Due Diligence For

CROWDFUNDING

Company Overview –

Swannies is a modern lifestyle brand for casual golfers.
*Souce: Crunchbase

Company Investment
Name: Swannies Minimum Raise: $100K
CEO: Matt Stang Maximum Raise: $400K
Company Founded: October 15, 2014 Structure of Raise: Crowd Note
Location: Minneapolis, MN Valuation: $2.5M Valuation Cap, 20% Discount
Crowdfunding Portal: SeedInvest Minimum Investment: $500
Crowdfunding Link: https://www.seedinvest.com/swannies/seed  

Website: https://swannies.co/

 

Review Overview

Positives Risks and Reservations
Large target demographic Competing against large apparel manufacturers including public companies.
Affordable products Although Swannies is showing a gross profit in 2016 the members of management are not currently receiving paid compensation.
Growing Revenues Founders lack startup experience
Attractive margins of 45-65% Products are not proprietary
Crowd note that includes a 20% conversion discount and 5% interest rate Relatively low prior revenue at $70,125 for Jan 1, 2016 through November 1, 2016
Business model that relies on tying up a significant amount of capital in inventory

Problem

Golfers, especially millennials are put off by the high prices tag, outdated designs, and limited use of existing golf apparel.

Solution

Current:
Swannies has created a lifestyle apparel brand that provides a fresh alternative. They use modern designs that can be worn anytime and have affordable prices that appeal to millennials.

Long Term:
They want to increase pro shop traction in 2017 which they hope will build a customer base for retail and online expansion in 2018

Business Model

Swannies sells golfing apparel direct to consumer online, as well as wholesale to 3rd party retail locations with a current emphasis on golf course pro shops. Swannies has retail gross margins around 65% and wholesale gross margins around 45%. Their products retail prices range from $20-$59.

Traction

  • Sold to 15 golf courses in 2015
  • Approximately 69 orders for 2016
  • Expect 200 orders in 2017*Source: Company provided on crowdfunding campaign website

Senior Management Team

  Matt Stang Adam Iversen Sam Swanson
Position: Co-Founder/CEO Co-Founder/COO Co-Founder
Ownership Percent: 38.4% 19.1% 15.5%
Linkedin: https://www.linkedin.com/in/matt-stang-b9157125 https://www.linkedin.com/in/adamiversen N/A

Advisors:

Tom Johnson – Handshake Retail Sales Solutions

Rick Nordvold – Ex-CFO, Golf Galaxy

Toby Nord – Director, Ventures Enterprise at University of Minnesota

Summary:
The founders certainly have a passion for their industry and the game of golf. Although the management team certainly has enthusiasm, they have limited very limited prior startup or professional experience. The team has put together a strong backing of advisors including the former CFO of Golf Galaxy and the director of the Ventures Enterprise program at the University of MN.

Market Analysis

Industry: Golf Apparel Industry

TAM (Total Addressable Market): $1.7B by 2019 (U.S.)
*Souce: SeedInvest

Driving Trends: 4.3% CAGR

Industry Opinion:
The apparel industry is extremely competitive and Swannies is going up against well-established and large corporations. With targeting the golf apparel industry Swannies will also have to contend with the seasonality factor. Going into the market with the value proposition of being “Cool” and low cost will be a challenge to maintain. The golf apparel industry is quite substantial and there certainly is room to carve out a niche market but the marketing spend needed to reach consumers and stay relevant will not come cheap.

Competition

Differentiator:
Swannies differentiates their products by being significantly lower priced than the competition as well as being more appealing to the Millennial consumer.

Main Competitors:

  Travis Matthew Under Armour Nike FootJoy Adidas
Market Cap N/A $11.74B $88.17B N/A $32.79B
Website https://www.travismathew.com/ https://www.underarmour.com/en-us/ http://www.nike.com/us/en_us/ http://www.footjoy.com/ http://adidasgolf.com/

Company Financials

Revenue to date: $80,535 (through 11/1/16)

Revenue Last Fiscal Year: $10,409 (2015)

Previous Funds Raised: $27,500, pre-seed, January 2015

Use of Funds

If minimum amount is raised:

  • 55% golf course sales & inventory expenses
  • 25% salaries & compensation
  • 20% offering expenses

If maximum amount is raised

  • 44% golf course sales & inventory expenses
  • 24% salaries & compensation
  • 12% SKU expansion & other inventory
  • 10% brand awareness growth
  • 10% offering expenses

Exit Opportunities

Given enough sales and consumer adoption Swannies could be considered an interesting acquisition for one of the major golf equipment brands looking for ways to reach a younger demographic. OGIO’s recent acquisition gives us a great comparison tool to assess a value for Swannies. OGIO reported EBITDA estimates of $9M for 2016. With being acquired for $75.5M their valuation was 8.4 times EBITDA. Swannies disclosed a projected EBITDA of $20,980 for 2016. From this, we could calculate a current valuation for Swannies around $176,000, which is dramatically different than the $2.5M valuation cap with this offering.

Recent Acquisitions in the Field

Date Company Acquired Acquired By Amount
Jan, 11, 2017 OGIO International Callaway Golf $75.5M
November 2008 Ashworth Inc. TaylorMade-Adidas Golf $20.7M

Expert Opinion Summary

Lifestyle apparel companies are numerous and in general is an overcrowded industry. Establishing a brand and relying on that brand to sell product is a very challenging business model. Golf apparel lines traditionally rely heavily on professional sponsorships to market their brand which can be extremely costly.

Swannies has been granting stock to employees in lieu of compensation in the past and doesn’t currently have any employee compensation budgeted in their projections. This raises concern as eventually the founders and employees will expect to draw a living wage.

When comparing the valuation of Swannies to the recent acquisition of OGIO, the investor is purchasing a lot of blue sky with this offering. Given the stage of the company, debt financing might be more appropriate than the amount of equity they would need to give up for a fair valuation.

AngelList: https://angel.co/swannies
Crunchbase: https://www.crunchbase.com/organization/swannies#/entity

Disclaimer

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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Jake Fisher

Entrepreneur and Angel Investor. Along with founding Crowdfund Research, Jake is the Managing Partner at Venture Formations.
Jake Fisher
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