has raised in total so far just on marketing in the U.S. last year. Lemonade's level of marketing spend is minuscule in comparison to what the competition in the property/casualty industry are forking out year over year."
A Mixed Perspective on Lemonade's Proposed IPO - Carrier Management
Lemonade declined to comment, citing the "quiet period" companies are required to follow after filing IPO plans.
Plenty of Competition
Tallents said many of Lemonade's competitors are already moving toward AI-friendly millennials as the InsurTech has or have incorporated AI into their business. That's a dynamic that makes it hard for Lemonade to succeed, he said.
"It's much easier for major players to copy Lemonade's technology than it is for Lemonade to build a strong distribution network and generate brand awareness. This is where Lemonade is going to struggle. It takes a lot of continued investment in marketing to reach new customers and be the loudest voice in a crowded field," Tallents said. "To put it in perspective, Lemonade spent $19 million last year on marketing and was racking up losses. GEICO spent more than three-times the amount that Lemonade has raised in total so far just on marketing in the U.S. last year. Lemonade's level of marketing spend is minuscule in comparison to what the competition in the property/casualty industry are forking out year over year."
A Mixed Perspective on Lemonade's Proposed IPO - Carrier Management
