Update and notice of new £3 million EIS private offer
Below we reproduce an update on Canopy EIS and notice of a new £3 million EIS private offer, which has been provided by West Hill Capital, the arranger of the offer.
The minimum investment for Wealth Club investors is £20,250 (normally £50,001.75) and you can apply online – see below.
Please note: the information reproduced below has been provided to Wealth Club by West Hill Capital. It includes forecasts and forward-looking statements – these are targets and not guaranteed. Wealth Club has not reviewed or verified the information included, the company forecasts or the deal details. This is a high-risk and illiquid investment in a single company with no diversification – you could lose your capital. Please read the Private Placement Memorandum ("PPM") carefully to form your own view and ensure you wholly understand the potential benefits and risks.
***FROM WEST HILL***
We are delighted to announce that Canopy has successfully launched a transformational partnership with OnTheMarket (OTM), the UK’s third-largest property portal. As the UK’s most trusted lettings portal, OnTheMarket will be offering instant tenant screening to 4,500 lettings agents, providing a tremendous opportunity for Canopy to potentially scale very rapidly in the coming months.
OnTheMarket CEO, Jason Tebb said: “Our partnership with Canopy is a direct result of feedback from our agents and is a further progression of our OnTheMarket platform.” As a strong endorsement of this fact, Canopy received over a hundred demo requests from agents across the UK in the first week of launching with OnTheMarket, where typically it sees conversion rates of 90%. The board of OntheMarket (subject to contract) has subsequently confirmed that they wish to invest at least £350,000 in Canopy on the same terms as West Hill investors, representing c.12% of the equity on offer.
This is a significant development that provides the framework for Canopy to deliver its multi-award-winning platform to a large number of the 13 million renters in the UK and is welcome news after a tumultuous year for renters, who at times were unable to move house, and lettings agents, who were closed for long periods.
Whilst the OnTheMarket partnership will remain exclusive for 12 months, Canopy has also received strong interest from Zoopla, which sees an opportunity to modernise an industry fraught with the inefficient manual processes that Canopy addresses.
In light of the recent news, West Hill is pleased to provide an opportunity for shareholders to invest alongside existing corporate investors such as Direct Line Group, Experian and Aryza (Pollen Street Capital) to acquire up to £3 million of EIS equity being offered at a 50% discount to the previous round, with the discount reflecting the delays experienced by the Company.
OnTheMarket has confirmed it will be investing, with additional interest received from several other corporate and institutional investors. However, West Hill is leading the raise and has secured the opportunity to offer the discounted equity to West Hill introduced investors first. Shares will be offered on a first come, first served basis. Partners of West Hill will also be investing in this round.
Read important documents and apply
Canopy’s platform, commercial model, progress to date and expansion strategy
Canopy has built and launched an industry-leading platform with a unique proposition, substantial B2B partnerships and a tested route to market. User numbers are growing and, as of last month, Canopy was providing tenant referencing to 476 agents, with Canopy's RentPassport and RentTracking prodcuts enabling 46,000 renters to build their credit history through Experian and Equifax. Boosted by the OnTheMarket partnership, Canopy is expecting to attract almost 1 million renters to the platform by the end of next year.
Utilising Experian data and Open Banking, Canopy has been recognised as one of the most innovative Fintech platforms in the UK, transforming the way renters can rent a property whilst providing valuable data on a renter’s financial position, consumption habits and purchasing power. The Company operates a unique and scalable commercial model, where leading property platforms, lettings agents and institutional landlords are highly incentivised to drive large numbers of renters to the platform. The Company aims to become the number one personal financial management platform for renters, obtaining valuable Open Banking based consumer data and monetising a multi-million user base via diverse and recurring revenue streams.
Despite there being 13 million renters in the UK, the experience for renters is burdened with paper-based inefficient manual processes. Canopy has developed and launched two differentiated digital products, which provide significant cost savings and efficiencies for housing providers, whilst also addressing traditional pain points faced by renters, both at the point of moving (RentPassport) and mid-tenancy (RentTracking). In conjunction with Experian, Canopy’s two gateway products streamline the tenant screening process and generate valuable consumer data. Canopy is then able to offer bespoke advertising of financial products provided by third-party financial services businesses at discounted rates that are appropriate to the individual.
- RentPassport (point of moving) – the current UK tenant screening process is archaic: agents manually obtain bank statements and references to assess a tenant’s suitability, taking 2 to 4 days and costing between £25 and £70 per tenant screened. In partnership with Experian, Canopy is able to produce an automated, portable digital financial profile that takes 5 minutes to generate, costs a maximum of £5 per tenant and includes an Experian-based credit score. In addition to cost savings, RentPassport is an industry-leading solution that enables letting agents to close deals faster and see an accurate assessment of a tenant’s affordability.
- RentTracking (mid-tenancy) – Canopy’s RentTracking solution enables renters to improve their credit score simply by paying rent on time. This gives housing providers accurate data that demonstrates a renter’s suitability. Payment data is automatically sent to Experian and Equifax, so for the first time what is typically a renter’s largest recurring expenditure is reflected in their credit score.
Distribution is via partnerships with national property portals, letting agents and institutional landlords, all of whom are highly incentivised to refer their vast customer bases to Canopy. Partnerships are agreed with names such as Savills, Hamptons, Chancellors and Douglas & Gordon, as well as institutional landlords Get Living, Rettie, Moda Living, Affinity Living and One Manchester. New partnerships currently being negotiated include Zoopla, Boomin, LSL, Connells, Dexters, Leaders Romans Group and Marsh & Parsons. The Company is looking to finalise partnerships with unicorn Fintech businesses Revolut, Monzo and Monese which could promote Canopy’s rent tracking to their substantial customer bases.
West Hill has worked closely with the Company and its corporate shareholders in recent months to ensure that the right team is in place to deliver on Canopy’s considerable potential. Following the close of the capital raise, the current CEO will be stepping down due to serious health reasons, with CFO Chris Hutchinson taking over as CEO. We are delighted to also report that one of the property industry’s most senior pioneers, Mark Witherspoon, has joined as Chairman. Mark brings a wealth of experience as the former CEO of Hometrack and as an ex-senior Zoopla executive. Mark is extremely well connected across the property sector and will be highly instrumental in Canopy’s expansion strategy. Mark, Chris and the team are supported by hugely experienced non-executive directors and an advisory board of senior executives from firms such as CBRE, Foxtons, Experian, EY, BUPA and Brevan Howard.
As Canopy scales in the coming months, Management sees a significant opportunity to monetise a rapidly expanding user base through subscription services (e.g. premium RentTracking) and via the sale of relevant financial products on the Canopy marketplace. The Canopy marketplace offers renters a growing catalogue of tailored financial products such as contents insurance, utility switching, income insurance, travel insurance, car insurance and personal loans, with Canopy receiving commission of around 23% on each product sold. As the platform matures and more products are added, Canopy expects the cross-sale of insurance and non-insurance products to become very significant, potentially generating revenues of £58 million in 2025.
Financials and potential returns – not guaranteed
There are notable examples of highly successful personal finance software platforms that have scaled exponentially and monetised large user bases to become substantial businesses. Mint.com, a free personal financial management platform was sold with 1 million+ users within three years of launch for $170million, before building to 20 million users. Credit Karma, a free credit reporting platform built an $8.1 billion business through targeted advertising and the sale of third-party products. The recently listed £9 billion foreign exchange platform, Wise plc, successfully tackled pain points and reduced the costs associated with foreign currency transactions, whilst challenger bank Revolut, has attracted near triple-digit revenue multiples and is now valued at $33 billion, a sixfold increase in only a year.
As a unique digital marketplace with strong fundamentals and positive unit economics, Canopy exhibits many of the qualities of some highly successful platforms. The Company is poised to potentially achieve rapid growth, aiming to become a major personal financial management business with substantial recurring revenues. Based upon the assumptions in the Offer Document, anticipated conversion rates and growth, Canopy expects to have almost 1 million renters on the platform next year with projected revenues of £6.3million, rising to more than £58million in 2025, with EBITDA of £10.7 million.
The current round provides an opportunity to invest alongside corporate investors at a potentially attractive discounted pre-money valuation of £8.4million. Based upon the Company’s illustrative financial projections, with a median EV/revenue multiple of comparable platform businesses of 15.8x and with a 50% small company discount applied, investors in the offer could potentially achieve a 10.0x return on investment in 2024 and an 18.7x return in 2025.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
EIS investments are high risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value.
Before you invest, please carefully read the PPM, which contains further details on the considerable risks, alongside the Wealth Club Risks and Commitments.
This is a single company private EIS offer with no diversification. It involves investing in an early-stage business which is by nature high risk and prone to failure. You could lose the amount you invest.
Remember, there is no readily available secondary market for this kind of investment, which is long term, illiquid and hard to sell and value. An exit could take longer than the three-year minimum holding period.
Please refer to the PPM for further details of the risks.
Structure and fees
Investors will pay no direct initial or ongoing charges to invest. Fundraising costs are being met by the Company. Please refer to the Schedule of Charges for more details.
The investment will be held via a nominee structure through Aldbridge Nominees (Woodside).
Register your interest – no obligation
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
- Single company
- Target return
- 10x in 2024
- Funds raised / sought
- £3.0 million sought
- Minimum investment
- 30 Sep 2021