Company Update - March 8, 2023

Canopy’s Future Hinges on Certification

Sustainability Meets Health

Between 2020 and 2022, one object suddenly became central in the lives of many Americans: the face mask. Its protective power made it indispensable during the pandemic. But most masks were disposable and made from plastics. And they caused a disproportionate amount of pollution. In 2022, we disposed of 3 million face masks each minute. We find them everywhere — on the streets, in bodies of water and on beaches. Admittedly, we’ve had limited choices when it comes to masks. More sustainable alternatives were not really available at the beginning of the pandemic. The choices ranged from washable but less protective cloth masks to full-face masks used for nuclear disasters.

That’s why hundreds of startup founders around the world started developing practical, effective, and durable face masks to protect against COVID-19 and other threatening viruses. Among them, Joe Rosenberg started Canopy, a startup that designed a comfortable, transparent, and reusable face mask for everyday citizens and healthcare professionals.

KingsCrowd rated the company a Neutral Deal during its last raise, which closed in June 2021. At the time, Canopy raised $330,013 at a $6.5 million valuation. Two years later, the company is raising again. The market is different now. Most Americans are not wearing masks anymore. But COVID is still infecting people, and healthcare professionals are still protecting themselves against it. Despite a change in the consumer market, Canopy is showing fair progress.

Medical Attention

Joe previously projected that Canopy would start generating revenue in 2021. And the company did earn $74,052 in revenue that year and $150,000 in 2022, according to him. However, he also expected to make the company cash flow positive in 2021, but this did not happen. (Learn the lingo: a company that is cash flow positive earns more cash from sales than it spends on operating expenses.) Therefore, the company’s financial results are fair but far from impressive.

Canopy’s product is getting great recognition, though. The company validated the effectiveness of its innovative mask and has been granted a patent for the device. It won the RISE Innovation Award and the KidneyX COVID-19 Kidney Care Challenge in 2021. 

Canopy also closed its first hospital sale but must wait for National Institute for Occupational Safety and Health (NIOSH) certification to actually generate revenue from the contract. Canopy expects to get this certification in 12 to 18 months. It would catapult the company to another level, since healthcare professionals could use its mask every day while most average consumers barely even wear cheap disposable or cloth masks anymore. Until then, neither the trial with Northwell Health nor the strategic partnership with Access Strategy Partners — both of which were mentioned in Canopy’s previous raise — can start. Obtaining certification is a must if Canopy wants to catalyze the growth that investors are looking for.

A Scrappy Team

Canopy’s execution since its last raise has not been especially impressive. But the team’s scrappiness boosts the company’s evaluation. 

Kim Rosenberg, Joe’s wife, joined the company as a co-founder. Thanks to her, the founding team doubled in size. Her management experience in finance makes her a good addition to the team.

Neither co-founder is getting a salary. It is usually a good sign when founders believe so much in their startup that they are willing to work for free. Of course, few passionate founders have the financial bandwidth to grow their company without income. Joe sold his previous wine business for enough money to be able to afford it. 

Joe’s passion paid off. Canopy was accepted into StartX, Stanford’s startup accelerator, in the fall of 2021. Getting admitted into StartX is not easy, especially for startups with no relation to Stanford. Hopefully it will give Canopy’s founders access to a network of brilliant medtech founders.

Facing Forward 

Joe has clear goals for Canopy’s future. In 2023, he wants to make the company cash flow positive and grow his direct-to-customer sales, which help ensure Canopy’s survival while it waits to sell to healthcare professionals. Most importantly, Joe wants to work to ensure a good product quality, which will be essential to getting NIOSH certification. Once the company gets NIOSH certification, it will focus on selling to hospitals and healthcare facilities. 

In 2024, Joe wants to close a deal with one of the three major health trust purchasing groups that act as middlemen, buying products in bulk for hospitals to help them reduce costs. Doing so would get Canopy’s product into hospitals more easily. That might be difficult, given that Canopy faces a large number of competitors, but it would be a good step in the right direction. 

As sales grow, the startup should increase its gross margin from 65% to 80% and might break even when it reaches $300,000 in revenue, according to the founder. However, he would prefer to invest profits back into the company to fuel its growth.

So far, Canopy has made fair progress given that it’s been addressing a direct-to-consumer market — a market that is not the company’s end goal. At $150, its mask is too expensive for most customers. And most Americans do not even wear masks every day anymore. But selling to everyday consumers is Canopy’s only way to generate revenue for now. The company will have real growth potential if and only if it secures the NIOSH certification. Encouragingly, Canopy’s awards and relations with healthcare providers show that professionals would be willing to use its mask.

About: Léa Bouhelier-Gautreau

Léa is passionate about impact investing and sustainability. Prior to KingsCrowd, she worked for Stanford’s accelerator, StartX, helping to select the most promising entrepreneurs. She also led the first award-winning study on the Malawian startup ecosystem. In her free-time, she volunteers to help entrepreneurs in Cameroon, Brazil and Colombia. Léa holds a degree in Anthropology from France and is currently enrolled in the UC Davis MBA program.

View more articles by Léa

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