Gryphon Deal Memo (Closing Date: 2021–02–19)

California classics are coming back to SeedInvest to raise a second round after launching their security focused modem e.g. a helicopter parent’s panopticon dream.

Want to see the complete rich format deal memo? Read the original post at: https://muhanzhang.com/Gryphon

Deal Abstract

California classics are coming back to SeedInvest to raise a second round after launching their security focused modem e.g. a helicopter parent’s panopticon dream.

Financials

1. Fundraising Target? $10000000
2. Fundraised So Far? $664000
3. Pre-Money Valuation? $25000000
4. Previous Year’s Annual Revenue: $1080814
5. Previous Year’s Annual Net Income (+ Profitable, — Burning Cash): $-688228

Six Calacanis Criteria

1. A startup that is based in SV? False, San Diego, CA
2. Has at least 2 founders? True, Two cofounders
3. Has product in the market? True, Has revenue
4. 6 months of continuous user growth or 6 months of revenue? True, 2019 revenue to 2020 grew by $300k, roughly 50% increase
5. Notable investors? False, No one they’ve named
6. Post-funding, will have 18 months of runway? True, Just needs $1m for 18 mths of runway

Seven Thiel Tests

1. Engineering? 2, Seems like a router with parental panopticon service in, not a 10x improvement
2. Timing? 2, Yes, more working from home, but not sure why this moment in history is why loads and loads of parents are going to suddenly buy routers to censor their kids internet (and why wouldn’t Verizon/Internet service providers eat this lunch)
3. Monopoly? 2, Good revenue, but not sure what small market they have a big share of
4. People? 3, Strong team, my concern is that they’re product nerds first, and good products don’t make for good businesses
5. Distribution? 1, eCommerce and big retail, this is a hardware business. Not to mention, the cable/Internet companies have the distribution via rented modem boxes for now.
6. Durability? 1, What’s to prevent the Internet providers from making their solution marginally better? E.g. TiVo and other DVR solution
7. Secret? 2, Helicopter parents are a large untapped market and one is going to see mass adoption of total surveillance by millennial parents instead of them going with cable/Internet provider option

What Has to Go Right

1. Solve the distribution, get cable/Internet companies to upsell Gryphon; 2. Alternatively, become more of a software/cybersecurity play and McAfee/Norton in the browser; 3. Figure out ways to boost recurring revenue e.g. through more cloud storage or password protection, any combination of added services with little to no marginal cost

What Could Go Wrong

1. This is a hardware business that is a vitamin, not a painkiller; 2. Internet providers do an ugly copy of Gryphon’s greatest features and placate their lazy customers (yours truly is certainly one of them,) 3. The market for modem innovation doesn’t exist, see Google Home’s Wifi (which I bought then traded in for my Internet company’s leasing option out of laziness.)

Muhan’s Bonus Notes

Very jealous/thrilled that the first investors on SeedInvest get to see a company come back, with success, and raise another round

So, did I invest?

1. Subscribe to https://muhanzhang.com/ to see my final investment decisions, keep track of my portfolio, and receive ongoing updates on my journey to investing in 50 startups as an unaccredited investor.
2. Read the rich format deal memo here: https://muhanzhang.com/Gryphon
3. Want me to cover your startup? Submit your ‘Request for Startup’ (RFS) submission here: https://airtable.com/shrzNK8tguH8qEUF6

Other thoughts, questions, comments, or concerns? Write me at mail@muhanzhang.com and let me know.