We thought the questions asked in the discussions area in our Crowdfunding Raise were superb so we wanted to replicate them here. Please let’s keep the discussions going and put forward your ideas to keep growing Crunch (and therefore your investment!)
Investor query (originally posted on Seedrs):
I see that the company was founded 14 years ago? That’s a very long time in Tech industry!
- How come you are still EIS applicable? This is not really a startup is it?
- What’s changed between 5 years back and now? What stopped you from being a 100mil+ business 5 years back?
- Why are you raising money from the crowd now?
- Where will it be spent?
Our response:
A superb question, how could we have existed for that long? I’ll answer this in more detail and your other points at the end.
When we set out, the original idea was just accounting software however I believed the big issue was around the small business owner getting a top quality accountancy service. The concept of software and service was born!
Once we had built our first architecture, we launched it for 1-2 Director Limited companies with all the software and all the service they needed; unlimited support, VAT returns and the full annual accounts preparation - all for £59.50+VAT per month.
Once we had launched (April 8th 2009) we started to understand operationally how to successfully scale the service side, we realised 2 things; this would be a marathon of a project and that it had the potential to generate lots of cash.
In the early years we talked to a handful of investors and nobody understood our software and service vision, so we decided we’d fund ourselves and go at our our own pace - we had enough cash. So therefore here’s your key answer, most tech firms generate little to no revenue and Crunch on the other hand with its software and service model didn’t need any investors. With no gun held to our head we could follow our instinct and build a vision that was super differentiated, super scalable and highly cash generative.
The things we have tried and tested have been never ending and to be honest, like all tech at some point it needs to be rebuilt. The old code had descended into a monolithic code block and needed to be rebuilt so using our cash from 2015 we started our version 2 of our platform from scratch. We then took a bank loan as is detailed in the deck and the big vision for our new services based architecture would take some 4 years to complete, finishing in 2020.
It’s taken what seems a long time but we’ve built something truly amazing (even with a pandemic and an unsupportive government towards small businesses), with the super scalability, significant differentiation and we’re finally made software and service truly scalable - with all its advantages to the end user and for the business, fantastic cash generation.
- How come you are still EIS applicable? This is not really a startup is it?
EIS is not just open to start-ups and the criteria that a business must meet can be complex. Crunch is a knowledge-intensive business so the criteria used by HMRC is different from mainstream EIS. As you would expect we have a high level of Governance in the business and we used an industry expert to ensure our application for EIS met HMRC’s criteria and thus was granted advance assurance.
- What’s changed between 5 years back and now? What stopped you from being a 100mil+ business 5 years back?
I think I’ve answered this in the above, we focussed on continually proving the business and all it’s complex scaling issues to solve. We focussed on automation and building the most powerful services based architecture ever, now a fully functioning v2.
We could have spent our time searching for an investor who really understood what we were doing but still our limit to monthly capacity was a maximum of 300-350 new accounts per month (Ltd). So unfortunately something that wouldn’t excite even the most passionate investor. We needed a super scalable front end software, capable of taking 1,000’s - 10,000’s of signups per month. We do now and we believe we can be a £100m+ business!
- Why are you raising money from the crowd now?
To be honest with our community centric business, Crunch Chorus, which we’ll look to take further in the near future, we had wanted to do this years ago but it didn’t have the support from the board. Bring us forward to 2021 and crowdfunding is a fantastic method of raising cash but in our view more importantly, rising profile. We compete against some seriously wealthy foreign accountancy software firms and we can see from the levels of signups during this raise that people are recognising there are other very capable players like Crunch in the market. We’ve heard this from our clients (members) for years that they absolutely love everything being in one place and it is super pleasing to be on the receiving end of so much praise for our software and service offering. Crowdfunding couldn’t be a more perfect advert and for a community centric business, nothing is better than being community and team part owned!
- Where will it be spent?
As we’ve detailed in the deck, the key areas are:
Growth marketing, creating a powerful team and implementing a campaign led approach, something we couldn’t do before due to capacity limitations.
Tuning of our UX and customer journeys so we can continually improve the conversions on an already impressive set of metrics; 2% overall monitisation, lifting to 9.61% once they has raised an invoice or expense (I.e. they realise a free piece of software can be that good and buy into the services side).
More features in our amazing software and services to help our members.
I hope this answers all of your questions.
Thanks,
Darren. CEO & Founder
