By David Stevenson on Friday 20 November 2015
By David Stevenson & Sam Hodges
One of the most interesting funding projects this year called POD Point has just gone live on Crowdcube
Crowdfunding platform Crowdcube have been quietly blurring the line between debt and equity within their fund raising campaigns for exciting disruptive businesses. Their traditional focus has been on raising equity from the crowd but in the last year we’ve seen more and more fast growing businesses using the platform to raise debt via mini bonds. This new campaign by Pod Point blurs that line in a very radical way – it features both an equity braise AND a debt raise via a bond. How do the numbers stack up for investors?
First though some basics on the business. POD Point, founded in 2009, is apparently ‘one of the UK’s fastest growing tech companies’ and supplies electric vehicle charging solutions to drivers and businesses across the country. In the norm, an electric car owner would have to find a power station to charge their car if they are running low on power but POD Point is looking to revolutionize this. The pitch from the business is to allow Electric Vehicle (EV) owners to charge their car by themselves instead of diverting off to a power station before being able to continue their journey.
The POD Point ‘Top Up’ model will boost the electric fuelled vehicle to maximum power as soon as it has been parked for an hour or more which will allow drivers to have their car ready to go whenever needed.
As mentioned earlier POD Point launched in 2009 and has been scaling fast. In the last couple of years the business has gone from £1.9m to £4.5m then up to £6.5m turnover and has earned a spot in this years Sunday Tech Track 100 list of the fastest growing tech companies in the UK.
The Equity Crowdfunding Raise
POD Point is looking to raise £1,500,000 through its crowdfunding raise while offering a stake of 5.45% to potential investors. The company has so far raised just over half (£862,170) from 135 backers and has 18 days left to reach their target. We first saw the campaign on Crowdcube this time last week and in just 7 days POD Point has raised a further £295,170 from another 72 investors.
At this point we’d have to observe that the valuation (over £30 million) is a bit rich in our view. The business will no doubt point to its track record, its longevity and its growing market share. All fair points but this is a competitive market and the likes of Tesla with their new home battery solution are lurking in this space. Remember that it’s great to be a disruptor until another bigger disruptor comes along.
What’s the business wanting the money for? A large chunk of the money (£1,000,000) raised is to go straight into the sales and marketing team to allow the company to scale up quicker and build the correct relationships it needs to roll our more of their charge points. The remainder of the raise will be split between software and hardware functions:
The first £250k will be used to build the ‘POD Point Array’ which is a new product specifically aimed at their customers who are rapidly scaling their charge point estate and need an intelligent system capable of locally managing it.
The final part of the money (£250k) is to go towards its charge point management system which is the system that runs the entire POD Point Network. The business plan outlines that POD Point has ‘an amazing pipeline of improvements’ which will act as key selling points and help expand their customer base.
The Mini-Bond Raise?
The Open Charge Bond is a ‘very straight forward idea’ giving investors the ability to share the success of POD Point’s Open Charge network of public, electric vehicle charge points.
POD Point is looking to raise a minimum issue of £250,000 with a fixed interest rate return of 8% over three years. The EV charging company has set a minimum investment level of £500 which has so far attracted 44 investors. The Open Charge Bond has currently raised £71,650 and there are 34 days left to reach their minimum target.
The money raised from this mini-bond raise will be used to help finance the rollout of their next generation public charging network, POD Point Open Charge. The cost of installing an Open Charge destination unit usually ranges from £2,500 to £5,000.
What to make of the bond for investors? Perversely although we are cautious about the equity raise, the bond seems a little more interesting if only because the interest rate on offer does at the least seem to be sensible for the risks involved. In order for you not to be paid back – an ever present risk for any financial instrument like this in crowdfunding – you’d have to burn through all the newly minted equity, as well as all the pre-existing equity. We haven’t checked the very print detail of the loan terms, so with that caveat in place, it could be argued that 8% every year for three years is an almost sensible price for taking the risk with this fairly established business (although we’d have preferred the rate to be closer to 10%).
Is there an Exit Strategy for the equity investors?
A trade sale looks the most likely exit strategy for the owners with the board looking at the possibility of selling up in 5-7 years. POD Point expect that 10-15% of all vehicles sold will be plug-in by that point and believe that the market will be at such a level that they will achieve an attractive exit multiple.
However, the owners also have expansion in their minds and believe there will be lots of opportunities to take the business across Europe. POD Point owners are also considering the idea of floating the business in the future.