Here’s everything you need to know about Solutions Vending International, or POPCOM’s, newest equity crowdfunding raise.
POPCOM is the innovative company behind a number of tech-forward vending machines and kiosks for the 21st century. The idea is sound: retail isn’t going away, but space is limited and expensive. As well, your typical soda machine isn’t going to cut it for the vast majority of products. So, POPCOM makes kiosks so small businesses can have a retail footprint and data analytics all-in-one.
They’re currently on their fourth equity crowdfunding raise and looking to raise $500k to help roll out about a dozen new kiosks, hire some more people, and as funding for manufacturing their next set of vending machines.
Is POPCOM a Good Investment?
While it is in a slight down-round, the pipeline is still incredibly strong, in my opinion. Down-rounds are common during market downturns because valuations are often based on public companies. As public companies decline in multiples, so do private companies. In the startup world, it’s never advisable to throw good money after bad, but it can be a great time to capitalize on those compressed valuations in startups you believe will be a long-term success.
Notably, POPCOM has quite a few things going for them. Most notable is a waitlist of over 800 retailers looking to rent a kiosk, and 11 kiosks already launched. This means they’re in the early stages of growth, and the money they use will be primarily for expansion. If they succeed, that’s when most companies tend to exit the “valley of death” because these funding rounds are essentially rocket fuel for expansion.
However, this is still a time of heavy losses, burning lots of money, and generally one of the most pivotal moments for many startups. If a company runs out of money in the midst of this ramp-up or can’t get costs under control, then it can prove disastrous. Here are a few reasons POPCOM might have what it takes.
Earlier I talked about “rocket fuel” for expansion. This essentially means dumping lots of money into a company so they can expand as fast as possible. One of the largest issues here is actually finding demand to meet, however. We’ve all seen and heard the startup solving a problem… nobody wants to be solved. (I’m looking at you, Juicero). This certainly doesn’t seem to be the case with POPCOM. If they meet the demand for 800 kiosks, that’s $1.72 million per month and $20 million in revenue per year. Their materials say this number could be as high as $4150 per month with more brands per machine, but using two brands is probably a safer and more realistic estimation. Given the current pace of their manufacturing, this means they will likely have demand for several years to come. As they continue to fulfill orders, that waitlist will only continue to grow over time. So, they likely won’t even need to spend money on marketing for the foreseeable future. There’s a pretty clear runway because they already have a product being built and customers lined up. This alone solves one of the biggest problems with most startups, and takes a good bit of guesswork out of the equation.
One thing that most people will likely overlook here is the data analytics side of POPCOM. Some of the largest companies in the world are data companies disguised as something else. Facebook isn’t a social media company, they are an advertising platform in which they use the massive amounts of information they take in to target ads to certain groups of people. Tesla, for example, uses their cars to endlessly map and take in information
to continually improve its self-driving car companies and collect various data for development. POPCOM uses each individual kiosk to take in a plethora of data that can then be utilized by their customers. They can also use this data to gauge retail interest and demand both across the board and in specific areas. The applications for this are seemingly endless, as they can become the premier company for information on retail analytics. This within itself could be a revenue source, should they deploy enough kiosks across the country to make the analytics worth it.
The economics here are actually quite strong as well. It takes between 7–20 months to break even per machine, which isn’t bad. This means there’s a large upfront cost, but as more machines are produced, they begin to pay for themselves, and any subsequent revenue from that is pure profit that is able to sustain new kiosk manufacturing and their general overhead costs. Eventually, they will have enough kiosks where they won’t need to raise more money because they will just be rolling forward profits from their recurring revenue. They might raise more money in order to continually ramp up production quicker, but the important thing is they won’t need to raise funds, it’ll just be more “rocket fuel.” There are also potential growth metrics here with things like ad revenue and expanding their analytics platform (for example, creating a subscription service centered around regional retail trends and analytics.)
One thing about startups is you’re not really betting on companies, you’re betting on people. Not only is POPCOM packed with industry rockstars and successful entrepreneurs, but Dawn Dickson, POPCOM’s CEO, has been a leader in the equity crowdfunding world and is a serial entrepreneur with previous exits.
Personally, I think they are in a pretty strong position right now, but they just need cash to continue their ramp-up. There will likely be another year or two of them taking in money with semi-heavy dilution from cash raises. However, once they get over that hill, the tone could change very quickly as the heavy upfront costs begin to dissipate and their recurring revenue model starts to show it’s strengths.