With the economy in recession and sales of mobile phones and other consumer electronics slowing globally, a British start-up called Raylo that is bent on both these themes is investing $100 million to grow its business. Raised £10m ($136m) to give consumers access to new gadgets through short-term leases.
The London-based company, which currently sells monthly subscriptions for phones, tablets and laptops in the UK, will use the raised funds to expand its roster to a wide range of gadgets such as e-bikes and invest in We plan to continue. Its technology includes an AI-based platform for assessing the risk of each sale, recommendation technology, and a platform called “Raylo Pay,” which Raylo has incorporated by third-party merchants to power its leasing services. included.
The cyclical aspect of its sales model is also the basis for another development in the business, according to the company, which Raylo said now has “B Corp” status. This means that Raylo, as a for-profit company, aims to “make a significant positive impact on society and the environment through its business,” as defined by the B Corp organization.
Notably, the funding will come primarily in the form of debt, with some being offered as equity, though CEO and co-founder Karl Gilbert has not disclosed the exact amount. NatWest and Quilam Capital are providing the debt, and an unnamed previous backer is providing the equity. (Existing investors include Telefonica, his Guy Johnson of Carphone Warehouse fame, Octopus Ventures, and Macquarie Capital.)
This is an important funding round for Raylo. So far, he has only raised around £12m in equity, including his $11.5m in 2021, and around £30m in debt. Raising debt at the moment is much easier than equity-based for many cash-generating startups. result of doing that.
“This round will not require a lot of equity in the future as it will transform our financial infrastructure,” said Gilbert, adding that the round was “designed to achieve profitability.” I was.
Raylo is growing fast, with its subscriber base doubling last year, which Gilbert expects to double again this year, and Raylo Pay, which has grown 10-fold in the last six months to reach ‘£3 billion opportunity has been reached.
While actual user numbers and revenue aren’t shared, Raylo’s off-platform activity appears to be a big prospect. Gilbert sees his company not as an e-commerce platform, but as a play on Raylo tech and other technologies, and how they all bring the startup closer together with neobanks and other financial services startups, personalization, AI, and more. , and related tools to better target services or to help people better manage their money.
Still, as far as consumers are concerned, the core of Raylo’s business and what it’s built around is the idea that people want the latest gadgets, be they phones or laptops, VR headsets or e-bikes. You don’t have enough disposable income to buy all the items you want. So we created a platform to accommodate this, allowing you to own these gadgets for a short period of time at a low price.
Monthly rates drop with the length of the lease, but currently the cheapest models are leased for £7.31 a month, tablets for £10.72 and laptops for £17.92. Gilbert says customers are given the possibility to purchase the equipment, but most customers do not.
Gilbert said the average loan is 19 months and typically comes from a stock pool that is 60% new and 40% certified refurbished. Few people choose to purchase products at the end of their lease.
“The proposal is designed for pure rental use,” added Gilbert. While 5-10% of businesses will contact companies to permanently store their goods, “the consumer rarely wants to own the product in the end.”
There are many other players in the circular economy world. The likes of Grover (which also focuses on gadgets and “leasing”), BackMarket (refurbished gadgets) and Vinted (clothing) have lots of money, big valuations and lots of customers. , has grown in size over the years. Others, like the Lumoid, find it difficult to maintain the right kind of traction.
In that sense, Raylo takes an interesting approach by focusing on technology and services for third-party platforms.
Phone “rental” is not a particularly new concept. This is because a cell phone company offering cell phone subsidies could theoretically let the user trade in or return the phone he was “selling” the phone on a two-year plan. It was done years ago. at the end of that contract.
This model has proven challenging for carriers. Carriers have been criticized by analysts over the past few years for putting huge sums on their balance sheets in subsidies for mobile phones, prompting consumers to move away from these and buy more SIMs to have more phones. I was drawn to the only plan. Flexibility (and ability to churn) in the long run. However, carriers may want to offer these options. This is where companies like Raylo can step in to provide both leases and management of those leases. (Notably, mobile giant Telefonica is one of the startup’s key backers.)
Needless to say, that model has backfired on some in a highly dynamic way. I once took over Uber’s car leasing business when I made the decision. The logic was that an independent company could do a better job managing and growing that business.
Metaphorically speaking, gadgets are much faster than cars, not to mention cheaper. So businesses that offer outsourced financing for gadget leasing, as Raylo does, may not want to handle such business themselves, but for customers who need it. Merchants who have that option.
“We may have started with our channel, but we see it as a platform that allows other people to distribute our brand,” says Gilbert. “This is he kind of a new category for BNPL, not to mention providing an important affordable channel, but also supporting sustainability efforts from OEMs.”
A focus on sustainability seems to motivate Raylo’s backers.
“We are pleased to support Leiro’s future growth ambitions with this new financing facility. and a passion for disruptive technology,” said Milena Sheahan, senior director at NatWest. “Raylo is a progressive, forward-thinking business with a robust platform to positively influence consumer behavior and attitudes toward future technology use. We are proud to join as one of our key clients.”