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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

Miriam Kramer, author of Space
30 mins ago - Science

China makes history with successful Mars landing

A model of the Tianwen-1 Mars rover is displayed during an exhibition at the National Museum of China in Beijing. Photo: Wang Zhao/AFP via Getty Images

A Chinese lander carrying a rover successfully touched down on Mars for the first time, state media reports.

Why it matters: This is the first time China has landed a spacecraft on another planet, and it launches the nation into an elite club of only a few space agencies to successfully make it to the Martian surface.

1 hour ago - World

UN: 10,000 Palestinians displaced in Gaza as Israel-Hamas fighting escalates

A Palestinian woman walks after she collects her belongings inside her damaged house following an Israeli air in the northern Gaza Strip. Photo: Ahmed Zakot/SOPA Images/LightRocket via Getty Images)

The United Nations warned Friday that ongoing fighting between Israel and Hamas "has the potential to unleash an uncontainable security and humanitarian crisis," in not only the occupied Palestinian territories and Israel, but "the region as a whole."

The big picture: More than 125 Palestinians, including 31 children have been killed in Gaza since fighting began Monday, per the Palestinian Ministry of Health. Seven people, including one child, have been killed in Israel, according to Israeli authorities.