Gobsmack EIS – existing investors
This deal is arranged by West Hill Capital, a respected private equity and venture capital firm, with which we have collaborated in the past.
It's an opportunity to make a further investment in Gobsmack Holdings Limited (“Gobsmack” or the “Company”) – a rapidly growing SaaS fintech company delivering sophisticated digital wallet technology that enables blue-chip clients to engage with and reward their customers.
Please read the offer documents carefully to form your own view and ensure you wholly understand the potential benefits and risks.
Under the current private placement, investors can choose to invest in EIS equity (minimum investment £5,170), loan notes (minimum investment £5,000) or both. The equity is being offered with pre-emption rights to existing shareholders until 12 October. Convertible Loan Note applications are currently required no later than 30 September, however, funds are able to follow up to three weeks from this date.
It is intended that an application will be made for matched funding for the New Convertible Loan Notes under the Government’s Coronavirus Future Fund and the terms and conditions of the New Convertible Loan Notes are based on the Future Fund Convertible Loan Agreement template. There can be no certainty at this stage that the application will be accepted, but if it is a Government supported entity will subscribe for New Convertible Loan Notes equal in value to those subscribed by private investors (to be committed by the cut-off date for application under the Future Fund scheme, which is currently set as 30 September 2020).
The summary reproduced below is from West Hill Capital. It doesn't reflect the views of Wealth Club. You should read it alongside the Private Placement Memorandum and form your own view as an experienced investor. Please remember there are no guarantees. This is an illiquid and high-risk speculative investment in a single company with no diversification: capital is at risk.
Read important documents and apply
Offer summary produced by West Hill Capital
"Gobsmack shareholders are being invited to subscribe for:
- EIS-qualifying equity, which is being placed at a premium to all previous rounds to date (EIS qualification is subject to the usual caveats and you are referred to Part I of the Private Placement Memorandum ("PPM"), which explains the position in further detail. In particular, you are recommended to take expert advice if you have invested in the previous convertible loan note issued by the Company or if you intend to invest in both Ordinary Shares and 8% convertible loan notes under the Private Placement).
- 8% convertible loan notes, which are expected to receive matched funding from the government’s Future Fund with the potential for conversion at a 20% discount to the next qualifying funding round, likely to be in the form of institutional investment next year. You should note that the conversion rights and terms of the convertible loan notes or the possibility of their redemption at a 100% premium to the subscription value are based on the template agreement provided by the Government, the terms of which are summarised in the PPM and contained in detail in the convertible loan agreement template attached to the PPM. These terms are highly complex and you are recommended to read these carefully and to consult with a professional adviser if you are in any doubt as to the contents thereof.
For the loan notes, signed applications are currently required no later than 30 September in order to meet the deadline for the government to match our funding. However, it is expected that the government will announce an extension to this in the coming days. Applications for convertible loan notes are therefore being entertained beyond 30 September in any event. The total combined amount across the two instruments that can be raised, including government funding, is limited to £5 million.
The Board and senior management have invested seven figures to date and have confirmed that they will again be investing on this round, with the Chairman being the lead investor (for the purposes of the application for matched funding) in the convertible loan notes.
Some of the highlights since the raise earlier this year:
- User volumes are ahead of the Company’s original forecast with an impressive c20,000 new users per month
- Generating average income of £15 per active user per annum
- Proven model that increases customer retention significantly, up to 18% for rewards programme members
- Cross sell rates of up to 3.5% have been achieved for programme members
- Big data is being used to offer deep insight into consumer behaviours, adding significant value to Gobsmack’s clients
- Making progress in discussions with potentially large international clients in the US and Australia
- Now engaged in adjacent markets with a theoretical addressable market available to Gobsmack of up to £80 billion
Gobsmack transforms how large blue-chip companies deal with their customers through dramatically superior digital engagement, which in turn enhances loyalty and retention rates, whilst also allowing for greater monetisation of the customer along the way. As of today, the Directors believe that there is no other provider of a Gobsmack-type solution in the market and that the Company has the potential to deliver across other industries in multiple jurisdictions.
Prior to using Gobsmack, the Company’s first insurance sector clients, RSA and Admiral, had traditionally suffered from low customer engagement often with little opportunity to communicate with their policyholders until renewal. There was no proper system in place to communicate digitally with the majority of communication and policy amendments made over the telephone. There was also little to no brand loyalty with a high proportion of customers switching to different insurers, leading to high churn rates along with a high cost of acquisition to replace lost business.
Gobsmack offers an all in one solution that provides their clients with a centralised hub for all customer interaction, which is also linked to a cashback rewards programme. Customer spending on day to day items with thousands of retailers generates cash rewards (paid by the retailer), which are paid into their digital wallet and can be used to offset or cover the cost of a policy renewal or pay for a service such as a utility bill. Importantly, early data demonstrates that retention rates across RSA and Admiral are up to 18% higher as a result of this, proving that Gobsmack’s model is a powerful tool to retain customers.
In addition, Gobsmack’s clients are able to provide vastly superior engagement and improved customer service, whilst increasing the lifetime value of the customer via new cross-selling and upselling opportunities, which are delivered in a personalised way through the digital dashboard that every customer will have by default. The customer is also able to make changes, add or remove products or services and view offers that are specifically tailored towards them from the big data collected on their personal spending both online and in store. In addition, the analysis of the data on how customers interact with the digital dashboard will provide another powerful tool in driving tailored communications to customers. Gobsmack’s clients obtain deep insights into consumer behaviours, life events and spend propensity enabling intelligent cross and upselling. For consumers, this data powers tailored relevant offers and communications, making them feel known and valued by their service provider. This data alone is potentially enormously valuable.
The first Gobsmack customer expected to upgrade to the digital wallet is MORE TH>N, a company with 1.4 million customers. Admiral, with over 5 million customers, is expected to be the next to utilise the digital wallet with the Post Office, SAGA and JaJa, with a combined 8 million customers, all expected to launch next year. These companies alone have contract values of approximately £30 million over the next 3 years largely from the recurring licence fee revenues.
Discussions are also in progress with US insurer, Geico, who have over 25 million customers, as well as with Suncorp Australia who have over 9 million customers.
The brands within the RSA group also represent an additional 17 million potential customers in Scandinavia, Canada and Ireland, whilst the Admiral Group has businesses in Spain, Italy, France, USA and Mexico. The Company has also confidentially been in discussion with British Gas, O2, Vodafone, BUPA, lastminute.com and LV=.
The pandemic has graphically highlighted to large corporates the urgent need for them to drastically improve digital communication channels with their customers. For example, the move to work-from-home ostensibly shut down call centres overnight, leaving customers frustrated and unable to undertake simple tasks such as renew a policy or service, change an address or upgrade. This represented millions in lost earnings to these firms and in one such case with BT Sport, customers unable to call to manage their services had no choice but to cancel their subscription. During lockdown, Admiral felt obliged to return one month’s premium to all policyholders at a cost of £100million. If the Admiral dashboard had been live at this stage, Admiral could have simply credited the customers’ digital wallet with these funds to offset the cost of renewal. Geico in the US experienced similar circumstances, but at a cost of $2billion. Needless to say, Geico are now in discussions with Gobsmack about the digital wallet.
A number of institutional investors including European and US technology VCs have expressed interest in investing once Gobsmack has multiple wallet clients which are beginning to scale. The Board expects to raise institutional funding at a substantial uplift to the current valuation next year, in light of the very significant growth potential of the business and the recurring revenues being secured. Although Gobsmack has few if any directly comparable companies, it is worth noting that if a 2023 exit was achieved (based on Gobsmack’s illustrative projected 2023 financials) at the median EV/revenue multiple of 54 companies in the BVP Nasdaq Emerging Cloud Index, which provide cloud software to their customers, a shareholder subscribing for equity in this round could potentially receive an investment multiple of 9.4x, before taking into account EIS tax breaks.
Gobsmack is an excellent example of a technology company within our portfolio that has the potential to accelerate its growth as a result of the pandemic. Gobsmack’s corporate clients have no choice but to digitise and innovate in order to better serve and monetise their multi-million strong customer bases. With the threat of another lockdown looming and the government already announcing this week that people should once again work from home, this will only put further strain on the large corporates that are seemingly already at breaking point with the millions of customer enquiries they are dealing with."
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 Private Placement Memorandum which contains further details on the considerable risks, alongside the Wealth Club Risks and Commitments.
This is a single company 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.
The value of tax benefits depends on circumstances and tax rules can change.
Returns from the convertible loan notes are not guaranteed, and nor is return of capital. Please see the PPM for details of conversion and its impact on EIS relief.
The above summary,
which was produced by West Hill, contains opinions and forecasts, which are not
guaranteed. Before investing you should carefully read the Private Placement
Memorandum to form your own view.
Investors are investing in the company directly, so will pay no direct initial or ongoing charges.
West Hill will share a part of their fundraising fee with Wealth Club equal to 4% of the capital raised by Wealth Club. There are no other fees paid to Wealth Club.
Please see the offer documents for more details on fees.
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
- See Offer Documents
- Funds raised / sought
- £5.0 million sought
- Minimum investment
- 30 Sep (loan notes) / 12 Oct (EIS equity)