six start ups

Six start-ups seeking success by focusing on economic and cultural trends

We work with a lot of start-ups and scale-ups at Upfront. They may come as clients or we may approach them as prospects if they seem a good fit for a project. When considering how much name recognition a business may have – which is important for their credibility as a partner –  one rule of thumb in our auditing is to look at how much success they have had in raising funding.

At the bottom tier are those with seed funding, which is for the early stages of the business. Series A funding is sought when there is a solid customer base, but the company has yet to start product development or expanding (or both). This funding round is often dominated by one investor, typically a venture capital firm though crowdfunding is an increasingly popular alternative. Series B is when a business wants to expand yet needs money to meet the hoped-for demand. This can seem like Series A, though other investors often come on board at this point.

Series C funding is for the companies which have already built up a base and main product offering. What they are looking for now is to scale up. Think Deliveroo in 2015 or Reddit in 2017.

The probability of a company becoming a well-known brand is also much higher if it matches consumers’ changing needs and tastes. There are three prevailing economic and cultural trends that a product or service should look to map to right now.

The Flexi-worker

The gig economy means jobs and careers need to be rethought by both employers and employees.

More Choice. Less Money

Although technology has given millennials and Gen-Z more options than their parents, they are relatively poorer.

Make Things Simple

Consumers are happy to prioritise convenience and speed in a time-poor world.

Viewing the start-up scene through these lenses suggests the following companies will do well in the next few years.

Company: Zego

Funding Stage: Series B

Theme: The Flexi-worker

Founded: 2016

Latest Funding: $42M

Founded by Sten Saar and Harry Franks, two Deliveroo alumni who twigged pay-as-you-go insurance would appeal to their drivers, the Shoreditch-based start-up has raised $42m in its funding drive. This follows an extremely strong growth of around 900% in the last year.

With the gig economy doubling since 2016, and most workers aged between 16 and 34, demand for Zego’s insurance will increase over the next few years. Although much of the money will be spent on recruitment, a fair chunk will likely be saved for reaching out to the digitally-savvy younger generations who make up the bulk of the gig economy. It will also be needed for any expansion plans, whether in Europe or attracting non-delivery flexible workers. 

Company: Flatfair

Funding Stage: Series A

Theme: More Choice. Less Money.

Founded: 2016

Latest Funding: $11M

London-based Flatfair has raised $11 million with Index Ventures as the main investor. Much of this will be spent on recruitment to support its scaling plans; the glut of adverts for business development specialists on LinkedIn and Glassdoor could herald a major marketing drive.

What makes Flatfair stand out is its “deposit-free” offering, where tenants can pay a membership fee rather than a deposit, along with giving access to their bank account. When they move on, end-of-tenancy charges can be taken without any need for surety. Consumers seem happy to trade cheaper immediate costs for access to their accounts; though that may change if they feel the independent adjudicators hired to resolve disputes favour landlords too heavily.

According to its figures, Flatfair is enjoying 25% growth month-on-month and expects £15m in revenue during the next twelve months. The target customer base of younger consumers are most likely to rent and poorer. The opportunity to cut immediate cost and remove the main leverage landlords can have over them has an obvious strong appeal. Nevertheless, renters need a landlord. The landlords will be tempted by the chance to claim up to three month’s rent from the tenant than the standard five weeks, albeit in cases where the adjudicators feel any property damage reflects the fee.

Company: Cazoo

Funding Stage: Series B

Theme: Make Things Simple

Founded: 2018

Latest Funding: €28M

This start-up, located in the shadow of Euston station, is yet to launch but has already attracted strong interest from partners and investors. Cazoo picked up €27.7 million in a September funding drive. Started by the founder of Zoopla, Alex Chesterman, the platform hopes to disrupt the used-car selling market by offering simplicity and delivery.

The focus on convenience, both when using the platform and ensuring the car is delivered promptly, will appeal to the time-pressed motorist who needs a vehicle in a hurry. However, Cazoo has done a reasonably good job of hiding the details before launch, making it hard to work out exactly how different its platform is from future competitors, such as

Nevertheless, second-hand vehicles have a colossal number of variables which can go wrong and, given how they are more costly than books or fashion items, trust between buyer and seller is essential. As few people will be able to sell enough cars to get a solid trust rating, there is the possibility things can go wrong. The steps Cazoo take to solve this issue will determine if it succeeds.

Company: Curve

Funding Stage: Series B

Theme: Make Things Simple

Founded: 2015

Latest Funding: £4M

The results of Curve’s crowdfunding campaign in September may look small compared to the sums raised by other start-ups in this list. This is not the only difference. It was open to pre-registered customers who got the same valuation – £159 million – that Series B investors had in July. Curve hoped to get £1 million. It took the company a little over 40 minutes to get four times that amount.

The four-year-old fintech, founded by former Israeli special forces soldier Shachar Bialick, lets people combine all their payment cards into one. It has now raised around £60 million in total and is far along the scale-up process. Given how one card takes up less space (not to mention work) than many, Curve’s basic appeal probably won’t fall anytime soon.

Company: Strong Roots

Funding Stage: Series A

Theme: More Choice. Less Money

Founded: 2015

Latest Funding: £18M

This is a company which, at the time of writing, could face hurdles due to Brexit uncertainty. Yet there is still plenty to recommend Strong Roots, even if the Dublin-based vegetarian frozen-food firm forgoes its subsidiary in Shoreditch. The $18.3 million it picked up in September will be spent on a combination of expansion in the USA and research. It is also in the process of building its UK market penetration up from 4%. The current target is 90%.

Strong Roots’ success is largely due to consumers’ growing affinity for vegetarian options over meat equivalents. While it is possible meat will rebound, it won’t happen immediately. If Strong Roots expansion plans work, then it will be in a very strong position. The company has been eager to spend on advertising in the past, working with TBWA Dublin and Core Media, sponsoring Virgin Media’s coverage of the Six Nations and a food truck/camper van.

Company: Depop

Funding Stage: Series C

Theme: The Flexi-worker

Founded: 2011

Latest Funding:  $62M

Most start-ups do not get to Series C. Either they fail or are bought out. Depop is one of the exceptions. The fashion-focused ecommerce app picked up over $60 million from American investors in June as it seeks to expand stateside. Already established in Europe, with around five million users, the London-based company is trying to boost its membership to 15 million by 2022.  

The basic idea, according to founder Simon Beckerman in an  Artefact interview from 2015, is that “Depop is your own shop in your pocket”. Wherever the creative goes, their shop follows. Users – often the makers of the products– post pictures of what they want to sell or buy. It has proved popular; sellers have made over $570m through Depop since 2011. This is because it occupies a strong niche within the gig economy. More than a few people live by becoming freelance artisans. With no shift back to the former total dominance of permanent jobs, it is no surprise that people are adapting to their skills, as well as what they want to do.

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