Investment Opportunity | Multi-Award Winning Diamond & Coloured Gemstone Supplier

London DE is one of the UK’s leading suppliers of certified diamonds, emeralds, rubies, sapphires and other coloured gemstones. They ethically source and supply loose stones and create bespoke items of handmade jewellery in their workshops in London’s Hatton Garden.

Building on their unique set of relationships within the industry, they can deliver gemstones and jewellery at a price well below that of traditional high street retailers. Each piece that they create is unique, hand-made and never replicated. They also offer a selected range of ready to wear jewellery, in addition to bespoke pieces.

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Problem

The coloured gemstone market is one of the last unconsolidated global industries, relying on lengthy fragmented supply chains and artisinal mining operations. This creates problems when it comes to transparency and accountability, it also produces systemic inefficiencies in the supply chain.

Market Size and Market Opportunity

Demand for emeralds, and in fact all coloured gemstones, has risen substantially over the past decade, generating significant tail-winds in the sector.

Coloured stones are very much in vogue with the major fine jewellery designers and retailers around the world. A significant amount of this demand has been driven by the Asia-Pacific market.

To quote PR Newswire 2019:
“From a mere US$2 billion, coloured gems could displace diamond’s market share and reach $10 billion in the next decade.”

London DE are engaged in a market that is set to grow by over 500% in the next 10 years.

Distribution / Sales / Revenue Model

London DE do not have retail premises, allowing them to operate with low overheads. This enables them to channel investment into marketing, advertising and PR in order to build and maintain their brand and reputation, whilst minimising fixed costs. Their international focus reduces the systemic risks associated with operating in a single region, mitigating some of the challenges presented by Brexit.

Their customer base includes retail and trade clients, to whom they supply loose gemstones, ready-to-wear and bespoke jewellery.

Due to London DE’s joined-up approach, they’re highly flexible and adaptable, allowing them to deal with small retailers and consumers as well as larger institutions. They produce engagement rings, jewellery, accessories and bespoke jewellery, as well as fine loose stones to the Business to Business and Business to Consumer market.

Team

Philip Spencer ACSI, BA Hons –Founder & Managing Director

Ling Li GIA GG –
Business Development Manager

Shazia Lalani – 
Marketing Manager

Tobias Graham – 
Sales Manager

Annabel Spencer ICSA –
Non-Executive Director

Competitive Advantage

Typically, emeralds produced in Colombia pass through as many as 10-15 hands prior to reaching shop windows around the world. This is an unintegrated and inefficient supply chain. London DE aim to achieve economies of scale by bulk purchasing stones, via their network close to source. This also has the benefit to investors of offering a fixed and floating charge over their assets – the gemstones they hold as inventory.

London DE are involved in the development of API software that will enable them to both sell their own inventory and broker those of other companies. They already have well established supply lines into South American gemstone networks and intend to replicate this into South East Asia.

Positioning in Marketplace

London DE operate in a well-established and competitive market. They have unique selling points that differentiate them from some of their rivals.

London DE distinguish themselves from these businesses in several ways; their main focus being upon the ethical standards and integrity of their business. This means they take great care in confirming the provenance of the materials and gemstones used, ensuring fair trade and environmental principles and standards are maintained.

They have a unique set of relationships with South American emerald producers and suppliers and a European exclusivity agreement with one of the principle emerald dealers in Colombia. This allows them to offer one of the widest ranges of products and services in the industry. As a result, their consumers are provided an unrivalled level of choice, along with price guarantees and a deeply personal buying journey from start to finish.

Milestones

  • Formation & consolidation: 2013-15
  • First SME Award: 2016
  • First industry Award: 2017
  • Fund raising: 2017-20
  • New ecommerce platform launch: 2020 (Q2)
  • Development of Business to Business API: 2019-21
  • Full inventory of coloured stones acquired: 2021 (Q1-Q2)
  • B-B API launch: 2022
  • International expansion (sales offices established in key hubs): 2022-2023
  • Debt investment exit horizon (maturity of loan notes): 2024-2025
  • Equity investment exit horizon (IPO / sale to a larger competitor): 2023-2025

Exit for Investors

London DE are looking at exit horizons of 3-5 years for all investors, options for this on the equity side include an IPO or the sale of the business, either in whole or in part, to one of their larger competitors.

Blue Chip Customers – Key Clients / Strategic Partners

London DE have a written exclusivity agreement covering the whole of Europe with one of the leading distributors of Colombian emeralds, who incidentally have the largest Instagram following of any coloured gemstone wholesaler in the world (full details available upon request). They operate a hybrid model so they have both business to business and business to consumer sales channels.

Performance

London DE are in their seventh year of trading and their turnover increased by 60% in 2019.

Exit Strategy

London DE know how important it is for new investors to have a clear line of sight to their eventual exit, along with a credible return on investment. They have adopted a straightforward approach to investing, with a well defined 5 year horizon and both capital growth and income generating alternatives, so it is possible to start to achieve a return on your investment within a month.

Investment Offering

London DE are offering £1m in loan notes (having already raised just over 50%), these are over a 5 year term, with early exit available after 12 months, paying a monthly coupon at an annual rate of 10-15%.

They are also offering £1m in Enterprise Investment Scheme (EIS) equity, to balance debt with dilution and providing for income or capital growth alternatives. To date they have raised 20% of this target.

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