Today, we are proud to announce the first investment we made into our portfolio, GoCaptain. GoCaptain is a BNPL (Buy Now Pay Later) driving lesson financier, helping those who can’t afford driving lessons upfront to split the cost over time with zero interest.
History and Present of Driving Lessons
The first driving test ever issued in the UK was in June 1935, which was created in response to the rising amount of accidents and deaths that were happening in roads as a result of a lack of understanding of road procedures. Subsequently, the first driving schools started popping up right after then, but because the structure of these driving tests were kept in secret instructors were left “guessing” how to teach pupils on how to pass it. Until 1956, most driving schools operated as small businesses, with the British School of Motoring eventually taking monopoly. The Suez conflict caused many of these small driving schools to shut down and since then, the industry has been dominated by big driving schools.
These days, there are over 15,000 driving schools in the UK split between the Driving Instructors Association and the Motor Schools Association. As the cost of driving lessons continues to rise from (£30 an hour) and sometimes upto £40 an hour in London, many young adults are put off by the prospect of learning how to drive. Although rail and bus transport in London is ample, the rest of the population in the UK generally rely ongmai automobiles to get around town/go to work, and expensive driving lessons that teens and young adults cannot afford upfront means that myriad job opportunities get lost. Currently, if they cannot pay for driving lessons upfront, they usually have to go through bank loans, which themselves have very predatory terms and high interest rates.
Like most industries the driving schools industry was and is still massively affected by COVID-19. During the first and second lockdown in the UK, the DVSA and Government agreed to put all driving lessons and tests on hold in order to lower the spread of COVID-19. At the same time, with public transportation use strongly discouraged, this caused a massive demand for driving lessons and tests. On reopening day in June 2020, almost 7 million applications for driving tests were made between the DVSA site re-opening at 8am on Friday and 8pm that evening, causing the DVSA website to crash.
History and Present of Buy Now, Pay Later and other forms of credit
Buy Now Pay Later as a concept has been around for a long time. In 1641, the Pilgrims used to pay their debts in “installments” to London creditors. However, credit financing started becoming a lot more prominent around the mid 19th century, when Singer Sewing Machines started utilising their “dollar down, dollar a week” payment method and used that to become the leading sewing machine seller at the time. Since the mid-19th century up until the modern day, BNPL plans have been mostly used in home financing and vehicle purchases, with credit cards being the primary way to delay payment on smaller items.
Modern day BNPL platforms are more focused on consumers purchasing quick, desirable items such as articles of clothing in installments rather than bigger goods such as furniture or fridges. BNPL solutions enable customers to feel less guilty about “nice to have” purchases since the payments are spread over time rather than all at once. In addition, many Gen Z adults are starting to stay away from credit cards due to the punishing interest rates on late repayments, thus creating even bigger markets for BNPL. There is still much scope for BNPL to be used in more industries- namely, in this case, driving lesson finance.
Potential Market Opportunity
A myriad of BNPL platforms are currently leading the pack, but none focusing on the driving lesson sector like GoCaptain. Startups such as Klarna help people buy day to day consumer products such as clothes, animal supplies, and electronics using a BNPL API that merchants can integrate into their POS systems. Other apps, such as Billie, focus specifically on B2B transactions.
GoCaptain has shown extremely impressive traction at its early stages. Currently they have generated over 1500+ email sign ups on their waitlist, and they’re soon to onboard one the the UK’s biggest driving school franchise onto their partner list, among many other small driving schools. The average wealth in developed countries such as the UK is decreasing (millenials and Gen Z are on track to be poorer than their parents were at the same age) due to the simple fact that wages have been stagnant for a long time and the cost of living has gone way up. Because of these reasons, BNPL will become one of the most dominant ways for young adults to pay for goods and services. In 2021, the global BNPL market reached £11.57 billion, and is projected to grow another 22.4% to £14.1 billion by 2028. This means there is a massive scaleup opportunity for BNPL services. Although currently GoCaptain will be focused on the UK for the time being, there is opportunity to take this worldwide and serve countries in other parts of the EU, Africa, Asia, South America, etc.
Other facts related to market size:
1- The average cost of learning to drive is £1300+
2- £1.5m annual learner drivers per year and of which 64%+ are Gen-Z consumers
3- £1.5bn is spent on driving lessons alone annually
Potential Challenges
One of the potential challenges that this team faces is in the area of FCA regulation. Will BNPL financiers start to become more heavily regulated, and if so how difficult will the process be? On 25 October 2021, the UK government opened a new consultation to figure out how they want to regulate the BNPL market. For the time being, as long as there is a fixed sum of money to be repaid within 12 months and no more than 12 installments, there is no regulation. However, this could change in the future as the FCA mulls how to best protect consumers in the BNPL space. GoCaptain must be vigilant about future changes in law should they come into place, and have the resources to be able to adapt.
Another challenge is how easily other, larger BNPL firms could move into this space. This could be somewhat mitigated if GoCaptain were to grow and retain customers quickly enough (volume network effect) that by the time Klarna, Zilch, and/or Paypal were to think of such a thing, GoCaptain would present itself as an acquisition opportunity rather than an outright competitor.
Founder + Team Potential
Abraham and David are the right people to bring BNPL to driving schools and revolutionise the industry in the long term. They impress us because of the progress, tenacity, and adaptivity they have shown over time while building the business. In particular, one of the times they have adapted feedback extremely well was right after they pitched at the London New Tech pitch event. Our cofounder, George, suggested the team could actually build and prove out a lot with a smaller amount of funding than they expected. He not only listened with intent, but actively implemented our suggestions and grew their waiting list several-fold. Meanwhile, their ability to learn quickly and scrap for customers is something we love to see. We’ve listened to stories of how Abraham basically taught himself the basics of API development (no easy feat) as well as how he put his boots on the ground to onboard various driving schools to his platform one by one.
In summary: we forecast GoCaptain to not only dominate the UK BNPL driving lesson market, but also eventually dominate the rest of Europe and the world. Time after time, we’ve heard of tales of GoCaptain being turned down by various investors and VCs because of the all too often “too early for us.” We believe by being their first investor, we can capitalise on the potential of these founders that plenty of VCs and angels have missed, and we’re excited to continue to tap into talented, overlooked founders like Abraham. Tune in to see more fund memos come from our factory!
Signup to our newsletter to get our latest trends, thoughts and articles from the team at Horizan