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A new generation of technologies and innovators are joining forces to disrupt and redefine the automotive market. Electric Vehicles (EVs) have reached a quality threshold suitable for millions of people, but they remain impossibly expensive for many. That’s the view taken by Oliver Jones and Luke Gavin, the London-based pioneer entrepreneurs who are challenging this problem head-on with their start-up elmo. They plan to replace ownership of cars with an innovative new subscription model, working exclusively with electric vehicles.
elmo’s founders believe they can democratise access to this class of vehicle. Monthly subscription plans are an exciting break from convention, promising to reduce barriers to entry, while introducing flexibility – a recurring demand of the millennial generation. To buy a Tesla Model 3 in the UK will cost £40,000 and up; well out of reach for most people. “elmo is designed to remove the cost and complexity of switching to an EV. Every aspect of your elmo bundle is personalised to fit your specific requirements,” explains Jones. This includes bundling in all the other relevant services; from your personal charge point, to insurance, maintenance, and even the energy required to run the vehicle on a reduced electricity tariff at home.
“There’s a revolution going on in the mobility landscape; manufacturers, energy companies, and the car makers are all making plays in this space. Part of that is pressure from governments, and now societal pressure. We want to play our own role within that.” elmo’s mission is to accelerate the transition to EV mass adoption through business model innovation, noting that 26% of CO2 emissions originate from transport in the UK (the biggest single contribution) as a major motivation to start the business. While reducing emissions, EV drivers benefit from remarkably low charging costs at home, which can save some people thousands on petrol.
Most EVs on the road now have a range of 120 miles to 350 miles, so can comfortably do 2 commutes on a single charge. Jones points out that you may never need to use a public charge point (which costs more than charging at home). 8,000 miles of driving could cost as little as £340 per year. There’s no road tax to pay either.
“The main problem with this transition to EVs, is that the cars themselves cost £5k-£10k more than their equivalent model in petrol or diesel. This price barrier is too high for most people. Coupled with that, there’s a perceived complexity issue. We all know how to top up with petrol at the pump, but the notion of charging, kilowatts and range is unfamiliar. It’s funny because for many people an EV would be far more convenient; you can charge at home, overnight and remotely! An EV is parked most of the time which means it can be charging. Our business proposition is a subscription platform that simplifies things for consumers, as well as allowing them to benefit from the running cost savings from the first day of driving.”
“With an elmo subscription, you get a total cost of ownership for your vehicle, including even the energy required to run the car – that’s a world first and something we are hugely excited about”, explains Jones. “elmo customers are not tied into a long-term lease. We connect consumers with local EV dealerships for monthly contracts and make it work economically for both sides. In particular, we want to focus on second-hand electric vehicles, as that means we can offer a very low price. This is a great opportunity for people who are uncertain about making the switch to electric, who can now try it on a monthly subscription [from 2020].”
The founders are childhood friends from the Southwest. Luke Gavin has a green energy background: educated at Imperial College as an energy scientist, then consulting corporates and the government on the green transition and specifically electro-mobility. Oliver Jones is an Oxford Classics graduate, who has been helping founders to raise some £300million of private investment, as former Head of Marketing at Angel Investment Network. He also hosts The Startup Microdose Podcast – a popular podcast interviewing entrepreneurs, investors and industry leaders. Their company is at the very earliest stages having just raised seed capital from angel investors and a fund. They aim to release the first version of the platform to select trial users in early 2020. Anyone interested in trialling can sign up via their website or contact [email protected].
Jones decided to go with SeedLegals having interviewed the founder, Anthony Rose, on the podcast and having worked closely with them at Angel Investment Network. elmo used it first to complete a Founders Agreement: on the terms of their working relationship. Then, following up with a pre-Seed Funding Round, open to Angel investors.
“Compared to using a conventional lawyer, SeedLegals makes the process much more seamless and much cheaper.”
On creating a SeedLegals term sheet for investors, Jones says he, “was hugely relieved when I started using the platform, as the timeline was laid out, with clear instructions on what you need to do at each step. Most terms I’d come across before, but I was still intimidated by the process as a first-time founder. SeedLegals explains each term in context, without any ‘legalese’. This takes the thinking out of it for you, as the terms are made clear.”
An important part of their fundraising story has been to take advantage of the innovative new ‘Instant Investment’ tool on SeedLegals, which allows startups to close rounds early, and top-up with additional funding later.
“We got to £210k of our £300k target and decided to close the round there so we could leave our jobs and get to work full-time. We knew that the Instant Investment provision would allow us to complete the round as we went – which we did, getting to over £300k in September”. ‘Instant Investment’ gives startups much more flexibility and control, allowing founders to make continuous progress without waiting for additional investors. In this instance, Elmo could close the round early, without depending on others to launch the business. Both founders were able to comfortably quit their jobs, and draw-down on the capital already raised.
With Instant Investment, new investors can quickly subscribe for shares on the same terms, whenever they are ready. There is no need for a ‘round’ as such, and no need to change the terms of the Shareholders Agreement. Personalised subscription forms are automatically generated on the platform, and can be signed online by new investors. As payment is received, the platform auto-generates their share certificates, Companies House and HMRC documentation, and the Cap Table automatically adjusts. It is a powerful new way for founders to control their finances, by taking ownership of the schedule.
Jones praises SeedLegals for introducing much-needed standardisation and transparency to startup fundraising terms too, as most founders, and most investors don’t want or need a bespoke deal. “The process was all automated too. It sounds hyperbolic to say it, but I have no idea how we would have done it, as easily as we did, without that support system in place. The feedback from investors has been absolutely great too, so I expect SeedLegals will become the conventional way to fundraise now.”
elmo has the potential to radically alter the car market at scale, making things simpler in the process. It is a very exciting business to watch, introducing a dynamic low-cost subscription model for Electric Vehicles, designed around the needs of a younger demographic. This is a company thinking big, with the potential to secure substantial market share on the back of their business model innovation, democratising the nascent (and otherwise expensive) EV market.