Husband and wife have built a patented beauty accessory for customers with textured hair. Inspiring story of perseverance and innovation in entrepreneurship, their next step is building the beachhead into a brand that owns beauty products across multiple beauty markets.
|1. Fundraising Target? |$1070000|
|2. Fundraised So Far?|$129776|
|3. Pre-Money Valuation?|$5000000|
|4. Previous Year's Annual Revenue |$1997203|
|5. Previous Year's Annual Burn |~$186478|
The 6 Calacanis Characteristics ("Sow Passion, Not easy mediocrity", or S2 P6 N18)
|1. A startup that is based in SV?||False: Marietta, GA|
|2. Has at least 2 founders?||True: Two|
|3. Has product in the market?||True:|
|4. 6 months of continuous user growth or 6 months of revenue?||True: $829k in 2018 to $1.997m in 2019|
|5. Notable investors?||False: Bootstrapped, compelling narrative navigating predatory finance system in the US|
|6. Post-funding, will have 18 months of runway?||True: Profitable!|
|1. Engineering?||4||I myself am not the market, but checks out that the product is significantly better|
|2. Timing?||3||eCommerce, long tail, good time to solve deep pain points for more specific customer profiles|
|3. Monopoly?||2||Not the market, only hearing of it now. That said, I feel like this concept isn't strange to me/has surfaced before.|
|4. People?||4||Definitely right people. The only people asset you'd wish to take this to the next level are executives with CPG experience.|
|5. Distribution?||3||eCommerce! Also interesting partnerships with SallyBeauty.|
|6. Durability?||3||Patents are good, but not conclusive in defense. Company needs to build brand and develop more products.|
|7. Secret?||3||Textured hair products/beauty products for traditionally underserved markets is going to be an enormous growth market in the coming years.|
What has to go right for the startup to return money on investment:
1. Grow revenue while maintaining good margins: at present, their profit margin is only 10%. To put it into perspective, at current valuation of $5m, every dollar invested if profits were divided into dividends would net $0.037, so a 3% return; 2. Expand into their customer class: PuffCuff needs to be the first product, with many more innovative solutions coming afterwards; 3. Identify competitive advantage against big beauty brands like L'Oreal, Amazon Prime Wardrobe, etc. and provide unique, non-substitutable products.
What the Risks Are
1. CPG: Not a space I generally invest in, but though eCommerce removes the barrier to entry, it makes competition more aggressive; 2. Costs of ongoing R&D: Not sure what the costs of developing new products is on a timeline; 3: CAC and LTV: How to build a profitable D2C relationship with consumer that allows for ongoing high margin relationship.
Bonus Muhan's Notes
Love hearing entrepreneurs be real with what it takes a business. It's an unforgiving world out there for many people.
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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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