Switchpoint Payments Business Plan — The Offer, Returns and Recommendation

The R22m seed at R57m pre-money for 28% of post-money share capital, the return profile, and what the plan recommends.

The Offer, Returns and Recommendation

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15.1 Structure
15.2 Modelled returns
15.3 What the numbers support
15.4 What the numbers do not support
15.5 Recommendation

15.1 Structure

Term	Proposed position
Instrument	Ordinary or convertible preference shares, preference ranking ahead on a return of capital
Amount	R22.0m
Pre-money valuation	R57.0m
Post-money valuation	R79.0m
Equity	28% of post-money share capital
Option pool	12%, established pre-money
Series A assumed	R85.0m at R380.0m pre-money in month 16
Seed holding after the Series A and option top-up	21.5%
Board	One investor-nominated non-executive director, with reserved matters
Information rights	Monthly management accounts and annual audited financial statements
Drawdown	Subject to the six conditions precedent at Section 13.3

15.2 Modelled returns

Figure 24. Modelled proceeds to the seed holding at exit.

Exit assumption, FY2031	Enterprise value (Rm)	Proceeds to seed (Rm)	Multiple	Internal rate of return
3.0x FY2031 net revenue	R571	R123	5.6x	41%
4.5x FY2031 net revenue	R856	R184	8.4x	53%
6.0x FY2031 net revenue	R1 141	R245	11.1x	62%
7.5x FY2031 net revenue	R1 426	R307	14.0x	69%
9.0x FY2031 net revenue	R1 712	R368	16.7x	76%

These are two-round outcomes presented as one number, and the distinction matters

Every figure in the table above assumes the Series A is raised at R380m pre-money and that no further equity is required. Both are assumptions rather than commitments, and together they are the reason the seed holding dilutes from 28 per cent to 21.5. If the Series A prices lower, the dilution is greater and every multiple in the table falls proportionately. If a third round is required — which the model does not contemplate but which a business consuming R107m of equity before breakeven might well need — the dilution compounds again. The honest framing is that an investor is underwriting a distribution rather than a point estimate: 11.1 times if the thesis holds and the rounds price as modelled, and one to two times invested capital on the reduced-scope path at Section 9.4. The round should be sized and priced against that distribution, not against the terminal-year figures alone.

15.3 What the numbers support

▪ A genuine and quantified structural gap. A R48 000 trade invoice costs R1 176 on card and R25 on the capped rail. That volume does not appear on card rails today at any price, and the rail that can price into it now carries 60 million transactions a month.

▪ A distribution model that inverts the cost structure. Software integration rather than field sales, at a partner revenue share of 18 per cent of net revenue on originated merchants — expensive, explicit, and renegotiable at renewal.

▪ Segment economics that fund themselves. The practice book at 5.3 times rising to 7.8 subsidises the trade build-out for four years, with practice payback at 4.6 months.

▪ A stated and pre-committed downside response. The reduced-scope path is the board’s intended action rather than a failure scenario, and it returns capital rather than losing it.

15.4 What the numbers do not support

▪ Any valuation anchored on payment volume. The capped rail is 69 per cent of volume and 39 per cent of net revenue. The blended take rate falls as volume grows.

▪ A single-round commitment. The seed funds 19 months against breakeven in month 45. A Series A of R85m is a requirement, not an ambition.

▪ Underwriting on the terminal-year figures alone. FY2031 EBITDA of R19.2m reaches zero at 18.3 basis points of further card compression, which is a plausible market outcome rather than a stress case.

▪ Waiving the sponsorship condition. Without an executed agreement the company has no route to market, and the sponsor’s collateral requirements are unknown until it is negotiated.

15.5 Recommendation

Proceed, on the six conditions precedent and with a two-round commitment

An investor is being asked for R22m to fund nineteen months of work whose purpose is to establish whether trade counters will move manual electronic funds transfer volume onto a request-to-pay rail at approximately R1.25 million per site per month. The evidence needed to answer that question arrives around month 18, two months after the Series A must close. If the answer is yes, the modelled outcome is 11.1 times over five years with a further round required. If the answer is no, the company can be reduced to a smaller self-funding practice-segment acquirer and a trade sale returning one to two times invested capital is the realistic outcome. Three things should be tested in diligence ahead of all others: the sponsor bank’s collateral and termination terms, the invoice value distribution at the first two trade integrations against the R50 000 rail ceiling, and the investor’s own view of where South African card pricing settles over five years.

The plan should be assessed on one question ahead of every other. Everything in this document — the card economics, the partner channel, the cost structure, the funding path — is either supporting architecture or a consequence of the single assumption that a trade counter will migrate its manual transfer volume onto a capped-fee real-time rail delivered inside its own software. The rail now exists, carries the volume, and clears the R50 000 tickets that matter. Whether merchants will use it at the modelled rate is the thing the seed round is being raised to find out, and the plan is honest that this is what it is buying.

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