Deal Abstract

https://republic.co/alphaflow

Marketplace for sellers and buyers of real estate financial instruments. Has nearly $1 million in revenue as of 2019 and in a good position to grow. Valuation at $40mm means I’m auto-out of the deal, but not a bad growth investment for those who like real estate.

Shout out to reader and fellow investor Peter for forwarding me the deal!

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The 6 Calacanis Characteristics (91 161 18)

Check	Yes/No
1. A startup that is based in SV	Yes: San Francisco, CA
2. Has at least 2 founders	No: One
3. Has product in the market	Yes
4. 6 months of continuous user growth or 6 months of revenue.	Yes: 2018 revenue was $126k, 2019 was $922k
5. Notable investors?	Yes: Y-Combinator, Social Capital (and 2018 scandal,) and others.
6. Post-funding, will have 18 months of runway	No: Burned $3mm in 2019, raised only $500k.

The 7 Thiel Questions (ETMPDDS)

1. The Engineering question:
   • Good: this market exists and is indeed very fragmented.
2. The Timing question: 
   • Good: managed marketplaces for the win.
3. The monopoly question: 
   • Good: Look at that revenue. But I will say, regulatory may slow it down.
4. The people question: 
   • Good: Team seems well positioned to execute. Interesting that founder found and sold RealtyShares. Not sure how the company was, but an exit’s an exit.
5. The distribution question: 
   • Good: Hobnobbing with finance bros.
6. The durability question: 
   • Good: Solid.
7. *What is the hopeful secret?: 
   • Not much secret, there’s definitely a market for digitizing the purchase and selling of digital real estate financial instruments.

What has to go right for the startup to return money on investment:

1. Pretty certain this will return money on investment.

What the Risks Are

1. Capital Risk: Only raised $502k, which is two months of burn.

Muhan’s Bonus Notes

I think this company will make money. But to put it into perspective, let’s say you put $25k into financing this company. If you invested that same amount of capital in 10 companies at a $4 million valuation, you’d be potentially looking at tripling your money instead of 50%-75%.

Also happy bonus that Lesley Brice from Groundfloor gave them a positive review!

Financials (References)

• Current Fundraised: $986k
• Valuation: ~$40MM

Updates

New round at $55m on May 2021, with new financials.

This is where I’ll post updates about the company. This way all my notes from offering to post-offering updates will be on one page.

Review these deal memos every time the startup raises a new round

Test if original thesis still applies

Notice trends in how you think

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