Company Overview –
Swannies is a modern lifestyle brand for casual golfers.
|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|
|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|
Golfers, especially millennials are put off by the high prices tag, outdated designs, and limited use of existing golf apparel.
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.
They want to increase pro shop traction in 2017 which they hope will build a customer base for retail and online expansion in 2018
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.
- 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|
Tom Johnson – Handshake Retail Sales Solutions
Rick Nordvold – Ex-CFO, Golf Galaxy
Toby Nord – Director, Ventures Enterprise at University of Minnesota
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.
Industry: Golf Apparel Industry
TAM (Total Addressable Market): $1.7B by 2019 (U.S.)
Driving Trends: 4.3% CAGR
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.
Swannies differentiates their products by being significantly lower priced than the competition as well as being more appealing to the Millennial consumer.
|Travis Matthew||Under Armour||Nike||FootJoy||Adidas|
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
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.
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