I have been trying to predict the value of Freetrade for the next investment round in terms of pre-money valuation.
The next round will be Freetrade’s sixth round of investment and it was mentioned last week on Adams Ask Me Anything (2/4/20) that the next round may occur during the 2nd quarter of 2020.
The previous 5 investment rounds were as follows:
So, how do you value Freetrade?
Should it be based on User Growth, Monthly Active Users (MAU), Assets Under Management (AUM) or some other mechanism? Without having details of Freetrade MAU or AUM it is far easier for shareholders to predict the price relative to Freetrade user growth, and since this has been accelerating over the recent months then the valuation (and share price) will be increasing at pace also.
In the round 5 Freetrade investment deck (slide 19), Freetrade previously stated
"We believe the most relevant framework to value Freetrade is looking at comparable companies.
New businesses are usually loss making and tend not to disclose financial metrics. This makes customer numbers the best publicly available metric for valuation comparisons.
We look at other consumer, mobile-focused fintech cos as the best to measure against."
Back then Freetrade compared Robinhood, N26 and Monzo valuations versus their customers to come up with an average value of 872x per customer.
So, what valuation could Freetrade expect today?
The last reported user figure to sign-up was #13304x on 6th April 2020. So, using the 2019 average value multiplier, Freetrade current value could be 872 x 133040 = £116,010,880.
What potential valuation could Freetrade have at the next investment round?
Obviously, between now and the next funding round, there will be further growth in user sign-up, hopefully matching or bettering the current average figure or approximately 800 users per day. So if we assume that round 6 will be around the end of May 2020, then that gives a potential extra 50 days x 800 users = 40000 users could join Freetrade and presumably get to near 180000 users which would translate to a valuation of £156,960,000.
Now all these figures are estimates and total conjecture, they don’t take into account new features or additional markets, but I would be interested to hear other viewpoints on what you think the next Freetrade valuation would be for the sixth investment round. More or Less?