Startups focusing on profit sink into “zombie mode”, blasts online will writing startup boss

Like many startups, Farewill has made major cuts to help shore up its finances but its co-founder says the startup is now stronger for it.
Startups focusing on profit sink into “zombie mode”, blasts online will writing startup boss

Startups are guilty of falling into “zombie mode” by focusing only on turning a profit, according to the co-founder and CEO of a UK startup trying to shake up the death industry.

Farewill was co-founded in 2016 by 33-year-old Dan Garrett, a Royal College of Art student, whose final project at the college spawned the Farewill business.

UK-based Farewill, which Garrett co-founded with Tom Rogers, who left the startup in 2022, has the lofty ambition of trying to redesign the death industry.

Farewill offers online will writing, probate and cremation services and witnessed strong growth during Covid.

The startup has raised over £30m to date and its backers include Augmentum Fintech, the publicly listed fintech fund, Highland Europe, the growth stage tech fund, and Taavet Hinrikus, the co-founder of Wise.

Farewill has recently published its financial results for the year ending July 2023, reporting revenues of £4.9m, up from £3.6m the year before, and losses of £4.2m, halved from £8.4m the year previous.

Like many startups, Farewill, which has hundreds of thousands of customers and says it’s the biggest will writing firm in the UK, has had to cut costs amid a push to make a profit.

But Garrett says many startups have effectively become “zombie” businesses by focussing too heavily on hitting a profit at the expense of growth.

Garrett said:

“I think the danger is so many companies have gone from growth to just focusing on profit and then found themselves with a borderline break-even business with no growth in it and that is worth diddly squat.”

He adds:

"Lots of companies have gone into zombie mode by only focusing on profit and then not focusing on top line."

During the period, Farewill made significant job cuts, with headcount reducing from 127 to 69 (it now stands at 66) while the startup kept “central costs controlled”.

Job cuts have come across the board, in areas such as its executive team, design, software engineering and research.

For example, its software engineering team has been cut from around 35 to seven, but Garrett says the startup is now “moving faster” than before.

In its early years, Garrett admits Farewill “had too much money, we were overstaffed, trying to do too many things at the same time and as a result getting nothing done”.

On the cuts to the business, he said: “I am not going to pretend that period was fun.”

He adds:

“We took our medicine and we are a much stronger business as a result”.

The co-founder says Farewill is currently focused on top-line growth in a “fiscally responsible way”.

Its next set of results, for year ending July 2024, will show that it is heading “in a much, much better direction” albeit still incurring a loss over the year.

He says in April this year, Farewill reported annualised gross sales of £11.4m and its loss in Q1 this year was £300,000.

Across the Farewill business, revenues are split nearly evenly across will-writing, probate and cremation, although probate revenues are slightly less, says Garrett.

“Funerals is growing quite quickly because will writing is a more mature business unit,” he adds.

During its latest public fundraise, a crowdfunding campaign, Farewell took a value hit, cutting its value from £86m to £30m.

“Was our business overvalued in 2020? Yes. Is it undervalued now? I would say yes.”

On its next likely fundraise, Garrett said:

"i think we will just focus on profitability in the business, we have got enough cash to do it.”

Around eighty per cent of Farewiil’s wills are distributed by partnerships- be it when someone is buying a mortgage, life insurance or getting a free will via a charity.

Farewill has recently launched a prepaid funeral plan service and in the short-term plans to focus on the UK, not overseas market.

Follow the developments in the technology world. What would you like us to deliver to you?
Your subscription registration has been successfully created.