Root targets $6B+ valuation in pending IPO, a boon for insurtech startups

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This morning Root Insurance, a neoinsurance provider that has attracted ample private capital for its auto-insurance business, is targeting a valuation of as much as $6.34 billion in its pending IPO.

The former startup follows insurtech leader Lemonade to the public markets during a year in which IPOs have been well-received by investors focused more on growth than profitability. In the wake of Lemonade’s strong public offering and rich revenue multiples, it was not impossible to see another, similar startup test the same waters.

Root’s $6.34 billion valuation upper limit at its current price range matches expectations for its bulk. The company is targeting $22 to $25 per share in its debut.

The startup will raise over $500 million from the shares it is selling in its regular offering. Concurrent placements worth $500 million from Dragoneer and Silver Lake raise that figure to north of $1 billion and could help boost general demand for shares in the company. Snowflake’s epic IPO came with similar private placements from well-known investors in what became the transaction of the year.

Will we see Root boost its target? And what does Root’s IPO price range mean for insurtech startups? Let’s dig into the numbers.

Root’s numbers

We’ve dug into Root’s business a few times now, both before and after it formally filed its IPO documents. This morning we will merge both sets of work, snag a fresh revenue multiple from Lemonade, apply it to Root’s own numbers, observe any valuation deficit and ask ourselves what’s next for the debuting company.

Will we see Root’s IPO price rise? Here’s how to think about the question: