Will Wynne, managing director of London-based Smart Pension, explains why the business should win the innovation in funding category of the Guardian Small Business Showcase competition.
At Smart Pension we offer auto-enrolment for workplace pensions to UK SMEs. The market is heavily loss making initially, but then becomes quite profitable from 2018 onwards, once all companies are signed up, mandatory contribution percentages rise and assets under management accumulate.
Forecasting losses presents funding challenges for any new company, plus financial services is notoriously hard to break into due to regulation, red tape and the wealth of incumbent competition.
As a consequence we split our fund raising into three steps:
1. Prove the concept is feasible, build the technology prototype and set up a legally compliant pension pot.
2. Polish the platform, begin acquisition, and demonstrate the machine works end-to-end.
3. Ramp up marketing and pursue as much share as possible before all UK companies have signed up and the party is over.
Our (high risk!) proof of concept funding came from family. We needed more than originally planned but agreed a line of credit to be repaid by phase two. Phase two comprised tech and finance entrepreneurs who could see the opportunity was real, thanks to phase one. It was crucial we could offer SEIS/EIS here or a convertible note.
We are now beginning phase three, talking to venture capitalists of various sizes and financial institutions about a larger, much more traditional, cash injection via equity to drive acquisition, having parlayed our way here by successfully navigating phases one and two.
All entries which meet the competition criteria are published and our judging panel select a shortlist of the three for each category. Winners are announced at an awards ceremony in summer 2016.
