Deal To Watch: Is This Startup The Amazon For Vegans?

Key Stats:

Summary

To date and as of October 15th, 2018, Billion Vegans has raised $48K

The Billion Vegans team has been selected as a “Deal To Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10-20% of our deal diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to hello@kingscrowd.com

Problem

In recent years, the amount of self-identifying vegans has risen dramatically, with the percentage of the U.S. population identifying as vegan rising from 1% in 2014 to 6% in 2017, a significant 600% growth over just three years.

This increase in demand for vegan products is hardly surprising. Millennials are increasingly entering the workforce and becoming a major determinant of consumer demand. As a generational trend, Millennials tend to care significantly about issues like climate change, animal justice, and health-consciousness. Products that advance these causes have a leg-up in convincing a following from this new cohort of consumers. It just so happens that vegan products fulfill all three.

The rapid popularization of the vegan diet has manifested itself in our everyday lives – large chains like Pizza Hut, Pret a Manger, and Marks & Spencers have all added various vegan choices to their menu options. The vegan movement has already proven its significance in the food industry.

But veganism’s impact on various industries does not stop here. In fact, the vegan lifestyle extends to beyond food: often vegans try to purchase and use products that follow the same guidelines as a vegan diet, using faux leather instead of real leather or makeup products that aren’t tested on animals. The end-goal for vegans is not to just stop eating meat and animal products, but rather to stop using animal products at all.

But, significant challenges face prospective vegans. To find vegan products, from shampoos to shoes, people have to research products diligently to ensure that what they purchase is consistently vegan. Often, sellers claim that their products are vegan, even when they aren’t.

Consulting lists of vegan-friendly producers/products and looking for these specific products in non-vegan stores is time-consuming, and often individuals have to read through lists and lists of ingredients/materials, to verify themselves whether or not a product is vegan.

Even after a vegan goes through this entire process, they’re faced with a lack of product variety to choose from. Each of these hurdles is a nuisance, but each a necessary step for vegans to maintain their lifestyle, and so many continue facing these inconveniences every day.

Solution

Billion Vegans is an attempt to remedy this situation and solve for these inconveniences. In short, Billion Vegans provides a platform for vegan consumers to find products by vegan sellers. Unlike other vegan companies, which mostly manifest as online retailers, Billion Vegans hopes to create a marketplace.

This means, instead of purchasing products, storing items in inventory and shipping orders upon purchase, the company is more providing a service, connecting a variety of sellers to buyers, who may either depend on Billion Vegans for fulfillment or fulfill orders themselves.

Products on the Billion Vegans Platform have to be certified, then vetted thoroughly again to ensure that every item sold on the site is authentically vegan. In making every item vegan, Billion Vegans provides an unmatched convenience to vegans; consumers no longer need to spend so much time researching in order to find products consistent with their lifestyle.

Business Model

Thus far, the business model seems to work sustainably. Over the three months since Billion Vegans began marketing, customer acquisition costs are $22, a healthy amount lower than their extrapolated customer lifetime value. And, with an average order size of about $42 it seems that the team is succeeding in serving up options that their customers actually want.

Their affordable acquisition cost is likely due to their being an early entrant into the space with a solution that meets a real need. A ⅓ acquisition cost to LTV is in line with what we would expect, and these numbers indicate a business model that could be sustainable if they can continue to drive repeat customers.

Product Roadmap

Their approach to facilitating orders has so far been entirely based on Dropship, where sellers ship directly to consumers, and the marketplace only serves to host a forum where buyers can look for items conveniently. However, Billion Vegans plans to become a full end-to-end e-commerce vegan marketplace, planning to carry white label products and fulfilling orders themselves.

Further down the product road map, the team sees opportunities to also launch a starter kit program, subscription services, and their own “Karma Point” system and credit card.

Although some of this seems aspirational, we see validity to the product roadmap because they are really the first accessible e-commerce solution for the vegan market. Thus there is more room for expansion in this market where the opportunity is still wide open.

Performance

Since the company launched almost a year ago, Billion Vegans has onboarded 4.5K products from 200 sellers and is fully functioning. Prospective investors can view the website here.

After three months of marketing, they currently have a consumer retention rate of 17% and a conversion rate of 1.5%. We’d like to see these numbers improve, especially on the retention side of the business. We would expect that, if functioning well, a niche business like theirs would be able to drive more returning shoppers.

However, in many ways the business is still building out its product line and will likely be more equipped to retain customers as its product line grows.

Nonetheless, the Billion Vegans’ message is resonating with customers as every dollar the team has spent in early beta testing has driven over two dollars and fifty cents in ROI.

As the team begins to invest more resources in marketing we’d imagine this ratio will continue to increase, for a few reasons.

First off, the market that Billion Vegans is hoping to penetrate is so far largely unaware of their new platform and increased awareness will help accelerate adoption due to word of mouth and general brand awareness.

Even more, a larger marketing budget means that companies are much more capable of creating synergies between marketing campaigns, which can only go to improve their return on investment.

Understanding this, Billion Vegans is planning to scale up its marketing budget significantly with capital raised from this round of fundraising. If their WeFunder raises $100K, they plan on allocating 70% to marketing, and 30% to operations and fees..

Alternatively, if their WeFunder raises $1M, 50% of investments will be allocated to marketing and the rest to operations and fees. This suggests that management is well aware of the pressing need for acquiring a large user base to fully realize the value of first mover market advantage.

Financials

Billion Vegans, currently valued at $5M, raised $300K in SAFE securities in January of 2018 and has so far raised $48K on WeFunder. This means, the co-founders of Billion Vegans still retain 93% equity stake in their company.

Though the company has already begun generating revenue, Billion Vegans is still very much in the early days and more rounds of funding will be needed to fully operationalize and penetrate the current market opportunity.

While the valuation is a bit high for the current state of the business, we think this is a bit mitigated by the large and growing market opportunity they have in front of them with minimal online competition

Management

The management at Billion Vegans consists of CEO/Co-founder Alon Hochberg and CPO/Co-founder Amir Lavi, both seasoned veterans and experienced in their respective roles at the organization.

Hochberg has founded five companies to date, where he served as CEO/CTO and oversaw two of his companies acquired. Even more, Hochberg is a board member on a variety of other ventures and the founder of his own VC fund. This is a very valuable set of experiences for an early-stage company.

Hochberg’s experience running a VC fund of his own means that he understands, even beyond his own ventures, what the components are that make up a successful venture. His experience at leading a company from startup to acquisition shows that Hochberg is able to grow his ventures rapidly and effectively, and position them for potential liquidity events.

In addition to his role as the CEO and Co-founder, Hochberg is also the sole member of Billion Vegans’ Board of Directors and owns 100% of the company’s authorized stock.

Lavi is also a serial entrepreneur, having started three ventures of his own, where he gained significant experience in the roles of a product manager. His exposure to product management, gained over the course of a decade, also will prove to be a valuable addition to Hochberg’s skillset.

Between the decisions that Billion Vegans has already made and the unique perspectives, skills, and experiences that Hochberg and Lavi bring, management at Billion Vegans is well positioned to guide their company well.

Rating

Billion Vegans is a Deal To Watch. This recommendation is guided by a few primary reasons.

1. Product/Market Fit

Billion Vegans has proven through early signs that the concept of an all-vegan marketplace is in demand. For instance, they have achieved a 2.5X ROI on the minimal marketing dollars they have spent in early test. .

Their 1.5% customer conversion rate, though lower than the average company’s, can be expected to rise as the company refines its operations and continues to onboard more products.

Their customer lifetime value to customer acquisition cost ratio is healthy and, in fact, higher than the average company’s lifetime value to acquisition cost ratio. Though marginal customer acquisition costs may increase in the future as more vegans gain awareness of their business, customer lifetime value can also be expected to rise as their marketplace continues to undergo development, growth, and streamlining.

And, even if some ratios are lower than reported averages, it is still worth noting that these numbers that Billion Vegans have come up with have been guided by only three months of marketing. If the company is able to gain the funding necessary for an increased marketing budget and raise more awareness, these ratios are likely to change, and even more likely to improve.

2. Market Growth Potential

For a marketplace like Billion Vegans to actively try and make veganism easier to manage and handle, it is highly likely that many vegans actively embrace Billion Vegans as a convenient way to maintain their lifestyle, and try out their services.

So, as veganism grows year by year, the potential customer base for Billion Vegans also grows year by year. The rapid adoption of veganism in many countries around the world, and notably so in the United States means that Billion Vegans is very conveniently positioned to capitalize on this large potential customer base.

Another important note to make is that this growth in vegans around the world is happening despite the difficulties involved in turning vegan. With Billion Vegans alleviating or mitigating so many of the hurdles to becoming a vegan, it is conceivable people who otherwise would have given up on veganism could be more receptive to a vegan lifestyle, given the newfound convenience.

The high growth in Billion Vegans’ target market means that their business’ potential revenue streams and customer base is growing rapidly as well, which can only go well for the company.

3. Experienced Management

Management at early-stage companies is crucial in determining the success or failure of any company, and Billion Vegans is guided by strong management.

Hochberg’s exposure to growing ventures and running companies as a CEO has helped Billion Vegans so far, successfully leveraging $300K to build a fully functioning platform, support many sellers and products, and also begin generating revenue.

Hochberg not only has the credentials and experience running a business, but he has also shown signs of finding product market fit over the past year.

Though their strong early market entrant position in a growing market with a demanded solution gets us excited about the investment, their valuation and early stages are still things that you need to consider especially with amount of marketing and budget cost that will be involved in getting this business to scale.

Nonetheless, we think they have a unique opportunity to help build the #1 marketplace for vegans, which is a unique opportunity to get into a market that will likely see significant investment over the next several years.