In her latest Crowd View column, Lisa Walls-Hester takes a look at MBJ London a company aiming to disrupt the global web industry with its brand new concept of WaaS – website as a service.
MBJ London wants to become the world’s leading website provider for small and medium-sized enterprises (SMEs). It is currently running an equity crowd raise on Crowdcube and has so far funded 181 percent of its target raise, having launched the equity crowdfunding campaign 28 days ago. At the time of writing has attracted 262 investors and raised more than £635k in investment.
There are other web builders in this space such as soletrader.com, Bonline, or The Web Kitchen, but MBJ London has changed the rules and is offering clients a design, build and website management service as an ongoing contract.
It is calling the product ‘WaaS’ - website as a Service, a solution that offers website development and digital solution experience for SME’s, with no upfront costs. Clients will be able to see the end result before making any payment and benefit from continuous and ongoing development and content management.
The company says “It enables clients to gain a high-quality online presence via a subscription-based model. Think of an IT department for companies who cannot afford one.”
Companies routinely outsource services such as PR or the company payroll, but now MBJ London have brought the outsourcing concept to web management.
The MBJ prospectus says the shift towards subscription rather than a product-based model is a growing trend, with industries from film, music, software and fast-moving consumer goods all jumping on the subscription business bandwagon.
There is certainly a market opportunity in this arena, four years ago SoleTrader.com launched in the UK (with crowd equity investment) and at that time claimed to be the first ‘professionally built website’ provider dedicated to sole traders and small business owners globally. Having grown from a bedroom concept business it has expanded and now manages thousands of websites for clients in Canada, South Africa, Australia and New Zealand. In the UK it has just become the endorsed website provider to B&Q Tradepoint's 2M tradesman and earlier this month completed its first VC round with Hambro Perks.
DIY websites options exist such as Wix and Moonfruit, and whilst these providers have really improved features and functionality in recent years it still takes a long time to create a DIY website, a precious commodity for SME owners.
MBJ London says “Do-it-yourself solutions are more affordable, but the quality of the end product is limited to the ability of the individual working on it.”
There is clearly a growing trend for ‘Do-it-for-me’ developers that are cost efficient and hassle free. A solution that sits in between professional web development agencies and a freelancer with little or no recommendations will fill a currently underserved market.
Whether MBJ London can achieve its lofty ambitions to become the world’s leading website provider for SMEs remains to be seen. To be successful the company needs to strike a balance between being a streamlined low-cost provider for the majority, and must also be able to execute a flexible, bespoke services for busy business owners. After all SMEs by their nature are dynamic and off-the-shelf packages and contracts will not fit all businesses.
MBJ London says “The business model does not require millions of customers to become highly profitable. With just a few thousand clients, the recurring revenues and subscription-based model bring the potential for annual revenues in the tens of millions.”
It says “As the customer base and revenues grow, we will benefit from long-term relationships with our clients, recurring revenue streams and a highly scalable business model. Thus offering the possibility of a sizeable return for early-stage investors.”
The WaaS model launched three months ago and in that time the company has signed up over 50 companies. Most contracts are for a minimum two-year period.
The company currently offers clients three pricing plans and says websites are just the beginning of the customer relationship. It already offers a number of add-on services and plans to develop these further to offer a full vertical integration of complementary products and services.
Sales for the year ending April 2016 were £202,853 and the company is forecasting total sales of approximately £16.3m by April 2020 with net a pre-tax profit of £5.3m.
It is offering both, A and B shares. All investments above £15,000 qualifying for A shares with full voting rights. All other investments will receive B shares.
The company attributes a pre-money valuation of £5.4m and says it has based this on the calculations of its new WaaS model, excluding ‘premium’ segment and used net cash flow in order to arrive at the current valuation.
MBJ London will use the new capital to invest in its sales and business development teams. They also foresee the medium term need to recruit more software developers, UI/UX, and account managers.
The company’s prospectus hints at the possibility of applying a franchise model to achieve rapid growth through external partners. It briefly mentions early negotiations with one international partner to leverage the MBJ brand have already taken place.
MBJ London says there are several options for investors to exit the investment: a share buyback, possibly from a larger external investor, or by raising debt finance, a trade sale or an Initial Public Offering (IPO).
It says an IPO is its preferred option, and it wants to grow the company to a size where this is possible. “IPOs can be achieved with lower valuations than many people realise. We believe that this represents the option with the highest potential return for our investors.”
In the interest of disclosure, I bought Soletrader.com shares over four years ago and I am happy with the company’s achievements so far and I will be adding MBJ London to my portfolio. However, this equity investment is not one for the impatient investor; the company estimates the time frame for an exit to be five to eight years.