Howsy makes renting better. For everyone. We are building the #1 serviced marketplace for renting.
Business overview
Investment summary
Business highlights
- Applying for Future Fund, not conditional - see Key Info
- Award winning startup and the UK's "Best online agent"
- Over 7,000 properties on the Howsy marketplace
- Join institutional investors in this convertible note
Key features
Learn more about convertible loan campaigns.
Idea
Introduction
Nobody associates the rental market with change or innovation. The UK’s 4.5 million private rental properties are serviced by either tenant-find-only online services, high street agents or landlords do it themselves. Same model, same players, same terrible service.
Now there is an alternative. Howsy has challenged the traditional over-priced & under-serviced lettings model. We have created a digital marketplace that removes traditional agents, bringing down the cost of managing a property by an estimated 75% & delivering great customer service.
Howsy taps into half of the 4.5m private rental properties let each year. This is considerably higher than the 1m residential properties sold per year.
We want our customers and friends to join us in scaling Howsy to become a household name and make renting better for everyone.
Substantial accomplishments to date
Over the past 4 years, we have assembled a world-class team coming from companies like PayPal, Zoopla, AxelSpringer, Propertyfinder, Microsoft, and Endsleigh. Howsy's team of 81 operate across three locations, 2 in the UK and 1 in South East Asia. We also work in partnership with self-employed viewing and inventory clerks.
We have now scaled our marketing channels and developed a proven customer acquisition strategy that has resulted in a 48% growth rate over the past two quarters.
Howsy recently acquired the second and third largest online agents in the UK. This has substantially increased deal flow for our fully managed proposition and has unlocked one of the largest landlord databases in the UK.
This year Howsy completed its C-Suite.
We have had a strong response from the press, featured in Forbes, The Guardian twice, in TechCityNews, Startups.co.uk.
Even during unprecedented global health and economic crisis, April 2020 was the second-biggest month in our history for new properties.
What our customers say
Monetisation strategy
Howsy generates revenue from charging a fixed fee from £39 per month outside London right through to £115 per month in London with additional insurance services provided.
We also generate up to £1,000 per managed property by finding tenants, conducting viewings and taking photos. These additional services are delivered by our on-the-ground Howsy Hosts or trusted suppliers.
We are preparing to trial additional revenue services such as cleaning, furnishings, utilities, flower delivery and high-speed internet
Use of proceeds
Howsy has always grown with its community. We are inviting you to join this investment round because we want you to share in our growth.
Times are tough everywhere, but Howsy’s services can help, even in lockdown. We’re building a digital service that makes renting 100% faff-free.
We’re aiming to qualify for the “Future Fund”, a government support package for start-ups like Howsy. You can find out more information about this scheme here: https://www.gov.uk/guidance/future-fund, and also in the Key Information tab.
It is a co-investment support package - meaning that the Government will match any qualifying investment 1-1. We are aiming to qualify for the Future Fund with this Convertible Loan Note.
Investment funds will form part of a planned larger investment round in 2020. In the short-term funds will be used for working capital and growth marketing.
Disclosures
The company has the following outstanding loans:
1. £50,000 Bounce Back loan at an interest rate of 2.5% per annum. The loan is to be repaid on over the course of 6 years, and repayments will start in 2021.
2. A secured £3.1m debt facility with The Prism Income Sp LTD with an interest rate of 15% per annum, of which £1.64m has been drawn down so far. This loan also has a 1% administration fee payable every 6 months on any outstanding loan amount. Each tranche is repayable 12 months from the date of drawdown. A fundraising round of a minimum of £3.1m will trigger the repayment of this loan.
None of the funds raised from this investment round will be used to repay these loans.
Key Information
Convertible Loan Note
Seedrs is supporting companies who are intending to apply to the Government backed Future Fund. You can read more about the Future Fund here: https://www.seedrs.com/learn/blog/the-future-fu....
In order for a company to be eligible to seek matched funding from the Future Fund, this investment round must be on the convertible loan terms that have been prescribed by the Future Fund for this purpose. These terms differ to our normal ‘advanced subscription agreements’.
Given this product differs from most campaigns on Seedrs, we urge all investors, including regular Seedrs investors, to read the information below and ensure you understand the terms in full before making your investment.
1. Key terms
You will see a term sheet attached to this Campaign in the Documents section which sets out the key terms of the convertible loan and you can see the full document prescribed by the Future Fund here: https://www.british-business-bank.co.uk/ourpart....
A summary of the key terms is set out below, but should be read in conjunction with the term sheet:
Discount: 20%
Interest: 15% per annum, non-compounding. On conversion events, the company can choose to repay the interest or convert it to equity (generally without the discount). See the Term Sheet for more details.
Redemption Premium: An amount equal to 100% of the principal loan amount
Qualifying Equity Financing. The convertible loan will automatically convert on an equity financing raising at least the total loan amount, at the lowest share price of equity financing less the Discount.
Maturity Date: 36 months from signing convertible loan agreement.
The default position is on the maturity date is that the loan will convert to equity unless the investor majority elect to redeem.
If redeemed, the company will repay the principal together with the Redemption Premium.
If converted, the conversion price will be at the most recent funding round share price less the Discount, provided that funding round happened after 20 April 2020 and was at least a quarter of the size of the convertible loan investment. If no such funding round has occurred, conversion will be at the share price of the last funding round prior to 20 April 2020 (no Discount).
Other events of default or conversion: There are various other scenarios in which the convertible loan may convert or be repaid and investors should reference the term sheet:
Non Qualifying Funding Round: The convertible loan can convert on an equity financing round which does not meet the size criteria of a ‘Qualifying Equity Financing”, at the election of the majority of investors under the loan. Please see the term sheet for how this conversion is priced.
Exit: The convertible loan will automatically convert or be redeemed on an Exit, whichever would give investors the higher cash return. Please see the term sheet for how conversion is priced and payments on redemption in this scenario.
Events of Default: The convertible loan is to be repaid on the events of default, such as liquidation or winding up. See the term sheet for more details.
2. Government matched funding
The company intends to apply to the Future Fund for matched funding on the total eligible amount invested in this funding round. Subject to eligibility criteria and the Future Fund's approval, the Future Fund will “match” the funding raised via Seedrs or other eligible sources, subject to a minimum investment of £125,000 and a maximum investment of £5m. The Future Fund is to be allocated on a ‘first come, first served basis’ to eligible and approved businesses, so there is no guarantee that a company will receive the Future Fund matched funding.
You will see that we have now reflected the Future Fund investment as part of the round as we have received confirmation the application has been accepted. It is distinguished in pink in the progress bar of the campaign. This is to give investors an indication of the potential total size of the funding round (and potential dilution on conversion), but to also distinguish it from regular investment through the Seedrs platform.
Seedrs does not charge any fees in relation to the Future Fund matched funding, application process or for acting as lead investor with respect to applications.
3. Conversion to equity
The convertible loan agreement prescribed by the Future Fund is equity-focused and favours conversion of the loan to equity as the default position.
Redemption is only available in certain scenarios and is often subject to the vote of the majority of the investors. Where a vote of investors is required, Seedrs will vote on behalf of any investors it represents as nominee.
There is a possibility that the convertible loan will convert in some scenarios without the consent of Seedrs (if we do not make up a majority of investors). It is also Seedrs’ position that this is primarily an instrument for investing in the equity of the fundraising business and our default position would be to vote in favour of converting the loans to shares in the company unless there is a clear or compelling reason not to.
4. Risks
As always, investors should be aware of and accept the risks involved in investing in early-stage and growth-focused businesses: https://www.seedrs.com/pages/risk-warnings
In addition to the usual risk warnings included above, investors should be aware of and accept the following with respect to convertible loans:
The convertible loan agreement is intended as bridge funding to a future funding round, but there is no guarantee that a company will be able to secure further funding.
The Future Fund is to be allocated on a ‘first come, first served basis’ and there is no guarantee that a company will be successful in its application to receive the Future Fund matched funding.
There is a risk that the Company may not have sufficient funds to repay the loan on the maturity date, pay interest when it becomes due or pay the redemption premium included in the terms.
Convertible loans are unsecured obligations and in the event of a winding up or liquidation event will rank behind secured creditors of the Company.
5. Secondary market
Investors will not be able to sell their interest in the convertible loans on the Seedrs Secondary Market unless and until they have converted to shares in the company (and then only subject to eligibility and the terms and conditions of the Seedrs Secondary Market).
6. EIS Relief - past, current and future
As noted above, the convertible loan instrument is not compatible with EIS requirements, so no EIS applications will be made with respect to investments in the convertible loan.
The government has confirmed that investing in the convertible loan will not impact EIS relief previously claimed on investments in the fundraising company:
“The government has confirmed that such previous investments will not be affected where the convertible loan converts into shares. Where the convertible loan note redeems, we have been alerted that the government intends to make changes to the rules to clarify that this is compatible with such previous investments.”
However, investing in a convertible loan could impact your ability to claim EIS relief on future investments into the same company. The government has not clarified the position on this and has said it is a matter for HM Treasury and HMRC.
Seedrs is unable to provide tax advice. Tax treatment depends on individual circumstances and is subject to change.
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