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Illustration: Aïda Amer/Axios

Root Insurance, a tech-enabled auto insurance upstart that lives among the legacy giants in Columbus, Ohio, recently raised around $350 million at a $3.5 billion valuation, Axios has learned from multiple sources.

Why it matters: VCs are valuing Root more as a tech company than as an insurer, arguably more because of high growth rates than the actual tech component. We've seen this elsewhere in the insurance sector (e.g., Lemonade), and in all sorts of other consumer-facing areas (eyeglasses, razors, mattresses, etc.). The the jury remains out on the sagacity of such classifications.

  • Context: Coatue Management and DST Global co-led the Series E round. Root previously raised $177 million, including a $100 million Series D round last summer at a $1 billion post-money valuation. Existing backers include Drive Capital, Redpoint Ventures, Ribbit Capital, Scale Venture Partners, and Tiger Global.

The bull case is that Root can get a lower-risk user pool than can traditional insurers, because in most states it uses a "try-before-you-buy" mobile app that leverages telematics to gauge driving style. This lets it offer below-market rates which, in turn, lowers churn. The company also has moved its claims infrastructure in-house, which should give it better control of user experience.

The bear case is that Root has a higher loss ratio than do incumbents like Progressive and Geico, per statutory filings, and its single product line doesn't help offset customer acquisition costs via bundling. Plus, even the most generous VC backers can't help Root compete on balance sheet with a rival like Geico, which is part of Warren Buffett's Berkshire Hathaway.

  • CEO Alex Timm, who declined to discuss the fundraise, argues that startups will always have higher loss ratios as they works out some of the kinks (including Root's apparent under-pricing in its key Texas market, which it has since corrected). And, to be fair, it's Q4 2018 loss ratio fell 50% year-over-year after a Q3 2018 increase.

Go deeper

The massive early vote

Illustration: Sarah Grillo/Axios

Early voting in the 2020 election across the U.S. on Friday had already reached 61.7% of 2016's total turnout, according to state data compiled by the U.S. Elections Project.

Why it matters: The coronavirus pandemic and its resultant social-distancing measures prompted a massive uptick in both mail-in ballots and early voting nationwide, setting up an unprecedented and potentially tumultuous count in the hours and days after the polls close on Nov. 3.

Republicans gear up for day-of and post-Election Day litigation

Voters wait in line to cast their early ballots Photo: Joe Raedle/Getty Images

Republican Party officials say they're already looking to Pennsylvania, Minnesota and Nevada as likely battlegrounds for post-election lawsuits if the results are close.

The big picture: As pre-election lawsuits draw to a close, and with President Trump running behind Joe Biden in national and many battleground state polls, Republicans are turning their attention to preparations for Election Day and beyond, and potential recounts.