- Hard to argue with a business that went from $0 to $1MM in revenue in a year.
- Super boring business model that I understand.
- Lean team and great margins.
I figured out how to add highlights in Gutenberg via HTML:
<ul> <li> <span style="background-color: rgb(232, 234, 235);"> <b><i>Good: </i></b> <i>Smile Direct Club raised $380 million at a valuation of $3.2 billion in October 2018.</i> </span> </li> </ul>
|1. Ssyndicate lead has >5 years investing and >1 unicorn investment||Fail|
|2. A startup that is based in SV||Fail (Holladay/Salt Lake City, Utah)|
|3. Has at least 2 founders||Pass|
|4. Has product in the market||Pass: Yes|
|5. 6 months of continuous user growth or revenue.||Pass: Revenue grew from $0 to $1MM in 2018|
|6. Notable investors?||Fail: Bootstrapped, heck yeah|
|7. Post-funding, will have 18 months of runway||Pass: Yes, incurred 113k in second half of 2017, so 226k annual, raised $738k.|
|8. Proprietary technology?||Fail|
|9. Network effects?||Fail|
|10. Economies of scale?||Pass|
|11. Great branding?||Pass: (Huzzah for UX cofounder)|
- The Engineering question: Bad: betting on the kiosk
- The Timing question: Good: Smile Direct Club raised $380 million at a valuation of $3.2 billion in October 2018.
- The monopoly question: Bad: not sure why this would be a winner-take-all market. Should be a fairly profitable and straightforward e-commerce play.
- The people question: Good: Startup professionals who were both reasonably senior at exit to start this company. Bootstrapped.
- The distribution question: Good (with a catch): Smile Love is making a big bet on these kiosks. Uncertain what a growth channel this will be. Otherwise, online economics are good.
- The durability question: Bad (by default): not sure how much innovation is going on in the teeth aligning space. Unless someone comes out with a radically cheaper and/or better solution. should be durable.
- The secret question: Bad (by default): people want great teeth, and apparently InvisAlign (Smile Direct Club) is not the best solution.
What has to go right for the startup to return money on investment:
- Growth of this market continues.
- Either proprietary technology is developed or the company develops something more defensible. Somewhat skeptical about this kiosk, but certainly gaining a unique brand and distribution channel would be key.
- This company is less of a venture investment and more of a play in e-commerce. I’m 100% fine with that, but good to clear expectations. There are plenty of lucrative e-commerce plays (Chewy.com, Dollar Shave Club, Bonobos)
What the Risks Are
- Competition: will Smile Direct Club take its gigantic war chest to choke its competitors a la Amazon and Diapers.com?
- Technology: whoever Smile Love’s supplier is, what’s to stop another firm from licensing the technology and doing what Smile Love is doing?
- Ambition: this business looks like an amazing lifestyle business, and given the governance structure, unsure what the liquidity event would be.
02/16/22: Just saw this in my SeedInvest holding account