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A greenfield opportunity for investors in the insurance sector?




By Lisa Walls-Hester on 21st October 2016


You would be forgiven for thinking that the centuries old insurance industry has little to offer in the way of new products or innovation but EmbryoCare, believes it has a product which is completely new to the insurance market. The company is inviting investors to fund its equity crowd raise which will help it bring its product to market.

 

EmbryoCare is a UK insurance provider, which offers specialist cover for the health of unborn babies and young children, from 20 weeks in-utero to two years old. It can be taken out by parents-to-be to assist with any financial challenges if there is a serious issue at birth or in the early life of their child.

 

Ground-breaking innovation, be it a service, product, idea or method, doesn’t come around often and is usually a consequence of a personal frustration and entrepreneurial resolve. When CEO, Jamie Moyes’s son was born with a severe medical condition he realized that there was a lack of financial help for parents in this situation. Private medical insurance policies do not cover unborn babies and are inadequate for mothers, usually providing only a few hundred pounds for childbirth.

Moyes decided to change this and teamed up with investor director Craig Rochford to develop an insurance product to help families mitigate their financial worries when personal tragedy strikes.

 

EmbryoCare has been designed following substantial market research, end-user feedback, and medical guidance. Moyes, recruited consultant paediatrician at The Portland Hospital, Dr John Fysh as the company’s chief medical officer and consulted with insurance industry experts to create the product.

 

The company sees potential for EmbryoCare beyond the consumer market and intends to target corporates. It wants every large-scale employer to offer its product to their workforce. EmbryoCare can offer bespoke packages created to provide financial and emotional support to companies and their staff, cutting costs and building staff loyalty.

 

The opportunity for investors

 

The philanthropic and social benefits of this investment are clear but what about a financial return for shareholders?

 

The company claims it is offering a unique product which meets an unmet need.

 

The product can be licensed in many markets and the business is ready to monetise, as well as having one policy ready for market it also has a pipeline of new products under development.

 

EmbryoCare is already generating interest from larger insurance players, which offers the reassurance that there is the appetite within the industry for new risk. The company has secured an agreement to bring EmbryoCare to New Zealand and Australia. An Australian-based medical insurer will partner EmbryoCare in a joint venture (JV) which offers the company license fees, a proportion of gross premium income and an equity stake in the JV.

 

Other potential partners for JV agreements have been identified and the company is currently negotiating an agreement in China.

 

The team has attributed a pre-money valuation of just under £6.5m including a 10 per cent currently unallocated share options pool to the company and is seeking to raise £1.4m for 17.9 per cent equity.

 

The valuation reflects the two years of research and development investment. The company says it has amassed significant amounts of highly specific data regarding medical, infrastructure and distribution expertise.

 

The campaign is running on SyndicateRoom and carries a minimum investment amount of £1,000.

 

The company expects to produce 21,000 policies in the first year and 59,000 in year two. It is forecasting revenue of £8.2m by year five with a low overhead base of around £650,000 per annum.

 

Use of funds and exit

 

The company believes it has established a first-mover advantage and says any competitor will be at least 18 months behind them bringing a product to market. It intends to deploy over thirty per cent of its minimum funding target of £1.4m to turbocharge its marketing efforts and to launch its new suite of products.

 

There are plans to hire a B2B sales executive to specifically target corporate sales contracts if the round overfunds.

 

EmbryoCare is aiming to become the leading prenatal insurance provider in the market and wants to capture significant market share before considering any exit opportunities. It believes the most likely exit route for investors will be a trade sale of the company to a large insurance brand and puts this timeframe at three to five years.  

 

A "greenfield" opportunity is a market that has never been commercially exploited. EmbryoCare is effectively prospecting a new frontier in insurance and any success will inevitably draw competitors.

 

If the company can navigate global regulatory and licensing hurdles and secure wide market penetration quickly, the company has the potential to give investors a substantial return on their investment.

 

 

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