Gobsmack EIS

This offer is now closed (7 May)

This offer has now reached capacity. There are other single company EIS offers currently open for investment. 

Co-invest with West Hill Capital investors: recurring revenue fintech with blue-chip clients, including Admiral and More Th>n

Gobsmack Holdings Limited (“Gobsmack” or the “Company”) is a rapidly growing SaaS fintech company delivering sophisticated digital wallet technology that enables blue-chip clients to engage with and reward their millions of customers.

Co-founded in 2015 by the former COO of the £1.4 billion AXA Commercial Lines business, Gobsmack has already attracted an impressive client list and pipeline, including More Th>n (1.4 million customers) and Admiral (5 million customers). The Company is now in the final stage of negotiation with The Post Office (6 million customers), with a contract expected to be worth in excess of £20 million over the next 5 years (not guaranteed).

Far from being ‘another reward programme’ provider, Gobsmack’s powerful and first-to-market platform harnesses all a corporation’s disparate customer data behind an engaging client-branded reward app. This helps the brand recognise and reward customers and engage them in timely and relevant conversations, especially at key life stages (e.g. moving home) and product stages (e.g. renewal). Gobsmack has enabled its blue-chip clients to cross-sell and incentivise loyalty, significantly increasing customer lifetime value. 

Contracts are based on multi-year licences and 75-90% of projected revenues are recurring. Actual revenues in 2019 were c.£2 million, expected to rise this year to £5.2 million. In 2021, the Company expects to be cash-positive with rapidly growing EBITDA forecast to reach £42.8 million in 2024. Please note these are forecasts, not guaranteed.

Gobsmack engaged West Hill Capital (“WHC”) to raise £3 million under EIS, extended to £5 million due to investor demand.  WHC has now secured £4.7 million – the last £300k is exclusively available to Wealth Club members. Capital raised in this round will be deployed to support Gobsmack’s next two client launches and bring third-party resource in-house. 

The target return is 31x in 2024 (high risk and not guaranteed) before EIS tax relief.

The management believes this will be the last equity round required before the Company is able to generate profits from Q1 next year – not guaranteed.

The minimum investment through Wealth Club is £22,500 (normally £50,400) and you can apply online.

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.


Highlights

  • Proven business model – £2 million revenue in 2019, £5.2 million estimated in current year 
  • Forecast rapid growth by 2024 with sales of £62 million and £43 million EBITDA (not guaranteed)
  • 75-90% of projected revenues are recurring
  • FTSE 100 and blue-chip client list, including More Th>n, Admiral 
  • Strong developed pipeline, including The Post Office (contract expected to be worth over £20 million over 5 years – not guaranteed)
  • Proprietary technology; the company retains all of the IPR
  • Proven management team and Board who have collectively invested over £1 million to date
  • FCA regulated 
  • Oversubscribed funding round
  • Target return 31x in 2024 (not guaranteed) before EIS tax relief
  • Limited capacity – £300k Wealth Club allocation
  • Single company deal with no diversification, high risk
  • Pre-money valuation £15.9 million
  • Minimum investment £22,500; 50 shares at £450 per share
  • Please note, you will also need to become an “elective professional client” of West Hill before your investment is accepted

Gobsmack EISThe offer

Gobsmack is a subscription-based digital loyalty and rewards business which helps its blue-chip clients retain customers as well as sell more products and services to them. 

Gobsmack’s target clients are FTSE 100 companies with 1+ million customers operating in sectors that have increasingly fickle, price-driven customers – particularly insurance, travel, telecommunications and utilities.

The company’s pipeline of potential clients includes Moneyplus Group, Policy Expert, British Gas, Nationwide, Yorkshire Building Society, O2, The AA, and LV=. Royal Sun Alliance Group, which owns existing client More Th>n, has expressed interest in expanding the program across all parts of the business, including its affinity partnerships with Tesco, John Lewis, Marks & Spencer, Argos and others.

Previous fundraisings provided the funding for the development of the original platform, its test launch with Royal Sun Alliance, the delivery of the second iteration of the technology, the securing of the first clients and the development, build and launch of their programmes, and the growth of the strong sales pipeline.

The Board has invested in excess of £1 million to date and is investing again in this round alongside WHC. 

Now, to deliver the next two client launches and bring third-party resource in-house by significantly expanding the employee base, Gobsmack is raising £5 million under EIS, of which £4.7m has been already secured. The remaining £300k, under EIS, is exclusively available to Wealth Club members. 

Based on current projections, the Company expects to be cash generative from Q1 2021 – not guaranteed. 

The target return for investors in the current round is 31x in 2024 (not guaranteed) before EIS tax relief.

Minimum investment of £22,500 (normally £50,400) through West Hill. This is equivalent to 50 shares at £450 per share.

In our view, Gobsmack is becoming an important service to its large client base, helping them cultivate loyalty in an increasingly price-driven, fickle environment. The Company appears lean and highly scalable with the potential for rapid profitable growth, albeit this is not guaranteed.

The Board has significant experience and is heavily invested in the company, aligning interests with investors. 

In our view this an interesting opportunity for experienced investors to participate in the small amount of equity remaining in a popular, high-potential, albeit high-risk, company. 

The business 

Operating a SaaS model, Gobsmack offers its proprietary platform technology to blue-chip clients primarily as a combined digital wallet and Customer Interaction Hub (CIH) proposition; however, clients can also opt to utilise the wallet proposition on its own. 

Gobsmack enables its clients’ individual customers to collect cash rewards on everyday spending. There are currently more than 5,000 partner brands online and in-store – including AVIS, Sainsbury's and Just Eat. Customers can then redeem their cash rewards against spending within the client’s business (be it insurance renewals or phone, energy and credit card bills). In this way, customers save costs by remaining loyal to a brand.

With Admiral or More Th>n, the reward cashback generated often covers the total cost of insurance renewal. This could mitigate the risk of losing customers, potentially making Gobsmack’s platform a valuable part of the clients’ business.

Revenue model

Clients pay a one-off set-up fee of c.£250,000, which covers the cost of building the bespoke client-branded platform. 

Contracts are based on multi-year licences and 75-90% of projected revenues are recurring from a combination of sources, including:

  • Annual user fees per wallet
  • Monthly fixed licence fees
  • Commission share – a percentage of cashback earned
  • Tenancy – retailer payment for exposure on the platform
  • Interest on cashback funds held 
  • Data analytics services and sale of anonymised customer data 

Gobsmack’s forecast growth is predicated on increasing its client base and the number and size of digital wallet users.  It is the Company’s strategy to follow its customers and partners into other territories as and when management and financial capacity are available. 

Covid-19 impact

The Management has reported some disruption with planned projects with companies in severely affected industries (e.g. travel) being put on hold. However, at the same time it reports a a considerable increase in demand from both existing clients and several pipeline customers requesting roll-out be expedited as digital channels of communication become more important with the reduced availability of staffed call centres. Similarly, the increase in consumer online spending enhances the savings available to customers through the rewards scheme, and this impact is already being seen in the platform metrics. 

Management 

CEO Henry Allen leads the executive team. Over the last 25 years he has managed a variety of businesses principally in the financial services world, including leasing, lending, insurance and private equity, in both consumer and commercial customer segments. His experience includes multiple senior roles at both GE Capital (including leading the commercial finance business in Europe) and Marsh (including leadership of the multinational and global personal lines businesses, whilst based in New York), as well as working in private equity, consultancy and the management of a smaller growth-oriented business. Henry has previous experience of running an early-stage technology business focused on providing white-label products and services.

Co-Founders and Non-Executive Directors

The co-founders of the business, John Shaw and Max Carruthers, have invested considerable time and financial resources in taking the Company to its current position.

Max Carruthers has 40+ years’ experience in the insurance industry and his last employee role was as COO of an AXA Intermediary with £1.4 billion annual turnover. 

John Shaw is a serial entrepreneur, a Founding Director of HUGHUB (digital broker platform) and a Founding Member and Creative Director of Aitch-C (financial services brand specialist).

Financials and target returns

The Company has been funded to date by £7.1 million equity and £510k convertible loan notes. 

In May 2018, the Company received EIS advance assurance.  HMRC has confirmed in writing that the Company qualifies for EIS relief as a Knowledge Intensive Company. The Company has received authority to issue EIS certificates to qualifying investors for all its capital raises to date.

The Company is forecasting £5.2 million of sales in this current year. This is forecast to grow to £13.5 million in 2021, taking the company into profitability.  Thereafter, rapid growth is forecast and by 2024 the Company estimates sales of £62 million and EBITDA of £43 million. Please note, these are all forecasts and not guaranteed. 

The pre-money valuation in this round is £15.9 million.

In terms of an exit, Management believes the strong recurring income could potentially make Gobsmack attractive to private equity or trade buyers.

Should the Company deliver its ambitious plans, investors in this round could receive highly attractive returns commensurate with the risk. The Company aims to achieve either three-year target returns of 21x before EIS tax relief or four-year target returns of 31x before EIS tax relief. These are forecasts and not guaranteed. 

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. 

Fees

Investors are investing in the company directly, so will pay no direct initial or ongoing charges. 

WHC 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.

Our view

This could be an interesting opportunity to invest in a commercially compelling, high-growth, IP-rich young EIS company that has the potential, if successful, to deliver attractive returns.

In our view it is impressive how this young Company has engaged so many large blue-chip clients in such a short period of time, becoming an important part of their business – highlighting the strength and skill of the management team and founders. Experienced investors should form their own view.


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.

The details

Type
Single company
Sector
Technology
Target return
-
Funds raised / sought
-
Minimum investment
-
Deadline
CLOSED
Last updated: 29 April 2020

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