UK-based smartphone subscription startup Raylo has poured $ 11.5 million in Series A funding into its top pocket, led by Octopus Ventures.
The equity round follows a debt increase last year – bringing Raylo’s total equity to $ 40 million (equity and debt) since it was founded in 2019. The previous group of investors also includes the Macquarie Group, Guy Johnson from Carphone Warehouse and the co-founders of Funding Circle.
The new funding will be used to recharge a subscription smartphone game that will encourage consumers not to own a mobile device – but instead pay a monthly fee to lease a new or refurbished SIM-free device.
Raylo says it has seen 10x year-over-year growth in customers and revenue and plans to use Series A to accelerate its growth in the UK – including doubling its workforce and advancing its technology. And while it suggests that it entertains the idea of a future global rollout, it remains firmly focused on the UK for now.
Consumers who choose to get the latest smartphone hardware through Raylo pay less than the full MSRP for a device because they don’t actually own the hardware at the end of the contract.
Environmental issues aside, this can become increasingly important given the rising price of premium phones like the top-of-the-line iPhone, which has passed the $ 1,000 mark in a few years.
Plus the fact that most consumers just don’t spend that much on a handset. Leasing and returning offers an alternative way for people to use such expensive high-end devices.
At Raylo, the leased cell phone is usually returned after the 12- or 24-month contract expires – with the returned device being processed for reuse over a second (or third) leased life with another user.
Old devices are recycled (by partners) according to Raylo. So it is promoting a circular model that promotes sustainability through longevity of device usage compared to the more typical upgrade scenario via a cellular provider, where a consumer can simply toss their old, unused handset in a drawer and waste its further potential benefits.
However, many people give old devices to other family members, sell them, or even trade them in. However, Raylo claims that there are an estimated 125 million smartphones in the UK in idle “hibernation”. So the suggestion is that many smartphone users don’t bother to give their old phone a second life.
Raylo assumes that each of its subscription-leased devices can be used by a total of three customers for 6-7 years – which, if reached, would mean a lifespan allegedly almost twice the UK average (2, 31 years).
To meet the longevity goal, all phones included come with a free case and screen protector.
However, users also have to weigh up whether they want to pay for the insurance as well, because they have to be careful not to damage the leased handset or risk having to pay expensive repairs or a one-way fee. (Raylo sells its users its own device insurance as an optional extra, which increases monthly costs slightly.)
Of course, Raylo competes with the mobile operator’s own device subscriptions. But here, too, claims are made that it is cheaper to lease it – although it should be because the consumer does not own the hardware at the end of the contract (i.e. it does not automatically have something of value to sell or trade elsewhere).
If a user does not want to return a device (or fails to do so) after the end of the contract, they must pay a one-way fee – which varies depending on the hardware of the handset and the duration of the payment. But the fee can climb to over £ 600 on the premium end – after 12 months of using a Samsung Galaxy S21 Ultra 5G with 512GB of storage or an iPhone 12 Pro Max, for example.
Consumers who would like to use the same device instead of an upgrade after the end of the contract can choose to continue paying their usual monthly fees – with payments up to a maximum of 36 months, after which the one-way fee drops to a token of £ 1.
All Raylo leased devices come with a 24-month guarantee that faults not caused by user damage or accidents will be repaired free, or a replacement device will be provided if the handset cannot be repaired.
Tosin Agbabiaka, early stage fintech investor at Octopus Ventures, commented on Raylo’s Serie A in a statement: “The subscription economy is rapidly changing the way we access products and services – but the smartphone, a person’s most valuable device , it’s still locked behind a bundled, ownership-based model. This means that most people are trapped in a buying-and-throwing cycle with high financial and environmental costs.
“Raylo solves these problems by providing access to premium consumer devices at lower, subscription-based prices, helping to expand access to the latest technology. By reusing its equipment at the end of its cycle, Raylo is also the sustainable choice in this market and has created a product that its customers love – the possibilities here are enormous and we believe in them [co-founders] Karl [Gilbert], Richard [Fulton], and Jinden [Badesha] have the vision and in-depth knowledge to transform the way we all access our devices. “
In recent years, a number of remanufactured electronics companies in Europe have attracted investor attention, where lawmakers are also considering the right to repair laws.
Recent financings in this area include a $ 335 million round for French startup Back Market for the refurbished appliance market; a $ 71 million round for Grover’s subscription electronics business, based in Berlin; and a $ 40.6 million round for Finland-based Swappie, which repairs and sells used iPhones, to name a few.