A Highway for Fish
Imagine asking a fish to take the stairs. Crazy, right? Well, fish are forced to take stairs — called fish ladders — to cross dams. Fish ladders are stairs where some of the reserve’s water flows down to let the fish jump up from ladder to ladder and allows them to cross the dam.
Fish ladders have negative effects on biodiversity. The fish are using tremendous amounts of energy to cross this ladder and not all of them make it. Only 3% of the key species actually reach the part of the river where they are supposed to reproduce. Ladders also have financial consequences. Dams lose 2% to 14% of their water by letting it flow over the ladders, according to Vincent Bryan III, founder and CEO of Whooshh Innovations. This is a loss of energy, potential electricity and revenue.
So Vincent had a better idea. He created a highway for fish. The highway is a tube in which a little bit of water is pumped downward, flowing from up to down and letting the fish comfortably swim up the dam. It also increases dams’ revenue as they have more water available to generate electricity.
Whooshh Innovations was rated a Deal to Watch during its last raise in 2021. At the time, the company impressed us with massive revenue growth of more than 1,000% between 2019 and 2020 and a promising and unique product. Did the company keep following this path?
The Plunge
Unfortunately not. Whooshh Innovations was hurt badly by the COVID-19 pandemic. According to Vincent, some of the company’s projects did not get permits for up to two and a half years as the administration slowed down. The demand in fish passage projects also dropped. Therefore, as sales need up to two years to turn into recognized revenue, the company’s revenue dropped considerably.
In 2021, Whooshh Innovations made only $482,379 — back to its revenue levels of 2019. It is completely understandable that Whooshh Innovations was hit hard by COVID-19. The company’s revenue depends partially on government grants, which were affected by the pandemic.
In 2022, Whooshh Innovations grew its revenue by 2x to 3x compared to the previous year. It is a good sign that its activity is starting to ramp up again. Vincent also told me that he already closed contracts for 2024 for a value similar to its 2020 revenue, around $5 million. This is great news. It shows that despite the downturn, dams still have interest in the company’s product.
But one thing doesn’t fit in the equation: the company’s valuation. Whooshh Innovations was valued at $84.9 million during its last raise for a revenue of $5.6 million. It was overvalued, but its valuation was not outrageous. It is now valued at $169 million for a revenue of more than $1 million in 2022. Even if we consider that the company has about $5 million in contracts for 2024 — which would bring its revenues to 2020 levels — the tremendous valuation increase is not justified as its revenues are going down and barely coming up.
For investors investing in 2023 to get a 10x return, the company would need to get acquired or go public at a valuation of $1.69 billion. The odds are very low that this will ever happen. First, the company would need to generate revenue of at least $200 million a year. That’s not impossible, but the road would be long and the company would face many risks and obstacles along the way. Second, there are only around 1,200 unicorns — startups valued over $1 billion — in the world so far, and only 8% are hardware companies. It’s a tough club to get into.
Overall, Whooshh Innovations’ current valuation is extremely unfavorable to investors.
Swimming Up the Dam — Again
Whooshh Innovations has a real value proposition and a diversified business model. The company makes money from sales and grants, as well as from subscriptions and the sale of its data. This diversity is a good start as recurring revenues and data sales allow for fast and continuous growth without being capital intensive. But I would like Whooshh Innovations to demonstrate a clear growth strategy to reach $200 million in yearly revenue. Hardware companies take time to grow. It must improve its processes and show a strategy to contact potential customers and close sales. Unfortunately, if the company continues its operations as it has in the past and simply hires more salespeople, it might not reach this revenue point.
I love Whooshh Innovations’ product and I hope it will be successful. It has a positive impact on biodiversity and increases the amount of electricity that can be produced from hydropower, a renewable resource. However, I only realistically see it succeeding as a small business. I’m pessimistic regarding its chances to give an interesting return for investors. Now it’s up to Vincent Bryan III to prove me wrong.
