Chimni Launches SEIS Fundraise
Chimni has launched its first external fundraise, to support the next stage of our development. This page contains an overview of the deal structure contained in the Term Sheet as well as answers to key questions around the deal. There is a downloadable copy of our pitch deck at the bottom of this page.
See the 'Introduction to Chimni' video above.
What Are The Basics of the Offer?
Chimni is raising £150k in seed investment in return for 15% of the equity of Chimni Ltd, which holds all assets, IP and rights of the Chimni project. Our offer is based on a pre-money valuation for Chimni of £850k / post money £1M. We have secured HMRC Advanced Assurance for our SEIS eligibility. The fundraise is scheduled to end on 31st March 2021.
What Is 'SEIS' And Why Does It Matter?
SEIS stands for 'Seed Enterprise Investment Scheme'. It is a government initiative to give significant tax breaks and Capital Gains exemptions to incentivise people to support very early stage businesses. Anyone investing receives a 50% tax break in return. The investor also benefits from a capital gains tax exemption on any profits that arise from the sale of shares after three years. The net impact is that for every £10,000 invested the capital at risk is only £2,750. Investors are allowed to invest up to £100,000 in SEIS schemes each tax year.
There is more information and links to good sources of insight here: www.chimni.com/seis-explained
How Did You Value Chimni For This Fundraise?
We were heavily influenced by this article by SeedLegals founder, Anthony Rose. It points out that valuing a seed stage company is very often a finger-in-the-air effort. However, they surveyed over 1000 successful SEIS fundraises and created a value range that seems to make sense to investors and entrepreneurs. Chimni is between the 'Launch' stage and the 'Traction' stage outlined in the article, which means we should be valuing the company between £850k and £1,500k. We chose the bottom end of the range to reflect that Nigel Walley is still the only firm member of the management team, and that we still have to build a team to grow Chimni. We also felt that caution in the early valuation could reward initial investors and make it more likely that we can deliver increases in underlying value in future fundraising rounds.
SeedLegals article on valuing start-ups here: www.seedlegals.com/how-to-value-your-company
Why Haven’t Chimni Raised To Date?
We haven’t needed to. All work and activity on Chimni has been funded by Nigel Walley to date, with most ‘traction-building’ activity in the last two years not requiring outside funding. We now want to build on the opportunities that have developed through this period, particularly the opportunity to integrate with other industry software platforms and to launch trials of our first revenue generating services.
Why Are You Splitting the SEIS and EIS Fundraising?
As described above, the current valuation of Chimni for the SEIS raise is based on a standard low-ball approach for valuing early start-ups where market value can be unclear. This is to the advantage of the SEIS investors but we believe that, with the launch of the first product in the property market, we can offer a more rational valuation of Chimni’s potential. It is expected that this will be much greater than the current valuation, allowing us to deliver the SEIS investors an uplift in the value of their investment at the next fundraise (what is termed an 'up round').
We believe that three things will deliver this increased value: continued growth in user numbers; a significant industry systems integration (eg with a large estate agency software, or with a Local Authority - see note on 'Trial Participation' in next section) and finally the successful launch of one revenue generating product (see note on 'First Product Launch' in next section).
What Will This Tranche of Funding Be Used For?
Funds from the current SEIS round will cover hosting and development for this 6 month period, which includes one permanent member of the Chimni team (Nigel Walley). It will also cover 6 months of scheduled software development projects which break down into four strands:
Code Audit – The Chimni app is running on our launch code base and as we move to wider distribution we need to review codes, frameworks and hosting before the next significant development. This work will produce a ‘state of play’ report that we will distribute to shareholders.
Functional Improvement - The current Chimni code expects logbook owners to do a lot of uploading work. We want Chimni to be more immediately functional ‘out of the box'. So we are focussing on a series of integrations with open data sets and complementary services that have become available over the last year, so that a new Chimni log offers a wider range of useful data and functionality with the owner having to do too much work.
Trial Participation – Chimni has been working with the MHCLG to organise trials of logbooks in the ‘home buying & selling’ industry. These are now being planned for Q1 2021 and we will need to integrate with estate agent and conveyancer systems to participate.
First Product Launch - We intend to launch our first revenue generating service – the ‘Sales Pack’ for home sales. This product has been developed in conjunction with a data supplier - SearchAcumen – and is part of the conveyancing industry’s push to encourage sellers to prepare their Upfront Information before starting a sale. This product will be used for Chimni to participate in trials being run in conjunction with the Conveyancing Association.
What Are The Major Project Steps Envisaged By The Plan?
The Pitch Deck (see page 20 in the .PDF document at the bottom of the page) lays out a Five Stage process to national roll-out. The First Stage is now complete and we are preparing for Stage 2 between January and June. This stage will involve our market test of our first revenue generating product (a 'Sales Pack').
What Are The Key Success Metrics For This 6 Month Activity?
While Chimni is available to anyone in the UK at the moment, we have not been focussing user recruitment outside London. This won’t change for the 6 months of activity envisaged in this SEIS raise. The activity forecast for Q1 and 2 in 2021 is intended to prepare the platform for a national roll-out in the second half of 2021. To that end we intend to use this 6 month period to:
• Complete the planned software development programme
• Trial launch the ‘sales pack’ product in London and the SE
• Participate in the industry trials we have helped organise in the ‘buying & selling’ sector
• Identify the management positions and candidates necessary for a national launch
• Appoint a small non-exec board
What’s Chimni’s Burn Rate?
Chimni has been running an extremely lean basis and intends to continue doing so in the next development phase. This means that the monthly burn rate after the SEIS raise will increase in increments towards a monthly £20K, with spend split between admin/hosting, development and marketing.
When Will Chimni Need To Raise Money Again?
Chimni intend to run a follow on raise using our EIS allowance to generate £500k to cover activities for 18 months starting at the end of the Q2 2021. The formal part of this raise is planned to start on 1st April to last 3 months till end of June. But obviously the informal marketing of it would start at the close of the SEIS process at the end of March.
What Will Be the Key Targets in the Next Block of Activity?
Chimni intend to run a raise using our EIS allowance at the end of the Q2 2021, to prepare for a national roll-out of services.
Is Chimni a B2B or B2C Proposition?
At core Chimni is a B2C concept, with a vision for supporting homes throughout their lifecycle. However, we believe that in the early years of logbook adoption the main point of contact a consumer has will be through industry intermediaries (estate agents, conveyancers, architects) and non-profit intermediaries (local authorities, history and residents groups).