There are various companies entering this space. The founders gave a pretty comprehensive answer on the Crowdcube discussion forum regarding the competition:
Can you please explain who your competitors are? I feel like Deloitte Propel might be for example but I am not sure. This will help us understand how mature the market is and may be come up with some comparables.
Good question. Our customer segment is self-employed people. To us, self-employment is a mindset, rather than a legal setup, but there are 5m in the UK. Whether youâre a sole trader or small limited company, if you have fewer than 5 employees, we think youâre different to other businesses. Youâre the sales person, star employee, head of operations and finance director all in one.
Deloitte Propel is an interesting one and not far off, but their target segment is bigger companies. In fact I think Coconut would ourselves be a target customer of Propel.
Categories of competitors as I see them:
Cloud accounting packages
Xero, Quickbooks, Freeagent and similar products. We compete with these on a few dimensions. If you look in our competitor slide I think it outlines this.
Whilst these are good products if youâre an accountant, finance trained or a company with >10 employees, they arenât great if youâre a small, owner-managed operation. Cloud accounting was built in a time when smartphone penetration was below 20% and the prevailing smartphone was the Blackberry.
Weâve seen the effect of mobile-first disruption on banks, when you realise that real-time notifications and nudges create a transformative experience that you couldnât have imagined before Revolut. Weâre bringing the same mobile-first, real-time thinking to accounting and tax.
As a practical example of this, the first question you are often asked to set up your âchart of accountsâ in accounting software. As an accountant, I even find this a stressful concept. With Coconut, you just connect your current account and we extract 24 months of banking data. Then we apply our industry-leading âAccounting Intelligenceâ to categorise and you have a P&L and tax insights without any data entry.
This is a totally different experience to Cloud Accounting and the value you deliver fast is a 10x transformation.
I think one of our customers said it best:
âIâm absolutely loving your app. Iâm a new business owner and have been running my business for almost a year now. Iâve tried Quickbooks and Xero and would get so frustrated I felt like I had to have multiple cups of tea in a sitting just so I could remain focussed on what all of the terminology means, but with Coconut I donât have to and itâs such an easy and enjoyable process. THANK YOU!!!â
Whatâs more, we have 1,300 accountants now using our accountant portal and some of those asking about transitioning fully to us for their self-employed base rather than using cloud accounting because itâs more efficient.
When you combine this with the fact that we can also process payments and hold money, you create a superpower thatâs difficult to match with traditional accounting products.
Smart banking & accounting combos
Examples of this are ANNA Money and Countingup. Whilst our initial products were similar for various reasons, both companies are very focussed on the banking & accounting combined. With ANNA even explicitly going for a banking license.
Weâre very different as, whilst we do also offer a current account and card, weâre current account agnostic and powered by Open Banking. Itâs unique to us that we can work with customers who donât have a current account with us. We can power up any type of current account with our Accounting Intelligence and platform, whether youâre a Barclays, Lloyds, AMEX or Starling customer (you can connect accounts from any of 20 different banks to Coconut).
There are 5m self-employed people in the UK who already have a current account and we can work with all of them tomorrow. Whatâs more, this is going to enable us to grow fast internationally too.
Smart and traditional banks
Companies like Tide, Starling, Revolut, Barclays etc. We see Coconut as the ultimate accounting and tax tool for self-employed people. Banking is a complicated business and to do it well takes time, money and focus. Current accounts are also becoming commoditised. Accounting products are also a complex category of product and to do it well takes focus.
Weâve seen smart and traditional banks partner with Xero and Quickbooks to effectively outsource their bookkeeping features. And we already have customers from these banks through Open Banking so work with all of them (except Tide) at the moment. We are building a layer on top of the banking infrastructure, powering up dumb bank accounts with really cool accounting features.
Whatâs more, many customers manage their business across 2 or 3 accounts and credit cards. You can pull all of them into Coconut providing one place to manage your business.
Dedication to self-employed people
One other point to make around competition is that weâre completely dedicated to self-employed people. We believe this gives us a moat we can continue building. We donât dilute it trying to build for bigger businesses.
We want to be the obvious answer to the question, what accounting product should I use for my self-employed business.
It means we can also start solving some of the problems specific to self-employed people where your business meets your personal life: paying into a pension, getting a mortgage, finding the right loan, getting access to benefits like sick pay that you had in employment, medical insurance etc.
These arenât problems that any company focussing on a range of different business sizes will try and address but creates a big revenue opportunity for us and a clear differentiator.
Other types of products that could be competitive are:
- Open banking plays - Portify (although more consumer now), Albert (acquired by Santander)
- Feature apps - Receipt bank, Invoice2Go
- Existing tools - spreadsheets, shoe boxes
