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Casavo•20 August, Casavo team
Our first bond issuance to fuel our growth
Casavo was founded over two years ago, and month after month we have announced new rounds of capital raising now reaching the sum of over 100 million euros. To understand the logic behind this continued raising of funds it is necessary to analyze two fundamental aspects of our company.
Casavo is not just a company, but a startup
The first is that Casavo is a startup, or rather a recently established company that has not only the goal of offering a consumer service but also wants to develop a business model that is innovative and able to be replicated on a larger scale. We are talking about the so-called “scalability of the business”. In order to do this, large initial investments are necessary, which in our case is mainly an investment in human capital. Casavo today has a team of over 100 people. It also means investment in technology, the element that allows us to replicate the business model in different Italian and European cities. To be able to tackle these investments, we turned to investors that have contributed economically to the growth of our company with risk capital, also known as equity, in exchange for a percentage of company ownership. This economic contribution corresponds to about 30 million euros, which has been raised in various funding rounds over the past two years. The risk capital, or equity, is used to cover the so-called “operating costs”. A few examples that fall within this category are: the cost of staff, the cost of office rental fees, the marketing expenses, the investments made in marketing and development, and much more.
Real estate is a capital intense industry
The second aspect to consider is the industry in which Casavo operates: real estate. Those who are familiar with the world of real estate surely know that it is an industry that is very capital intensive. To be able to invest in real estate property you need to have at your disposal a large sum of liquid capital. In order to do this our startup, from the very first transactions, has operated like any investor, entrepreneur or family that needs cash for expenses such as those for the purchase of real estate property: we raised debt capital (i.e. money to finance the transaction) that is then returned each time the individual real estate transaction is concluded. These are long-term loans that allow us to grow quickly and acquire an increasing number of properties, and the more properties there are to purchase the more capital is needed. Today, Casavo has activated credit lines for around 70 million euros, which are used solely to finance the real estate transactions in accordance with our business model.
It is within this context that we can then understand the news, reported by Sole 24 Ore this week, of the first debt security issued by Casavo. It is further debt capital that, as previously explained, gives us the liquidity necessary for the acquisition of new properties, therefore accelerating our growth.
The only difference, in this case, is the financial instrument used to raise these new funds. Until now, we have always used lines of credit from which we can draw from when needed to finance the transaction to acquire a property. For each transaction, Casavo pays interest, which serves to pay back those who lend the debt capital. This instrument is very advantageous to the creditor: in fact it permits a high level of control of how the capital is used according to needs.
Debt security as a new tool to grow
Given that our company has proven in these years to be both solid and efficient, we were given the possibility to access another financing instrument: the issuance of debt security. Compared to the credit lines already described, there are two differences to consider:
- The debt security allows us to be faster in investing, as there is greater flexibility for us in the use of this capital to finance real estate transactions;
- The interest rate is, in most cases, more advantageous for the issuer of the debt security, in this case Casavo. This allows us to be more competitive in our offer to purchase properties, because a lower interest rate means a reduction in our costs.
The debt security was underwritten, i.e. financed, by Amundi SGR. The fact that an institutional player of this caliber has decided to invest in Casavo is another indication of the growth of the business and the development potential of this debt capital tool.
The debt security issued is therefore part of our strategy of raising debt capital and represents a positive outcome that allows us to accelerate our growth in the cities in which we operate.
We are thrilled to announce that we have now raised an additional €200 million of capital, bringing the total capital raised to date to €385 million, including debt and equity.
Last week we announced the closing of a new funding round called “Series B”, that follows the Series A one just after 7 months.