Deal Abstract
AI driven insight company wants to help you build a portfolio of fee free equities, using fee-free trading platforms. Can this go head to head against the Public/WeBull/Robinhood's?
Financials (VRB)
| Question | Notes |
|---|---|
| 1. Fundraising Target? | $250000 |
| 2. Fundraised So Far? | $117762 |
| 3. Pre-Money Valuation? | $10000000 |
| 4. Previous Year's Annual Revenue | $53098 |
| 5. Previous Year's Annual Net Income (+ Profitable, - Burning Cash) | ~$-9048 |
The 6 Calacanis Characteristics ("Sow Passion, Not easy mediocrity", or S2 P6 N18)
| Criteria | Yes/No |
|---|---|
| 1. A startup that is based in SV? | True: Mountain View, CA |
| 2. Has at least 2 founders? | True: Two |
| 3. Has product in the market? | True: Generating revenue |
| 4. 6 months of continuous user growth or 6 months of revenue? | True: '61% month-over-month revenue increase & 35% month-over-month' |
| 5. Notable investors? | False: None that I recognize |
| 6. Post-funding, will have 18 months of runway? | True: Only needs $15k for burn |
The 7 Thiel Questions (Every Time Man Profits, Don't Dismiss Serendipity)
| Question | Score | Notes |
|---|---|---|
| 1. Engineering? | 2 | Maybe the engineering is better, but not sure the AI here is 10x better |
| 2. Timing? | 2 | Lots of people trading now so good time for market |
| 3. Monopoly? | 2 | Good traction in small market |
| 4. People? | 3 | Seems like a strong team with a technical CEO |
| 5. Distribution? | 1 | How is this getting distributed to users? |
| 6. Durability? | 2 | More data better algorithms |
| 7. Secret? | 2 | Charging people money for access to an AI powered trading app is a venture sized business |
What has to go right for the startup to return money on investment:
1. The market for this type of insight has to grow at a venture sized speed; 2. Prep2grow has to outperform the market even during a downturn; 3. This business has to compete against the Public/WeBull's of the world
What the Risks Are
1. Market is not growing at a venture clip; 2. Too little data to see if the recommendations are good; 3. Robinhood/Public/WeBull eat the content business by also owning the trading platform
Bonus Muhan's Notes
Really, really interesting. Feels similar to my business except less person driven and more AI driven.
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.
07/14/22: Got an inbound email from a reader asking if the company shut down. Another subscriber confirmed
"From what I can tell, it's a zero. I asked Wefunder staff to contact and they couldn't get ahold of them. The website is down. So I assume it's a zero. They didn't handle this well at all. From what I can tell, they quite pretty shortly after closing the round. It looks like the CEO took a full time job and didn't have time to also work on Prep2grow. Dont remember the burn numbers but they were generating revenue and I don't think they went under do to burn. I think they just had better opportunities elsewhere. Seems a little sleezy to do so so shortly after taking investor money."
If anyone else has updates, feel free to write and I'll update this 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.