Patch Plants is crowdfunding

Also, please don’t take it the wrong way, but Amazon Prime :frowning:

Very sorry Patch Plants, maybe I misunderstand the business. A dinosaur of sorts.

There’s always room for lots of businesses.

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Apologies again. I have just seen plenty of marketing material in private and public fundraising documentation and this is misleading:

If I launch a food delivery business, I cannot use the £XXbillion restaurant business as my market. It would otherwise amount to a huge chunk of a country/region’s GDP. The same way some real estate companies cannot use the entire commercial real estate market as a growth anchor or sorts.

It would be advisable to use a more realistic number here. But I understand this is great marketing and I am not in marketing. I just prefer transparency.

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Hey Engineeer,

On our business model:

  1. Customers - We deliver to both consumer customers and businesses at the moment. Our footprint currently covers London and Paris, and we are looking to extend further

  2. Scalability - whilst you are right that there are some variable costs in our business that will always exist (ie the cost of the plants), we are able to reduce these by building relationships directly with growers (and the per item costs also reduce with volume), and much of the rest scales as our delivery density increases (reducing drop costs) and our reach increases (reducing customer acquisition costs)

  3. Defensibility - If you’ve downloaded our investor deck from the Crowdcube page, we have a slide on this (p18). Our business is defensible because of our unique combination of category expertise, and operational excellence. If you wanted to build our business today, you would need to replicate both. Ie our rich customer insight into buying preferences, plant care content, personal customer experience, alongside our tech platform, delivery density, and scale in buying and logistics. Amazon can’t provide all of this. And Amazon is great for buying things if you know exactly what you want. But what if you’ve never owned a plant before (as many of our customers haven’t). We help people who are nervous about owning plants pick the right plants for them, and keep them alive.

  4. Market - The gardening market is big - ÂŁ22bn in W. Europe, and significantly underpenetrated online at the moment, at just 7%. See our pack for more details.

  5. Assets - I think this misunderstands our business model. We are a Direct-to-Consumer eCommerce business.

In short - I encourage you to read our pitch deck!

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I think it’s fairly key to note that Europe (and the EU) doesn’t really have much thyme for Amazon, so whilst the UK could be an issue, sales in the EU could grow nicely.

That’s the hedge (ahem).

(That’s all the gardening puns I can fit in)

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Germany alone is the second biggest amazon market, so no idea how you get this idea.

No worries, thank you! It’s healthy to have different views on a business model that’s growing. Andreessen Horowitz VC fund runs red-team exercises to stress-test business ideas. And we here are all learning how to do research and invest.

We aren’t VCs who have other investors’ money to effectively bet with—gotta be extra careful.

In addition, a market size can be “massive”, but we have seen plenty of crowdfunded business fall apart because of many factors:

Those are just assumptions, not facts—customer acquisition costs can vary—and, as in the case of several UK and US unicorns, they can only grow, as some customers need to incentivised, before they become “sticky”. Plants aren’t a necessity, unlike food and getting around, so it can be difficult.

There’ve been plenty of unicorns that stopped growing as fast after a hitting a certain size, despite a large potential market size for each category.

(Also, to readers—to scale and to grow/expand are two different things. I’ve heard plenty businesses misuse the terms.)

Re: Amazon—I’d never underestimate them. They have a culture of Day 1. I am not a shareholder of Amazon but have studied them for long enough to see they don’t care about margins. Tesco and the likes used to say cheeky stuff to reporters back when Amazon announced it’d do groceries in the UK a few years ago—because its a “hard business”, “supply chain” , “relationships”, etc etc. Today, Tesco, M&S, Sainsbury’s are in a different world. Having such large and small competitors would be under “Risk Factors” if crowdfunding required to prepare S-1 / pre-IPO style legal doc.

Regarding smaller competitors—users still have a choice with Small and Medium and “large” (Waitrose) operators, so this should be considered by investors:

In the end, users will always win with more offerings (think Uber or Deliveroo—both of which are no technically tech), but this doesn’t guarantee that businesses will keep growing, which affects future valuation.

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@Patchplants I just have one point on this. Won’t Patch Plants only inspire customers to grow the next plant themselves after 1 or 2 purchases? After all isn’t that more satisfying. You are at the end of the day pitching to the ESG consumer many of which aren’t a million miles away from just doing their own growing.

Will you be heading into the garden accessories market? Or whatever the term for it is. Seeds, pots, feed etc.

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I think you make some good points here. However I wouldn’t underestimate the defensibility of a strong brand in addition to excellent customer experience. On the scalability piece I agree this is a question mark… but I think you’d have had the same scepticism about Away luggage… and they’ve done alright!

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We hope so! And we hope to be able to continue to provide customers with products and advice to support them in this journey. We already sell pots and some accessories (soil, plant food, care equipment, hand tools etc): https://www.patchplants.com/gb/en/accessories/

And for those who keep wanting to just buy plants, we of course will have those too! :slight_smile:

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Interesting! Hope to get an update on crowdcube soon as an investor. Very little communication going on there.

Not that interesting for investors getting a part of Arena Online Ltd. No exit!

I’m assuming it screws EIS status?

Wasn’t that three years ago?

Just looked. Date of share issue is 3rd Dec 2019. Date of EIS from 8th Jan 2022….so just ok. Phew

But curious, if the exit results in a share holding of a new business, and those new shares are not EIS, do they subsequently become liable to CGT?

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What would be the gain?

As the EIS 3 year period has passed my understanding is that the crowdcube shares convert to acquirer shares at X price (this would be the cost basis that would be reflected in your broker account) and you would only pay CGT on any profit/gain beyond X price when you sell them. In the US there is an extra caveat which is if you hold the new shares >12 months the CGT is capped at 20% rather than being taxed as regular income. I have a few filtering through into this category and the difference is huge if paying 40-45% tax rate.

No details of the exit yet and technically no gain as I this seems to have been a distress sale to keep the business alive. Had always thought someone like Amazon May buy them but maybe this makes them a bigger acquisition target. But if it just ticks along with no need to exit, that will be be form that we didn’t get asked about taking a cash option.