The Employee Benefits SuperApp
And Why We Invested in Cobee
Most of you have probably been in this situation: you get a job offer, glance at the salary, and either ignore benefits or find them so confusing that it is easier to simply dismiss them. As a candidate, it’s certainly not core or even relevant in the decision-making process. As an employee, it is worse: for the few benefits that you use, the process is bureaucratic and full of friction. Most likely, there are benefits that you will never know existed. Either way, there’s no perception of being rewarded through benefits.
Companies have been unable to extract the whole value of the benefit component of the compensation (which represents a substantial share in monetary terms), and to create an engaging experience around benefits. Until now…
Cobee https://cobee.io puts benefits at the core of compensation, and therefore as a central piece of employee acquisition and retention. Cobee is tackling a broken financial relationship between companies and its employees, where the latter i) is presented to a confusing and fragmented scope of benefits by the employer, ii) has no clear visibility on exactly which benefits are awarded or the financial value of such benefits, iii) has no easy or convenient centralized channel to access them, iv) can’t make on-demand decisions to consume those benefits, and v) have no personalization whatsoever.
For employees, Cobee provides an app that displays a holistic, real-time view of the benefit compensation balance as well as how much they save as they spend. The app is coupled with a payment card to consume those benefits whenever and wherever the employee desires.
For companies, Cobee aims to reduce the administrative hassle of managing different processes and benefit providers. This problem has become increasingly painful with the proliferation of digital vertical benefit offerings to the employees (gym, insurance products, mental wellness, perks, vouchers, salary advance). Cobee offers an easy-to-use, fully digital SaaS platform to centralize all benefit providers, upload their employees, configure and personalize benefit offerings, and automate payroll reporting.
During our assessment in DILA, there were several indicators of the superiority of Cobee’s product and value proposition versus traditional providers, such as Edenred or Sodexo. The main differentiator was the systematic outbidding and replacement of large global competitors in tier 1 commercial processes: nearly 40% of Cobee’s current customers were formerly served by traditional providers. This is a strong validation sign, considering Cobee is still at an early stage.
Furthermore, the comparative analysis provided by a recently acquired customer was conclusive: after replacing one of the incumbent companies with Cobee, there was ~100% growth in transactions per active employee, which translated in increased satisfaction and engagement.
The Opportunity Size
The lack of innovation in the space over the years is surprising considering the size of the market. Cobee operates under a B2B2C model, which provides the reliability and recurrence of enterprise SaaS revenue and blends it with the upside of transactionality generated through marketplace commissions.
The compensation and benefit software platforms market totals US$35B globally, and is growing at a 6% CAGR, according to Employee Benefits Market Intelligence. Also, there’s the pool of global benefits that Cobee will monetize through commissions and interchange fee. According to the International Labor Organization, there are 3.3bn employed people globally receiving +€1.5T in benefits.
Another relevant consideration when thinking about the size of the opportunity was that Cobee has been conceived to become a worldwide category leader, where their commercial and product strategy have been developed based on this vision. Around 50% of their customers are large multinational companies, and Cobee’s objective is to become their global provider. Initial internationalization steps have shown that the addressable market is not limited to Spain or Europe. Our capital is destined to bring Cobee to Latam, starting with Mexico.
The Vision
DILA has built an investment thesis focused mainly on Cobee’s value and upside generated by the consumer or employee. We believe that the Company has the potential to position as a top-of-mind app in the day-to-day financial life of each employee, by providing i) visibility and transparency to the monetary value of the employee’s benefit package, ii) a clear display of the savings perceived in each transaction, iii) a centralized and increasingly large benefit offering, iv) an easy and engaging neobank type of experience, and v) the flexibility to transact whenever and wherever.
By providing a commercial competitive advantage against both traditional benefit providers and vertical providers, Cobee aligns the interests of every stakeholder (company, employee, and vertical competitors). The initial indicators of underlying consumer behavior are very solid and suggest a strong possibility of occurrence of our thesis: employees choose to use the Cobee app over other options and companies are benefiting tremendously by using the platform. We cannot wait to see what they will build going forward!
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Notice that we haven’t even mentioned the team. We always say that the team is the most important part of our investment decision. There is so much to say about our conviction in Cobee´s team, but if you are a Latin American employer, you will probably come by them very, very soon. We will let you decide why we are so excited about this one…
Go Cobee! Keep building and rising . . . Welcome to Latam!
