The spectacular collapse of WeWork in September 2019 was a wake-up call for the global technology sector.
The US co-working company, which billed itself as a technology firm, was gearing up for an IPO, raising a whopping $47 billion in investment to fund a launch in more than 110 cities around the world.
“I’ve had some of the very best funds in Europe offer us rate reports without having to launch an extended process,” says Barnaby Hassi-Yo, founder and CEO of Cleo, of the FinTech app’s “surprisingly simple” launch and series. Rounds before WeWork’s collapse. “We had incredible consumer traction and the number of active users was growing at a crazy rate.”
When concerns were raised about WeWork’s plans for profitability, the float was shelved and co-founder Adam Neumann was fired as CEO. WeWork, forced to change its business model, is worth $3.75 billion today.
Hashi-Yo, who founded Cleo in 2016, says venture capitalists around the world have also taken note of the losses of another fast-growing company, the taxi app Uber.
Speaking to TechBlast, he explains, “Everything changed with our Series B: It was right after the WeWork crash and the Uber moment, so VCs were suddenly paying much more attention to the singular economics of the business, not just revenue growth.
“We are purposefully – and perhaps naively – focused on growing our user base and doing everything we can to help them improve their financial health without spending a lot of time building a business model. This made the Series B much more challenging than previous rounds, and even though we ended up with multiple courses and a great investor, it took six months to close versus a few weeks for previous rounds.”
Cleo is a digital assistant that supports people throughout their financial life, from their first paycheck to their first home. The company aims to positively impact the lives of millions of young people with limited financial literacy.
By reaching these people early in their journey with clear and simple guidance – delivered in a fresh, engaging tone of voice that pulls no punches – Clea says it can completely change the trajectory of their financial lives.
The London-based company has just raised a £66m Series C round as it seeks to double in the US market.
“We learned from [our Series B experience] and really doubled down on building the business model before raising Series C,” says Hashi-Yo. “So even in a really challenging market, we were able to raise a great round pretty easily because the metrics made sense and there was a clear path to continued growth and profitability.”
Cleo has helped millions of users on their financial journey, with over half upgrading to one of the paid subscription levels within the first 12 months of downloading the app.
A US-first growth strategy
The Series C round of fundraising was led by Belgian investment firm Sofina with support from existing investors including EQT Ventures & Balderton Capital.
It concludes the remarkable success story of a British startup that deliberately adopted a US-first growth strategy to dislodge traditional US financial services providers who are making exorbitant profits by charging customers unfair and unnecessary fees.
“We originally created Cleo on Facebook Messenger, where we got our first million users,” the entrepreneur explains. “At first we were 100% UK focused and actually only launched in the US because so many users were asking when we were launching there. Knowing that there was a good audience, we built a version to run in the US as a five-day test and launched with fairly low expectations.
“Within a week we were growing faster than our product had ever been in the UK, with 10,000 users a day signing up and connecting their bank accounts to Cleo. That was the moment we realized that the US had to be our main market, and we were fully focused on making that happen.
“Today, we are $30 million in revenue, growing 3x a year, and valued at half a billion dollars.”
Hassi-Yeo says banking data partner Plaid has made clearing regulatory hurdles across the Atlantic “very easy”.
“They were launched in the UK so we used them, but their main market was the US. Initially, they took on much of the “hard work”.
Cleo will use the new funding to grow its headcount from 140 to more than 220 and continue to iterate and improve its product suite.
“Team is everything”
So what advice would Hashi-Yo have for young entrepreneurs?
“The team is really everything,” he says. “Never, ever lower the bar and be proactive in hiring and training employees for the next set of required roles.
“Talk to founders who’ve done it before – they’re the only people really qualified to give you advice on growing your business.
“But always remember that every business is very different and there are multiple ways to succeed, so don’t get discouraged either. Undoubtedly, this is a difficult path, but very useful.”