A Satisfying Purchase
I’ve never played golf before (unless playing it on my phone counts). But I have a few friends who grew up playing golf. They seem to enjoy it, so I always wanted to try it. However, as a first timer, I don’t want to spend a lot of money on equipment I might not like or continue using. Although a lot of articles talk about how to choose the best golf club, I would still like to test them myself and see what works for me before committing to a purchase. Luckily, this is a problem that Cadi is solving.
Cadi uses e-commerce and automated kiosk machines to make shopping for golf equipment easier. For example, customers like myself can buy golf clubs either at Cadi kiosks located on golf courses or by ordering them online and then picking them up from a nearby kiosk. Cadi allows users to test equipment before committing to buying them. This helps customers avoid the hassle and cost of returning them.
Cadi raised $509,833 on StartEngine back in April 2022. Here’s what’s changed since Cadi’s last round.
Going Digital
At the end of 2022, Cadi beta launched an app that connects to its kiosks, featuring a “try before you buy” marketplace. Golfers receive personalized recommendations and can order golf clubs, pick them from a kiosk, and try them for six to 48 hours before they commit to the purchase. Customers pay a small fee for trying golf clubs. It varies depending on the product and brands, but the demo fee is usually $25 or 10% of the product price. According to Cadi co-founder Matt Ahrens, one out of three people buy golf equipment after trying it.
Cadi has also completed setting up a smart radio frequency identification warehouse that allows the company to follow products and track them automatically through the trial period. This is done by installing a sensor on every single product, allowing Cadi to collect data on how the products are used and how long they’re used for. In return, this helps Cadi reduce labor expenses, as there is no need for a worker to scan every item. It also improves inventory accuracy.
Additionally, like Amazon Prime members, Cadi customers can pay for a membership to access certain features, which includes cashback rewards called CadiCash, access to certain products, and no additional fees for the “try before you buy” feature. This is important, as golfers often need to make multiple purchases over time. They still need a supply of balls and golf tees. Their current equipment could wear out, or they might just want to experiment with something new. So a subscription model that can get them discounts and rewards is attractive to customers.
A Bigger Audience
After its last round, Cadi pivoted to focus more on its online presence and the business-to-consumer channel than the business-to-business (B2B) channel. Matt explained that focusing on the B2B channel for golf courses was too capital intensive. Golf courses are scattered throughout the country. Without its online marketplace, the company would’ve needed to provide a lot of kiosks to serve every small area. So instead, Cadi is now building its online customer base and its regional growth by connecting customers to Cadi kiosks that are strategically placed in central regions such as Southern California.
Because of the pivot, Cadi didn’t execute on all 63 letters of intent it had during its last raise. But I still think the pivot is a smart move. Cadi can have access to a wider audience through its online channel than from individual courses.
Additionally, Cadi’s online marketplace has 11,000 customers, according to Matt. This is good traction considering the company only launched the marketplace at the end of last year.
An International Team
Cadi is still run by Matt and his co-founder, Tyler Gottstein. Although the raise page and Cadi’s Form C show only two employees, Matt confirmed that the company now has 27 people working for it internationally, compared to 23 team members in the last round. The increase in headcount could be a good sign, as Cadi has been working on improving its technology and scaling in different regions of the country.
Checking the Scores
Since the last round, Cadi’s revenue has declined from $726,891 (in 2020) to $438,345 (in 2021). Matt said this was due to the shift in focus from sales and revenue to product development. This makes sense — product development is an expensive endeavor. I think Cadi’s revenue will recover because it has now launched services such as the online marketplace. It is now just a matter of marketing those products and services effectively.
However, investors should keep in mind that Cadi went from being a profitable company to having a $733,151 loss in 2021. Cadi’s valuation also increased from $42 million to $49.8 million. With the declining revenue and negative income, the current valuation might not be justifiable. According to Matt, the valuation increase is due to Cadi’s intellectual property and the progress it has been making. However, I still think this is a high valuation considering the declining revenue.
Cadi still has an above-average revenue-to-valuation multiple of 111x. To give some perspective, golf equipment competitor Acushnet Holdings has a revenue multiple of about 1.7x. So it’s unrealistic to expect that Cadi would go public or get acquired for a price 111x its current revenue. Besides, Cadi’s valuation is still high compared to many early stage startups in the same industry (consumer products, goods, and services) that are actively crowdfunding, which average at $11 million.
