Mojo Mortgages EIS

Co-invest with the Maven and Mercia's Northern VCTs in extended Series A round

Award-winning FinTech online mortgage broker, partnered with Zoopla and Uswitch

Mortgages are a £1.5 trillion industry. In 2019 alone, 1.55 million mortgages were approved in the UK for a total value of £266 billion. However, due to a lack of adoption of technology, customers tend to experience the process as an ordeal: from trying to find the right mortgage to the lengthy to-and-fro paper-chase of application, submission and completion.

Mojo Mortgages (“Mojo”, “the Company”) addresses this pain point using technology and automation. FCA-regulated, award-winning online mortgage broker Mojo offers to make the entire process 65% quicker than the industry standard – and hassle free. Not only does it help customers quickly find and compare mortgage products they’re eligible for – it also does all the legwork, from application right through to completion. 

The service is completely free for customers, as Mojo receives commission from lenders and other providers.

The Company launched in February 2018 and has raised over £11 million from venture capital and private investors to develop its online mortgage brokerage platform. It has also established partnerships with the likes of Zoopla, ThinkMoney, Money.co.uk, Uswitch and Starling Bank. To date, over 5,000 customers have taken out a mortgage with Mojo, generating revenues of c.£3.0m.

To fund its growth plan, the Company is now raising £1 million under EIS in an extended Series A round. Wealth Club investors can invest at the same valuation as Maven Capital Partners and Mercia Asset Management (the investment adviser to the Northern VCTs), which co-led the Company’s Series A round in 2019. Management is planning a Series B round in 2021, aimed at a higher valuation, predicated on the business demonstrating profitable unit economics (timings, forecasts and higher valuation not guaranteed).

The Company expects to break even in FY23, with turnover of £5.9 million. The target mid-case return for investors after three years is 3.2x before tax relief, an IRR of 47% – high risk and not guaranteed.

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.

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The deal at a glance

Type Single company EIS private offer
Stage Scale-up
Date started trading February 2018
Funding to date £11.4 million equity
Co-investors Maven VCTs, Northern VCTs and high net worth investors
Sector FinTech
Fully diluted pre-money valuation £14.2 million
Market size est. £1 billion and growing
Business model B2B and B2C
Revenue to date c.£3m million with £1.4 million forecast in current year
Revenue model Commissions from lenders and other product partners
Profitability forecast from* 2023 – profitable unit economics from 2021
Forecast revenue in year 3* £5.9 million
Forecast EBITDA in year 3* Breakeven (£37k loss)
Target return in year 3* 3.2x mid-case
Target IRR* 47% IRR
*These are forecast and not guaranteed. Capital is at risk – you could lose the amount you invest.

Highlights

  • Co-invest with Maven and Mercia’s Northern VCTs at same valuation as the Company’s Series A round
  • Award-winning online mortgage broker
  • Over 5,000 mortgages sold to date, forecasting £1.4 million revenue in the current year – not guaranteed
  • Operating in a fragmented market with no clear market leader
  • Management expects Series B round in 2021 to be at a higher valuation – not guaranteed
  • Experienced management team and board who have invested over £0.6 million 
  • Single company deal with no diversification, high risk
  • Minimum investment £21,285 (750 shares at £28.38 per share)

This overview is based on the information available in the offer documents prepared by the management team in conjunction with Maven Capital Partners. Wealth Club has not independently reviewed or verified the information included, the company forecasts or the deal details. Please read the offer documents carefully to form your own view and ensure you wholly understand the potential benefits and risks.

Mojo – Maven VCTsHow does Mojo work?

For customers, the process is free, quick and painless – combining automation with human input. 

Customers complete a five-minute online eligibility check and are recommended products drawn from over 90 lenders and 20,000 deals across the entire market. A live online chat or phone call with one of Mojo’s CeMAP-qualified mortgage advisors follows; this takes about 30 minutes. After a final 15-minute phone call to gather the necessary documentation, a dedicated application manager looks after the submission to completion – taking the burden away from the customer. Once completed, customers speak with a Mojo protection adviser to review relevant insurance products.

Ineligible customers are prompted to join Mojo’s Mortgage Score™ programme to help improve eligibility.

Further automation and new products are planned, such as fully digital execution-only mortgages with NatWest and Santander, and “Smart Quote” home insurance with Legal & General.

Mojo is rated 4.6 / 5 on Trustpilot from over 1,200 reviews. It was awarded Best Mortgage Broker and Innovation of the Year at the 2019 British Business Bank Awards. In early 2020 Sifted (a Financial Times-backed news site focusing on European startups and innovation) named it one of nine rising FinTech apps to watch. In October it won Nesta’s Open Up 2020 Challenge, securing £200k of grants.

How does the business make money and acquire customers?

Revenue is generated through commissions from lenders, insurers and conveyancers. Customers are acquired through partners and through paid and organic digital marketing.

Current partners include the likes of challenger bank Starling Bank and property website Zoopla along with ThinkMoney, Uswitch and Money.co.uk, who use Mojo's proprietary white-label technology. Mojo also plans to target traditional mortgage brokers, home builders and online estate agents. Mojo receives a commission share on all financial products sold via partners, enabling Mojo to scale and access a wider customer base, while saving on direct customer acquisition costs. 

Market 

The UK mortgage market is fragmented and widely cited as one of the last financial services sectors to embrace technology and digital innovation. In recent years, there have been a number of new entrants aiming to address customer pain points. Habito, Trussle and Molo appear to be Mojo’s closest competitors which have raised significant funding, albeit Molo is yet to offer residential mortgages. Despite raising significant capital, all three competitors were loss-making in 2019 and do not appear to have scaled yet to a clear market-leading position.

While still loss-making itself, management believes Mojo can scale more efficiently than its competitors by growing through partnerships, as well as through direct customer acquisition. The aim is to be the first online mortgage broker to demonstrate profitable growth. This is not guaranteed.

Covid-19 impact

Covid-19 has delayed some house moves from completing during 2020. The Company re-forecast in April 2020 to reflect the anticipated impact of Covid-19, and adjusted its strategy.

Despite the ongoing uncertainty, Mojo has outperformed its Covid-19 plan since April 2020 and has continued to grow the team and move towards positive unit economics. 

How is the funding going to be used?

Capital raised in the funding round will be invested in:

  • Marketing – to continue driving user growth
  • The platform – to increase automation and develop new products
  • Growing the platform development and customer service teams

Management 

The executive team is led by co-founder and CEO Richard Hayes, an award-winning entrepreneur with a background in financial services. Richard previously co-founded and grew a financial advice business to over £4 million revenue and £1 million net profit before an exit in 2015. 

Executive Chairman Mark Cappell joined Mojo in July 2020 and is actively involved in the business 2 days per week. Mark has over 25 years’ experience in managing IT software and service companies. Mark has overseen five successful exits as CEO, which have added value in excess of £400 million to investors. Mark invested £100k into the business in the recent July 2020 funding round.

Richard and Mark are supported by Digital Director Andrew Gorry, Development Director Mark Quinn and Finance Director Lisa Emsley.

Board of directors

Executive Chairman Mark Cappell leads the board, which also has representation from Maven Capital Partners (Jeremy Thompson) and Mercia Asset Management PLC (Charlotte Barttelot).

Maven Capital Partners UK LLP (“Maven”)

Maven is an alternative asset manager with over £660 million of assets under management and available to invest. Maven manages four VCTs, a UK buyout fund and a number of regionally focused funds delivering debt and equity finance. It also has a specialist property investment team. Maven has invested £3.76 million in Mojo. This includes co-leading its Series A round in February 2019 and investing £0.75 million in July 2020.

At the time of its original investment in 2019, Maven conducted a thorough review process, including financial, insurance, management, commercial, technology, legal and tax due diligence. Ahead of its follow-on investment in July 2020, further operational diligence was commissioned to understand the deliverability of the Covid-19 plan. The Covid-19 adjusted financial plan on which Maven invested in 2020 is materially the same as that presented in the Information Memorandum.

Mercia Asset Management plc (“Mercia”)

Mercia is an AIM-quoted specialist asset manager with £800 million assets under management, invested across c.400 portfolio companies. It now manages approximately 30 EIS and regional debt and equity funds. In 2019 Mercia acquired the management of the longstanding Northern VCTs, managed by NVM Private Equity. NVM first invested alongside Maven in February 2019 and the Northern VCTs have continued to support the business, also investing a total of £3.76 million. This includes £0.75 million invested by the Northern VCTs in July 2020.

Financials

The Company has to date received over £11 million of equity funding. In February 2017 it obtained EIS Advance Assurance from HMRC, and in December 2018 it also received Advance Assurance that its activities qualify under VCT rules and the business can be considered knowledge intensive. The Company most recently issued EIS3 certificates in May 2019.

Mojo forecasts £1.4 million revenue in the current financial year to April 2021 (FY21), growing to £5.9 million in FY23 when it forecasts it will break even. It targets mid-case returns of 3.2x (47% IRR) after 3 years (before tax relief). 

The financial forecasts and returns, which are not guaranteed, are predicated on growing the number of mortgages sold from 1,829 in the current year to 7,765 by FY23 and raising £1.6 million in Series B funding in 2021. A larger Series B round may be considered to further accelerate growth.

Please read the IM for further detail regarding growth assumptions, risks and exit options. 

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 Information Memorandum, which contains further details on the considerable risks, alongside the Wealth Club Risks and Commitments

This is a single company EIS offer – there is no diversification. It involves investing in a loss-making, early-stage business. Businesses of this nature are high risk and prone to failure. You could lose the amount you invest.

If successful, funding in this round will fund the business until Q3 2021, when it plans to launch its Series B round targeting a higher valuation. This is not guaranteed – if this funding is not secured this will impact the Company’s ability to deliver its forecasts.

The Company is currently loss-making – over the last six months, the average cash burn has been c.£170k per month. Mojo has interest-bearing debt of £421k on its balance sheet. If the business were to take on additional debt, this would increase risk. 

A co-founder has recently left the business and there may be a dispute with the Company. The Company estimates, in the worst case, the maximum legal and associated costs of the dispute will be c.£140k. Please refer to the IM for further details.

Wealth Club does not take a seat on the board so cannot influence the business post-investment. There is a Board in place, which includes representation from Maven Capital Partners and Mercia Asset Management.

The value of tax benefits depends on circumstances and tax rules can change. 

If the Company were to achieve an early exit, this could affect EIS tax relief. However, an exit may also take considerably longer than the three-year minimum holding period.

Structure and fees

Investors will subscribe for shares in Life’s Great Group Limited. Its subsidiary, Life’s Great Limited, is the FCA-regulated entity, trading as Mojo Mortgages.

Investors in the current offer will be investing in EIS-qualifying D Ordinary Shares. Please refer to the Articles and Association and Shareholders Agreement for details on the share class and the rights attaching to it.

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

The Company will pay an introducer fee to Wealth Club equal to 3.75% of capital raised. Wealth Club will be entitled to a performance fee of 10%. The hurdle for the performance fee is a return of 2x subscription amount for investors (before tax relief). The Company will deduct this fee from investors’ holdings on exit.

Investors should note their investment will be made using a nominee structure via Woodside Nominees. Please read the nominee terms and conditions. 

Our view

Mojo has developed an award-winning product that customers seem to love, according to Trustpilot reviews. 

The management and board have sector experience and have invested significantly, aligning interests with investors.

Management is focused on moving the business to positive unit economics, with the goal of becoming the first innovative online mortgage broker to demonstrate profitable growth. The Company believes growing through partnerships should help achieve this – although there are no guarantees. 

This is an opportunity for investors to co-invest alongside reputable institutions in an innovative business operating in a fragmented market, with the added benefit of EIS tax relief. Experienced investors should form their own view.

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.

The details

Type
Single company
Sector
Technology
Target return
3.2x
Funds raised / sought
£1.0 million sought
Minimum investment
£21,285
Deadline
4 Dec for first allotment
Last updated: 19 November 2020

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