London-based rental deposit fintech Fronted founded by executives from Apple, Monzo, and Bud, is shutting down. Launched in 2019, Fronted worked with the aim to disrupt the rental market by offering credit products to help renters finance deposits using open banking and financial technology.
Back in November last year, Fronted raised over £20 million in a debt and equity deal led by Fasanara Capital. This came after Monzo co-founders invested £1 million in the company in 2021.
As the company shuts down, a notice on the Fronted website said: “After an incredible journey together, we’re saying farewell to Fronted. Thank you for being part of our journey, your support made it all possible.”
Talking about the decision to close the company, CEO Jamie Campbell, said, “The real reason behind the issue is that in September of last year, our cost of capital went through the roof which really impacted our ability to offer the product at a price that consumers would pay for it. We knew that we had good results when customers were paying around about £50 for it, but the shift in the market meant we couldn’t offer it for less than £100, and the price elasticity for our customers just wasn’t there.”
Reasons for failure
Fronted initially offered a 12-month deposit loan for renters to cover their rental deposits. Renters would pay back the loan along with interest on a monthly basis. Later, the company changed its focus and introduced a new product to help renters with a common problem: having to pay a second deposit before getting back their old deposit from a previous rental.
Fronted made this process easier by ensuring the return of the old deposit and covering the full cost of the new one. Renters would then repay this loan, which would cost them £50. To verify users, the company used a specialised API system.
As per Campbell, Fronted faced challenges because the cost of capital increased significantly, making it difficult to offer their product at an affordable price for customers. He recognised that this change in the market made it harder to make the product widely available and meet customer expectations regarding the price.
Despite its eventual failure, Fronted achieved some successes. They formed partnerships with software firms used by real estate agents and provided assistance to renters in difficult situations. Additionally, the company got involved in the discussion around lifetime deposit schemes for renters, although this policy has not yet been put into action.
Looking back, Campbell believes that teaming up with larger companies could have helped Fronted distribute its product at the desired price. He also acknowledged that the unexpected increase in capital costs in late 2020 caught many companies by surprise.
Though it recently signed a large deal, the company had to more than double the price, preventing them from going to market with the desired product.
