The spectacular collapse of WeWork in September 2019 was a wake-up call for the global tech industry.
The American space co-working firm, which billed itself as a tech firm, was preparing for an IPO after raising investments for a whopping $ 47 billion valuation to fund its launch in more than 110 cities. worldwide.
“I’ve had some of the best funds in Europe lean on and offer us spreadsheets without having to go through an extensive process,” says Barnaby Hussey-Yeo, founder and CEO of Cleo, of the “surprisingly easy” seed of the FinTech app and One round series. before the collapse of WeWork. “We had incredible consumer traction and were growing active users at a crazy rate.”
When concerns were raised about WeWork’s profitability plans, the float was filed and co-founder Adam Neumann was fired as CEO. WeWork, forced to change its business model, is now worth $ 3.75 billion.
Hussey-Yeo, who founded Cleo in 2016, says venture capitalists around the world were also taking notice of the losses of another fast-growing company, the Uber taxi app.
Speaking with TechBlast, he explains: “Everything changed in our Serie B: it was right after the WeWork crash and the Uber moment, so the VCs suddenly paid a lot more attention to the unitary economy of the business and not just the growth of the top. -line.
“We have purposely, and perhaps naively, focused on growing our user base and doing everything we can to help them improve their financial health without spending a lot of time building the business model. This made Serie B much more challenging than previous rounds, and even though we ended up with more terms and a big investor, it took six months to close compared to a couple of weeks for previous rounds. “
Cleo is a digital assistant who supports people throughout their financial life, from their first paycheck to their first home. The company seeks to positively impact the lives of millions of young people with limited financial literacy.
Reaching these folks early in their journey with clear and simple guidance, delivered with a fresh, engaging tone of voice that doesn’t throw punches, Cleo says she can completely change the trajectory of their financial life.
The London-based company has just raised a £ 66 million Series C round as it seeks to double on the US market.
“We learned from [our Series B experience] and it really doubled the business model building prior to the relaunch of the C Series, “says Hussey-Yeo.” So even in a really challenging market we were able to pick up a big round quite easily because the metrics made sense and there was a clear path to further growth and profitability. “
Cleo has helped millions of users on their financial journey, with more than half converting to one of its paid subscription tiers within the first 12 months of downloading the app.
The first growth strategy of the United States
The Series C fundraiser was led by Belgian investment firm Sofina, supported by participation from existing investors, including EQT Ventures and Balderton Capital.
An extraordinary success story closes for the British startup, which has deliberately embarked on a US growth strategy to replace traditional US financial services providers who make excessive profits by charging customers unfair and unnecessary commissions.
“We originally created Cleo on Facebook Messenger, and that’s where we got our first million users,” explains the entrepreneur. “In the beginning, we were 100% focused on the UK and in fact we only launched in the US as we had so many users asking us when we were launching over there. Knowing there was a receptive audience, we created a version to work. in the US as a test in five days and we launched it with pretty low expectations.
“A week later we were growing faster than our UK product had ever had: 10,000 users a day were signing up and linking their bank accounts to Cleo. This was the moment when we realized that the United States should be our main market and we focused completely on making it happen.
“Today we are a company with a turnover of 30 million dollars growing 3 times year after year, with a value of half a billion dollars.”
Hussey-Yeo says banking data partner Plaid made it “really easy” to overcome regulatory hurdles across the Atlantic.
“They had been launched in the UK, which is why we were using them, but their main market was the US. They initially handled much of the “heavy lifting” for us. “
Cleo will use the new funding to expand its headcount from 140 to over 220 and continue to repeat and improve its suite of products.
‘The team is everything’
So what advice would Hussey-Yeo offer to novice entrepreneurs?
“The team is really everything,” he says. “Never, never step down and be proactive in hiring and educating employees for the next required set of roles.
“Talk to the founders who have already done this – they are the only people truly qualified to give you advice on how to scale your business.
“But always remember that every company is very different and there are many ways to be successful, so don’t be discouraged. It is certainly not an easy path, but it is extremely rewarding “.
How the WeWork crash changed the VC mindset
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