Deal Abstract

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.

Financials (VRB)

|Question|Notes|
|---|---|---|
|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|

Source

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: 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!

Source

The 7 Thiel Questions (Every Time Man Profits, Don't Dismiss Serendipity)

Question	Score	Notes
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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