CEO of https://fruitstreet.com/ reached out over linkedIn "recruiting advisory board members" and in exchange, our compensation is the privilege of options or being able to buy equity via the ESPP. Shortly followed by the fact that ideally, they're looking for folks that want to both be advisors and "angel" investors by participating in the ESPP. He said the attached deck (provided in URL) was where I could learn more about their venture.
Well, "learning more" ends up being a pitch deck for what they're calling a Series A funding round. Setting aside the fact that I didn't know a company could have two Series A rounds 7 years apart (first was in 2016: https://www.venturecapitaljournal.com/telehealth-software-pr...), I saw some other things in the deck that suggested caution.
Take a look at the deck and some of my thoughts below.
Am I over-thinking this? Would you invest?
Appetizers:
* Slide 9 says $60M offer in the past, but slide 15 is saying this is a $5M Series A with a $33M pre-money valuation. Why the drop?
* His LinkedIn message claims $35M in commitments, and Google tells me commitments are binding agreements that just haven't been paid yet. Shouldn't that be reflected somewhere, maybe cap table?
* Shows a pro-forma from 2023 onward, but nothing historical other than a aggregate patient enrollments and annual gross revenue (if you can call it that) since 2014. For a 9-year company, it feels odd not to show any additional detail.
* They call out WalMart and Delta as "past customers" before talking about some current ones. Isn't that just saying they lost big deals?
Here's where it really get's interesting, I think:
Slide 13 at first glance looks like revenue by year, with a pivot in business model in 2018 and hockey-puck revenue growth year over year, but no. This is "Customer payments", not revenue. And then you read the footnotes...and you see that a customer named Sharecare gave them "revenue advances / unearned revenue" of $2.6M each year in 2021 and 2022.
Revenue advance / aka prepayment is supposed to be payment in exchange of future goods or services, but they actually call out that these payments were to "assist with [internal] operational expense and product development". Sounds less like "unearned revenue" and a hell of a lot more like a loan to cover expenses.
If you back those two numbers out, suddenly the picture of a healthy telehealth business post-covid shows a slow-down in 2021 followed by declining earned revenue in 2022.
And the two parts that had me saying "the nerve of this guy" (if I'm right?)... I realized nowhere in the deck do they say anything about the intended use of funds. We only know there "exit strategy" is to potentially be bought by a creditor and that there Series A of $5M is coincidentally pretty close to the $5.2M in "unearned revenue" over the past two years.
Feels like this place is sinking, they can't cover their expenses, have already taken out a loan, and now trying to ask people for a risk-free loan to buy them time for... well, I don't know... Fire sale to the creditor? collapse?
Again, honest question. Am I a cynic being unfair, or does this scream "warning! warning!"?
Well, "learning more" ends up being a pitch deck for what they're calling a Series A funding round. Setting aside the fact that I didn't know a company could have two Series A rounds 7 years apart (first was in 2016: https://www.venturecapitaljournal.com/telehealth-software-pr...), I saw some other things in the deck that suggested caution.
Take a look at the deck and some of my thoughts below.
Am I over-thinking this? Would you invest?
Appetizers:
* Slide 9 says $60M offer in the past, but slide 15 is saying this is a $5M Series A with a $33M pre-money valuation. Why the drop?
* His LinkedIn message claims $35M in commitments, and Google tells me commitments are binding agreements that just haven't been paid yet. Shouldn't that be reflected somewhere, maybe cap table?
* Shows a pro-forma from 2023 onward, but nothing historical other than a aggregate patient enrollments and annual gross revenue (if you can call it that) since 2014. For a 9-year company, it feels odd not to show any additional detail.
* They call out WalMart and Delta as "past customers" before talking about some current ones. Isn't that just saying they lost big deals?
Here's where it really get's interesting, I think:
Slide 13 at first glance looks like revenue by year, with a pivot in business model in 2018 and hockey-puck revenue growth year over year, but no. This is "Customer payments", not revenue. And then you read the footnotes...and you see that a customer named Sharecare gave them "revenue advances / unearned revenue" of $2.6M each year in 2021 and 2022.
Revenue advance / aka prepayment is supposed to be payment in exchange of future goods or services, but they actually call out that these payments were to "assist with [internal] operational expense and product development". Sounds less like "unearned revenue" and a hell of a lot more like a loan to cover expenses.
If you back those two numbers out, suddenly the picture of a healthy telehealth business post-covid shows a slow-down in 2021 followed by declining earned revenue in 2022.
And the two parts that had me saying "the nerve of this guy" (if I'm right?)... I realized nowhere in the deck do they say anything about the intended use of funds. We only know there "exit strategy" is to potentially be bought by a creditor and that there Series A of $5M is coincidentally pretty close to the $5.2M in "unearned revenue" over the past two years.
Feels like this place is sinking, they can't cover their expenses, have already taken out a loan, and now trying to ask people for a risk-free loan to buy them time for... well, I don't know... Fire sale to the creditor? collapse?
Again, honest question. Am I a cynic being unfair, or does this scream "warning! warning!"?