WiseAlpha, a fintech startup dedicated to fractional bond trading and ownership has announced a new fundraising round, via the crowdfunding platform Seedrs.
Unlike equities bond markets are not easily accessible to retail investors. Bonds are often denominated in units of 100,000 dollars, pounds or euros and bond issuers have traditionally focused on institutional investors, rarely promoting new issues to the general public.
WiseAlpha wants to change that and democratise bond investing through the use of fractional ownership.
How much is WiseAlpha raising
WiseAlpha, which launched 7 years ago, is asking investors for just over £1.0 million pounds and as of the time of writing they are closing in on that target.
The company has recently signed a joint venture with Titan Wealth and says it is integrating its fractional bonds trading platform into a bank, with more than 1.0 million customers.
A project which should go live by June this year
That all sounds very exciting so why does WiseAlpha need to raise the additional cash?
Well quite simply in common with many other Fintechs WiseAlpha doesn’t make money.
And according to its founder and executive director, Rezaah Ahmad, the business lost £2.0 million in 2021, with further losses of £1.1 million in 2022.
Management is confident that WiseAlpha’s losses will continue to decline as it reaches critical mass.
The deal with the as-yet-unnamed bank should prove to be a stepping stone to that point.
Assuming that the project reaches the 10% penetration rate that WiseAlpha is predicting.
However, as we have seen in recent weeks scale is increasingly important to Fintechs and without the necessary growth, VC investors seem very reluctant to commit additional capital to the sector.
How much Money has WiseAlpha raised in the past?
WiseAlpha had raised £8.20 million, before the latest funding round, via a mixture of crowdfunding and seed capital.
It previously tapped the crowdfunding market in August 2020 when it raised £3.1 million and also raised £2.80 million in 2018.
On that basis, it seems safe to assume that the firm has a cash burn of around £1.0 million per annum, which makes one question if the current million-pound raise will be enough to tide the company over, to the point where, proof of concept of deals with larger institutions might attract VC interest.
Part of the problem for Fintechs is getting their story heard when there are so many competing voices.
That’s likely to have been one of the reasons that WiseAlpha is pivoting towards the B2B space to partner with organisations that have a substantial customer base.
WiseAlpha is upbeat about its B2B prospects about which Rezeeh Amad has said:
“As long as we have more partnership opportunities we intend to keep investing in staff to keep scaling revenue.
He added that:
“I hope to be in a position 12 months from now when we can decide whether to focus on profitability or further investment in growth”
We wish WiseAlpha well in its endeavours but in the current climate, we are concerned that the business could run out of cash.
In our experience joint ventures, particularly those that involve the integration of technology rarely run to plan and long-term delays could prove very costly to the Wise Alpha business