There seems to be a strong anti 9SP theme on this board so I...

There seems to be a strong anti 9SP theme on this board so I thought I would try to bring a bit of balance to the debate.

I have been a long time holder of 9SP having first bought in just after the float. Ouch. I sold out and bought in again at much lower prices in 2019, 2021 & 2022. Even if I ignore the hiding on my original stake and just focus on the shares I currently hold, I am still massively underwater. So why do I hold on?

I was, until recently, in the innovation team at a regional Australian bank so I have some insight into the 9SP product, the ecosystem in which they operate and who are their actual customers.

Exactly what the 9SP product does is not well explained by their website or annual report. Basically, their platform ingests data from the multitude of SaaS apps that a small business might use day to day such as Shopify, MYOB, Stripe, etc. This is then interpreted and presented in a simple dashboard that highlights important information for the business owner. The idea is that data from the operational SaaS apps is turned into actionable insights by the 9SP platform. They have other products, but the dashboard is the main one.

Although 9SP do make their platform available directly to small business owners I doubt this is their preferred target market. In fact, this "direct to consumer" service was always offered for free. In the last quarterly update they have introduced a freemium model in which the basic service remains free but there are value added features for which a monthly subscription is payable. That might bring in a bit of cash but its not likely to be the main source of income.

The REAL customers are banks who are looking for an "adjacency" to their Small Business (SME) banking offering. 9SP's service isn't something a bank expects to make money out of. The idea is to offer "extras" that makes the core financial products (deposits, overdrafts, credit cards & loans) more attractive to customers. This is similar to Telstra offering toasters as rewards or an electricity retailer providing cheap movie tickets.

You can see this model at work by looking at the white labelled offerings of two 9SP clients.

BNZ: https://www.bnz.co.nz/business-banking/small-business/mybusiness-live

BoA: https://promotions.bankofamerica.com/smallbusiness/cash-flow-monitor

I haven't seen the Virgin Money proposition but I expect it is similar to BNZ & BoA.

Many banks would like a service like 9SP. They all have "innovation" teams who could do the initial engagement, spin up a proof of concept, do some customer testing and get everyone excited. The hard part is convincing the financial product owners (titles like Director of SME Lending) that the adjacency is worth it. Adjacencies are a hard proposition to sell because the cost is known but the benefits are not. And the benefits are hard to measure. Did we sell more loans because of 9SP? How do we prove that?

The climate for selling 9SP's product to a bank has been terrible for a couple of years. All of 9SPs target market has been cutting cost and focussing on core activities during COVID. Actually inking a deal is tough at the best of times but it must have been diabolical during a pandemic. That they even have a pipeline of leads is encouraging.

The last 9SP quarterly said they now have business development managers in London, Chicago and Sydney. And that the COVID restrictions are easing which will allow face to face meetings again. Hopefully once the BDMs can actually visit their leads, they will start to sign some contracts.

One more thing... The Visa deals seems to be of the "introducer" model. This means Visa would say to their bank customers "if you want a SME adjacency, why not look at 9SP". Given Visa has a relationship with most of the world's banks, its a huge benefit. Despite what some posters have said, there is no opportunity to sell 9SP subscriptions directly to small business owners who have Visa cards.

In summary, think 9SP has a potentially good future but it is still a very long shot. There are massive headwinds.

- The tech sell off is impacting them.

- COVID might be replaced by inflation as a reason for their target market putting innovation on hold.

- They are running out of cash and the low share price makes a capital raising ugly.

- The mystery buyer walking away left a stench.

- 9SP are not very good at explaining what they do and how they hope to make money.

I am hoping they don't go broke before they get a chance to prove themselves.