Deal To Watch: Doing Well And Doing Good By Walking??

Key Stats:

Summary

To date and as of November 28th 2018, AtlasGo has raised $18.7K

The AtlasGo 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

Corporate social responsibility is becoming increasingly popular as a method of raising brand awareness. With the rise of the socially conscious consumer, people are no longer just purchasing the cheapest products available on the supermarket shelf.

62% of consumers now cite brand trust as a significant influencer in the purchasing decision-making process, and 66% of consumers indicate a willingness to pay more for sustainable products.

 When isolating the younger generation of millennials, this number rises all the way to 73% of consumers. The next generation of consumers, and the largest growing market segment has effectively indicated the weight of a healthy brand image at this time, and companies in turn have increasingly invested in corporate social responsibility (CSR).

Companies who have effectively used CSR have benefited immensely. Toms Shoes, which built its business on the premise that for every shoe purchased, the company would send a pair of shoes to an impoverished child, grew from a small shoe-store to a large corporation with a valuation of over $600M within the span of 10 years in a heavily saturated shoe industry dominated by heavily marketed competitors.

They are consistently able to sell shoes at a very high price point with a high gross margin while spending virtually nothing on traditional advertising, relying solely on word of mouth for brand awareness.

Toms shoes is a testament to the power of CSR and the effectiveness of a healthy brand image in inspiring consumer trust and purchases. Other companies like Whole Foods Market have similarly benefitted immensely from a positive brand image, which helped them grow from a small business to an iconic supermarket chain which sold for $13.7B in 2017.

Evidently, companies that have embraced the potential of a positive brand image have been shown to perform very well in terms of growth and brand awareness.

Solution

AtlasGo is a “fitness for good” app that helps companies in their CSR efforts and a certified B-Corporation. Everyone walks, whether for exercise, or simply to get to work and back every day. Recognizing the ubiquity of walking, running, and cycling while keeping in mind the low costs associated with such activities, AtlasGo means to turn everyday exercises into fundraisers for charitable causes.

Companies choose the length and design of their challenges, and select a partner non-profit organization, which is then listed on AtlasGo. Individuals go on these various challenges, and for each km/mile logged, the corporate sponsor of the challenge donates money to the partner non-profit.

Corporations are able to create awareness of their brand by sponsoring these AtlasGo challenges and AtlasGo charges a % fee in addition to donations raised, all with no additional cost to the consumer.

The company also provides a corporate wellness challenge, where a company sponsors challenges to its own employees. Challenges work the same way, and sponsors can further tailor their challenges to better suit their go als with encouraging health and wellness among its employees. AtlasGo charges a flat fee for each employee, each month.

AtlasGo also includes a forum where users can connect with other users and discuss exigent social concerns like homelessness, education, ocean clean-ups, indicating that AtlasGo is actively working towards fostering a community of socially minded individuals, rather than settling as a walking app.

With no one else in this unique corner of the market, AtlasGo has an opportunity to become a market leader in this newly emerging space.

Business Model

The company’s business model, which relies on a few corporate sponsors to support their philanthropic efforts, is a recurring revenue model.

Sponsors who host challenges should be likely to return to this platform and host further challenges, since a company which hosts one challenge and discontinues their partnership is not able to make a lasting impression on individuals who use AtlasGo.

If a company wants to properly execute CSR to their benefit, it is in their own self interest to continue using the platform for a substantial period of time to ensure that their presence in supporting charitable causes will resonate with consumers and potentially influence public perception of their brand.  

Even more, AtlasGo is likely to enjoy many benefits from social media exposure. By nature of its business in combining fitness and philanthropy, participants in AtlasGo runs are very likely to share their involvement with the organization on their various social media outlets, furthering its brand awareness and participation.

 While of course, the company ultimately needs corporate partners who are willing to sponsor challenges for participants to engage in, a larger user base that regularly uses AtlasGo is likely to prompt larger organizations to host challenges.

Corporate sponsors engage in CSR primarily to encourage a more positive perception of their various brands, and if they are able to access a larger audience with their CSR efforts, then they benefit more from hosting challenges. More challenges and a larger variety of charitable causes is also highly likely to encourage further user base growth.

In short, AtlasGo’s potential growth in the next few years is cyclical in nature, and any marketing that the company does to grow its user base now will only expedite the hockey stick growth in store for the company.

Financials

The company already has raised about $1M in funding, with $48,000 in loans and $900K in SAFE securities. With this capital the team has raised $240K for non-profits from over 450 thousand miles of exercise, and hosted 55 challenges.  

The company itself made $25K through 2018 Q3, and projects revenue to grow steadily throughout the next year or so. By mid-next year, the company estimates about $78K in quarterly revenue. Though aggresive, it appears as though the team is finding traction and corporate buy-in, which could support this type of revenue growth.

Rating

1. Product/Market Fit

AtlasGo has a compelling product. In a market where consumers are increasingly looking towards socially conscious products and companies, all stakeholders can find value in participating in AtlasGo’s program.

On an individual level, everyday activities can now be used to promote causes that users care about without costing them anything. If individuals are willing to pay more for socially conscious products, then they should be more than willing to slightly alter their daily routines to help benefit causes they care about. The value-creation for individuals is fairly clear and straightforward as well. 

Partner companies are also able to access value in the form of positive brand associations. Positive perception of the brand is understood to bolster a firm’s sales in comparison to less positively regarded brands which directly benefits the corporation.

Even more, by engaging in C SR employees are much more likely to identify with their organizations, which is likely to increase employee motivation and decrease turnover. By promoting a healthy work environment, and boosting its image to the general public, AtlasGo has a lot to offer partner companies, and is likely well worth the fees that it charges.

2. High Growth Potential

The cyclical nature of the company’s growth is very important. Assuming a sharp increase in its marketing budget after this round of fundraising, the company can likely accelerate the business’ growth rapidly. Accounting for the scalability of AtlasGo’s business, the company has the potential for elevated growth in the next few years.

3. Go To Market Strategy

So far, investors have provided a little under $1M in funding to the company. Surprisingly, in the past two and half years, the company has only spent $5,000 in marketing.

With over $300K still on the balance sheet as of EOY 2017, we would like to have seen more invested in marketing to prove the ability to scale the business up rapidly.

Part of the reason for such small marketing spend is because this is a B2B sale that likely requires sales meetings rather than widespread digital marketing campaigns. This in it of itself is a concern because B2B sales cycles can be long and costly. With such a new product that is likely still not fully understood market education could hamper the ability to grow sales quickly.

Overall, management seems to be building a value add product that creatively includes both corporate and individual wellness into one platform. The best exit opportunity for a company like this will likely come from the corporate wellness market. Think Virgin Pulse or a company of that nature.

At the current $6M valuation cap and meaningful market traction, we think there is an upside opportunity but it does come with the inherent risks and challenges of trying to scale a product that is so new and likely misunderstood.