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- £4-4.5mRound Size
- September 2021Closing Date
- £25,000Min. 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.
- 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
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*
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
Use of funds
Engineer & former PE investor. Worked 5 years for Jon Moulton where he ran a €100m fund & was CEO of a portfolio company.
Former FTSE100 COO & board member of Capita. Now partner at HG Capital - one of Europe’s leading PE funds
Former product manager at ZipCar, Ebay & Skype with 10 years experience at IBM and an MBA from London Business School
Former Consultant at OC&C managing projects for leading FTSE 100 companies. First Class Degree in Economics at Cambridge
Former CFO at British Gas £1bn Insurance operation where over 9 years he grew the business to more than 4m customers
Former Head of Engineering at SeatFrog, and Senior Engineer at Unruly and Telefonica, with an MBA from ICADE
Former Commercial Director of British Gas Insurance - growing that business from inception to over 4m subscribers
15 years experience working with SMEs at BDO across multiple financial disciplines including VC/PE, buy-outs and public market transactions
Experienced director who ran Partnerships & Biz Dev at Local Heroes - the British Gas platform, British Gas Energy & Bounty UK
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
For full exit strategy, including exit scenarios, please see the investment presentation.
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.
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.
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