Toronto-based Walnut Insurance has closed $4.6 million CAD in fresh funding to help more insurers, brokers, and enterprise businesses deliver embedded insurance products.
“While it’s been a journey, I think we’re playing really nicely in the field of all these landmines.”
In an interview with BetaKit, Walnut co-founder and CPO Adrien Niblock said that the insurtech startup has started to find good footing in terms of matching insurance and distribution partners, and begun expanding more heavily into the enterprise market, something that requires additional investment on both the sales and engineering sides.
As Walnut has seen more interest from insurers looking to participate in embedded insurance, Niblock noted that the company has focused some of its efforts on “platforming” its offering. “We’ve been developing all the pieces,” he said.
“We’re turning into a bit of a platform now, so that insurers can actually turn their products into APIs and distribute through partners as well … We’re becoming a bit more of a technology player versus just a matcher between insurance companies and partners,” he added.
Founded in 2020, Walnut matches insurers with distributors and provides the tech infrastructure to embed insurance directly into the products and platforms of enterprise businesses and financial institutions. By doing this, the startup claims it helps clients reduce marketing spending and improve distribution. More established players like Singapore’s Bolttech and New York-based Cover Genius do similar work.
“Our goal is really to create a foundation for embedded insurance and hopefully participate in the wave, because embedded insurance, I don’t think, is an ‘if,’ it’s a ‘when,’ just because it makes sense for all parties,” Niblock said.
Walnut’s latest, all-equity, all-primary financing, closed in April and was led by existing investor NAventures, the venture arm of the National Bank of Canada. It has renewed its support for the company after co-leading its $4-million CAD seed round in late 2022. “Our ongoing investment and partnership reflect our confidence in their vision and execution,” NAventures principal James Povitz said in a statement.
The company’s latest funding round also saw follow-on support from Highline Beta and participation from a trio of new backers in Telus Global Ventures, Diagram Ventures, and Portage Ventures. It brings Walnut’s total funding to date to approximately $10 million. The startup plans to use this capital to expand its platform and scale its operations, adding to its engineering team and targeting new partnerships.
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“Walnut is not just redefining the future of embedded insurance—it is also actively transforming the way creditor insurance is integrated and deployed in Canada,” Diagram co-founder and CEO François Lafortune told BetaKit. “Walnut’s unique approach to embedded insurance distribution aligns with our vision of supporting transformative technologies that have the potential to drive significant industry change.”
This round comes more than a year and a half after Walnut closed its seed financing, which was led by ATB Financial and NAventures, with participation from Harvest Venture Partners, Highline Beta, and N49P.
Niblock declined to classify Walnut’s latest round, claiming that Walnut’s revenue is “similar” to that of a Series A stage company, while the size of the financing was “a little bit smaller than a typical Series A.” He noted that fundraising was more difficult this time around due to the macroeconomic environment, adding that the process took longer amid these conditions.
It has been a tough fundraising market for tech startups, and data indicates this is especially true for FinTech and insurtech companies. Niblock claimed that Walnut’s latest round ultimately came at similar terms and a “pretty much flat” valuation relative to the company’s 2022 seed financing, despite the growth and the traction Walnut has achieved since then, but declined to disclose how exactly the funding valued the startup.
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Niblock argued that embedded insurance is a good idea for companies when the products they sell require some type of insurance. According to Walnut, embedded insurance offers a better distribution strategy and gives insurers and brokers the ability to profit share versus front-load marketing costs. Walnut targets FinTech firms, financial institutions, telecommunications companies, and consumer brands building out FinTech products, connecting them with a variety of insurers and products.
Today, Walnut integrates with more than 10 insurers, helping companies like Telus and National Bank offer travel insurance, providing insurance on the Tim Hortons card, and enabling firms like ATCO to deliver appliance warranties in an embedded fashion. On the distribution side, Walnut charges a setup and software-as-a-service (SaaS) fee and participates in some commissions as broker, while on the insurer side, it is more of a SaaS business, Niblock said.
“By embedding insurance products directly into the products and platforms of enterprise businesses and financial institutions, Walnut removes significant marketing costs and drives insurance distribution through partner-driven channels,” Lafortune added. “This strategy not only supports a more sustainable distribution strategy for insurers, but also ensures that consumers receive tailored insurance products when and where they need them.”
Some of Walnut’s expertise comes in integrating insurance into various digital ecosystems quickly, taking one to three months to launch an embedded insurance product, rather than the years some other providers require. Niblock claimed the startup helped Telus and National Bank both do that in less than three months.
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“While we see a lot of infrastructure providers driving one to two year executions, I’d say our real competitive advantage is speed and cost,” said Niblock.
Lafortune expects to see more companies integrate insurance into their products and services, and sees room for Walnut to play an important role in facilitating this shift.
With its latest fund, Diagram has expanded beyond its traditional venture studio model to make external investments into companies it did not help create. Diagram has now invested in five companies that fit this bill. Lafortune noted that Walnut is “one of the first examples of Diagram’s direct investment strategy.”
Walnut is one of the first examples of Diagram’s direct investment strategy.
For now, Walnut and its nearly 30-person team is focused on building its presence in the Canadian market. Though it already runs some programs in the US as many of the companies it works with have American entities, Niblock emphasized that Walnut aims to prove itself in Canada before figuring out how to export its tech to the US.
In recent years, Niblock noted he has seen other insurtech companies raise tons of money, secure lofty valuations, and then falter amid the downturn. Publicly-traded insurtech firms like Hippo, Lemonade, Metromile, and Root Insurance have experienced challenges during this time, as have many of their privately-held peers, including Next Insurance, Pie Insurance, and Policygenius. Meanwhile, here in Canada, fellow insurtech startups like Toronto’s Briza and Vancouver-based Apollo Insurance have faced difficulties of their own.
According to Niblock, building an embedded insurance tech company is particularly tough because it requires working with partners and insurers that lack tech infrastructure, plus the expertise to understand how to execute, factors that have helped fuel “a large graveyard of embedded insurance players.”
“While it’s been a journey, I think we’re playing really nicely in the field of all these landmines, and I think we’re poised to be the enabler for embedded insurance as a whole,” he said.
Feature image courtesy Walnut Insurance.