Updated: Sep 13, 2020
All of the information given was obtained through public channels, no confidential information has been given here. Please consult the campaign materials for any information not within public domain. The campaign is due to launch tomorrow morning.
As this post was made prior to the campaign launch, please see my posts in the comment section, where I have summarised any learnings made after having assessed the pitch materials (pitch deck, etc).
Stage: Generating revenue/Scaling
Moneybox is a wealth management app, offering ISA and pension products.
✔️Strong team (founded, ~scaled and exited startups previously)
✔️ High growth
✔️ VC involvement (validates the investment)
❌Poor unit economics (Although specific numbers are as yet unknown, £5m in losses vs £1m in revenue, despite 450k users suggest the acquisiton cost may be too high, hindering profitability)
**Edit: The pitch revealed that Moneybox's unit economics were actually in good shape; see the comments section at the bottom of the page for more info**
❌ EIS relief unlikely (Moneybox assets likely exceed the £15m limit)
❔Transparency key KPIs such as CAC are not (yet) publicly disclosed, but may be within the campaign materials or obtainable through a founder call once the campaign is launched.
A very strong team (>1 founder(s), startup and incumbent industry experience, previous exits, etc), with a positive culture (important for hiring, staff retention, etc). Of the roles they have open, I expect they may take time to hire software engineers (given the shortage in the UK). Thankfully, recent mass-redundancies (and therefore more available engineers) in the UK could mitigate this risk.
Moneybox offer savings (Cash ISAs) and investment products (Stock and Shares ISAs, Lifetime ISAs, Pensions, ESG funds, etc) through their mobile app. The app is famed for allowing users to invest spare change (so called 'micro-investing') through round-ups or regular deposits.
The app is rated 4.3 on Trustpilot and won the consumer investment award for best money app in 2019. The android app has a rating of 3.8 vs 4.7 for the IOS app, possibly suggesting a lack of feature parity between the two platforms. Negative reviews largely centre around a drop in interest rates for the cash accounts (which, in fairness, is an industry-wide issue) and a poor ISA transfer experience. The UX is simple and playful, coupled with an onboarding flow that takes less than a minute. The app tech stack is similar to that used to make stack overflow (the wikipedia for programming), so the app could hopefully scale well without outages, etc.
N.B. Moneybox do not offer financial advice (unlike, e.g. Nutmeg); that is, they offer a suite of investment products and the onus is on the user to decide the most appropriate product.
My concern is that apps with a broader scope, such as Plum (which offers energy switching, etc on top of investment products), may prove more appealing to consumers over time. Note that moneybox does showcase a few consumer retail discounts in-app and may expand this functionality going forwards. Another concern of mine is that challenger banks (e.g. Starling, Monzo and Revolut) are well positioned to replicate a micro-investing feature for their large user base, rendering moneybox redundant; they could instead prove potential partners however (e.g. via Starling's marketplace)
In the financial industry, customers are relatively 'sticky'. That is to say that, hopefully, moneybox users will not churn. This is because switching providers (e.g. transferring ISAs) is a lengthy, painful process. It is partly why Hargreaves Lansdown enjoys a client retention rate of 95%.
As Moneybox are neither a bank nor a financial advisor, they should have a lower cost base (no regulatory or governance costs), giving them a cost advantage over competitors such as robo-advisors (e.g. Nutmeg) or challenger banks (e.g. Monzo).
This time, i've opted to cover similar insurgent competitors (Moneyfarm and Nutmeg) as well as an incumbent competitor (St. James Place, the barclays of wealth management). Be mindful that there are plenty of startups abroad that could Moneybox could run into (e.g. Acorns in the US, Scalable Capital in Europe). Also be mindful that this is not a comprehensive assessment, there are many competitors in the UK worth considering also (e.g. Plum, PensionBee, Tickr, etc)
As growth is an important aspect of a startup, please see below a chart of Moneybox's user growth for your consideration:
As above, If moneybox continue their growth trend, they could reach one million customers by H2 2021.
KPIs 📊 📐🗄️
You might be able to obtain some of the missing metrics through the campaign materials, or a founder call when the campaign launches. Alternatively, some metrics are easily inferred.
All round valuations are rough estimates based on companies house filings and public information (news articles, etc). I have assumed Moneybox will crowdfund the maximum amount that can be done without a prospectus (£6-7m). Small VC/Angel investments (£<1m) have been omitted for convenience.
**EDIT: After the campaign launched, it was revealed that the valuation was ~£140m including their latest funding round/series C. The valuation I used for their 2018 raise above is also (marginally) overestimated**
Given that Nutmeg have crowdfunded, and are also a wealthtech startup at an almost identical stage, I believe they make an ideal comparable:
Nutmeg (2019): £1.5bn AUM; 30% YOY growth; 70k customers; £7m annual revenue; £250m pre-money; ~35x revenue multiple
This would suggest that a reasonable valuation for Moneybox would be £35m! However, Moneybox is growing revenue and users 3x faster than Nutmeg, so a higher revenue multiple could be justified. My (stretch) target valuation for Moneybox would be ~£100m (excluding the £30m series C), given we find out their CAC:CLV ratio (profitability potential) is all good.
**EDIT: After the campaign launched, Moneybox's 2020 full year revenue forecasts were revealed. Whilst I cannot share these figures, I will note that -if used to draw up a fair valuation- they lead to an attractive valuation (in my opinion), representing a marginally higher premium on Nutmeg's multiple despite much higher growth and better unit economics**
Fair valuations can be determined by deducing what valuation would give a reasonable return (often considered as an amount equal to your total portfolio). This ultimately depends on your exit valuation estimates, etc; It is a highly speculative process.
Consider the chart below for an idea of potential returns for Moneybox investors at certain ‘starting’ valuations and exit (taken from other wealthtechs) valuations:
30x is often touted as commensurate reward for venture risk (this is because a 30x return would 'return the fund' for a classic VC fund portfolio size of 30).
This valuation method would suggest that:
- If you believe Moneybox is the next St. James Place, a £100m valuation is fair.
- If you believe Moneybox is the next Betterment, a <£50m valuation is fair
💡 Please be mindful that this chart doesn't account for the (often heavy) negative effect of dilution! If in doubt, just halve the cash returned on exit to simulate dilution (i.e. rather than £1k on exit, assume £500 on exit).
Listed financial services/wealth management companies are buoyant despite COVID, lending to a potentially strong IPO market
There is modest M&A activity in this space:
- Wealthify, a welsh robo-advisor, was acquired in early 2018 by Aviva for £17m. Wealthify crowdfunded on Seedrs in late 2016 at a £11m post-money valuation.
- Quovo, an investment advice/data startup, was acquired by Plaid for ~£155m in early 2019.
There is an opportunity for an M&A, but given that wealthtechs of this size are rarely acquired, the possibility of an IPO should be considered.
Whilst it validates the investment case to have a VC on board, none of Moneybox's investors have been early stage investors in a 'unicorn' startup - something I look for when assessing the track record of venture firms.
Note that, as this post was made prior to Moneybox's campaign launch, I have predicted the terms for the round based on companies house filings. A key assumption is that Moneybox will offer the crowd the same terms/share class as the VCs (Nutmeg, a similar company in size and nature, did so).
N.B. Note that, given the above assumptions, Moneybox could offer preference rights to investors, meaning investors rank senior to other earlier investors (i.e. 'first dibs'), which mitigates risk. There could, however, be no pre-emption rights attached.
**EDIT: After the campaign launched, it was revealed that the shares are *not* preference shares, but ordinary shares. They *do* have pre-emption rights attached**
Shareholder Communication ☎️📻✉️
As moneybox have not crowdfunded before, it is uncertain how frequent and detailed their shareholder updates might be. They have, however, promised to invite shareholders to an exclusive online shareholder forum, as well as early access to beta products/features. This echoes Freetrade, who have given product and growth updates through their forum, and given financial updates yearly through their crowdfunding campaigns.
It is not clear if Moneybox furloughed staff, or implemented a working from home policy. Given the size of the campaign, a future fund round is unlikely.
Moneybox have been referred to as 'COVID winners', given the growth they experienced as a result of renewed interest in savings and/or investment products in light of the pandemic; The stock market has seen high exposure in media, and the economic downturn has highlighted the importance of savings.
| Not financial or legal advice | All opinions my own | Please do your own
research | Capital at risk |
| Startups are illiquid | Don't pay dividends | Suffer dilution | Usually fail |
| Even tax relief is at risk |
Disclosure: I am a shareholder of Crowdcube. I am yet to decide whether I will invest in this campaign.
Whilst I can't share confidential information, for any questions please feel free to comment in the forum, or even email me (email@example.com).
Moneybox Companies House filings
Moneybox blog, website and social media
Numerous articles and press releases on Moneybox