Zephyr Aerospace Deal Memo (Closing Date: 2021-01-01)

Muhan Zhang -

Deal Abstract

Zephyr Aerospace
Republic is a startup investing platform where you can invest as little as $10 in impactful startups
Republic

Travel hacker is now taking his talents to designing an economy++ lie flat sleeping solution for air passengers.

Financials (VRB)

|Question|Notes|
|---|---|---|
|1. Fundraising Target? |$1070000|
|2. Fundraised So Far?|$586814|
|3. Pre-Money Valuation?|$5000000|
|4. Previous Year's Annual Revenue |$0|
|5. Previous Year's Annual Net Income (+ Profitable, - Burning Cash) |~$-517908|

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: Puerto Rico!
2. Has at least 2 founders? False: Two
3. Has product in the market? False: All patents and provisions
4. 6 months of continuous user growth or 6 months of revenue? False: No revenue
5. Notable investors? False: No one that I recognize.
6. Post-funding, will have 18 months of runway? True: Likely to raise 18 months of runway.
Source

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

Question Score Notes
1. Engineering? 2 Good engineering but not seeing how this doesn't take up double the size of economy.
2. Timing? 1 No one is traveling with COVID.
3. Monopoly? 1 No market share.
4. People? 1 Passionate founder but no experience selling B2B to airlines (only tickets B2C)
5. Distribution? 1 Selling hardware to airlines
6. Durability? 4 I have to imagine once the seats are installed, one will not uninstall them lightly e.g. very durable.
7. Secret? 1 Installing comfort seats for economy that take up double the space will make outsized returns for airlines.

What has to go right for the startup to return money on investment:

1. Manufacture the product; 2. Generate revenue; 3. Make more money for airlines

What the Risks Are

1. Airlines don't want this because margins are already very thin; 2. Eco customers won't pay for this because the space between eco and business (eco++?) is thin e.g. disappearance of the middle class; 3. Manufacturing difficulties

Bonus Muhan's Notes

Very curious to see what the future flights look like post-pandemic.

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

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.