When people in the US or Europe think of crowdfunding and medical expenses, they think of websites like GoFundMe, where people raise funds for specific problems. But today the news comes that another approach – a crowdfunding and mutual aid platform that pays off when its members get into a medical emergency – is seeing a significant boost in its growth and financial support.
Hailing from Shuidihuzhu in China (translated as "mutual aid for water drops"), Waterdrop announced today that it will be in a new round of funding jointly led by two strategic investors, insurance giant Swiss Re and returning investor Tencent, Raised $ 230 million. The WeChat platform is used to register users and purchase products using a quick QR code scheme.
Past investors, IDG Capital and Wisdom Choice Global Fund, also participated in Series D. The startup does not announce its rating. However, when the round partially closed at $ 200 million earlier this month, Pitchbook found the valuation before money was $ 1.8 billion. That puts the valuation now at just over $ 2 billion.
The funds will be used not only to grow the platform further, but to partner with others in the healthcare ecosystem, from pharmaceutical companies and insurance companies to hospitals and pharmacies to other clinical care facilities, in part through a new service called Haoyaofu, and is designed to be affordable to members Offer medicines and treatments.
Waterdrop has also explored how it can do more to enable more services. Medical consultations, overseas medical care and other health services such as cancer screening and routine checkups are cornerstones of the health insurance that already exists.
“We are excited about the enormous growth potential that lies ahead of us. Our long-term goal is to become a leading online health platform in China with an ecosystem that includes insurers, pharmaceutical companies, hospitals and drugstores, and care and rehabilitation facilities, ”said Peng Shen, Founder and CEO of Waterdrop. in a statement. "We strive not only to help users with funding problems, but also to offer them integrated health services."
Beijing-based Waterdrop noted that this is Swiss Re's first investment in an insurance startup in China and the largest private fundraiser to date for an insurtech company this year in a market that is in part not driven by the Global upswing sparked the attention the healthcare sector is getting due to the coronavirus health pandemic, but the drive for better technology-based solutions to meet a range of new needs across the ecosystem, from healthcare providers to those working on drugs and other innovations towards the needs of the patient.
“As a leading online InsurTech company, Waterdrop is well positioned to address the weaknesses of traditional insurance and pave the way for future industry breakthroughs, such as the accelerated technological innovation and digitization of the industry worldwide that we saw during COVID -19 situation, ”said Ning Zhou, Head of Main Investments and Acquisitions for Asia at Swiss Re.
Indeed, ironically, the same uncertainty that COVID-19 has brought to many industries has given insurance startups a boost. Lemonade, the US-based insurance technology startup, raised $ 319 million more when it went public and currently has a market cap of $ 3.5 billion.
The reference “water drops” in the name of the startup is based on the basic requirements of the business model and requires a low buy-in from its customers (ie just a drop of water).
Part of the Waterdrop business, which is only active in China today with a beta version of an international website launched in April 2019, is focused on helping each other out with illness. In one part, users contribute very incremental amounts of money starting at half a cent to a utility program that pays out up to 300,000 yuan (about $ 43,000) from Waterdrop when members are unexpectedly hit by a major medical setback.
Children, middle-aged people, and adolescents have a list of 106 conditions that are covered, including cancer. Other age groups (and presumably different categories of users, e.g. those with pre-existing health conditions) have smaller and different lists of conditions that are covered.
The other part of this business is focused on providing mutual aid to those who suffer an accident that results in permanent disability or death. In these cases, up to 100,000 yuan ($ 14,500) will be paid out.
These amounts might not sound like much, but in a country where approximately 600 million people earn just 1,000 yuan ($ 144) a month, these can be significant amounts either in place of or as a supplement to other more expensive insurance programs. (The average monthly per capita income is much higher at 30,000 yuan.)
Another part of the business is focused on more traditional health insurance services, with monthly payments starting again at low sums of money, such as long-term serious health insurance that starts at 4 yuan ($ 0.58) per month.
A third part is a more traditional crowdfunding platform for healthcare costs.
Water droplet wasn't without bumps as you'd expect. A revelation in December revealed how employees, under pressure to meet aggressive growth goals, restricted filing due diligence and, in some cases, lay on application forms. (The company responded by firing the team in charge and working to take better action to keep things like this from happening again.)
It has also created public blacklists to name and shame those who have tried to defraud others on its crowdfunding platform, indicating an ongoing problem that this is also being abused.
Even so, the Waterdrop businesses have seen strong growth overall.
The Insurance Mall now has 120 million policyholders with a written premium of $ 865 million in the first half of 2020, which is close to the total written premium for full year 2019 (in essence, it means business has doubled so far). For the full year 2020, Waterdrop Insurance Mall expects total written premium of $ 2.0 billion or more than 100% year-over-year growth, with total earned premium of $ 865 million or 300% year-over-year growth. Waterdrop crowdfunding has raised $ 4.6 billion from 320 million unique users over 1 billion donations by the end of July 2020. And Waterdrop Mutual has paid out $ 233 million to 12,819 families to date.
For comparison: In April 2019, Waterdrop demanded 78.8 million users with withdrawals of 440 million yuan, or $ 65.34 million, from 3,100 families so far.
Swiss Re's investment is important not only for the funding itself, but also because Waterdrop is not alone in the market. Another major competitor Alibaba supports is Xiang Hu Bao (which translates as "mutual protection" in a less prosaic way) on the heels of growth.
"We will continue to build our solid partnership with Waterdrop, working together to help the issuer industry evolve and drive digital innovation," said Russell Higginbotham, CEO of Reinsurance Asia and regional president of Swiss Re, in a statement.
For investor Tencent, a significant stake in a healthcare company that ties its services to its WeChat messaging platform is an opportunity to continue leveraging this growing space against one of its major competitors in the country.
"Amid the rapid expansion of China's commercial health insurance market, Waterdrop took great advantage of the market opportunity and harnessed the power of technological innovation to serve tens of millions of families," said Yu Haiyang, MD of Tencent Investment, in a statement. "Tencent continues to be a long-term supporter of Waterdrop and will help deliver an even better user experience."