Friday, 4 March 2016

Is Gripit really worth £13.5m?

Well the answer according to the Crowd is yes - it has fully funded and is now in over drive.

So how do we get to £13.5m when it was worth just £320k in 2014 when it funded on Dragons Den?

Meaden has put in more cash as a convertible loan which takes the input up to around £1m. Sales are yet to get going but it is believed that they will. Predictions show turnover of almost £20m in 2018 with profits of £8.5m.

If they achieve this, can we say the business would be worth 6 times EDITDA or £51m? This would give investors now a return of almost  X4 - good but not stella.

What are the risks?

The business has never been stress tested - £20m is along way from £300k in revenue and will take a total sea change in management and skill levels.

The marketing budget, which last year was just over 10%, peaks at  15% of revenue next year and then falls to just over 5% in 2017 and 3.5% in 2018. Is this realistic for a trade and consumer product that has to sell in volume? As a yardstick Sugru, which raised £3.38m on Crowdcube at a value of around £27m last year, anticipates spending 18% of its revenue to achieve sales of £14m in 2017. That's over 5 times Gripits estimate for a far larger turnover and interestingly Sugru projects a lower growth rate year on year.

Market changes - what happens to gripits when the planet decides that plaster board is out dated and not eco and that producing massive numbers of plastic disks is not good for the environment?

Taking into account the estimated return if things go well and the risks that might mean they dont, hasn't the value for investors at this price already been stripped out?

One final thought. Meaden had a twitter chat with us over this and proclaimed that the reason she didn't invest in this round is because she wanted the democratic benefits of ECf to spill over onto the people who 'buy, use and love ' gripits.

We just wonder about that.

At this valuation most of the up side has been cleaned up and is ECF really meant for the types of people who will be using plaster board day in and day out?

She didnt like our points, calling them cynical and declined to continue. Cynical is possibly using the average persons money to make loads of money for yourself. We will have to wait and see.


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