Raylo Raises $11.5M to Expand Mobile Device Leasing

Raylo Secures $11.5 Million in Series A Funding

Smartphone subscription service, Raylo, headquartered in the UK, has successfully raised $11.5 million in a Series A funding round. The investment was spearheaded by Octopus Ventures.

Funding Details and Previous Investment

This equity financing follows a previous debt raise and brings the total funding secured by Raylo since its establishment in 2019 to $40 million, encompassing both equity and debt. Investors include Macquarie Group, Guy Johnson from Carphone Warehouse, and the founders of Funding Circle.

Expanding the Subscription Model for Smartphones

The newly acquired funds will be allocated to bolster Raylo’s subscription-based smartphone service. This model encourages consumers to utilize devices through monthly payments rather than outright ownership, opting instead to lease SIM-free devices, both new and refurbished.

Significant Growth and Future Plans

Raylo reports a tenfold year-over-year increase in both customer base and revenue. The Series A funding will be used to accelerate growth within the UK market. This includes a planned doubling of the company’s workforce and continued technological development.

The Benefits of a Smartphone Subscription

Subscribing to a smartphone through Raylo allows consumers to access the latest hardware at a lower upfront cost compared to the full retail price. This is because the user does not gain ownership of the device at the conclusion of the agreement.

Addressing Rising Smartphone Costs

Considering the increasing price of premium smartphones, such as the iPhone, which has surpassed $1,000 in recent years, this subscription model presents a viable alternative. Many consumers are unwilling to spend such substantial amounts on a single device.

Leasing provides a pathway for individuals to experience high-end devices without the significant financial commitment of purchasing them.

A Circular Economy Approach

At the end of a 12 or 24-month lease, the mobile device is typically returned to Raylo. These returned devices undergo refurbishment and are then offered for reuse to new customers, potentially enjoying a second or even third life.

Devices that reach the end of their useful life are recycled through Raylo’s partners. This promotes a circular model focused on sustainability and extending device lifespan, contrasting with the common practice of consumers discarding older handsets.

Reducing Electronic Waste

While many individuals do pass on or sell their old devices, Raylo estimates that approximately 125 million smartphones are currently unused in the UK. This suggests a significant number of devices are not being given a second opportunity.

Raylo projects that each leased device can be utilized by three different customers over a period of 6-7 years. This would represent a lifespan nearly twice as long as the UK average of 2.31 years.

Additional Services and Considerations

To enhance device longevity, Raylo provides all leased phones with a complimentary case and screen protector.

Users can also opt for insurance coverage, which protects against damage and potential repair costs or non-return fees. Raylo offers its own device insurance as an optional add-on to the monthly subscription.

Competition and Cost Comparison

Raylo competes with device subscription plans offered by traditional mobile carriers. However, the company asserts that its leasing options are more affordable, due to the absence of final ownership for the consumer.

Non-Return Fees

If a user chooses not to return a device at the end of the contract, a non-return fee applies. The amount varies based on the device model and the length of the lease, potentially exceeding £600 for high-end models like the Samsung Galaxy S21 Ultra 5G or iPhone 12 Pro Max after 12 months.

Alternatively, users can continue making monthly payments beyond the initial contract term, up to a maximum of 36 months, after which the non-return fee is reduced to a nominal £1.

Warranty and Support

All Raylo leased devices are covered by a 24-month warranty, which includes free repairs for faults not caused by user damage or accidents. If a device cannot be repaired, Raylo will provide a replacement.

Industry Perspective and Future Trends

Tosin Agbabiaka, an early-stage fintech investor at Octopus Ventures, commented on Raylo’s Series A funding, stating that the subscription economy is transforming access to products and services. He highlighted that smartphones, despite being essential devices, remain tied to traditional ownership models.

“Raylo addresses this by offering access to premium devices at lower subscription prices, broadening access to technology. Their commitment to repurposing devices promotes sustainability and provides a customer-loved product. The potential for growth is substantial,” Agbabiaka stated.

Growing Investment in Refurbished Electronics

The European market has seen increasing investor interest in refurbished electronics businesses, coinciding with discussions around right-to-repair legislation. Recent investments include a $335 million round for Back Market, a French refurbished marketplace; a $71 million round for Grover, a Berlin-based subscription electronics service; and a $40.6 million round for Swappie, a Finnish company specializing in refurbished iPhones.