Event: dozens on Seedrs – Q&A with Aritra Chakravarty, Monday 4th March 18:00


#21

No, but that for me is a little besides the point.

Arro Money, just had to revise its pitch from 20 million to 14million and is still going to miss its’ pitch target, it’s only half way. It’s also somewhat further down the line then Dozens and has a whitelabel product offering.

Dozens is undoubtedly a better idea, but hasn’t done as much yet. There’s lessons to be learned here and Dozens have the opportunity to change tact early and get it right first time.

In the last three months there has been a few Fintech raises:

Chip pre-money under 14.4 million with 75k accounts open. (Under 5 million first round iirc).
WiseAlpha pre money under 10m (think had to drop valuation.)
Coconut 8.5 million

All of these are way ahead of Dozens and yet, we’re talking nearly double or triple the valuation.


#22

I don’t even understand who arro is targeting. I mean, the basic personal account is just a spaghetti of fees

Chip has essentially brought in customers with its marketing budget

So, really there’s a lot of money in the market if they’re getting those kinds of numbers, I think.


#23

What has Dozens done that’s different?


#24

It’s actually built an app :wink:


#25

So Arro is just exploiting people who would otherwise struggle to get a bank account by charging them for the privilege. As for Chip “You can put money away even when you’re overdrawn, making it easier to build up a pot and use them to pay off your overdraft all in one go.” This hardly sounds like sensible financial advice unless they are paying more interest than your overdraft is costing.


#26

Indeed it does. I’ve said as much on the Monzo forums and on Crowdcube (I feel at least somewhat responsible for their downward momentum shift…).

This is not so bright from them. Chip however is a bright young company doing some good stuff. Chip 2.0 and Chip X may even rival dozens’ eventual bond offerings.

There’s no way Dozens is currently valued almost double what Chip is. Never. Chip has had two hugely successful Crowd raises and was for a brief period the holder of the most investors in a single raise. (Think Monzo may have taken that mantle back.)


#27

They aren’t, until they are, I suppose :joy:


#28

But Chip only pays interest if you have friends and can persuade them to sign up for an account too as far as I read it which is surely a pyramid scheme.


#29

You’re missing the point. Chip is established, has more users and users money in their accounts.

Valuation isn’t all about potential, it has to be about the now too. Dozens isn’t worth nearly double what Chip is right now. Undoubtedly the potential is there, but they’re still in beta and don’t even have all aspects of the app available to people.


#30

Sorry, I wasn’t criticising your thesis, just stating my views on a couple of the competitors.


#31

:wink: no worries - I think you’re right to be honest. I called Chip a Ponzi scheme before today, but I’m still a shareholder and can appreciate what they’ve done right.

Sidenote: I’ve just realised dozens is currently valuing itself 5m higher then Hyper Sciences, who have contracts already in place with Shell and NASA plus a whole heap of engineering patents.

I’m looking forward to seeing the pitch deck, hopefully it will all be explained there.


#32

Squirrel is another comparable, two successful raises, last one at a 7M valuation. They are handling more money and customers than what Dozens is aiming for…at the end of this year.

The 10M pledge for the Dozens crowdfunding round is a testimony to the fantastic product and the team ethos. There is a risk this could backfire and hurt the brand should the valuation be too unrealistic.

I trust the community here is experienced not only with fintech solutions but also investment in fintech, hope the team would take everyone’s feedback into consideration


#33

I think it’s more then that, should dozens need a second raise from institutional investors shortly afterwards and the valuation is the same or is only slightly better then 25m (or god forbid worse). Things could turn sour really fast.

Don’t get me wrong, dozens are doing an amazing thing letting customers share in their success, I imagine @AC could pick up the phone to STI Group and get the backing he needs tomorrow. I just don’t want to see it go wrong, because of what feels like, from the lack of evidence to hand, a misplaced valuation.

[Also worth noting pledges have been made without seeing a valuation or pitch deck and were made as ranges rather then an amount.]

I hope we’ll/they’ll do it. I want dozens to be amazing. Just don’t want it to Revolut along the way.


#34

Hi all,

Apologies for slight delay in response - took off right after the live Q&A and only landed in San Francisco last night local time (who doesn’t love a hopping flight). Did read the valuation critique then but wanted to ensure am rested enough to be articulate in the defence before responding.

(Fyi, I have spent seven of my twelve years in banking in corporate finance and deal-based roles (advisory for M&A, IPOs and then as principal for HSBC’s internal M&A teams), and not a single of the 25-odd institutional sized deals I have been part of has not had a valuation debate, so am glad we are doing this (and totally the opposite of running away from it). If you haven’t figured already, engaging on any financial topic is my switch-off from the day-to-day manicness of running a fledgling fintech! :slight_smile: )

So, the first rule of valuation is that we must on both ends admit that its a subjective not an objective process. For M&A and IPOs we typically used to produce a football field (see http://www.wallstreetoasis.com/finance-dictionary/what-is-a-football-field-graph for just how big typical ranges out of some super technical analyses, that I have spent way too many hours of my life on, are). Then we bankers would draw a line through the value that ‘felt right’ and justifiable in qualitative rather than quantitative terms, hence the subjectivity of the outcome. Btw, this is true for even traded shares of public companies - the listed price is not a DCF or P/E everyone agrees on but simply what price the last buyer and the last seller decided to agree on).

So I guess the key question is why do we think our future earning potential today is different to what it was for any of the startups you have mentioned at similar stages? I generally like speaking in absolutes rather than in comparison to what others have done, but will make an exception in this case due to the construct and criticality of the debate.

So, a few comparitive factors for you to consider (bearing in mind, for eg, at £1m for 2% Revolut were valuing themselves around twice of our ask) :

  1. We have two full FCA licenses - eMoney as well as MiFID Discretionary Investments, a not just atypical but also a rare combo. Did they?

  2. This is primarily down to one of the world’s most stringent and therefore respected regulators believing in our very experienced management team to not just take in deposits from the retail customers in UK but also manage their investments for them as well as distribute other investment products to them. Each of our VPs comes with years of experience in the vertical they manage - and yet fresh eyes for the world of finance.

Note that the Investment license application has way higher scrutiny than eMoney and we even rethought how to assess risk appetite and suitability in a user-friendly way, but the regulator was still ok to approve our application. Plus we did it all within five to six months from start to finish. Did they?

  1. We have a product breadth and maturity that is unheard of for an MVP approach (see comments in this and Monzo forum about our launch scope making some serious established fintech offerings look like MVP). We want revenue positive customers not users acquired through job interviews from day one. Did they?

  2. We have designed and built - from scratch - an 800-page app simultaneously in native iOS and AOS within six months. Plus an orchestration layer connecting to 20+ partners that gives you seamless and instant transfers not just across licenses but also between users. Not to mention our own balance engine that helps keep the new home for your money sync and display multiple different balances at the same time, so you can stay on top of your finances. Did they?

  3. We have created a brand, a product shelf and a journey that is inclusive and not crass. We talk about you asking questions to your existing bank, we incentivise you to stay on track with your budget and save, we tie up every cash reward whether for bonds or referrals to you saving not to you acquiring more credit (a credit card based acquisition strategy is way simpler and cheaper to execute btw, as some other competitors have indeed done). We worked tirelessly to not take obvious shortcuts but to create a business model that flourishes when you do well. Did they?

  4. Finally, and maybe some others would have made this point 1, we have already secured substantial institutional participation for this round with this valuation before taking any crowd investments into account.

Having said all of this, I do accept your fundamental point that its a relatively risky strategy. What if we don’t acquire the ‘users’ (which in your assessments is the only thing we miss to justify the valuation). But I would argue that risk started on day one when I sold 65% of an idea for $5m more than a year ago - with no team, no product, no users (instant effective valuation of $8m). Should I have worried about a down round at that point, effectively risking the wiping out of the equity for my colleagues and me? Or were we better off accepting the challenge, working our socks off and ensuring the next round was bigger and larger than our projections? Think this one is now blowing in the wind.

So, believe in us - join the bandwagon. Help us get the 100k users that in your mind justifies this valuation within the next few months and we can raise more money then. We are up against it with the big guys who have been around for centuries - the rewards are not going to come without the risks, or the hard work. Of course, totally understand if this is outside your risk appetite and then you should definitely wait it out till the next round as without doubt early stage investing is full of all kinds of risks!

ONE LAST THING. As a thank you to your overwhelming response so far on community, user growth and crowdfunding (and for making it to the end of this super short post) - and to prove we are always listening to you - am happy to drop the pre-money valuation to £20m.

Given the institutional interest secured already at £25m, hope you understand the dilutive impact and therefore seriousness of this decision. Sincerely hope this defence and the value we bring is now enough to convince you to stay the course with us.

Best as always,
AC


TLA Lexicon:

DCF: Discounted Cash Flow valuation
P/E: Price/Earnings multiple valuation
MVP: Minimum Viable Product
TLA: Look it up :wink:


#35

Beautiful rebuke as ever @AC

Consider me sated. Now where is my wallet?


#36

Excellent response and as always I love the clarity of the answer as well as the open approach to the discussion and the fact that you are willing to take feedback on board. Thanks @AC


#37


#38

Thanks AC for the detailed reply. Definitely a lot of valid factors you shared here.
I appreciate the constant open discussion with the community you are building.

I will stick to my initial pledge and may even try to grab an additional dozens shares if liquidity and time allow.
Can’t wait for the round to open, wishing you a successful and prompt campaign


#39

Thanks AC for detailed response. I was having lots of concerns on valuation and now you have responded all of them very well. I have invested double than my original plan in you and your baby “Dozens” on Seedrs. Best of luck


#40

Info memo now available on Dozens Info Memo