Please find answers to common questions we’ve been asked below.
Feel free to ask more by emailing firstname.lastname@example.org and as we get more we will add them to this FAQ!
An ASA – Advanced Subscription Agreement – is a financial instrument that allows people to invest in a company early, ahead of a full investment round.
You can find a good general overview of ASA’s from the legal firm Ashfords here.
Investment in an ASA is converted into shares when there is a qualifying equity round. We are planning this to happen in the first half of 2023. The share price and company valuation will be set by the lead investor at that time, but as an advanced subscriber you will receive a 17% discount on that price. The maximum valuation of the company has been set at £8.4m for ASA investors to ensure your investment is not diluted too much should the lead investor set a very high valuation.
If no conversion happens within 6 months (the long stop date), your investment will automatically convert at the previous post-money valuation of the company – £2.7m.
The key terms of the ASA are available on the Crowdcube site. Feel free to ask any questions you may have about this but please be aware that we cannot provide any financial advice.
The most likely exit plan is a trade sale.
This will probably be to a system integrator such as Accenture, ATOS, or Elsevier who can use our solutions as part of a package to provide digital transformation solutions to their customers globally. We have not engaged with any of these companies yet, its simply too early, but we do have a partnership agreement with ATOS in place so we are on their radar.
Other potential acquirers could be the big enterprise search players, IBM, Microsoft or Google.
An exit through an IPO (Initial Public Offering) is also a possibility but perhaps the least likely scenario.
We would expect to complete an exit in three to five years, depending on market conditions and commercial traction.
Although its hard to estimate our valuation at exit, we mentioned a long time ago that our investors would be “disappointed” if the valuation is less than £100m at the time of exit. We still stand by this as a visionary target but of course this is not something we can attempt to guarantee.
We don’t have one at the moment – this is because the investment is through an ASA which means the prices will be set by the lead investor in the first half of next year. Please refer to the ASA section above.
However, there is a minimum and maximum valuation set through the ASA. Specifically this is £2.7m and £8.4m.
Our previous post valuations were:
– Q1 2020: Pre-money £1.2m, post-money £2.7m
– Q3 2018: Pre-money £825k, post-money £1m
Unfortunately the previous investor has withdrawn from the process for the time being. This is because, with the current economic climate, they wanted to focus on organisations at a later stage of commercial development to reduce their risk.
We are currently working with a number of other alternative investors to finalise the equity round which we plan to complete in the first half of 2023 – the earlier the better of course!
Once this round is complete your investment will be converted to shares in accordance with the ASA and at the share price and valuation set by the new investor less your discount for investing early.
Although our solutions are a general technology applicable to multiple markets we are currently focussing our efforts on the UK engineering sector. The reasons for this are:
- It is the single biggest market in the UK for companies with turnover >£50m
- They are a knowledge based sector using information that is large and complex which is a particularly good match for our solutions
- They are technically aware and ready to take on new innovative solutions
- They are not as constrained with compliance and regulatory factors that other industries are, eg finance and legal
We do however plan to move into other adjacent sectors, the most obvious being finance once we have achieved a bridgehead in engineering. The reasons for not doing this now are to avoid stretching ourselves too thin on the sales and marketing front, but also we are aware that we will need more security and compliance accreditation to do so, which although not expensive, is a lengthy process to go through.
Our revenues so far for this calendar year are ~£80k.
We sell to large enterprises so sales lead times as significantly longer than a consumer business, typically 6-9 months and over the last year we have built up a strong sales pipeline with containing over 50 companies and worth over £3.5m – this is the revenue we would receive in the next 12 months if we onboarded every one of those companies tomorrow.
Obviously closing down every customer prospect tomorrow is unrealistic, so we assign a probability to each customer based on where we are in the conversations with them – eg a customer we have only done one pitch to would have a probability of 5% – which creates a more realistic expected value of £600k.
Included in the 50+ companies above are 9 companies who we very actively engaged with and who are performing detailed evaluations and proof of concepts with. This includes big name companies such as WSP, RS Components, Lane International, and Babcock. If we closed all of those 9 customers tomorrow this would generate £800k revenue in the next 12 months.
Neural Search (also know as Vector Search) is a new technology so there are not that may direct competitors at the moment.
Other companies working in this space include Jina.ai, Weaviate, Qdrant, and Pinecone. We watch these companies very carefully.
The companies listed above create tool kits for software engineers in companies to integrate neural search into their knowledge base. This takes a lot of skill since this is a very complicated technology.
We take a different approach. We provide complete solutions to customers so they do not have to do the hard work of understanding and integrating complex solutions, and we target the users of these solutions as opposed to software engineers. Both approaches are of course valid, but this does give us a clear point of differentiation to the other providers of neural search technology.