Slingshot Insurance, an AI-native embedded insurance startup, is exiting stealth with $27 million in seed funding. The Minneapolis-based company focuses on small policies consumers can buy alongside another purchase, such as coverage when booking a flight, a model known as embedded insurance. The funding was co-led by Rally Ventures and Skyward Group, with participation from insurance industry veterans including Jim Hays, who will join Slingshot's board.
Rally is also a co-founder of Slingshot, part of a broader approach by the firm that has seen it co-found roughly eight portfolio companies that have either launched or remain in stealth. Slingshot is led by first-time founder and CEO Ethan Genteman. Its software helps businesses offer these policies by connecting them with insurers that back the coverage, using AI to process and share data between the two sides in an effort to reduce the administrative work that can make inexpensive policies costly to offer.
Slingshot's first customer and design partner is Vertical Insure, which serves more than 750,000 customers at an average premium of $25, according to Slingshot. Genteman said the company's first program will launch this month. For now, Slingshot earns revenue as a technology provider working with outside insurers, and it charges a 5% technology fee to administer programs through its platform.
The six-person company, which formally began operating July 1, is also pursuing an acquisition that would allow it to back policies itself. Genteman said Slingshot is not a carrier yet but is rapidly closing on one. One product in development would let parents buy insurance when signing a child up for youth sports, such as a $25 policy covering cancellation or an injury during a season for a parent spending $2,000 on a volleyball league.
Genteman argues that as vertical SaaS companies look beyond traditional subscription fees for growth, embedded insurance is a largely untapped opportunity to generate incremental revenue from transactions already happening on their platforms while delivering additional value to customers. He said the challenge is that the insurance and regulatory landscape is incredibly complex, and most SaaS companies lack the expertise, industry relationships or understanding of where to begin. Slingshot aims to provide a white-glove service for those companies, helping them go from an insurance product idea to a fully operational offering.
The difficulties facing Slingshot's first customer helped bring the startup together. Rally had already helped start Vertical Insure, which uses software platforms to sell insurance to its customers and struggled to find insurers whose technology and processes could keep up, according to Genteman. Vertical Insure co-founder and CEO Brock Noland, also a Slingshot co-founder, said in a statement that the company can design the products its customers need almost overnight, but the industry is highly regulated and the antiquated approval process on the carrier side slows everything down.
Genteman sees a broader opening among vertical SaaS companies, which sell software tailored to a particular industry. He argues that insurance could give them another avenue to make money from purchases customers already make through their platforms, since they already know their customers and what they are buying. He cited examples including a babysitting platform offering coverage for replacement childcare if a sitter cancels, pet boarding software offering coverage for unexpected vet bills, and an equipment rental platform letting customers add protection at checkout against damage or theft.
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