Portfolio Favorites 2022 - Part 2: Cushon

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Article with the basics to my personal Investment Series 2022.
Part 1 - Favorite Portfolio 2022: DeadHappy & Hectare
Seedrs registration for new investors: signup

Investment 1, Jan 2022: DeadHappy
Investment 2, Jan 2022: Hectare
Investment 3, Jan 2022: cushon
Total portfolio size

£250 (5%)
£150 (3%)
£300 (6%)
£4,300 (86%)

Cushon sees itself as a FinTech startup and offers employees in the UK the opportunity to save and invest through their employer. Here is Cushon's press release regarding their current financing round.

The reason for the financing round is their next company acquisition. This is Cushon's third acquisition in a short period of time. With the takeover, the company's AUM (assets under management), will reach GBP 1.7 billion. Cushon's total AUM thus roughly doubles vs. its current size. The takeover still has to be approved by the FCA (Financial Conduct Authority).

The financing round is only available via Seedrs to existing investors and new investors who know the direct link to the campaign. The round will not be publicly advertised, making it an opportunity only available to insiders and well informed new investors. Cushon's campaign is set to close tomorrow, Monday afternoon (January 31, 2022).

The current funding round has a total size of GBP 35MM, consisting of newly issued shares (equity) and debt (a loan). The main investors in this round, who will receive shares in the company, are Augmentum Fintech and AshGrove Capital, each with an investment of GPB 5MM. Another existing investor (VC) will invest an additional GBP 2MM. AshGrove Capital is also providing a substantial new line of credit of approximately GBP 18-20MM in return for the right to purchase additional shares in Cushon at a later date. This option for AshGrove is a disadvantage to all other investors who may be diluted later, if AshGrove exercises the option to acquire additional shares. This is where it comes down to whether existing investors can get pre-emption rights and reinvest at this point in order not to be diluted and thus be able to maintain the same percentage holding in Cushon. The VCs receive preference shares for their total GBP 12MM investment. On liquidation or if an exit occured, VCs would get their invested capital back first, before other investors/ crowd investors are paid out. This is a small disadvantage and an additional risk that should be considered. However, the agreed simple (1x) non-participating preference is a commonly seen standard and acceptable. In contrast to the VCs, crowd investors do not invest many millions of capital.

Comparables/ Similar companies
Pensionbee, Nutmeg, Moneybox and Wealthfront, among others, could be used as a benchmark. Nutmeg was recently acquired by JP Morgan, and Wealthfront is also breaking news of a takeover. I recommend to take a closer look at these companies in order to be able to better assess Cushon's potential and risks.

AUM, Assets under Management (invested customer funds)
Pensionbee is currently listed on the stock market with a market capitalization of GBP 290MM and has approximately GBP 2.6B AUM. Thus, Pensionbee's rating is approximately 11% of their AUM. Pensionbee's market capitalization has steadily fallen over the past year. In the past, Pensionbee's valuation equalled up to 20% of the AUM. Roughly speaking, a rate of 5% - 15% of AUM seems appropriate as a valuation metric for such companies. 15% can be seen as a rather aggressively high valuation that can be more easily enforced in the private sector (non-listed companies). 5% - 10% of AUM seems to correspond to a rather conservative assessment. This gives Cushon a valuation range of GBP 85 – 170MM at GBP 1.7B AUM. The valuation level of GBP 95MM of their current round is on the low end, giving a valuation of around 5.6% of AUM (GBP 80MM pre-money plus assumed round size of GBP 15MM in shares). Overall, Cushon expects to be able to increase AUM to GBP 2.4B by end of their next financial year (March 2023), which could then correspond to a valuation of GBP 120 - 240MM.

Cushon expects to generate approximately GBP 5MM in revenue for the current financial year (ending March 2022). Including the current acquisition, the planning for the next financial year assumes revenues of around GBP 17MM. In comparison, Pensionbee generated approx. GBP 6MM in sales in calendar year 2020 and was able to increase this to GBP 13MM in calendar year 2021. Should Cushon achieve the projected sales target, the result would be that it could then be worth as much as GBP 380MM at 17MM sales (vs. 13MM sales from Pensionbee) when basing the valuation on revenues and in comparison to Pensionbee's current GBP 290MM valuation.

Key drivers for Cushon are future growth and achieving breakeven/ profitability. Existing customers will already increase Cushon's AUM by around GBP 300MM per year and further acquisitions and organic growth need to be added on top of this. Cushon plans to reach breakeven within 1-2 years, which I also see as positive.

Conclusion: While investing in Cushon still involves uncertainties and potentially negative factors (as discussed above), I believe that the positives outweigh the negatives and the risk/reward trade-off looks compelling. Nevertheless, above all, Cushon's future potential maximum valuations within the next year (in the range of GBP 240MM to 380MM) need to be treated with caution. I'm assuming a rather slower increase in valuation. I see good potential for Cushon overall, and as a long-term investment, Cushon is added to my portfolio favorites.

A big 'Thank you' to John, Florin and Steve, who contributed valuable feedback, which helped to derive my above views.

Another article will follow shortly, in which I will add Savvy Navvy as the fourth investment to my portfolio favorites 2022. Check back in a few days!

Disclosure of conflicts of interest: I have invested in some of the startups mentioned at an earlier time and/or at a lower valuation or better terms.

Risk warning : This is my personal sample portfolio 2022. The content is for general information only and does not provide any guarantees. This is not investment advice nor a recommendation to buy or sell any particular startup. This is not intended to be a promotion of any individual investment opportunity and is not an offer to the public. You decide for yourself how you proceed. Investments in startups are high-risk investments and regularly lead to total loss of capital invested. This is an illiquid investment class. It is often not possible to recover the capital invested before the company is sold or at all. Please also note the disclaimer.


I have been investing in startups since 2014. In recent years, my portfolio has grown to over 150 investments of various sizes. On my blog I regularly report about crowd investing and my investments.

This Post Has 2 Comments

  1. George

    Hello Philip, I just wanted to ask if it makes sense to only invest the minimum amount in companies. I'm a student and have a limited budget. Could you please help me to invest my budget wisely.

    1. Philip

      Hello George,
      thank you for your question.
      I am not allowed (also for legal reasons) to give any advice. You alone have to decide how to invest your money and you are responsible for it.

      Personally, I would first try to create a financial plan and set my goals: How much money do I have to invest each month? How do I distribute this sensibly? Do I still have debts that I should pay off first so that no further interest accrues on them? How much "cash" would I like to save up at least as an emergency reserve, maybe around 1-3 net monthly income? What risk am I willing to take and what return can I expect? How long is my investment horizon? Which form of investment is suitable for me? How do I distribute possible investment capital sensibly? Maybe a share in shares and ETFs (also possible as a savings plan) in order to save capital in the long term (over 10-20 years) with manageable risk?

      I would address the following topics later, when a basis for the above points has been created: Which additions to other investments with higher risk is acceptable for me, maybe invest approx. 10-15% from the portfolio in P2P loans and/or startups? Maybe 5% crypto? Work carefully into each subject area, try and learn with little capital. Build knowledge over time and then invest more after a few years if it works really well.

      If all the basics are in place and the decision has been well thought out, I think it is quite possible to invest smaller amounts in startups. In most cases, the fees are percentage/ pro rata, so that smaller investment amounts can also make sense. Is a personal decision whether you want to familiarize yourself with a new subject area for a small amount every year. If the amounts are always to remain so small, it may not be worthwhile. When it comes to learning and getting started and then stepping up the ante later, startup investing can be very exciting and educational. The possible higher return also means that there are considerable risks - up to the total loss of the money invested.

      I wish you much success and good luck!

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