Invest Smartly in Startups: Using Industry Benchmarks for Valuation Analysis

CHART OF THE WEEK 📈

• Despite various startup valuation techniques, reliance on industry benchmarks is common in online fundraising. Overvaluation is a prevalent issue among startups, irrespective of the valuation method employed.

• Understanding the valuation of other startup offerings is crucial for investors engaging in Equity Crowdfunding (ECF) deals. KingsCrowd’s updated valuation-to-revenue industry data chart aids investors in assessing a company’s valuation against industry standards. Only companies with $50,000 or more in revenues were included in the data used to make the chart.

• Investors should use this chart to understand whether startups are overvalued. They should prioritize industry median valuation-to-revenue ratios over averages, as outliers can distort average figures.

• Assuming all other factors are equal, investors looking to prioritize high returns should favor startups with valuation-to-revenue multiples lower than their industry medians.

Join our investor webinar this Thursday, March 28th, at 12 pm ET, to learn about the exciting opportunity to invest in KingsCrowd through Wefunder. This session, led by KingsCrowd's founder and CEO Chris Lustrino, will explore the details of our business model, vision, and operations. Moreover, rotating guests will offer insights into our innovative products, comprehensive services, and in-depth analysis and data.

Don't miss this chance to learn more about KingsCrowd and how your investment can propel our journey.

Join us to explore the potential of being part of our growth story.

PITCH REVIEW 💸

Brief: Gryphon Online Safety is a notable player in the cybersecurity industry, focusing on protecting against digital threats. The company provides advanced WiFi router systems, enhanced by machine learning for continual improvement. With $12 million in sales and a tripling of paid subscribers in two years, Gryphon offers a range of home Wi-Fi routers emphasizing parental control and cybersecurity. It’s raising $2.5M with a valuation cap of $35M and a minimum investment of $100.

Key People: CEO John Wu and CTO Arup Bhattacharya co-founded the company, which has over a decade of industry experience. Together, they have more than thirty years of experience, providing a solid foundation of knowledge and expertise in the cybersecurity sector. Before founding the company, both spent time at Novatel Wireless, a 5G cloud company committed to enterprise solutions.

Interested in Gryphon Online Safety? Access the deal report HERE 🔓📈

Summary

Here's what we like: The cybersecurity industry is large and expanding, and Gryphon Online Safety is carving out a niche in this lucrative market with its mesh wifi routers. With $12 million in sales and a threefold increase in paid subscribers in two years, Gryphon has demonstrated significant traction in a competitive space. This growth indicates a strong product-market fit and customer satisfaction as more users turn to Gryphon for reliable and effective cybersecurity solutions.

Gryphon's high-performance WiFi system, user-friendly app, and advanced machine learning technology provide a comprehensive and evolving defense against cyber threats. The machine learning aspect of Gryphon's technology means that it is designed to improve over time, offering long-term value to customers and maintaining its competitive edge as cyber threats evolve. Additionally, Gryphon's intellectual property, including patents, provides a protective moat in a competitive environment.

The company's business model, which includes recurring revenue streams, is also a strong positive. Recurring revenue models are attractive because they are predictable and have the potential for long-term customer relationships. Gryphon's ability to retain customers and grow its subscriber base is a testament to the effectiveness and essential nature of its service offering.

Here's what we don't: Despite Gryphon Online Safety's compelling cybersecurity product offering, potential investors have significant concerns. The company is still pre-profit and experiencing negative revenue growth, with an annual revenue drop of 22.50% reported. This suggests customer acquisition or retention challenges or increasing competition impacting Gryphon's market share.

The high monthly burn rate of $101,543 against a cash position of $73,796 is also concerning, as it indicates that without additional funding, the company could face cash flow problems imminently. This is compounded by the alarming net income figure of nearly -$3.2 million, which raises questions about the company's current cost structure and scalability.

Investors may also question Gryphon's valuation cap of $35 million, which may be considered optimistic given the company's current financial risks. Significant sales and marketing investment is needed to stimulate growth, and this investment carries considerable risk, particularly if the company fails to reverse the negative revenue trend and control its monthly expenditures.

ON THE POD 🎙️

This week, Chris joins another podcast called Next Big Thing HQ, hosted by Connor Fata. The pod gets into the future of alternative investments, discussing how the landscape is shifting towards more diverse portfolios that include startups, real estate, collectibles, artwork, and debt products. Chris emphasizes the importance of informed investment decisions in this evolving market. He also talks about the challenges and rewards of being a founder, highlighting the journey of KingsCrowd and its mission to take the sting out of startup investing. The podcast provides insights into the private equity world, the role of data in investment decisions, and the potential of equity crowdfunding.

Listen to the full episode here

STAFF PICKS 🌶️

Because Coffee

Because Coffee, a specialty coffee company, stands out in the bustling $45 billion U.S. coffee shop market, focusing on quality and unique roasting technology. The company operates two retail locations and aims to expand across the Southeast U.S. and bolster its online presence. With ambitions to open ten stores and hit $5 million in revenue by 2026, Because Coffee is also diversifying revenue through subscription services and mobile offerings.

• Pre-Money Valuation: $11.5 million

• Minimum Investment: $1,000

Ruck Sox (Revenue Share)

Ruck Sox, a veteran-owned company, makes unique performance rucking socks for outdoor activities like hiking. These socks, the first of their kind in the U.S., are made entirely with American materials and labor. In its first eight months, Ruck Sox has already achieved $19,000 in sales and boasts a strong social media presence with 86,000 followers. The company prides itself on production by special operations veterans and collaboration with American firms like National Spinning and Surratt Hosiery.

• Revenue Share Percentage: 9%

• Minimum Investment: $100

Curtiss Motorcycle

Curtiss Motorcycle creates luxury, eco-friendly bikes with a unique Axis-centered Design. Amid the growing electric vehicle market, Curtiss focuses on high-end, sustainable motorcycles, targeting the expanding niche of electric personal transport. The company is raising funds on Wefunder to complete testing and certification of their first model, The 1, and to support production and marketing efforts.

• Pre-Money Valuation: $5.6 million

• Minimum Investment: $1,000