Estateguru is the leading cross-border marketplace for short-term property backed SME loans.
Business overview
| Location | Tallinn, Estonia |
|---|---|
| Social media | |
| Website | estateguru.co |
| Sectors | Finance & Payments Digital Mixed B2B/B2C |
| Company number | 12558919 |
| Incorporation date | 24 Oct 2013 |
Business highlights
- €201m property backed SME loans funded in 2021 (€540m total)
- Expansion to Germany and UK preparations completed
- 125k registered investors - 32k in 2021 vs 25k in 2020 (+28%)
- Set up of capital markets team and LUX Credit Fund
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Idea
Introduction
Estateguru (EG) is the leading Pan-European marketplace facilitating property-backed loans for SMEs and providing carefully selected investment opportunities for our global investor base. By connecting different service providers, SMEs and investors into one single marketplace, we are able to offer a seamless, cross-border and digital service for borrowers and investors. The team consists of 117 professionals from 18 nationalities based in 8 countries.
Since 2014, Estateguru has expanded to offer investments in 8 countries, facilitating more than €540m worth of loans and rewarding its 125k investors with €41m in interest payments.
Estateguru facilitates projects with solid real estate collateral (1-st rank mortgages), to achieve straightforward and secure funding. This model is especially useful for entrepreneurs who struggle with the ‘one-size-fits-all’ policies typical of banks. At the same time, it has provided a historical average interest rate of 11.2% to retail investors.
Substantial accomplishments to date
EG has already conducted 2 successful Seedrs campaigns (>€1m in 2020 and >€1,3m in 2021 ). These were dedicated to increasing EG’s investor network across Europe, while providing the opportunity to become a shareholder via Seedrs. The last campaign was filled within only 8 days!
During the previous campaign EG made a commitment to:
- Increase its loan volumes
- Expand into new markets
- Establish the capital markets team
- Increase the output capability of our IT team
On the Sales side EG established new monthly sales records throughout 2021 and closed the year with €202M of loans funded (€120M in 2020).
Of this, ca €69M was funded in Germany, and we also began financing the first projects in Spain. EG has also launched in the UK market.
The company has grown from 60 employees to 117 YoY, investing heavily into HR with a view to achieving new levels of growth.
A strong Capital Markets team was hired:
Judith Tan (Head of Capital Markets) - previous experience includes positions with Morgan Stanley, Lehmann, Commerzbank, and Nomura.
Paavo Põld (Director of Capital Markets) - previous experience includes positions with Hansa Investment Funds, and Limestone Fund.
The EG LUX Credit Fund was established with the EIF (European Investment Fund) being the lead investor in the Fund.
Our IT team grew to 25 FTEs. Amongst their main accomplishments in 2021 were:
a) Investment Strategies was introduced to investors;
b) Heavy infrastructure improvement in terms of Architecture and Data.
Monetisation strategy
EG has several revenue streams and we are working to further diversify them.
The majority of the company’s revenue (80%) is generated from success fees paid upfront by borrowers during the transaction. Sometimes administration fees are applied, which are paid on completion of the project. The success fee typically ranges between 2.5-4% of the funded volume. Annual administration fees, when applied, are in the range of 0.5-1%.
Additionally, the company earns revenue from transactions that occur on the Secondary Market; a 2% fee is applied when an investor sells a claim.
The company’s strategy entails securing more institutional capital (15% of loan volume in 2021 vs our target of 60% in 2022), as additional revenue is generated from the interest spread, management and success fees paid by these institutions. Our goal is to increase this source of revenue so that its contribution to our profit margin is equal to that generated by the success fees from our borrowers.
Use of proceeds
Continuing its success story and taking the business to the next level, EG is currently raising its third stage of capital with Seedrs, as part of the upcoming B-Round.
The allocation of funds raised will be similar to the previous round:
1) Expansion - EG continues with fulfilling its roadmap by entering:
The United Kingdom - Having hired our first staff members and opened an office in Manchester, the funding is needed for new hires, legal costs, partnership fees and marketing.
Netherlands - Legal preparations are in progress and Country Manager recruitment is ongoing.
France - planned.
2) Capital Markets - Strengthening the team and widening the Institutional Capital sources via the Luxembourg Credit Fund and several other credit lines. New investment products are planned for the 3rd or 4th quarter of 2022!
3) Technology - IT infrastructure investments for delivering higher loan volumes and supporting the growing investor base;
Focus on data and architecture.
Key Information
Advance Subscription Agreement
This investment round is being raised by way of a convertible equity investment structure, in this case an "advanced subscription agreement".
The key terms that apply to the Company’s advanced subscription agreement are set out below. See also attached Key Terms document for further details.
• Discount: 20%
• Valuation Cap: €170,000,000
• Conversion is triggered by ("Trigger Events"):
- An Equity Fundraise – defined as the Company raising investment capital of at least €2,000,000 from one transaction or a series of transactions, in exchange for the company issuing of shares;
- A Change of Control of the company (transfer of more than 50% of the share capital); or
- An IPO – being a listing of the company’s shares on a recognised stock market or secondary market.
• If a Trigger Event occurs, the ASA will convert at:
- the lowest price paid per share in connection with the Trigger Event, discounted by the Discount; and
- the Valuation Cap divided by all issued shares and outstanding options and equity interests in the Company, discounted by the Discount.
• Longstop Date: 24 months from signing of instrument. (Note: this will be after the campaign closes).
• If conversion has not been triggered by the Longstop Date shares will be issued on the longstop date at the Default Share Price, which is:
- the lower of (i) the lowest price of any share issued after the date of the agreement; and (ii) a price per share of €3,607 (the share price set by the previous round with an implied company valuation of €49,019,130).
• The convertible would also convert to equity at the Default Share Price in the event of winding up or liquidation of the company.
Share Classes
The company has two share classes:
Preferences Shares and Common Shares. Preference Shares receive a 1x non participating liquidation preference. Both shares have voting rights.
In the case of default conversion upon Longstop Date, investors will receive Preference Shares.
In the case of a Trigger event, investors will receive the highest class of share issued in the triggering round.
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