Creandum backs Laka

If you happen to operate in the world of startups there are two things you hear more or less daily: "change the world" and "disruption". This is the mantra of Silicon Valley. Build something from the ground up in a unique and different way and thereby completely change an industry or a market. It's a very compelling idea, but the reality is that most startups aren't true disruptors. They rather have an incremental impact on an industry. Over the last decade, we've seen a handful of companies do this; Airbnb within temporary accommodation industry, Uber for transportation, and Creandum portfolio company Spotify for music. Those who truly disrupt their industry, create outside returns.

This is why when we meet companies who objectively aspire to change an industry we pay close attention. Today we couldn't be more excited to announce that Creandum V is investing in Laka, which is exactly one of these ideas.

The flaws of modern insurance.

The insurance model was born in the late 17th century after the great fires of London. The first policies were therefore centered around property insurance. The business model back then is strikingly similar to what it is today. In fact, the oldest insurance company still active today was founded in 1710. (This speaks to great lengths about the disruption that the industry has faced since.) Unfortunately, this unchanged model still has lots of flaws. These flaws lead to a profound distrust of insurance companies.

At the heart of this issue lies a profound conflict of interest between insurance companies and the people they insure. When you get an insurance cover, you typically pay a monthly premium for the coverage you need, and if anything unforeseen happens you make a claim with the hope that the insurance company reimburses you. On the other hand, insurers make money on the difference between premiums collected and claims paid out, meaning they have a strong financial incentive not to pay their policyholders. This is not trivial. Rarely do businesses become more profitable by delivering precisely against the promise of their customers, which is true for the insurance market.

The flip.

So is there a way to align incentives between policyholders and insurers? Well, Laka and Creandum truly believe so and it comes dow to....no monthly premiums!

Instead of charging monthly premiums, customers commit to sharing the total cost of claims when something happens. Laka targets communities of customers who basically aggregated their individual risks into a pool, and equally share the cost burden when something unforeseen happens. As for Laka, instead of collecting a misaligned spread between premiums and claims, their business model involves charging a percentage on top of monthly claims. The end result is a beautiful and transparent insurance model that incentives Laka to process and pay claims as quickly and accurately as possible...and by the way it also becomes ≈40% cheaper than traditional insurance.

Laka is starting out within the specific insurance vertical of bike and bike equipment across the UK, and people love them. They have thousands of customers across the UK and an unprecedented 4.99 out of 5 's customer satisfaction! On the back of this Laka will soon expand to new geographies (hold tight ), as well as adding new insurance products to their offering shortly.

We couldn't be more thrilled to partner with Tobi, Ben, and Jens on this journey, together with our friends at LocalGlobe and Yes.vc.