Insurance has been fertile ground for artificial intelligence innovation, working as it does at the nexus of giant datasets, risk assessment, predictive analytics, fintech and customer service. Federato, a startup riding that momentum, has now raised $40 million to expand its business: an AI-powered underwriting platform to help insurers better understand and respond to risk.
Stepstone Group is leading the round with previous backers Emergence Capital, Caffeinated Capital and Pear VC participating. The startup has now raised $80 million in total. It is not disclosing valuation, CEO and co-founder Will Ross confirmed in an interview that it was a “serious, significant upround” that was multiples bigger than its previous valuation.
For some context, Federato’s last valuation was $125 million based on a fundraise from last year. Further context is that Duck Creek, one of its competitors, was snapped up by Visa Equity for $2.6 billion in 2023. The latter company offers a wider set of SaaS for insurance companies, it does show you directionally where the valuation for a lucrative AI product aimed at this sector could go. (Insurance, globally, is estimated to be one of the biggest industries in the world, totalling multiple trillions of dollars in value, with underwriting one of key areas where AI is expected to play a major role.)
Federato was co-founded by Will Ross (CEO) and William Steenbergen (CTO). Ross was one of the early employees at the Watson group at IBM, where he worked on the deal to buy the Weather Company and leverage the data from there to build environmental models. Later he went back to graduate school at Stanford, where he met the other William (Steenbergen).
It was 2021 and AI was already all the rage (January 2021 was the month OpenAI released Dall-E, its image generator). But it was already being positioned by many as a replacement for repeti …