Trouble is brewing at insurance aggregator Coverfox. The firm’s co-founder and chief technology officer Devendra Rane moved out of the company a month ago, while its chief executive officer Premanshu Singh resigned last week due to uncertainty over the future of the company, according to two people familiar with the matter.
The company executives had requested its existing investors to support further until it achieves profitability. But the investors declined to do so, added the two people.
“The company has been struggling to raise funds and its current investors also refuse to put in more money,” said the first person cited above, requesting anonymity. “This led to the top executives leaving and now the board has appointed a new CEO.”
Entrackr couldn’t ascertain the name of the new CEO.
Coverfox has been up for sale — looking to consolidate with a larger player in the sector for four-five months but to no avail, added the two people cited above.
“It had engaged with several companies including PolicyBazaar, Paytm and even Amazon but none of them showed interest in taking over the company,” said the second person cited above, requesting anonymity.
Paytm was reportedly in talks to absorb Coverfox but the talks didn’t go through. It was also said to be in conversations to raise $50 million in Series D round but existing investors aren’t keen on infusing more money, as per the second source cited above.
“Paytm had initially offered about $70-80 million to Coverfox but the company denied the offer as it believed it deserved a better deal,” said the above-quoted source. Six months later, it resumed talks with Paytm for the deal since the company talks with other potential acquirers did not materialize.
But, this time Paytm wasn’t even ready to pay the price it originally offered. “Paytm offered $25-30 million worth cash buy-out that the company’s board rejected,” he said.
Sources also say that the Noida-based firm has been building its own insurance vertical that is likely to be launched soon. It’s worth noting that SAIF Partners is a common investor in both firms.
Coverfox has been left far behind when compared to its deep-pocketed rival PolicyBazaar. Meanwhile, newbies like Turtlemint grew at a quick pace and grabbed more market share leaving Coverfox trailing. “Loss of market share and poor unit economics evaporated the confidence of existing investors,” said the second source.
Coverfox was founded by Varun Dua and Rane in 2013. However, Dua moved away eventually to start Acko General Insurance in 2016. Founded in September 2017 as insurance firm, Acko raised close to $150 million in total capital including a $36 million worth round in November last year.
According to regulatory filings, Coverfox had an operational revenue of Rs 32.4 crore while it spent about Rs 135.4 crore in FY19. So far, Coverfox has raised over $55 million from the likes of International Finance Corporation (IFC), Transamerica, SAIF Partners, Accel and Catamaran Ventures–the family office of Infosys’ Narayan Murthy.
Detailed queries sent to Coverfox’s CEO Singh last week didn’t elicit any response. Queries sent to SAIF Partners, Accel and Rane remained unanswered. We will update the post as and when they respond.
Paytm declined to comment on the story.
Entrackr couldn’t ascertain details of any kind of layoffs at Coverfox, however, CVs of top management executives have been floating in the ecosystem for a while, say sources. Reviews on Glassdoor by Coverfox’s employees also allude to the fact that the company is going to a financial crunch.
That said, it remains unclear on how things will pan out from here for the Mumbai-based company. Even if it finds an acquirer place, it is sure to be a distress sale. No stakeholder is expected to make any money from Coverfox.
[“source=entrackr”]
