Deal Abstract
https://www.seedinvest.com/bext360/seed/highlights
SaaS platform that wants to use blockchain, AI, and loT to improve the transparency of supply chains of global commodities. Seems like it has a lot of moving parts on technology. Has large customers like Gucci, Calvin Klein, Nespresso, on board.
Decision
Pass
Why Investing/Passing
- Uncertain who the customer is
- Even if the problem exists, uncertain that it’s sale-able
- Very concerned this is solving a virtue-signal problem
The 6 Calacanis Characteristics (91 161 18)
| Check | Pass/Fail |
| 1. A startup that is based in SV | Fail: Probably headquartered in CO or WA where the accountants/various documents infer. |
| 2. Has at least 2 founders | Pass (2) |
| 3. Has product in the market | Pass |
| 4. 6 months of continuous user growth or 6 months of revenue. | Pass (sort of): 2018 revenue was $85k, 2019 revenue was $335k. |
| 5. Notable investors? | Fail: No one I recognize. TechStars but just an accelerator, not a notable individual. |
| 6. Post-funding, will have 18 months of runway | Pass: Raising $1MM at $463k yearly burn means ~26 months, though obviously burn increases once the money comes in. |
The 7 Thiel Questions (ETMPDDS)
- The Engineering question:
- Good Enough: The technology here is pretty boring. Use React and other modern technologies to build a web/mobile/native app suite for startups. Boring in this case is good though.
- The Timing question:
- Eh: While it’s true that consumers want more ethically sourced goods, I’m not sure this time in 2020 is the reason that companies would start spending money here more than they have been.
- The monopoly question:
- Sure: though I imagine it’s an expensive monopoly to build between sensors, crypto apps, and “artificial intelligence.”
- The people question:
- Not Bad, Not Great: I don’t doubt that the two know about this problem space, but I do doubt whether these founders can 1) scale a product, 2) consistently identify the key decision makers at large enterprise, and 3) scale a big business.
- The distribution question:
- Bad: what does it look like for great distribution in this business? Ideally someone whose CEO who has all friends who are chief sustainability officers at large corporations who will sign multi-million dollar contracts and fund development.
- The durability question:
- Sure: Similar to monopoly question, I agree that after it gets built it’d probably be pretty durable, but at what cost.
- *What is the hopeful secret?:
- Large corporations are all going to have sudden urgent need to visibly demonstrate their supply chains in order to woo customers.
What has to go right for the startup to return money on investment:
- Regulation Increases Compliance Costs: Until the government makes it so this is a need-to-have instead of a nice-to-have, I don’t see rapid growth happening.
- Scale Service into Platform (Build a Robust Hardware/Software): There’s a lot fo components going on here, and building a single nexus for all this info would be critical (and important.)
- Anchor Clients to Fund More Development: Between sensors, crypto applications, and various nodes on the network of verifying supply chain, this company needs some large clients to frontload development for these applications.
What the Risks Are
- Vitamin versus Painkiller: I’m concerned that the problem this business solves is virtue signaling and not a deep business problem.
- This business is not venture-backable: due to the high failure rates of startups, I need companies that will 5x-10x my money, and ideally, 100x my money.
- Problem definition and startup agility. Both founders have a deep expertise in their respective backgrounds (supply chains in developing countries and electro-mechancial engineering, respectively,) but I don’t see much startup DNA here.
Muhan’s Bonus Notes
Financials (References)
- Total Amount Raised: US $8,500
- Total Round Size: US $1,000,000
- Raise Description: Seed
- Minimum Investment: US $1,000 per investor
- Security Type: Crowd Note
- Valuation Cap: US $7,750,000
- Offering Type: Side by Side Offering
Updates
From Allyson Q on the Bext360 team:
“Muhan – thanks for your query. 95% of consumers are looking to make sustainable purchases, however, the average company only knows 7% of what’s going on in their supply chains. Accordingly, our customers are brands and corporations interested in supply chain digitization for benefits concerning transparency – operational insight, access to capital and preferential lending terms, premium materials and products, sourcing commitments and operations in the green tech and sustainability market – which ultimately result in cost saving and reduce risk for our customers.
Also the savings from supply chain disintermediation can save companies 20-30% of the cost of their inputs. Certainly, the businesses that do not pursue this will have serious pain. Companies that do not adopt a solution like ours will continue to overpay for commodities that are sourced from suppliers, which continue to destroy the environment and will have difficulty attracting customers who care about the environmental and social impact their supply chains have or create.
Decisions makers are frequently the Director of Supply Chains in collaboration with their sustainability and IT teams. “
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.
