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Hometree

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Hometree is challenging the home service industry with its no claim no price hike promise as well as digitalising the market from contract to service delivery.

  • £4-4.5m
    Round Size
  • £32m
    Pre-money
  • September 2021
    Closing Date
  • £25,000
    Min. Investment

Hometree is challenging the home service industry with its no claim no price hike promise as well as digitalising the market from contract to service delivery.

Currently the market is dominated by large incumbents, who have taken advantage of their current customers applying loyalty tax to their premiums and creating a segment of customers who are disgruntled by the cost and services they receive. Hometree have come to the market to address these customers, offering digitalisation and a no claim no price hike promise.

Led by the founder, Simon Phelan, the team has raised its level of ambition for the business and is setting out its stall for building a £1bn+ business. Hometree is operating in a sector that has demonstrated high margins at scale and which has attracted the attention of both public market and private equity investors. With the market leaders losing customers due to poor levels of service, Hometree is positioned to disrupt the sector with a technology solution and digital service to a new generation of consumers.

New capital invested in this round has an expected range of 4-12x returns in a 3 year exit with £4.5m post money.

Highlights

  • Hometree has the potential to achieve valuation of c.£1bn - Using the current forecasts for the business and comparing to the market data below, Hometree can achieve its potential over the coming years and grow to millions of subscribers, creating billions of pounds of value.
  • Currently the market is dominated by large incumbents, who have taken advantage of their current customers applying loyalty tax to their premiums and creating a segment of customers who are disgruntled by the cost and services they receive. Hometree have come to the market to address these customers, offering digitalisation and a no claim no price hike promise.
  • Strong leadership team with extensive years of experience in the home cover sector.
  • Hometree has invested in developing its own platform that can drive down costs by automating many services.
  • New capital invested in this round has an expected range of 4-12x in a 3 year exit time frame

Market analysis

Market Size

The UK presents a large market opportunity in which large established players are generating strong profit margins. The UK home cover market alone is a huge opportunity with 8m homes and a >£350m profit pool.

Key European markets provide ample opportunity for long term growth ambitions:

Germany - 12.2m homes*

Ireland - 840k homes*

Spain - 4.6m homes**

France 8.7m homes*

Competitors

The market leader is British Gas with over £4m customers and an EBITDA of 26%.

The sector has also seen many examples of similar subscription models receiving injections of both public funding and private equity. For further details please see attached investment deck.

*Assumed addressable market is same as the UK - 30% of total housing stock

**Assumed addressable market is 25% of total housing stock

Business model

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Use of funds

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Financial projections

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Key team

Simon Phelan - CEO - founder and Business Leader

Engineer & former PE investor. Worked 5 years for Jon Moulton where he ran a €100m fund & was CEO of a portfolio company.

Dawn Marriott-Sims - Chairman

Former FTSE100 COO & board member of Capita. Now partner at HG Capital - one of Europe’s leading PE funds

Alejandro Yanez - Head of Product

Former product manager at ZipCar, Ebay & Skype with 10 years experience at IBM and an MBA from London Business School

Pranjal Arya - Commercial Director

Former Consultant at OC&C managing projects for leading FTSE 100 companies. First Class Degree in Economics at Cambridge

Kevin D'Arcy - Insurance & Compliance Director

Former CFO at British Gas £1bn Insurance operation where over 9 years he grew the business to more than 4m customers

Alejandro Inestal - Head of Engineering

Former Head of Engineering at SeatFrog, and Senior Engineer at Unruly and Telefonica, with an MBA from ICADE

Mark Whitbread - Chief Business Officer

Former Commercial Director of British Gas Insurance - growing that business from inception to over 4m subscribers 

Aaron Awan - Finance Director

15 years experience working with SMEs at BDO across multiple financial disciplines including VC/PE, buy-outs and public market transactions

Nick Bellman - Business Development Director

Experienced director who ran Partnerships & Biz Dev at Local Heroes - the British Gas platform, British Gas Energy & Bounty UK

Charlotte Fowler - Head of Customer Success

Former Head of Customer Support & Service at the Times, and very experienced customer success experience in the energy industry at Orsted Energy, Dong Energy & Pulse Business Energy

Exit strategy

For full exit strategy, including exit scenarios, please see the investment presentation.

Fee summary

Standard Co-Investor Circle fees are applicable as below:
Oxford Capital Access Fee – 2% 
Annual Service Charge– 1%
Oxford Capital Profit Share – 20% 

Please refer to the Co-Investor Circle IM for full details of the fees and custodian charges.

Risks

Execution Risk: Struggle to maintain high servicing standards so no longer differentiated in the market place.

Competition Risk: Whilst the 4 large incumbents are clear competitors that Hometree are targeting, there is potential for another small competitor to take marketshare.

Partnership Relevance: Currently reliant on comparison website partnership for 60% of sales.

Third Party Risk: Still dependent upon a third party of engineers (PMS) for some servicing.

Profitability Risk: Not able to increase gross margins to allow them to challenge for marketshare.

For risks and mitigating factors please see attached full investment deck.

Oxford Capital is an Alternative Investment Fund Manager (AIFM) as defined by the Alternative Investment Fund Managers Directive (AIFMD), providing access to Alternative Investment Funds (AIF) and Co-Investor Circle (a MiFID service). You are deemed sufficiently knowledgeable to understand the significant degree of risk involved with making direct investments into unlisted securities. Through the Co-Investor Circle, Oxford Capital offer a strictly non-advised service. The service offering is the provision of deal information, deal access and deal execution-only and is subject to the Terms and Conditions of Oxford Capital’s Co-Investor Circle. Indication of Oxford Capital’s intention to invest or otherwise is not to be taken in any way as the provision of guidance or advice. You are required to make your own independent assessment, or seek professional advice, in respect of the suitability of any investment you may make through the Oxford Capital Co-Investor Circle and the legal, regulatory, tax and investment consequences and risks of doing so.

We provide here the detail of many (though the list is not exhaustive) of the key risks of the types of investment products Oxford Capital offer access to.

Capital at Risk

Oxford Capital invests in unquoted securities. Such investments can be considerably more risky than investments in quoted securities or shares. Investing in unquoted shares may expose you to a significant risk of losing all the money you invest. You should ensure that you are able to bear any such losses before making a decision to invest. Before investing, you are strongly recommended to consult an authorised person specialising in advising on investments of the kind described on this website.

Liquidity Risk

Unquoted securities are illiquid investments, meaning it may in practice not be possible to deal in them, and exit from a shareholding investment is often only possible by the sale of the entire company. Unquoted securities are often subject to transfer restrictions and are difficult to sell. An investment in unquoted securities should be considered a long-term investment. That is to say, although you may qualify for EIS tax advantages in relation to qualifying security after three years, it may in practice require you to hold your interest in that security for significantly longer than this.

Valuation and Dealing Risk

Unquoted securities are difficult to value and it is hard to assess the risk of investment at any given time. Even where a valuation is provided, there is no certainty that third parties will be willing to deal at that valuation.

Tax Risk

Tax reliefs are dependent on individual circumstances and references to tax laws or tax levels on this website are subject to change. Oxford Capital does not offer tax advice.

Early-Stage Investment Risk

Oxford Capital invests predominantly in early-stage companies. Early-stage companies are exposed to significantly more risk than more established counterparts, increasing the chances that they might fail. They can experience significant and sudden increases or decreases in value. They often serve small, niche markets or face the challenge of gaining a foothold in a larger, well-established market. Smaller companies can be less resilient to economic shocks and have a higher dependency on key personnel. They can also be vulnerable to sudden changes in the nature of their industry sectors, or competition from bigger companies and new market entrants.

Dilution Risk

When investing in early-stage companies, it is possible that the value of your shares could be reduced through dilution, where companies raise further equity capital in fundraising rounds in which you do not participate. This can result in a company delivering a ‘successful’ exit, but early investments returning little or no capital.

Performance Risk

Past performance is not a guide to future performance and may not be repeated.

Documents

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