Welcoming Inven, and Planting Seeds for our Future

The 3rd of October this year marked my 6th year anniversary since founding Hometree. Back in 2015 and 2016, boilers and the broader home energy space certainly weren’t headline news, and it wasn’t obvious to most people I spoke with that an enormous company could be built in the home services market. However, inspired by US residential solar financing pioneers SolarCity & SunRun, I was convinced that the decarbonisation of the home presented enormous potential to create value, and also to have a significant impact.

Fast forward six years and the same category that rarely appeared in the press is now rarely out of it - whether it's the recent gas crisis that has raised fears for many homeowners around being able to afford to heat their homes, or the fact that decarbonising homes is now a key pillar of Boris Johnson’s plan to unleash a “green industrial revolution”, or the ongoing debate of whether boilers are going to be electrified or become a key part of a “hydrogen economy”. On the business side, the landscape has equally changed beyond recognition, with institutional capital recently starting to recognise the potential opportunities opening up to leading companies helping to decarbonise homes - with a few recent examples including Goldman Sachs acquisition of GreenSky and support of Goodleap (a residential solar financing platform in the US backed by NEA), Brookfields acquisitions of EnerCare (Canada) & Thermondo (Germany), Sunlight Financial’s (US) recent SPAC sponsored by Chamath Palihapitiya & Apollo, and EnPal’s (Germany) recent raise from Blackrock.

Here at Hometree we have been head down building our core business in the UK Home Cover, or Home Emergency Insurance market, and were not focused on fundraising, but recognising this growing interest in the broader home services market, and the enormous opportunities opening up for leading players, the board and I were intrigued when a general catch-up with leading energy focused growth fund Inven Capital turned into a serious conversation around them getting involved.

What appealed to us about Inven was that as part of Czech Republic’s CEZ Group, one of the largest utilities in Europe, and having backed most of Europe’s leading energy start-ups such as Sonnen (sold to Shell), Tado and Zolar, they have a unique vantage point into the evolution of the broader energy & home services space, and can help Hometree position itself to take advantage of the most exciting trends. Furthermore as a growth investor, taking them in ahead of planned growth financings over the coming years gives us an internal investor who will have the firepower to continue to invest in the business as we scale.

As such, we were delighted recently to welcome Daniel, Ivo and all the Inven team to the Hometree journey in a funding round that was supported by many of our existing investors including DN Capital, Anthemis, Oxford Capital, and Perscitus LLP, and I thought it would be interesting to write about what this investment means for our business, and where we are going in the future.

Doubling down on our model today

Whilst the future opportunity set available to Hometree is undoubtedly exciting, one thing is certain with this recent funding - that the majority of the capital will be going into continuing to scale up our existing model which is now working extremely well.

Today we are a leading challenger brand in the UK home cover market - a market with over 8 million homeowners who rely on this product for peace of mind when they experience a home emergency. This market is dominated by two large incumbents who have an increasingly "disgruntled" customer base as barriers to entry have allowed poor customer service levels to persist and unsubstantiated price increases to become the norm. In our view, the enormous profitability of the market incumbents today is really the profitability of the past (i.e. historical customers are paying x times more than new customers), and the pressure the incumbents are under to maintain this base of "legacy" profit makes it difficult to compete with a new more customer centric player. Furthermore, legacy tech-stacks, contractual issues and unionisation within their engineering base has resulted in service challenges and higher costs to serve, whereas a new entrant can create a cost and service advantage through continuous tech development.

Taking advantage of this opportunity is now the top focus for all the team at Hometree, and in the coming years we believe we can scale to a base of millions of customers in this category alone - whilst providing homeowners with a new, fairer model to get peace of mind for the most stressful home emergencies. 

Inven and our existing investors completely understand the magnitude of this opportunity that we have in front of us in the Home Cover industry, and accordingly the majority of their capital will be going into continuing to grow our customer base, further investment into our product & technology capabilities, and some additional capacity to make game changing hires.

Planting seeds for the future 

When I started Hometree, my vision wasn’t to build just a home cover challenger brand, but instead to build a platform that helped accelerate the decarbonisation of homes. Whilst starting in the UK home cover market made sense, ultimately I have always only seen this as step one on a multi-stage journey to build a much broader home & financial services platform that can help millions of homeowners around the world.

As one of the leading "new energy" investors in the world, Inven instinctively understood the opportunities starting to open up as part of the transition to net zero, and that if we got the home cover model right, it could be a very powerful launchpad into being able to offer a much broader suite of products and services in the home.

Accordingly, part of this funding will be going into “seeding” future products that Hometree can offer to homeowners, helping us to get ahead of some of the big opportunities that are starting to emerge. Whilst we are not yet ready to announce these new products, one thing that is clear is that they will revolve around the decarbonisation opportunities opening up in the home - a market opportunity that McKinsey believes will require trillions of pounds of investment and which will create 1.1m skilled jobs*. Today ⅓ of carbon emissions comes from heating homes and businesses**, and although most of the technology required to decarbonize them is already available, renovating tens or hundreds of millions of individual homes is going to be a massive undertaking. What is more, no single player in the ecosystem can tackle this alone, and in our opinion, it is going to require platforms like Hometree to bring together all the necessary stakeholders - be they local tradespeople, hardware manufacturers, or the capital markets - to start the flywheel. There is a huge need for service providers who can install, maintain, repair and finance this transition, with new business/ownership models (i.e. leasing) also likely to play a part, and it is for these reasons that we remain so optimistic about our future and our potential to play a small part in accelerating the drive to net zero.

Summing it all up  

In my six years since founding Hometree, I have never been as excited as I am now about how well positioned we are to take advantage of some very big headwinds. We believe for net zero to be reached, it will require the convergence of two very big trends - FinTech & CleanTech – and given we already have a “boots on the ground” national network of engineers, and a fully regulated insurance business model, we believe we have the right foundations in place to be a future leader. This new investment from Inven not only gives us the capital to continue to be able to invest in our future, but a very smart new partner on our board who can help us navigate what will undoubtedly be a journey with plenty of twists and turns.

I want to finish this piece by saying a few thanks. Firstly to our new partner Inven for believing in our vision. Secondly, I want to say thanks to my board and broader investor base - without whom we would not have gotten through the last 6 years. Particular thanks go to my Chair Dawn Marriott, Paul & Richard Pindar, Guy Ward Thomas, Ruth Foxe Blader, David Mott, George Henry, Jon & Spencer Moulton and Adrian Field, Oliver Pawle, Nick Discombe & Niall O’Connor. Finally, I want to say thanks to the whole Hometree team - who continually amaze me at how committed, hardworking, and fun they are. It is deeply humbling being able to build a company with so many great people.

*McKinsey believes that €28 trillion will be required to decarbonise Europe over the next 30 years, and that 30% of that will be required for buildings and homes. They also outline that in the buildings sector, the EU would need 1.1 million skilled workers to retrofit homes with higher insulation and install green heating and cooking systems. Source found here - https://www.mckinsey.com/business-functions/sustainability/our-insights/how-the-european-union-could-achieve-net-zero-emissions-at-net-zero-cost

**Department for Business, Energy & Industrial Strategy 2019 UK Greenhouse Gas Emissions : final figures - statistical release and summary. Source found here - www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-to-2019