Anyone else think Freetrade's Revenue Estimates were overly optimistic?

I was going through the pitch deck and thought the revenue growth in 2021 was extremely optimistic both on customer growth and rev per customer. What do you guys think? I Invested in R4,R5, and R6 but I am not sure the valuation will hold up for Series B later this year.

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I think every pitch deck on every crowdfunded investment I’ve ever looked at was extremely optimistic, but that’s just me :laughing:

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Yeah totally. I liked the pitch deck in general, a lot, actually. But the projected revenue numbers were just over the top. You go from losing £7m in 2020 to making £25m in profit 2 years later? I mean, c’mon! This just makes me think whoever made the projections doesn’t know what they are talking about.

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Unlike other fintechs (e.g. Monzo) the business model for Freetrade makes a lot of sense.

e.g.

  • interest on cash
  • FX fees on non-gbp trades
  • subscription fees for ISA, etc

This means every customer will likely be generating some revenue.

I was quite impressed by their Assets Under Administration (AUA) - almost £150m… If the current trend continues then their forecasts aren’t completely unrealistic.

Aggressive but many risks remain e.g. Robinhood joining the market, virus uncertainty, etc…

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Edit:

  1. Optimistic but achievable;
  2. Estimates and projections are just that. To be taken as guidelines;
  3. If Freetrade takes 4 years to achieve a 3 years projection… I’m happy with the outcome.
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I think they were optimistic, especially the revenue by customer. I believe it implies that many customers will convert in Premium and there is a risk to that.

Good news is that there are more revenue streams than just premium - even the basic accounts generate some revenue through interest and fx which is great.

In summary I think it is ambitious, but if a startup is not ambitious they why bother creating a company from scratch

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I had a brief stint in a startup incubator and we were basically told the numbers need to have a certain growth trajectory or your startup won’t attract VC investment since they are only interested in hyper-growth, hyper-scalability businesses. I haven’t seen a single startup pitch on or off crowdcube without wildly inflated projections, it seems weird to me but it’s the way the game is played.

TLDR: Ignore 3 year projections.

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People need to learn about operational leverage and scale, especially in software businesses… whilst I won’t comment on whether user or revenue numbers are achievable, that’s how you can dramatically turn a large loss into a profit.

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Unrealistic, yes. Technically possible, yes. Likely, no. You just need to look at the previous pitches to see they are always about 2-3years behind where they predict. Does it matter, no. Most important question, why? The trends are bang on what they need to be, we are past speculative investment into a product that doesn’t exist. If they meet next years targets 12 months late doesn’t bother me as long as the growth trend is still good and it looks like they will be profitable in. 2-5 year timeline.

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I completely get that, I have been part of fundraises as well, but we’re not talking 100-200% Growth in 18 months its nearly 500%. Thats astronomical lol.

Growth in customers HAS been 500% in a year. What has not happened yet is translating that to revenues. Only recently has charging ISAs been switched on. This month invest is switched properly. Next month plus/ alpha begins. Sept (possibly - more uncertainty here) SIPPs start. Etc etc. As with most Fintech the growth is there in users - can you translate that to revenues. To me the path to do that here is much clearer than most… but let’s see

Someone has already pointed out on Crowdcube their revenue performance compared to actual from their previous funding round pitch deck:

FY19 Revenue: £86k actual vs. £1,456k projected (~94% underperformance)

So don’t take any of their figures as gospel (neither should you)

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Perhaps they missed the target, but is it a failure if they achieve that next year? Of course not. When you aim for hyper growth it’s always likely to be very missable. However the trend and key performance indicators all point to this eventually being realised. That’s perfectly fine. If anyone here thinks they can create a 140million business in 5 years then good luck.:stuck_out_tongue_winking_eye: I doubt adam thinks hes failed. :rocket:

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I do really appreciate everyones due diligence on this. That’s exactly what you should do when investing. I agree, if you don’t achieve the forecast growth but are a year out then fantastic news anyway.

Going forward we know that there have been issues in shipping invest and then the time frames expected for fractionals but I think we’re all now hoping iteration of new product can become much quicker. It will be telling if freetrade plus can be shipped next month as mentioned the other day :grin: if that happens. I’m going to have much more confidence in the numbers again because you’d think that indicates they can start to bring on board other things that drive value, sipps in September for one and open up to Europe to achieve an even higher rate of growth after that.

Exciting times a coming

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I’ve watched enough episodes of Dragons Den to agree with you… The question at this point is, do I care? What matters most right now is that we’re seeing strong customer growth. The revenue will follow but for now a line stolen from a Kevin Costner film ‘Build it and they will come’

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In all honesty all these companies miss their targets both Monzo and Revolut have done so too. Achieving a goal 12 months later is still winning. if Freetrade ends up doing 3mil instead of 5mil this year I’m still happy with that. In the early days all these start up miss hit their targets. For me the brand, the community, the team and the problem It’s solving in my opinion will see them hit the year 3 target within3 to 5 years. Let’s ride out for the long haul and help our company ramp up as many users as possible.

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Definitely overly optimistic but you if you fundamentally believe in the business they could eventually reach that scale, though highly unlikely in the stated timeframe.

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Maybe it’s optimistic, but we have no base to track that yet. I mean so far Freetrade’s priority wasn’t really in the marketing and expansion.

The priority was building up the invesmtent platform, adding fractionals and more stocks and get the premium account set up, as well as adding European stocks.

Once these are all done we can see expansion in Europe and scaling up in more marketing efforts. So maybe their projections are a bit overly optimistic, but we are now very close to the true customer growth phase and we can see the result after that.

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The customer number growth seems pretty reasonable, but I agree the revenue per customer growth seems far too high. It’s possible they intend to act as a platform reseller now they are operating their own platform (i.e. utilise their infrastructure to complete trades on other vendors behalf, as they themselves were doing prior to activating their own platform) and revenue from that has just been haphazardly squished into the ‘per customer’ figure rather than as it’s own line item, but it would have made far more sense to highlight that revenue stream than to bury it.

Yesterday, during @adam AMA I was doing some research and I stubbled upon the 2016 pitch deck (which at the time, looks like it was sent by Adam himself !).

If we set aside the fact they were looking at a 2017 launch (ah ah, nice one…) the financial projections estimated to reach 211k accounts in year 3 and “only” 636k accounts in year 5.

Today’s estimates might look overly optimistics but I think it’s good to notice that current growth is way better than the one expected at the begining of the journey in 2016 !

Now, funny enough, if I look at the 2016 deck, the Y4 projection (4 years after the then estimated 2017 launch) would be sometime next year… the estimation then was to have 454k accounts with an AUM of 5,813£… it looks like FT will deliver on that promise ! #kudos

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