Once again what a vision Chip has with their new Savings account with cash prizes based on Premium Bonds.
They have the foresight to see that the market is saturated with similar companies PLUM-EMMA-ANNA etc.ALL struggling to monetise their product they have also started alternative investing in Cars,Wine,Scotch etc.
And I will say this āI donāt give a damn if they donāt have a VC onboard,nothing wrong with growing a little slower if required,as in like right now!
Chip announced they will it profitability this month and that they have also received a number of investment offers.
I donāt think they will be profitable at all,
They will be milky money as long as they could by crowdfunding and giving all rosy picture.
This is what chip has been doing since they started.
Interesting opinion. Shame the facts differ. Might not be in a lot of profit but I donāt think they would explicitly say they are if they werenāt
how much cash they have left?
Not true. Theyāre preparing everyone to ask for more money in another crowdfunding round. If they were profitable, they would not need to raise again. The only way they could be āprofitableā is if theyāre using a non-GAAP measure, like, āprofitable on a per Ā£ saved by customer basisā or something equally obtuse. 6 months ago they were burning over Ā£1,000,000 per month. What could they have done to increase their revenue by over Ā£1m per month in the last 6 months?
The annual report submitted to companies house for the period ending December 31st, 2022 showed that their highest-ever month of revenue was Ā£278k and so if they were to be profitable this month they would need to have increased their revenue by >400% in 6 months without any increase in costs. If they had done that, they would be shouting it from the rooftops.
Chip was due to run out of money in the middle of 2023. Theyāre obviously not profitable. Theyāre obviously going to ask for more money in the next few months. Theyāre obviously going to wheel out the classic narrative that ā[they] have so much institutional interest but in order to maximise shareholder value we need one more crowd raise to give us the negotiating power to get the best institutional raiseā and that, of course, the new valuation (which represents a ~75% loss for people who participated in the most recent crowd raise) is actually a great opportunity to increase shareholding before the institutions arrive.
They have lied at every turn. The turnaround required to go from burning Ā£1m per month to being profitable in the space of 6 months during a recession would be one of the greatest business turnarounds of this century and their talents would be wasted on Chipā¦ and this would all be while their TrustPilot rating is falling through the floor.
edit: actually it looks like they might be referring to āGross Profitā which is technically now positive because they reclassified almost all expenditures as āAdministrative expensesā instead of āCost of salesā. Per their last accounts:
The proof will be in the pudding, we shall see.
End of March 2023 - 9 million ARR.
End of May 2023 reading within the lines is over 15 million ARR, ties in with your 400% rise.
Exactly - hereās the exact words from the update:
āChipās pre-money valuation of Ā£126 million that we used to raise capital in March 2022 now represents 8x annual recurring revenue - well within market normsā
Therefore, Ā£15-16M ARR. Quite a remarkable uplift in such a short time. Iād imagine driven by huge increase in both new customers and active customers, and with bigger portfolios. I want to see if this continues for the next few months before getting too excited! However if they can keep on this same path there is the potential to really ramp up profits if costs are contained, invest in more features and marketing and it could really take off from thereā¦
Letās see but positive for sureā¦.
The valuation is now Ā£36m. They converted the Loan issued at the end of 2022 .
I mean some of this doesnāt make sense - Companies who are profitable do also raise money to fund growth + additional contacts/advice etc.
You may be right be I think it would be very bold to public say your ARR numbers against valuation. Saying their is interest from VC etc isnāt the same as this imo
Iād say the key word here is not now but WAS Ā£36M valuation. That is outdated based on the new ARR/profit position. However it is based on 1 month of data so Iāll wait until I see if this is sustained before getting too excited 
yes keep dreaming!
You are right
December 2022 they had Ā£278k in monthly revenue meaning that their ARR was ~Ā£3.3m. For their ARR to be Ā£16m today theyād need to have an MRR of Ā£1.25m which would be achieved with roughly a 50% MoM increase in revenue since December 2022. For the company to be profitable on these figures, they would need to have achieved that 50% MoM increase in revenue without any increase in costs. What about the Ā£50k/month they spend on prizes? What about the costs of accepting deposits?
The market-leading interest offered on savings certainly explains a meaningful increase in deposits but the cost of offering a market-leading interest rate isnāt free: how can that have happened without any impact on their costs? Are they accounting for the cost of offering these accounts differently? Chipās bank, ClearBank, generates roughly 1% of interest income on deposits, which is a big part of ClearBankās revenue: how much of that is Chip getting from ClearBank? 50%? 25%? Even if Chip were receiving 50% of all the interest income generated by customer savings, it would take north of Ā£2bn in deposits to generate Ā£15m ARR for Chip.
I hope itās true, I hope that they have achieved the impossible because it will mean that thousands of people will not lose money from participating in the crowdfunding, and I hope itās true as I will learn a lot from them if they have managed this, but given where they were just 6 months ago, it feels impossible, and so I remain very skeptical and expect that this is likely based on some very aggressive massaging of the numbers (e.g: artificially inflating their MRR for one month, and then extrapolating their ARR from that) specifically timed to this month so that they can raise another round before they run out of money.
I hope I look back on this post and think I was an idiot.
Raising money when youāre profitable is uncommon because there are much better financial instruments available. Raising money is better thought of as selling equity, and if your business is making money, why would you sell equity, thus limiting your upside? If Chip is profitable and growing their revenue 50% MoM then theyāre, effectively, running the business risk-free, and so selling equity (which is essentially a risk/reward choice) would be at the expense of shareholdersā future returns, and they could simply borrow money which would be much, much cheaper for them. There are cases where profitable companies raise money but I canāt imagine what Chip would need to raise money for if theyāre profitable.
If it can help in the discussion consider that Moneybox had Ā£45m of ARR (march 2023) with Ā£4.0bn of AUM.
Iāve mentally written off my investments (plural) in Chip. So if I ever got anything back in return Iād be happy.
Hereās to hoping they have got on the right side of the equation.
Chip have stated that they have multiple investment offers.
Assuming that is true, and that Chip accept one or more of the offers, then the pre-money valuation will provide a good indication of the state of the business (as a VC will have access to Chips financials).
Iāve invested small amounts in maybe 7 of Chips crowdfunding rounds, so I hope itās good news going forward!
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