CommuterClub
Leading UK provider of season tickets as subscription service. Included in Sunday Times Tech Track.
- Location
- London, United Kingdom
Categories: Finance & Payments Mixed Digital/Non-Digital B2C
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Investment
sought: - £2,300,007
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Equity
offered: - 16.61%
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Investment
amount: - £2,520,439
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Valuation
(pre-money): - £11,546,623
Idea
Introduction
CommuterClub helps commuters save time and money, offering an online retail solution for the sale of season tickets and payments via a subscription service; a Netflix and Trainline for commuting. CommuterClub makes money by financing Annual tickets, earning interest and also from commissions from the retail of tickets.
CommuterClub is initially targeting the estimated £5bn UK season ticket market and eventually expects to expand internationally into an estimated +£20bn commuting market in cities such as NY, Paris and Hong Kong.
Since last listing on Seedrs, the business has made tremendous progress. The business expanded nationally, broadened its corporate solution and is in the process of launching a retailing proposition. Revenue has grown almost 3x in the last year and the business has processed close to £30mn in loans.
CommuterClub was recently included in the Sunday Times Tech Track 100 and has previously featured in the FT and the FinTech 50.
Intended impact
CommuterClub wants to become the established option for regular commuters looking for value and convenience. Our goal is to create long-lasting customer relationships allowing the business to own a sizeable and recurring proportion of the £5bn UK commuting spend. Our goal is to eventually retail and fund 10-20% of UK season tickets.
CommuterClub’s core product is a payment plan making the savings of Annuals affordable (Annuals offer big discounts but can cost £2,000+). CommuterClub leverages the growth of smartcard ticketing to deliver a unique payment plan which we believe is low-cost and makes Annuals more attractive to commuters. CommuterClub is also in the process of receiving accreditation from Rail Delivery Group to become a general online retailer of season tickets.
CommuterClub has tested its proposition across thousands of consumers and millions in loans, creating an attractive and highly scalable offering for urban commuters.
Substantial accomplishments to date
CommuterClub is growing fast. Since listing on Seedrs two and half years ago, the business has scaled rapidly, and in the last year we have tripled revenue. Key trading highlights include:
• We are targeting £20mn of loan volume in 2017.
• Strong customer retention with over 70% renewals.
• Excellent customer feedback with 4.6/5 via review platform Feefo.
• Partnerhips with leading UK rail operators, including Abellio Greater Anglia and First Group TransPennine Express.
• Establishing corporate solution with leading clients such as Airbnb, Pret a Manger and Hakkasan.
CommuterClub continues to be featured in the press and is the recipient of multiple awards such as the Sunday Times Tech Track, the FinTech 50 and the FT ‘Innovation to Watch’. The business is backed by leading by UK angels including Peter Jackson (ex CEO Travelex) and Chris Adelsbach (MD Barclays Techstars).
The current round is led by WGC, a leading FinTech investor who recently backed major UK FinTechs Zopa and Neyber.
Monetisation strategy
CommuterClub makes money via 3 business lines, consumer credit for the purchase of annuals, retail commission on the sale of tickets and servicing companies.
CONSUMER BUSINESS
CommuterClub is a retailer (Trainline for commuters) and financing business. Over the past year, CommuterClub has grown 3x in revenue.
CommuterClub aims to build long-term customer value, becoming the preferred way for a consumer to pay for their commute. With 70% YoY renewal rates, CommuterClub sees attractive lifetime value after factoring costs of customer acquisition.
CORPORATE SOLUTION
CommuterClub has consolidated its corporate offering over the past year, becoming an established provider to leading UK brands seeking an employee benefit. CommuterClub offers a fully managed outsourced arrangement for the company, charging monthly ‘Software as a Service’ fees. CommuterClub’s clients include Airbnb, Pret and Hakkasan, to name a few.
Use of proceeds
Having successfully built the platform and scaled it across thousands of customers and close to £30mn in loans at an attractive CPA, CommuterClub is now focused on further building a large customer base in London and across the UK.
The company intends to use the proceeds to tackle the following goals:
• Acquiring customers in the UK through offline and online digital advertising.
• Expanding the corporate offering both direct and in partnerships with benefit providers.
• Monetising customer relationship through cross-selling opportunities (credit or commuting related).
• Assessing potential international expansion opportunities in key commuter hubs outside the UK such as New York, Paris or Madrid.
CommuterClub is looking forward to the 2017 year end, with expected fare increases of 3.5% likely to drive incremental volume. The current economic environment, of low rates, inflation and wage stagnation supports CommuterClub’s core offering, helping commuters save and benefit from locking in fares.
Market
Target market
CONSUMERS
Commuting in urban areas is a major expense, yet consumers typically having limited alternative options. Monopolistic transport operators have little incentive to innovate, especially ticket retailing, with the result that sales are still largely offline and fragmented by operator.
CommuterClub gives a new choice, helping commuters find and purchase the best value tickets. Our core offer transforms the most discounted ticket, the Annual, into a monthly payment plan. We also retail any season ticket via a single national portal.
COMPANIES
CommuterClub also supports companies, helping them manage their season ticket scheme as a benefit. Our digital, self-service platform allows us to scale to both the needs of SMEs and also cater to large companies such as Pret-a-Manger and Croydon Council.
CommuterClub sees a large opportunity to shift the administration of season tickets to an outsourced provider and helps retailers and SMEs to fund the purchase of tickets via its loan scheme.
Characteristics of target market
The value of season tickets sold in the UK is c. £5bn (this is sales of Weekly, Monthly or Annuals), of which half are London Oyster cards and the rest rail tickets primarily focused in the South East.
In London only c. 10% of the 2mn regular commuters purchased an Annual in 2015 indicating the huge potential to increase Annual penetration by switching customers from other tickets (PayG, Weekly, Monthly) to CommuterClub’s payment plan.
Ticket pricing is regulated by the Department for Transport (DfT) and follows long-term planning cycles. The relative pricing of Annuals to Monthlies and Weeklies is set to a common formula across the UK that has become the industry standard over the past five decades and as described by the DfT is very difficult to change.
Beyond the UK, commuting hubs such as New York, Paris, Madrid or Hong Kong offer expansion opportunities. A high-level assessment identified international opportunities of over £20bn.
Marketing strategy
CommuterClub’s primary channel to consumers is online via its website (www.commuterclub.co.uk) supported by a lean telesales.
CommuterClub uses a disciplined and rigorous approach to customer acquisition with a Cost per Customer Acquisition target of full payback on spend within 12 months.
CommuterClub has tested multiple customer acquisition channels and approaches and has refined its marketing approach to a select group of initiatives which consistently deliver attractive CPA:
1) Direct online advertising primarily through social media (Facebook, Twitter).
2) Offline advertising on the London Underground and Overground Offline through tube panels.
CommuterClub employs a rigorous analytical approach to assess ad spend and is supported in its marketing by the agency All Response Media who have successfully scaled brands such as Made.com and 888 Betting.
CommuterClub’s digital marketing is headed by the former digital team from Graze and Totally Money.
Competition strategy
CommuterClub is the first provider, as far as we are aware, in the highly specialised niche area of financing and transportation. The business has developed a proprietary platform combining APIs into the rail ticketing system and funding providers that is difficult to replicate and is protected by exclusive agreements with a major rail operator.
CommuterClub is able to reduce credit risk through its access to the rail ticketing system, and any competing offering will first need to build this infrastructure before launching a truly competitive product.
Historically, the major high street lenders have struggled to get into niche lending opportunities in particular when they require a high degree of multi-party integration and investment in customer acquisition.
To date, the only competitor offering a similar value proposition that we know of is Premium Credit funded MyCommute4Less launched in Dec ’14. We believe the business has had limited traction and the business line has received limited attention or resource.
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