Soreto EIS

Referral marketing technology for e-commerce retailers, with 75+ clients including Samsung, H&M Group, Under Armour, Dyson and Google Store

In a crowded and competitive e-commerce landscape, retailers’ customer acquisition costs have trebled since 2013. This is partly due to falling consumer trust in corporate advertising; consumers now increasingly look to friends, family and third-party review websites when making purchasing decisions.

84% of consumers believe that word-of-mouth recommendations are the most trustworthy form of advertising. This presents businesses with an opportunity to leverage customers’ recommendations on social media.

To help businesses do this, Soreto Limited (“Soreto” or “the Company”) has built referral marketing technology that can turn customers into advocates – by rewarding them with special offers for recommending a brand they’ve bought from to their friends and family.

These offers are placed on the order confirmation page – helping monetise a necessary but underused step of the customer journey. 

Management reports the technology delivers an average return on investment (ROI) of 2,000%.

Unlike its competition, Soreto’s technology is integrated with the world’s largest affiliate networks – Awin and Rakuten, marketing platforms used by thousands of retailers. This means it can be rapidly added to a retailer’s website, without time-consuming and costly development work.

Soreto now has more than 75 global customers, including Philips, Casio/G-Shock, H&M Group (Monki, & Other Stories, Arket and Weekday), Google Store, Samsung, New Look, Puma, Under Armour and Dyson. In 2023, the platform delivered £8.6 million in incremental revenues for its customers – and generated £0.6 million of revenue for Soreto. Despite a difficult e-commerce market, Soreto improved its social click through from 30% to 40% and its average fee per sale from 4% to 7%.

To date, the company has been funded by the founder, who has invested £1.5 million in the business through a mixture of debt and equity, and a host of high-profile angel investors, including Tom Singh (founder of New Look) and family.

Now, to fund the growth of the sales and marketing team, the business is seeking to raise £900k in this round. £400k has already been invested by new and existing shareholders. Wealth Club members can take up the remaining £500k capacity. The minimum investment is £20,476.80 and you can apply online.

Predicated on successfully filling this round, the Company is forecasting sales of £1.3 million and break-even at a net income level in Year 1, subsequently growing to £14 million revenue by Year 5 with EBITDA of £7 million – not guaranteed. 

Based on the Company’s forecasts, the target return in Year 5 is c.10x (IRR 61%), after performance fees but before EIS tax relief. Investing at this early stage means rewards could be significant, but so are the risks. No further funding is planned to achieve these forecasts – not guaranteed.

The deal at a glance

Company by numbers

• 75+ global customers, including: Samsung, Philips Global, Casio/G-Shock, New Look and Under Armour
  
• 20%+ revenue growth year on year to £0.6 million in 2023
• Client retention over last two years: 92%
  
• Advanced pipeline worth an estimated £1.2 million, which the Company intends to convert in 2024
• Active in 28 countries
• Average onboarding time: 4-6 weeks

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.

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

Soreto’s plug-and-play onboarding, performance-based billing, and low-friction integration with major affiliate networks like Awin and Rakuten make it an easy decision to implement Soreto for many of its blue-chip customers. Indeed, it is already demonstrating that it can win business with household names, against larger incumbents.

Although management is looking to grow the recurring fixed fee element of the revenue, the CPA billing model remains predominant. This means revenues can fluctuate with changes in consumer spending. To help mitigate this, Soreto is active in 28 countries which reduces exposure to any one economy.

To date, the business has deployed invested capital efficiently and if management can continue to operate with a lean team and deliver on the attractive margins forecast, Soreto could be an attractive acquisition target, commanding a premium multiple at exit – high risk and not guaranteed.

We consider this to be a compelling, albeit high-risk, EIS investment opportunity although as usual you should form your own view.

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.