Proportunity

Proportunity logo

A mortgage lender that uses machine learning technology and finance to make home ownership possible.

Summary

• Convertible round with valuation cap of £36m
• In excess of £115m debt and equity funding raised
• Financed over £100m in property purchases to date
• Over 200% YoY in new customers, helped over 260+ home owners

Operations

Let’s face it, traditional renting and mortgages suck. They work against people trying to save and the problem is only getting worse as incomes cannot keep-up with rising house prices and inflation.

Proportunity is a mortgage lender that combines machine learning and finance to disrupt the broken borrowing system and make home ownership possible.

It's on a mission to help 1 million people onto the property ladder by 2030 and become the go-to home buying partner for everyone.

Customers use its proprietary machine learning tech to help find homes with high growth potential.

By de-risking the homes that Proportunity lends on, it's able to offer its customers an equity loan that increases their home buying budgets by as much as £150k. Its loan effectively closes the affordability gap and enables its customers to buy the home they want now rather than save for another 5 to 10 years.

Key accomplishments to date

Financed over £100m in property purchases to date. This year (i.e 2022), Proportunity has already helped finance almost £40m in property purchases, a 152% increase on the same period last year!

• 200%+ year on year customer increase, helping 260+ people onto the property ladder
• 45,000+ sign-ups to its platform and growing fast. Proportunity added 12,500+ users in Q1!

Customer experience

• Its tech helped its customers find homes outperforming the market by 100%. In the last three years, its London portfolio grew by 6.4% vs the market 3.2%.
• Among the top 10 mortgage lenders on TrustPilot, with 95% Great or Excellent rating.
• Digitised the entire home finding and mortgage process through its online platform.

Team & investors

• £115m+ debt and equity funding raised to date from leading VC funds including Anthemis, Axel Springer, Savills and Starwood (through Concrete VC)
• Strong founder pairing of AI and forecasting expertise, with backgrounds from Bain & Co, IBM and Booking.com
• Its team brings lending, financing, machine learning and marketing expertise from Google, Ebay, UBS, Lehman Brothers and University of Cambridge

Partnerships

• Lending alongside renowned banks and building societies, including Halifax, Kensington & Tipton
• Partnered with leading broker networks, including Brilliant Solutions, Finova & TMG and Finance Planning Group opening up a network of over 3,000 advisors.

Monetisation strategy

The market for households who rent, but want to buy is huge. Proportunity estimates the market to be at around £938b in the UK alone. Its products have three revenue sources:

1: Proportunity charges an upfront product fee.

2: Proportunity receives monthly interest-only payments on the equity loans that it provides to its customers to get onto the property ladder.

3: When its customers pay us back, Proportunity shares in the change in the property value based on its contribution. If the property value goes up, Proportunity makes additional profit. If it goes down, Proportunity shares in the downside with its customer.

Use of proceeds

Proportunity has big plans to become the go-to home buying partner for anyone struggling to get on the property ladder. With additional funding, Proportunity will double down on marketing to put Proportunity in the best position to capture the £4.4b market gap left behind when the market's biggest player, Help to Buy ends in March 2023.

Proportunity is also looking to expand its product range to bring two new products to market that aim to disrupt the broken borrowing system:

First, Proportunity plans to launch a 0% deposit mortgage.

Second, Proportunity aims to launch a 'rent to own' product to provide a pathway to homeownership for people who aren't mortgage ready. The product will enable its customers to find their dream home, move in now, and rent their way towards homeownership until they are in a position to buy. With its built-in savings and credit builder features Proportunity intends to help its customers become mortgage-eligible in 5 years or less.

ASA Key Terms

This investment round is being raised by way of a convertible equity investment structure, in this case an "Advanced Subscription Agreement". All investors in the round are entering into Advanced Subscription Agreements on the same terms.

The key terms that apply to Seedrs’ Advanced Subscription Agreement (the "ASA") are set out below. This convertible differs in a few key ways from Seedrs' standard convertible instrument.

Conversion of the ASA:

Conversion of the ASA is triggered by certain scenarios occurring ("Trigger Events"), as follows:

1. Financing Round: An equity raise raising at least £6m, or lower if agreed by the majority of the ASA holders.
2. IPO: The listing of the Company’s shares on a recognised stock market or investment exchange.
3. Sale: The sale of all or substantially all the assets of the Company or a number of shares that amounts to a ‘controlling interest’ in the Company (unless as part of a restructure).
4. Longstop Date: Where no other Trigger Event occurs first, the ASA will convert at the date of 30 September 2023.
5. Insolvency: Where the Company undergoes any other liquidation, dissolution or winding-up, whether voluntary or involuntary, resulting in a distribution of capital to shareholders.

Conversion Price:

On the occurrence of a Trigger Event, the investment will convert into shares at share price calculated as being the lower of the following:

• £36m divided by the fully diluted equity of the Company immediately prior to or on the date of the Trigger Event in question; or
• The price of any shares issued or sold as part of any Trigger Event, reduced by 15%.
• The calculation of fully diluted share capital assumes a share option pool of at least 15% and conversion or exercise of options, warrants, convertible instruments or exercisable securties that have been issued by the Company.

Conversion Share Class:

On the occurrence of a Trigger Event, the investment will convert into shares of a class that depends on the Trigger Event in question (see the rights of the various share classes in issue below). Again these differ from Seedrs’ standard terms, so please review these carefully:

1. On a Financing Round: the most senior class of shares issued as part of that round, provided that such class will have a 1x non-participating liquidation preference based on the ASA conversion price (ie. Series A Shares, Seed Preferred Shares, A Ordinary Shares or any new share class created for the purposes of the Financing Round)
2. On a Sale, the Longstop Date passing or Insolvency, the most senior class of shares in the Company at that time (presently Series A Shares) provided that such class will have a 1x non-participating liquidation preference based on the ASA conversion price; or
3. On an IPO, Ordinary shares (at which point all shares in the Company shall also convert into Ordinary shares, as below).

Share Classes

Currently, the company has four classes of shares: Series A Shares, Seed Preferred Shares, A Ordinary Shares and Ordinary Shares . The shares that investors will be receiving in this round will depend on how the ASA is triggered.

The rights attached to the share classes are as follows:

Series A Shares

• First 1x liquidation preference, ranking ahead of Seed Preferred Shares, A Ordinary Shares and Ordinary Shares
• Anti-dilution rights
• Voting rights

Seed Preferred Shares

• Second 1x non-participating liquidation preference, ranking behind Series A Shares but ahead of - A Ordinary Shares and Ordinary Shares
• Anti-dilution rights
• Voting rights

A Ordinary Shares

• Third 1x non-participating liquidation preference, ranking behind Series A Shares and A Ordinary Shares but ahead of Ordinary Shares
• Voting rights

Ordinary Shares

• No liquidation preference
• Voting rights

Conversion into Ordinary Shares:

The Series A Shares, Seed Preferred Shares and A Ordinary Shares can be converted into Ordinary Shares as follows:

• For an individual shareholder’s holding, at their request; or
• For the entire class of Series A Shares, at the request of the majority of Series A Share holders; and
• For the entire class of Seed Preferred Shares and A Ordinary Shares, at the request of the majority of the Seed Preferred Shareholders; and
• All of the above will convert into Ordinary Shares on an IPO

On conversion above, all affected shareholders shall be paid (where the Company has sufficient profit to be able to do so) a dividend equal to all accrued dividends. Where the company has insufficient profit to pay those dividends in full, then any unpaid balance will be considered a debt of the Company to the relevant shareholders, unless waived by (i) the majority of Series A Share holders in relation to any dividends due to those shareholders and (ii) the majority of the Seed Preferred Shareholders in relation to any dividends due to Seed Preferred Shareholders and A Ordinary Shareholders.

Group Structure

Investors in this round are investing into and will become shareholders of Proportunity Limited, Company Number 10470755. The Company also has four wholly owned subsidiaries that sit beneath Proportunity Ltd.

The subsidiaries are as follows:

1. SSM One Limited (09273700): An FCA regulated non-bank lender which issues customer loans.
2. Proportunity Investor NewCo Limited (12461995): Established to raise debt-based funding from HNWIs.
3. Proportunity CB SPV (12537146): Established for debt facility.
4. BrokerCo Limited (13544645): Established to house Proportunity’s brokerage.

Material Debt & Facilities

The Company and its subsidiaries have the following outstanding loans:

1. £1,250,000 Recovery Loan Scheme agreement with Conister Finance & Leasing Ltd, at an interest rate of 7.71% per annum. The loan is held by Proportunity Ltd and is to be repaid in monthly instalments with the final repayment on 24/10/2027. A debenture over Proportunity LTD has been granted as part of the arrangement.
2. A total of £697,000 of loan agreements from 4 individuals at an interest rate of 13% per annum. The loans are held in Proportunity Investor Newco. and are to be repaid by 30/09/2022. The capital is used to finance customer loans and is subordinated to the below mentioned asset backed financing from Conister.
3. The Company also has an asset backed financing agreement with Conister Finance & Leasing Ltd, this facility is held by Proportunity CB SPV, and the Company utilises this to give out loans to Proportunity customers. The total facility is £5,000,000, of which the Company is currently utilising £4,571,772. The facility has an interest rate of 8.5% per annum. The Company currently repays the facility on an interest-only basis. The principal is held on a yearly rolling contract, with the next extension date set on 12 April 2023 As part of the agreement there is a Parent Guarantee from Proportunity Ltd in the case where Proportunity CB SPV cannot pay.

The funds raised from this investment round will not be used to repay these loans.

Raise on Seedblink

As part of this funding round, the company also ran a campaign on the Romanian crowdfunding platform, Seedblink. The campaign is now closed.

The Company raised €174,000 from the Seedblink campaign. The investment is on the same terms as offered in this campaign.

The FX rate used for this reflection is 1 EUR = 0.859923 GBP.

Team

CEO, co-founder

CTO, co-founder

Head of Lending

Head of Data Science

VP of Marketing

Risks

As with any investment, investing in Proportunity carries a level of risk. Overall, based on the key risks highlighted below, the degree of risk associated with an investment in Proportunity is higher than in a company that's trading on a public market.

Early-stage investment

Proportunity is at one of the earliest stages of the business lifecycle, and the failure rate of companies at that stage is usually much higher than those at a later stage.

Illiquid investment

The number of transactions in shares of private companies is usually significantly lower than in public companies, typically resulting in it taking longer to sell shares in private companies at a price that is at least equal to the price that the shares were bought at. Accordingly, the Proportunity investment opportunity is considered to be higher risk than more liquid companies.