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Gabriel Budi Sutrisno · · 5 min readWhy PayPal’s VC arm is betting on Qoala despite the insurtech firm not yet being profitable
No profits, no sweat.
It’s become a cliche to say that VC firms are now “focused on businesses that can turn a profit.”
Yet Qoala, an Indonesia-based insurtech firm, has just raised a US$47 million series C round despite the fact that it’s still in the red.
The company reported a net loss of US$22.3 million in 2022, according to Alternatives.pe, which tracks regulatory filings. While it did not disclose details of its 2023 financials, Qoala confirms that it has yet to turn a profit.
The series C injection, led by PayPal Ventures and MassMutual Ventures, is smaller than the US$65 million that Qoala secured in 2022. The series B round was led by France-based investor Eurazeo, who also joined the latest fundraise.
The latest investment brings the insurtech firm’s total capital raised to nearly US$140 million.
In an exclusive interview with Tech in Asia, Qoala says that the latest funding round reflects a confidence that the company will break even in the future due to its “strong unit economics and positive contribution margins.”
The Qoala team / Photo credit: Qoala
Indeed, even in today’s environment, profitability is not always a rigid requirement for attracting investor funding, says Theresa Blissing, founder of the Asia InsurTech Podcast.
Given the country’s relatively low insurance penetration rate, “investors evaluating insurtech companies in Indonesia may place particular emphasis on the potential for market expansion,” she explains.
Qoala says it will use the new funds to expand its market reach in Southeast Asia, grow new distribution channels and product lines, and deploy AI into its operations.
Over five years of runway
The company’s 2022 loss was due to higher sales and marketing expenses as well as larger general and administrative expenses. The former was tied to higher transactions, while the latter included operating expenses and headcount costs, the company says.
These expenses were increasing at a higher rate than the gain in revenue between 2021 and 2022. Sales and marketing expenses rose from 56% to 105% of revenue, while the corresponding figures for general and administrative expenses increased from 203% to 243%.
Despite this, Qoala says that it has “cracked the right unit economics,” adding that it will focus on growth in 2024.
GWP fight
Profitability is not everything
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Despite generating US$280 million in gross written premiums since 2020, the Indonesia-based startup has yet to turn a profit.
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