Deal Link: https://www.seedinvest.com/solace/seed
Company Overview: SOLACE – leading deathcare into the digital age. A simple, modern and honest alternative to traditional funeral experience designed starting with the family. Solace is a direct-to-consumer direct cremation provider. A direct cremation is a cremation without viewing or service and is by far the leading choice - and growing every year - for families. We offer one all-inclusive price, digital and secure paperwork, no up-selling and arrangements made from anywhere, anytime with our mobile-friendly online process. To fulfill the cremation, we have best-in-class partners who handle the removal, cremation and return of remains as a white label extension of our team.
I'm choosing to pass on Solace. While it is a great idea, the team seems very professionally competent, they've proven they can make money, and are right on the cusp of the market being comfortable for these purchase types, I think this is still too risky of an investment for me. The founding team lacks industry specific expertise, I expect them to have about 12 months of runway, and don't think thats enough for them to hit a homerun. Ultimately, while Covid has changed how we work and live, I still see them having an uphill battle getting people in scale to purchase something this profound online in the next year.
Total Amount Raised: $129,700
Total Round Size: $1,200,000
Raise Description: Seed
SeedMinimum Investment: $1,000 per investor
InvestorSecurity Type: Convertible Note
Valuation Cap: $6,500,000
Offering Type: Side by Side Offering
The 6 Calacanis Characteristics
A startup that is based in SV?
Note: Team is based in Portland
Has at least 2 founders?
Note: Team has 3 founders
Has product in the market?
Note: Product has been in market for the past few months, with 300+ customers
6 months of continuous user growth or 6 months of revenue?
Note: Growth has remained flat at the start of year, and info has not been updated to represent the most recent 6 months. Marking as fail because of inconclusive data.
Note: No one noteworthy as of now.
Post-funding, will have 18 months of runway?
Note: They will not have 18 months of runway based on my calculations. I expect them to have about 11-13 months of runway unless they hit a homerun!
The 7 Thiel Questions
The Engineering Question
Analysis: While the team has no technical founder and seems to be outsourcing their dev work, their product at this point is not dependent on amazing engineering work, instead it is dependent on awareness. It seems if they have the mechanisms down pat they should be fine and they can make gradual updates when the time and resources permit.
The Timing Question
Analysis: With Covid changing how we work, play, and live to being more digitally focused, Solace has a chance to really capture the market and become the premier first provider in the space. Typically, users make low sensitivity purchases (clothes, movie tickets, uber rides) online and via apps. However, we are seeing a shift where more personal and milestone purchases are taking place online, especially with Covid. For that reason, I believe Solace is entering the market at the perfect timing, because this type of long lasting purchase is becoming normalized.
The Monopoly Question
Analysis: There are a ton of cremation providers out there and one of them could easily enter the space by changing their business model. There are also other providers similar to Solace that will compete with them for initial market share. Ultimately, I believe this space will be similar to car providers where there are multiple options and you go with the one you are most comfortable. Not clear monopoly like google or amazon, but definite room for significant market share.
The People Question
Analysis: The team is made up of three former Nike designers. They were senior, and you don't get to that level at a company like Nike without being very skilled and competent. However, I think they lack 3 key factors that could give them an edge. 1. Early stage startup experience - startups are all about hustle and grind and making pizza with only tomato sauce and cheese. My fear is coming from an organization like Nike where resources are plentifully, they will struggle to make more with less. 2 Lack of industry insight - while they have an advisor who is in the funeral space, it helps to have someone fulltime on the team (especially a founder) who knows the ins and outs of the industry. More traditional spaces, tend to be easier to navigate if you have some inside experience. They don't and I see this as being another up hill battle. 3. No technical founder - while the product is not heavily tech focused, I still believe it to be an asset for any company that leverages and plans leverage tech (which they do) in the future to have a technical founder. It sets a solid foundation for product growth and scale. I believe the team to very competent based on their past XP, but I see them missing key ingredients for success and having too much non technical overlap
The Distribution Question
Analysis: It seems like they are planning to spend a significant portion of their budget on digital marketing to raise awareness. It's not the wrong thing to do, but I think there are other areas that they can leverage which could return better results like partnerships with nursing and retirement homes which would allow for a streamlined and stress free process for families. Looking at their projections for funding, it doesn't seem like they've accounted for a partnership role and therefore marking them at neutral.
The Durability Question:
Analysis: Deathcare is a space that isn't going anywhere (yet...). While there isn't a barrier to entry on the tech level (pretty basic tech). I imagine this space to be very relationship based and building a network for partners takes a lot of work. For that, I think they have great durability as they are one of the first new movers in the space and will have an advantage of building their network and brand.
What is the hopeful secret?
My hopeful secret is that people are more comfortable with making larger, more personal and significant purchases online then previously. It started with clothes and pizza, now cars and with the digital push from Covid, I believe people will be comfortable with purchasing deathcare online. If this holds true and Solace can educate and capture the market, they have potential for great success.
What has to go right for the startup to return money on investment:
- Build meaningful partnerships that lead to recurring referrals. People only die once, so there is very low chance for retention, however there are 1000's of nursing and retirement homes. If Solace can build relationships with these centers, it would allow them to have a funnel for their service and take the burden away of having to educate over digital channels and bring more direct exposure to their target clientele.
- Solace wants to be the center for all deathcare needs, they already have plans to add urns. However, if they can expand beyond creamation, I believe they can be a success. This would include Wills, celebration planning, etc.. By offering a wide variety of services it would show they are the a market leader and are here to stay.
What the Risks Are
- People still aren't comfortable with making big purchases online. If they can't get over that barrier then the company never takes off. While I'm hopeful this can happen, death is very personal and people may still prefer an in person connection.
- The cost of acquiring a customer is too large and there is no retention. Realistically, they could make about 2k per household, which is not chump change, but if they have to continue to educate new customers for purchases, this will keep their CAC very high, because people simply aren't using their product more than once or twice (for their partner).
Linkedin: https://www.linkedin.com/company/solace-cremation/Company Website: https://www.solacecares.com/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.