Hybrid lettings agency Howsy to break even 6.5 years after launching
Figure is revealed by CEO Calum Brannan as his company seeks a further £800,000 to get it through to profitability.
Hybrid fixed-fee lettings agency Howsy says it will reach break-even within two years, some nine years after it was founded.
The claim is made within its pitch document to investors on crowd funding platform Seedrs, who are being asked for some £800,000 to help fund the company. It has raised £610,000 so far with 20 days left to go.
This, the company says, will be its final fund raise.
It has 7,000 properties under management and CEO Calum Brannan says his company wants to make renting a property as easy as booking a hotel stay.
This is the third time that Howsy has crowdfunded on Seedrs, raising £2.35 million in June last year and £700,000 in 2018 to fund its tech platform and the purchase of several competing businesses including The Happy Tenant Company and Upad.
Break-even
But despite increasing its gross margin by 30% and growing revenue by 134% during the pandemic, Brannan says the company still has two years to run until it breaks even.
This will be achieved by selling additional services to renters and landlords including insurance, utilities and furniture rentals, which are vastly more profitable than the thin or no-existent margins of its property management arm.
“Landlords use us because we offer a completely different experience to the high street by both saving them money and enabling them to manage everything online.”
Brannan says the company’s average annual rental income from a property is now £972, up from £660 two years ago.
Howsy says it is raising this funding as a bridging round to provide ‘runway’ to Series A, which it aims to complete by January 2022.
This is the name typically given to a company’s first significant round of venture capital financing and is when a firm like Howsy is judged to have survived the precarious early start-up financing years.
Howsy launched in 2016 as No Agent, with no significant revenue generated until 2017. We anticipate breakeven at the end of 2022, therefore 6.5 years after launch.
Howsy continues to invest in market-leading technology and growth marketing. With 3 acquisitions behind us and a fast-growing business offering a great alternative to the high street.
Andrew-with the greatest of respect, setting up a PR agency is not on the same scale as building out the tech stack and online marketing necessary to build an online lettings agency.
Quick maths says 7,000 landlords with an average revenue of £972 is £6.79 million. With revenue growth of 134% I’m not sure what you’re criticising here except implying Callum hasn’t used any of his own money (I imagine he has) and that it should break even faster?
I sincerely hope your business hits a £1.2 million ARR in eight months but if it doesn’t I hope you’ll come back and acknowledge that execution is hard.
Speaking as a founder of Proptech-PR a privately funded start up that launched in May 2020 during lockdown, who used my own cash, paid myself back all my start up capital about £50,000 after five months – and now have a business that makes 55.7% gross profit pre tax a month, I scratch my head why will it take nearly a decade for Howsy to ‘possibly’ break even? Maybe we should get on a call? Seperately Proptech-X my next venture is again backed by my own cash, though I have got a co-founder Matt Hughes, but that is because we are looking to generate £1.2M of revenue annually, 8-months after we launch at the end of April, and that requires a slightly larger team.