Kore Labs EIS – existing investors only, limited capacity

This overview is provided to make it easier for you to form your own view about the opportunity. This is a company for which Wealth Club has previously raised capital. 

What Wealth Club has done: we have reviewed the information provided by the Company and done our own research. Note: this doesn’t constitute an audit.

What to expect post-investment: the Company should provide bi-annual updates for Wealth Club to distribute to shareholders. The Company may also communicate with shareholders directly, however Wealth Club Nominees, which holds the shares, will be responsible for all corporate resolutions and communications relating to voting and pre-emption matters. 

Opportunity to invest in the last non-institutional round in Kore – recently named one of Europe’s six most exciting tech companies

Kore Ltd (“Kore” or “the Company”) is an award-winning Software-as-a-Service platform. It digitises financial product management to reduce regulatory risks, costs, and time to market for financial products. 

The platform creates a digital audit trail across all products and functions in one place, providing regulatory oversight for senior managers, a cross-product management tool for specialists, and an intuitive product hub for frontline users.

Due to an increasingly heavy regulatory burden on financial institutions – with the introduction of the UK’s Consumer Duty legislation and similar new laws across Europe – demand for Kore’s solution has escalated. 

Now, five years since launch, Kore serves a wide range of financial institutions, including one of Italy’s two largest banks (Intesa Sanpaolo), two of the big four banks in the UK (NatWest and Lloyds), and Rabobank in the Netherlands with ING expected to follow imminently, giving Kore two of the Netherlands’ top three banks.

Prominent organisations, such as Barclays, Deutsche Bank, Citibank, Aviva, Close Brothers, HSBC and Santander are currently either in pilot or in discussions. Meanwhile, a new partnership with global management and technology consultancy Capco, owned by $11 billion revenue Wipro, could potentially help Kore rapidly increase its international reach. 

As set out in the last shareholder update and webinar, the Company is seeking funding of c.£4-£5 million this year to support its commercial progress and scale-up plan.

£2 million of non-dilutive capital has already been secured in the form of grants and a soft loan from Innovate UK.

The Company has received two offers of up to £7 million equity funding from two institutions (Gresham House and Molten Ventures) at a similar valuation to the last round’s pre-money valuation. However, as the Company has received c.£2 million non-dilutive funds, and expects to grow ARR substantially over the next few months, it has decided to delay any institutional investment until 2025, when it believes it should be able to secure a material uplift in valuation, not guaranteed. The Company has also received trade approaches but equally would not consider this option until it is significantly more scaled and at higher valuation. 

Consequently, the Company is launching an EIS funding round for existing investors only, limited to c.£2 million. It’s an opportunity to invest at the same share price as the last round and protect from future dilution. Subject to capacity, the current round may be opened to select new high net worth investors from the financial services industry – some of whom have already expressed an interest. The deadline is 19 August. There is no minimum investment for existing shareholders and you can apply online.

If the Company delivers its growth plans, it expects future capital raises to be led by large venture capital or private equity firms – not guaranteed. So, this could be the last opportunity for individual investors to invest ahead of institutions. 

Management believes the Company can sustainably grow to c. £42 million ARR, £39 million revenue and £19 million EBITDA with around 19,000 licences sold in around 5 years. Predicated on these forecasts, the target return for this round is approximately 8x net of fees before EIS tax relief – high risk and not guaranteed.

Please read all investment documents prepared by the Company carefully to form your own view.

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.


Kore and Hargreaves Lansdown – watch video case study

 

“Kore Labs and their technology will allow us to get feedback from clients very quickly. We can integrate that into our product management process, and we can be agile and nimble in how we change, deliver, design and progress our products and services, Kore Labs will help us ensure that our helpdesk agents, our advisors, and our websites present the same information to clients at the same time. That means it’s easier for our clients to make good and informed decisions. It’s easier for us to ensure that they are achieving the outcomes that they need…”

Mona Christensen, Head of Client Outcomes, Hargreaves Lansdown

The deal at a glance

Type Single company EIS private offer – Knowledge Intensive
Stage Scale up
Date started trading Incorporated in 2017, started trading in 2019
Funding to date £11.2 million (excluding current round): £8.5 million equity, £1.3 million debt and £1.4 million grant funding
Co-investors Coutts Investors Club, Industry-experienced private investors
Sector RegTech / FinTech
Fully diluted pre-money valuation £31 million (calculated as if all options were exercised in full now)
Market size £13 billion total addressable market
Business / revenue model B2B, long-term multi-year SaaS licence contracts
Revenue last 12 months £2.3 million
EBITDA positive forecast from* 2026
Forecast revenue in Y5* £39 million
Forecast EBITDA in Y5* £19 million
Mid-case target return in FY28* 8x
Target IRR 60%
*These are forecast and not guaranteed. Capital is at risk – you could lose the amount you invest.

Progress since last round

In 2023 Kore raised £3.3 million, including £2.3 million from Wealth Club investors. Progress since then is highlighted below:

Financial 

  • Revenues of £2.3 million, outperforming budgeted net loss of £2.6 million by £0.3 million
  • 120% growth in contracted ARR from £0.5 million to over £1.1 million
  • Secured over £2 million in non-dilutive funding from Innovate UK, the innovation agency of the UK government, in the form of grants and a heavily subsidised loan. Obtaining this funding is highly competitive, with only 2% of successful applicants

Commercial 

  • Secured long-term contracts (up to 7 years) with blue-chip names such as Lloyds Banking Group, Rabobank and Schroders Personal Wealth. Two more contracts with top financial institutions including ING are at signature stage and expected to be signed during the round. The total value of these contracts increased from c.£ 450k to c.£2 million
  • 0% existing client churn 
  • Started to expand into existing clients (e.g. Intesa Sanpaolo and 7IM). Currently negotiating with other existing clients with number of users expected to triple
  • Expansion of distribution channels through partnerships, including a signed formal agreement with global consulting firm Capco and a partnership with PwC for the insurance market expected to complete soon

People 

Kore has bolstered its industry-leading team:

  • New CFO Guy Phillips, previously Director of Finance at British fintech unicorn Marshmallow
  • Senior additions to the client team: Sally Vernon-Evans, formerly of the Bank of England, and Fiona Lehane, a former partner at PwC
  • New Chair Sally Clarke, currently also on the board of Citigroup UK, Allied Irish Bank and BUPA, following the retirement of Phil Smith 
  • New Head of Data and AI Louis Brown to help continue building Kore’s AI capabilities 

Innovation & Awards/Recognition 

  • Named as one of Europe’s six most exciting startups by Money 20/20, the world’s leading Fintech conference, for being a 'category-defining solution' in fintech
  • ISO27001 certification – the global standard for best practice in information security, which should help substantially shorten the sales cycle. 
  • Invitation to join the highly selective FCA Innovation Pathways programme, as the regulator seeks to collaborate with innovators to simplify and standardise technical language for Consumer Duty and ESG.

Overview of 2023 and current trading

At the end of FY23, the Company hit 85% of its revenue target. The revenue shortfall was a result of longer than anticipated client onboarding times, as clients were European blue-chip financial institutions requiring extra due-diligence and/or ISO 270001 certification. The majority of pipeline clients expected to sign contracts in 2023 have now done so (Lloyds Banking Group, Schroders Personal Wealth, Rabobank), with a minority in the final stages of contract negotiation (ING Group). 

In Q4 2023 Kore made a strategic decision to redirect funds set aside for growth into investment on platform scalability as the size and calibre of Kore’s clients required the Company to prioritise obtaining ISO accreditation (certified February 2024). This should now help speed up sales cycles and achieve a gross margin >85%.

However, Kore has included a considerable procurement lag into consideration when producing the new forecast presented in this round.

The Company has significant cash runway, currently well over 12 months and is expecting c.£2 million ARR from its existing clients by the end of this year – not guaranteed. 

For more detailed financial information, forecasts, and assumptions please refer to the Financials, Capital Structure and Target Returns Overview. Please see the IM.

Demand for Kore has been strong to date from some of the largest financial services firms in the UK and Italy, with the Netherlands potentially to follow. 

Management knows the UK and European markets well. To expand into the US, Middle East and Asia it will look for trade partners (early-stage discussions are already taking place). 

Currently, the main competitors are bespoke solutions often implemented by internal IT teams who customise generic enterprise workflow tools. These solutions can have long implementation times and high capital expenditure and project costs. They don’t provide the 'all-in-one' approach offered by Kore.

Forecasts and growth strategy

Kore is forecasting ARR to reach £2 million by the end of this year. The Company aims to break even in 2026, with 2028 ARR, revenue and EBITDA projected to be £42 million, £38 million and £19 million, respectively – these are forecast and not guaranteed. 

Licence revenues are multi-year and the Company believes they are very ‘sticky’: once a large financial institution has invested time and resources to embed a new digital solution like Kore and built in it its archive of products and processes, it is less likely to seek change.

Kore’s average contract lengths are increasing; the latest contract in negotiation is up to 7 years (5 years plus an automatic 2-year extension).

Kore is a cloud-based modular solution, which requires a light-touch and low-cost implementation and enables customers to apply incremental adoption which helps the Company deploy its 'land and expand' strategy.

Initially, Kore aims to ‘land’ with a smaller number of licences, making procurement and contract negotiation quicker. Once the software is embedded, the focus shifts towards ‘expanding’, enabling the number of licences (and revenues) to increase at an accelerated pace.

Previously, both the ‘land’ and ‘expand’ elements of the strategy were equally weighted in the Company’s growth plan. However, the company has managed to attract top financial institutions in Europe (with a sales funnel including several global firms), with longer than anticipated onboarding times and fast internal adoption once the solution has landed. This have driven a fundamental change in the company’s sales strategy. Increase in client numbers (and resulting revenue growth) is now anticipated to be steadier in earlier years, with more emphasis on ‘expanding’ licence numbers and increasing ARR from existing clients. This is expected to lead to more reliable forecasts as it reduces the impact of unknown and variable onboarding times.

The Company has also continued to increase a focus on partnerships as a way to scale more quickly both internationally in the short term, and in other regulated sectors such as Healthcare, Pharmaceuticals and Telecommunications in the long term. Despite the current focus on the financial services sector, management believes these industries could derive substantial benefits from a solution like Kore, as they face similar regulatory challenges as the financial services sector.

Please refer to the IM for further information.

Private offer

Kore is seeking c. £4-£5 million. £2 million has already been secured through non-dilutive grants and loans.

The Company has delayed its institutional funding until it can secure a higher valuation. It has received two offers from institutions, both wishing to invest £5+ million, valuing the Company broadly the same as the last round. This is more capital than the Company wants to take at that valuation. 

Accordingly, the Company is now offering existing investors an opportunity to invest in a flat-priced round. Capacity is limited to c.£2 million. 

After the deadline for the first close, the Company may open the round to new investors, subject to capacity. 

Advance Assurance for this round was received in February 2024. Kore last issued EIS certificates in November 2023 and there have been no material changes to the nature or structure of the business since. Advance Assurance for this round was received in February 2024.

Please refer to the IM for further details.

Risks – important

This is a single company offer with no diversification. It involves investing in an early-stage, loss-making business, which is by nature high risk and prone to failure. There is a risk that the capital raised may not be sufficient to achieve the Company’s objectives. You could lose all the amount you invest.

Like all investments available through Wealth Club, it is only for experienced investors happy to make their own investment decisions without advice.

There is no ready market for unlisted EIS shares: they are illiquid and hard to sell and value. There will need to be an exit for you to receive a realised return on your investment.

Exits are likely to take considerably longer than the three-year minimum EIS holding period; equally, an exit within three years could impact tax relief. The value of tax benefits depends on circumstances and tax rules can change. 

Before you invest, please carefully read the Information Memorandum which contains further details on the considerable risks – alongside the Wealth Club Risks and Commitments.

Fees and structure

Investors will pay no direct initial or ongoing charges to invest. Fundraising costs are being met by the Company. Wealth Club will be entitled to a performance fee on exit. 

Wealth Club investors will invest using a nominee structure. This service is provided by Wealth Club’s subsidiary companies Wealth Club Asset Management Limited (authorised and regulated by the FCA) and Wealth Club Nominees Limited. Wealth Club Nominees Ltd will be completing the share subscription documentation on investors’ behalf.

Please refer to the Schedule of Charges for more details on charges (may vary for different rounds and offers).

All the services Wealth Club and, where applicable, its subsidiaries provide are governed by the Terms and Conditions of the Wealth Club Services.

Our view

While Kore missed its financial revenue target last year, it did manage its cost base accordingly and delivered a smaller than expected loss. Crucially, the Company managed to sign long-term contracts with some of the largest financial institutions in three European countries. This is testament to the maturity of its platform and increases the probability of both international growth and “expand” revenues– not guaranteed.Kore has strengthened its foundations for growth, focusing on the scalability of the platform – obtaining the highest ISO certification which is a requirement to speed up onboarding – and in its people.

In our view, this team has strong industry experience and a track record of previous successes in similar fields and the ability, network and status to open many doors to new target customers – you should form your own view. 

Having only launched the platform in 2019, we consider Kore has achieved a lot with a relatively modest capital investment of c. £9m of capital – lower than many other fintech startups.

The RegTech market is rapidly growing due to tightening regulation; Kore’s technology appears to have achieved good product-market fit and the Company appears well positioned for significant and sustainable growth – not guaranteed.

The unsolicited approaches from trade and financial institutions are encouraging. However, management believes it is too early to accept these offers and wants to continue focusing growth to turn these conversations into well considered higher valuation offers in the next few years – not guaranteed. 

We consider this a high-quality and compelling, albeit high-risk, EIS investment opportunity – you should form your own view.

Register your interest – no obligation

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. 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
8x
Funds raised / sought
£2.0 million sought
Minimum investment
-
Deadline
19 Aug 2024
Last updated: 18 June 2024

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