Deal To Watch: The Company Pushing For ‘Change’

Key Stats:

Summary

At time of publication, January 16th, Bucket had raised $3.9K

The Bucket 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.

The Company

Bucket is basically a digital piggy bank, a fintech platform reshaping the way physical coin currency moves in society. Bucket instantly digitizes all coins from cash transactions at the point-of-sale. The concept is simple: pay with cash at a Bucket partnered retailer or SMB and receive a receipt with a QR code that’ll let you transfer the change you were supposed to get, minus the bills, into the Bucket app.

Bucket is on a mission to accelerate humanity’s transition to a digital economy, being the first global aggregator of coin currency value.

The Market

Although the fintech landscape is fragmented and saturated, there is currently no company attempting to deliver a solution like the one Bucket is trying to pioneer.

According to research, an estimated $62m dollars in coins are found in landfills every year adding to an already financially and environmentally unsound society.

In the past 5 years, over 73 billion coins were minted in the US. In 2015, 32% of all retail transactions in the US were still done in cash. Although that number has decreased since 2012, we take it that the reduction is a general shift in behavior towards a more digital world, not a loss in perceived value of physical cash. According to another study cash as a payment method is still very frequently used in 2017, when looking at the bigger picture.

In a 2017 PwC survey, 1308 individuals 18 years old or older were surveyed regarding their fintech usage.

The concept that Bucket is proposing has been validated by the more well-known late stage startup, Acorn. Although their business model is different, the idea is similar and centers around the behavioral insight that consumers do not want change, even when a card is being used, they would rather make transactions when whole numbers are involved.

Although cash is king, there is no stopping the world from being digital and Bucket is helping pave the way.

Why We Like it

1. Traction as First Mover: As alluded to before, Bucket does not have any direct competitors, but does face the challenge of consumer apathy. Being a first mover always comes with similar problems, but that should change once the company begins their pilot. In 2018, Bucket launched their MVP in Northwest Arkansas with a primary focus on providing a complete experience across all retail categories.

In 2019, Bucket is ready for a nationwide pilot beginning in LA and Northwest Arkansas. The company has key partnerships lined up with over 40 retailers and over 30 government-related, nonprofit, and private enterprise partners combined. Longterm, Bucket has the capability to operate across all 50 states eliminating a major concern for investors.
2. Long Term Capabilities: Although Bucket might only be seen as a digital piggy bank once it launches, the company has the potential to be so much more. For instance like Venmo and Robinhood, the team could get into mobile banking and other financial services.

The team has stated that they are looking to add investment accounts and payment systems in the future. The possibilities are plentiful with a company like this one.
3. Digital Transformation Tailwinds: Every couple of months for as long as we can remember, new startups emerge claiming to digitize one thing or another. We are nearing the peak of a digital revolution. Many markets have looked to digitize their products as they prepare for millennials to exceed gen X in spending power by 2020.

Millennials are the generational cohort known to be digital natives. Video, AR, Banking, among other things, have all gone digital. Bucket is leveraging this trend at the right time and can hopefully achieve economies of scale before a direct competitor shows up.
4. Business Model: Although Bucket has yet to generate any revenue, it’s no surprise for a company as early stage as they are. Once Bucket launches, we think that Bucket will start generating revenue but are unsure how long it’ll take them to become profitable. Despite this, their current business model is attractive and structured in a way such that they receive 2.5% to 3.5% on deposits.

99 cents is the most amount of change an individual can receive. 3.5% of 99 cents is 3 cents. Let’s say a retailer does 1000 sales a day. Across 70 locations, the total would be $2100 a day. 99 cents is best case scenario so the actual number might be smaller but regardless, Bucket’s strategy of giving their app free to consumers and implementation free to their partners is key. With little startup costs, the company is positioned to scale.

Summary

The founders of the company are Francis Hwang and Daniel Kam, both having founded startups in the past. Both founders are also crypto enthusiasts so they should be knowledgeable in the fintech space. The success of the company relies heavily on their leadership.

In speaking with the team, they seem both capable and honed in on the problem they are solving for, which provides reassurance that this is the right team to execute on such a unique vision.

Rating

Deal To Watch

Bucket is a Deal To Watch. With a strong management team, a blue ocean strategy, and first mover adoption as a tool to digitize change, we think this team is in a unique market position and can build a really scaleable business if they prove an ability to gain stickiness with consumers.

The main concern lies in how the team will overcome consumer apathy as they launch. While Bucket’s idea seems very appealing in theory, in practice it might be a turnoff to consumers that can just as easily put their change in the tip jar. Marketing, word of mouth, and widespread retailer adoption are key to mitigating this risk, but until we know how it is received by consumers we are tentative on the overall outside.

Regardless, this is a really intriguing investment opportunity than can see healthy exit opportunities by organizations like Acorn and Venmo, which we mentioned above.