Deal Abstract
Affiliate marketing GiftCrowd site is making money helping parents and students gift gifts. They make money off of gift card redemptions and suggesting certain things for sale.
Financials (VRB)
| Question | Notes |
|---|---|
| 1. Fundraising Target? | $965000 |
| 2. Fundraised So Far? | $10609 |
| 3. Pre-Money Valuation? | $5790000 |
| 4. Previous Year's Annual Revenue | $2000000 |
| 5. Previous Year's Annual Net Income (+ Profitable, - Burning Cash) | ~$240000 |
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: Tenafly, NJ |
| 2. Has at least 2 founders? | False: Two |
| 3. Has product in the market? | True: Revenue generating |
| 4. 6 months of continuous user growth or 6 months of revenue? | True: Really impressive revenue growth |
| 5. Notable investors? | False: No one I recognize |
| 6. Post-funding, will have 18 months of runway? | True: Profitable?! |
The 7 Thiel Questions (Every Time Man Profits, Don't Dismiss Serendipity)
| Question | Score | Notes |
|---|---|---|
| 1. Engineering? | 2 | It's a SaaS platform for buying group gifts |
| 2. Timing? | 1 | Not sure why this is the moment this idea will take off, it's been around since 2015 |
| 3. Monopoly? | 4 | Really strong revenue for essentially what is an affiliate marketing site |
| 4. People? | 2 | Team seems fine but see the comments |
| 5. Distribution? | 3 | Really good distribution, as per monopoly and revenue point |
| 6. Durability? | 2 | Seems like an affiliate marketing play |
| 7. Secret? | 1 | Group gift giving is about to experience explosive growth and affiliate marketing is going to be a unicorn business |
What has to go right for the startup to return money on investment:
1. Keep acquiring more schools and PTOs, 2. Provide and capture more value rather than just brokering the transaction; 3. Market size has to grow suddenly
What the Risks Are
1. Small business not a startup; 2. Ultimately this is just an affiliate marketing site; 3. Feature not a company
Bonus Muhan's Notes
Notably, look at the comment from Damianou T about the managements responses to his questions.
Updates
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
So, did I invest?
Click here to find out.Other thoughts, questions, comments, or concerns? Write me at mail@muhanzhang.com and let me know.