Due Diligence For

CROWDFUNDING

Company Overview –

Pearachute helps children discover and explore activities that best fit their family’s schedule.
*Souce: Crunchbase

Company Investment
Name: Pearachute Minimum Raise: $50K
CEO: Desiree Vargas Wrigley Maximum Raise: $100K
Company Founded: November 2015 Structure of Raise: Crowd Saft, 10% Discount
Location: Chicago, IL Valuation: $7M Valuation Cap
Crowdfunding Portal: Republic Minimum Investment: $25
Crowdfunding Link: https://republic.co/pearachute  
Website: https://pearachutekids.com/  

Review Overview

Positives Risks and Reservations
Experienced and connected leadership. Burn rate is $60,000/month and the company planned to raise, $50k-$100k (which is 1-2 months of cash.)  However, they are getting great exposure and proving an ability to beat expectations. I would expect to see an angel/VC round as a quick next step and seek insight from the team.
Solid pricing with great early traction with a real need and massive market potential. Investors don’t have votes or any ‘say’ in company matters – they share in the upside but do not become actual shareholders with voting rights. (I could argue that this is a good thing with a large number of small investors, and mention it merely to create awareness.)
Should be fairly scalable, depending on the qualities of each market and their respective business development teams. I would like to know more details surrounding company’s differentiation and competitive/comparative advantage. It may be purposely withheld in a public forum because it is thin or easily copied, and that could be a wise decision. Yet at the end of the day, this would be one of the most critical success factors, and I would like to get some assurances from the team regarding how they will approach this and/or create a “blue ocean” strategy.
Oversold their maximum raise with a lot of time left.

Problem

For parents and caregivers, children’s activities are hard to find and even harder to book. Activity centers are poorly marketed and lock parents into expensive 10-12 week sessions for children too young to know what they like.

Kids’ activity space owners see high turnover rates season to season, lose revenue for unfilled spots, and are forced to cancel classes because of low enrollment

Solution

Current:
Pearachute created a monthly membership club that makes it easy for parents and caregivers to find activities for children age 0-12. Users can choose to sign up for three, six, or unlimited classes each month. They are able to search thousands of family friendly activities in their city and book instantly with no forms or hassle.

Long Term:
Pearachute’s future plans include adding the ability to book birthday parties, launching the Pearachute native app, adding the ability to book seasonal camps, and upgrading their Partner Portal.

Business Model

Pearachute makes money through a subscription model. They have three different levels of subscriptions; $39/month (3 classes), $79/month (6 classes), $129/month (unlimited classes). Their supply partners on the courses they offer provide them with a discounted rate. Pearachute has average margins of 29% across the three subscription levels. In a 10 month period, they saw a 340% growth in active subscriptions.

Traction

  • 28% MoM user growth
  • 4x revenue growth since August
  • Over 30K activities booked
  • Backed by Techstars Ventures, Chicago Ventures, the founders of OKCupid, HotelTonight, SitterCity,
    *Source: Company provided on crowdfunding campaign website

Senior Management Team

  Desiree Vargas Wrigley Brittany Graunke Erica Alhorn
Position: CEO & Founder VP Operations & Finance VP of Membership
Ownership Percent: 40% N/A N/A
Linkedin: https://www.linkedin.com/in/desireevargas/ https://www.linkedin.com/in/brittanygraunke https://www.linkedin.com/in/erica-alhorn-8a94048

*Builders VC, LLC owns 30% of the company

Advisors:

  • Sam Yagan – Chairman, Co-Founder of OkCupid
  • Paul Lee – Board Member, CEO & Co-Founder of Builders Studios, general partner at Builders VC

Summary:
The team has great experience and education. They have shown an early ability to tap into valuable investor and other networks. Their early successes show that they are making great decisions for the company, right out of the gate.

Market Analysis

Industry: Kids Activites

TAM (Total Addressable Market): $32B
*Souce: Portal Page

Driving Trends:
As 75M millennials start having kids the market is expected to grow. 78% of millennials prefer to spend money on experiences over things.

Industry Opinion:
The company is leveraging technology to provide a solution that may not have been possible without it.  The fact that there are others on this space provides additional validation for the industry.  There is a real need and desire for this type of service, and the solution is a win-win for all.

Competition

Differentiator:
I’m not able to find a strong differentiator.  This firm has been able to grow more quickly than their competitors and they appear to have great investor connections.  It seems the ability to finance & execute expansion faster than others could be an ability for the company to open new cities and become the dominant player.

Main Competitors

  Kidpass LittleLane Sawyer
Funds Raised $1.2M $20K $1.5M
Website https://kidpass.com/ https://www.littlelane.com/ https://www.hisawyer.com/

Company Financials

Revenue to date: $140,580

Revenue Last Fiscal Year: $140,580 (2016)

Previous Funds Raised: $1.2M, seed, February 11, 2016
*Source: Crunchbase

Use of Funds

  • Native App
  • User Growth
  • Market Growth
  • In-House Development Team
  • Improve the Partner Portal

Exit Opportunities

It appears to me that they will likely offer a series of VC rounds and through their investor network connections will position for an acquisition and/or public offering down the road.  With the dynamics of today’s new ventures, I would bet on the company keeping itself private unless it was determined that a public offering would benefit them moreso due to the increased public exposure of an IPO.

Expert Opinion Summary

A quick encapsulation of the opportunity.

  • real product/service need with early traction
  • good business & revenue model
  • great team
  • great investor connections
  • unclear differentiation and competitive/comparative advantage

AngelList: N/A
Crunchbase: http://go.microsoft.com/fwlink/?LinkId=121315

Disclaimer

Crowdfund Research is a publisher and does not offer investment advice to any specific individual.  Crowdfund Research and its authors do not receive any compensation for the due diligence reports. 
 Crowdfund Research and its authors do not offer investment advice, nor do we endorse or recommend investments in any company or the suitability of an investment for any particular investor. Crowdfund Research is not registered as a broker-dealer or financial or investment advisor and does not provide any services requiring such registration. The information in this report or on our website regarding any company is based on publicly available information or directly from the subject company.  Crowdfund Research makes no representation or warrant as to the adequacy, accuracy or completeness of such information. Any opinions or forecasts expressed herein are our own, are not intended as investment advice and are subject to change without notice. This report has been prepared solely for informative purposes and is not a solicitation of an offer to buy or an offer to sell any security.
This report or the posting of information on our website regarding any company, including any links to information on our website, should not be construed as an endorsement or recommendation of that company for any purpose whatsoever.  This report does not take into account the investment objectives, financial situation or needs of any particular investor, and each investor should consider whether any investment opportunity is appropriate given their investment objectives and current financial circumstances. Any person considering any investment in any equity crowdfunding investment whatsoever is encouraged to consult with their own investment or financial advisor, tax advisor and/or attorney beforehand.
All investments entail risk. The companies on our site are generally small or early stage companies and are subject to risks inherent in investing in any small or early stage company as well as other risks specific to their business and operations. In addition, securities of these companies may be highly illiquid, requiring that they be held for an indefinite period of time or have a limited market for resale. Therefore, no one should invest in any of these companies unless they have no need for liquidity of their investment and can sustain a total loss of their investment.  You should only invest an amount of money that you can afford to lose without changing your lifestyle.
You should thoroughly review the complete offering materials for any investment opportunity, particularly all risk factors, prior to investing in any offering and become familiar with the investor requirements, investment limits and your ability to resell the investment.   

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Todd Mortenson

Todd Mortenson

Co-founder at Crowdfund Research
Todd is an accomplished executive with experience leading high growth ventures in addition to serving as a board director. Mr. Mortenson has played a leading role in the launching ventures across multiple industries from Real Estate to Hospitality to Manufacturing to Oil & Gas to Industrial Equipment to High Tech. Todd received his MBA with a concentration in Venture Management from the University of Saint Thomas and his Certificate of Director Professionalism from the National Association of Corporate Directors.
Todd Mortenson

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