Deal Abstract
Nerds have developed a new type of bicycle chain and pulley system and want to go head to head against the 100 year old invention.
Financials (VRB)
| Question | Notes |
|---|---|
| 1. Fundraising Target? | $1000000 |
| 2. Fundraised So Far? | $686024 |
| 3. Pre-Money Valuation? | $3300000 |
| 4. Previous Year's Annual Revenue | $0 |
| 5. Previous Year's Annual Net Income (+ Profitable, - Burning Cash) | ~$-2483 |
The 6 Calacanis Characteristics ("Sow Passion, Not easy mediocrity", or S2 P6 N18)
| Criteria | Yes/No |
|---|---|
| 1. A startup that is based in SV? | False: Boulder, CO |
| 2. Has at least 2 founders? | False: Two |
| 3. Has product in the market? | False: No product in market |
| 4. 6 months of continuous user growth or 6 months of revenue? | False: No revenue |
| 5. Notable investors? | False: None |
| 6. Post-funding, will have 18 months of runway? | True: No burn yet |
The 7 Thiel Questions (Every Time Man Profits, Don't Dismiss Serendipity)
| Question | Score | Notes |
|---|---|---|
| 1. Engineering? | 5 | Incredible engineering improvement |
| 2. Timing? | 2 | Not sure this is the right timing for market to adopt better tech on cycling |
| 3. Monopoly? | 1 | No product in market |
| 4. People? | 4 | Right people, esp with the parent co help |
| 5. Distribution? | 1 | No manufacturing capacity |
| 6. Durability? | 4 | Super durable if they can get the bicycle industry on it |
| 7. Secret? | 1 | Better innovation can be better business and $1m is enough to compete against decades of millions of dollars of capital investment |
What has to go right for the startup to return money on investment:
1. Start selling bicycles that are super high margin to bootstrap for lower margin bicycles like Tesla; 2. Go from R&D into mass manufacturer; 3. Build massive D2C brand
What the Risks Are
1. Super capital intensive; 2. No idea what unit economics are like; 3. Sadly, as much as I love bicycles, this doesn't seem like a growth industry on venture size (even bikesharees are more of a network venture play that hardware.)
Bonus Muhan's Notes
So so so cool. Can't wait to see one of these in the wild.
Updates
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Review these deal memos every time the startup raises a new round
Test if original thesis still applies
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So, did I invest?
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