With more consumers shopping online for everything from dog food, fashion to luxury jewellery, it’s now possible for millennial couples to source wedding gifts online with Prezola. Here, they talk entertainingly about how they raised money with active investor BGF Capital.
What are the details of the company, when was it founded and why? What is the background of the founder and the goal of the company?
Prezola is the UK’s leading wedding gift list company where couples can choose from 50,000 products from over 500 brands alongside a honeymoon fund, cash contributions and charity donations. The group also owns GettingMarried.co.uk, the UK’s leading wedding website platform.
The original concept came from my wife and co-founder Ali Beaven on her birthday in 2008. She wanted to add her favourite things from her favourite shops to a single online gift list that would give friends and family a helpful steer on what to buy. Nothing existed.
After much research, we founded Prezola in 2011 and the site went live that September. Ali has a background in interior design while I come from a media and technology background. Combined, our skills proved to be a formidable mix.
The goal was to give millennial couples a great online alternative to old-fashioned department store gift lists. Prezola would mix gorgeous gifts from all their favourite brands with cash contributions, exceptional customer service and a full end-to-end service.
Six years on and department stores such as Debenhams, House of Fraser and Harrods have closed their wedding list services, while John Lewis now lags behind Prezola on the volume of wedding gift lists managed. Prezola has helped over a million customers buy a gift for thousands of couples throughout the UK and is now the market leader.
How much initial investment did the company need to start and where did it come from and how did the product grow to the point where another round was needed?
We had £50,000 to fund the launch of Prezola, which was begged and borrowed from friends and family as well as their own savings. This got the first version of the site built but didn’t leave much budget for marketing. We sold the family car, our beloved Land Rover, to fund the first ad campaign.
A supportive bank helped to get Prezola through the first couple of years and to its first £1 million of revenue, but more substantial funds were needed to really fuel the growth. We sold our family home to fund further development of the site, a move into larger premises and the acquisition of the UK’s leading wedding website platform, GettingMarried.co.uk.
With the extra cash on board and a much bigger business to manage, Prezola grew from annual revenue of £1 million to £2.5 million, then £5 million and on to £10 million. The newly expanded group was managing over 5,000 wedding gift lists and 15,000 wedding websites each year while continuing to grow rapidly.
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Talk about the investment process. From start to completion, what was involved procedurally and what do scale-up companies need to be aware of to ensure an efficient fundraise?
By 2016, we were beginning to feel the strain and desperately needed more bandwidth and experience at the top of the company. Cash remained tight, especially in the winter low season and headcount was now approaching 50.
Prezola’s bankers, RBS, introduced BGF Capital to the team in November as a potential lead into a full private equity beauty parade. The BGF team loved the business and made a strong, off-market investment offer. Liking what they saw, the management team took up the offer and the process began.
Prezola and BGF held their first meeting on 3.11.16 with initial documents and plans exchanged and reviewed quickly thereafter. BGF presented their proposal on 5.12.16 and heads of terms were signed on 9.12.16. Four weeks.
With holidays and Christmas coming up, the process began in earnest in January with a target completion date of 8.4.17, around 12 weeks.
Lawyers were appointed on both sides and the due diligence process began. The first six weeks focused on fine-tuning the business plan, forecast model and the details of what we planned to do with the investment.
Legal and financial due diligence followed, and this was tough. Not because BGF were being tough but because we were woefully under-prepared. An email from the external due diligence consultant quoted “the company’s internal systems are somewhat lagging behind its rapid growth.” This was putting it very politely.
Despite a huge amount of work and some big discoveries during due diligence, we were actually good to go at the 12-week deadline, apart from one oversight. With prior year revenue at £9.93 million, Prezola hadn’t audited its accounts as this wasn’t necessary. However, BGF couldn’t proceed without a full audit and we had somehow missed this vital detail.
We needed to find an available and approved auditor who could move immediately. On the last day of the tax year.
Four weeks later and with the accounts now audited, the transaction completed on 12.5.17 and the £3 million of new capital arrived in the bank that evening.
What exactly will the money be used for and how will you maximise control over your cost base moving forward?
We’ll use the money to increase management bandwidth and depth of experience and will appoint a new FD, Product Director, Operations Director and Chairman.
Also, we’ll provide technical development across both the Prezola and GettingMarried.co.uk platforms and increase user acquisition and marketing activities.
What specific advice would you give to scale-up companies seeking to follow the same route of investment?
The first thing to understand is the time commitment that fundraising entails. It is a huge distraction for management, particularly if you’re also running a high growth business.
We didn’t appoint an intermediary and this may have helped. Our whole team was inexperienced in the process and although we had good, experienced lawyers, we took on much of the heavy lifting ourselves. I would appoint an intermediary next time to negotiate with investors and help prepare the way.
Be prepared. You will need everything, so get to work on the data room early in the process.
Choose your investors wisely as the post-investment fit is really critical. Ours are great, supportive, passive and encouraging. They have quietly helped us restructure our business and get ourselves in shape. As a direct result we’ll deliver 50 per cent growth in revenue this year alone.
Follow your gut instinct. If fundraising from a VC or private equity is a possibility you’re doing something right. You have an investable proposition that you have created. If possible, take your time and find the right partner for you.