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Kokoon

Platform:
Crowdcube
Stage:
Seed
Industry:
Technology
Location:
UK - London
Date Rated:
28/09/17
Raise:
£750,000
Equity:
11.23%
Valuation (Pre Money):
£5,928,540
Industry: Technology
Location: UK - London
Platform: Crowdcube
£750,000 Seed
Valuation: £6,678,540
Date Rated: 26/09/17

MANAGEMENT

PRODUCT

INVESTMENT
Tax Status: EIS

Business Summary

Kokoon is a headset that promotes sleep by managing your personal audio environment, and reads your mind to actively manage that environment as you drift off, sleep and wake up. Kokoon launched a Kickstarter campaign in May-15 to great fanfare and has generated over £2.8m in pre-orders to date. These funds are earmarked for expansion of the team and to drive marketing activities.

Financial Overview

Date (y/e) Jun-18 Jun-19 Jun-20
Sales Jun-18£5,200,000 Jun-19£10,600,000 Jun-20£23,100,000
Gross Profit Jun-18£2,800,000 Jun-19£7,400,000 Jun-20£16,500,000
GP as % sales Jun-1854% Jun-1970% Jun-2071%
Overheads Jun-18£1,900,000 Jun-19£5,700,000 Jun-20£10,600,000
Operating Profit Jun-18£900,000 Jun-19£1,700,000 Jun-20£5,900,000
OP as % sales Jun-1817% Jun-1916% Jun-2026%
Closing Cash Jun-18- Jun-19- Jun-20-

Note: This financial information has been sourced from the company on 27/09/2017 or from public sources. Financial data is NOT verified by Wheatfromchaff Ltd.
49%
SKILLS:
EXPERIENCE:
COMMITMENT:
The team lacks a senior individual responsible for marketing activities and there is a lack of prior early-stage or leadership experience. The absence of a CFO/FD is also concerning.
The team is young but reasonably experienced, having overseen large projects in their previous roles. The CTO's background in medical electronics is the most directly relevant to Kokoon.
The team all appear to be working on Kokoon full time, and have put in some significant time already. The marketing function, which will be expanded post-funding, is an unknown quantity.
57%
MARKET:
PRODUCT:
COMPETITION:
The market for sleep aids is valued around the $80bn mark globally and continues to grow. Audio equipment (from ear plugs to white-noise generators) is an established category.
While Kokoon has generated masses of interest and pre-sales, production has been consistently delayed from the original Feb-16 and the product is currently in a closed beta stage.
Kokoon seems to be the only EEG-informed headset for sleep (Onkyo are also involved in one for concentration). There is no exposition of the benefits of 'active' headphones vs other solutions.
77%
PROFITABILITY:
CASHFLOW:
RETURNS:
The high-level forecast shows an operational plan with attractive margins and feasible growth, however given £2.8m of FY18 sales date from 2016 the sales ramp-up is steeper than it looks.
There is insufficient information available to fairly rate this aspect of the business
Based on the forecasts investors stand a good chance of seeing significant returns. There's a lot of investment and acquisition activity in this sector.


Conclusion

Despite the lack of an experienced marketer the team have clearly managed to create a significant amount of buzz around their product. It is extremely concerning though, that production has slipped repeatedly from the timetable provided in the original Kickstarter campaign. At this point it is difficult to see the £2.8m of pre-sales as revenue, rather this is now likely to be a significant liability with outstanding production costs that will need to be met before the company can move forward.

It would be helpful to be provided with a current cash balance and historic financials demonstrating the actual P&L over the life of the company, given the scale of both revenue and overheads. At this level of investment the presence of a CFO to ensure proper oversight would be very reassuring too.

Related Links

Crowdcube Pitch

www.kokoon.io

 

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