PensionBee/customer shares: honey trap

The prospect of an IPO windfall helps tiny start-ups recruit bright staff that would otherwise wind up at Goldman Sachs or McKinsey. Could the same bait be used to lure customers?

PensionBee, a pension consolidation platform, is giving it a go. Customer acquisition is one of the steepest costs facing tech start-ups. Promotional discounts burn through cash: witness ride-hailing apps such as Uber or China’s Didi. Streaming, ecommerce, food couriers and fintech are similarly crushed by the cost of bringing customers on board. 

Two-thirds of DoorDash’s 2019 revenues went on sales and marketing. So-called insurtech Lemonade counts on earning back acquisition costs in two years.

In China, aggressive promotions to ramp up user bases have kept companies in the red for far longer. Ecommerce group Pinduoduo, which listed on Nasdaq in mid-2018, spent 90 per cent of revenues on sales and marketing in 2019; in the first nine months of the current financial year it was still running at a hefty 80 per cent. First Page Sage, a search optimisation group, lists education and financial services among the biggest spenders.

Yet courting customers with shares remains rare. Airbnb and Ocado are at opposite ends of the spectrum in terms of outcome, but both started with decent brand awareness. The US hosting site offered 3.5m shares, or 7 per cent of the offering, when it listed in December. Landlords jumped in. For many, presiding over properties emptied by lockdowns, the subsequent trebling of the share price presumably outpaces rental receipts. But in 2010 shares in Ocado, an online grocer founded by ex-Goldman Sachs bankers, were largely shunned by its shoppers.

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Success in winning over customers as investors (and vice versa) means doubly binding users who get to share the spoils of their own custom. On the downside, investors take a double hit if it all goes pear-shaped. But things do not always bifurcate quite so neatly. More than a decade after its listing, Ocado has yet to turn a profit. Any shopper who bought the maximum £12,000 of shares in 2010 would now be sitting on a £175,000 nest egg.

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