Delee is raising a preferred equity round at a valuation of $22 million. The benefit of preferred stock is that preferred stockholders will have priority over common stockholders in the event of liquidation. However, in the event of liquidation, investors of this round will receive the same payout as common equity holders and will lose the benefit of voting rights. Furthermore, a valuation of $22 million with no revenue is on the high side of early-stage companies in the online private market. Therefore, Delee’s price rating is its lowest.

Delee operates in the cancer diagnostic market. In 2021, the global cancer diagnostic market was valued at $17.2 billion with a compound annual growth rate of 11.5%. North America accounts for the largest market share with 42%. With the current growth rate, the global cancer diagnostic market is expected to reach $26.6 billion in 2026.

The rapid growth of the cancer diagnostic market is attributable to the increasing demand for early cancer detection, since early diagnoses have been shown to increase survival rates and decrease the costs of treatment. Advancements in imaging systems have also propelled market adoption of newer technology. Delee will focus on the detection of breast, prostate, colorectum, and lung cancer, as those four types account for more than 40% of new cancer cases. Due to the large market size, escalating demand, and fast market growth, Delee receives an above-average market rating.

Delee co-founder and CEO Liza Velarde holds a bachelor’s degree in international business. A Y Combinator alum, she is responsible for the company’s fundraising, business development, and strategic planning. Over the last five years, Velarde successfully raised more than $2.4 million from investors and secured $2.5 million worth of pre-orders before the company’s product launch. In addition, Velarde was acknowledged as one of Forbes’ 100 most influential women in Mexico. 

CTO Alejandro Abarca and CMO Juan Felipe Yee are Delee’s other two co-founders. Like Velarde, Abarca and Yee are alumnis of Y Combinator. They both hold engineering degrees, Abarca’s focus being on physics and Yee’s focus being on biomedicine. Together, they created Delee’s CytoCatch isolation platform. Both Abarca and Yee have more than a decade of experience producing medical devices and biosensors, with several scientific papers published in international journals. Their expertise on circulating tumor cells greatly contributes to Delee’s product development.

In addition to the founders, Delee has a strong advisory board that covers engineering, scientific, and medical fields. Delee’s team also includes six research scientists, five design engineers, and three biomedical engineers. Overall, Delee has a robust cohort of founders, advisors, and team members. So the company receives an above-average team rating.

The isolation and analysis of circulating tumor cells (CTCs) is a relatively new practice and has a high barrier to entry. One of Delee’s strongest competitors in this practice is the CellSearch system, which is considered to be the first and only actionable test for detecting CTCs. The CellSearch system detects CTCs by capturing specific proteins on the tumor cell membrane. However, this method limits the efficiency of CTC detection. That’s because this method causes downregulation, which makes the proteins less responsive and therefore harder to study. 

Delee’s technology can isolate CTCs irrespective of the proteins expressed in their membranes by using a sample enrichment method. This method is based on the differences in size and deformability between blood cells and CTCs and therefore avoids the downregulation that could cause the loss of valuable information. The company’s technology also has a patent pending to increase its defensibility. Therefore, Delee stands out against its competition and receives a high differentiator rating.

Delee’s performance has been fairly strong up to this point. Despite being in a pre-revenue development phase, Delee has a relatively low monthly burn for a team of 20-plus researchers and engineers. The company also successfully raised more than $2.4 million in prior funding. This is crucial for a biotech company, as biotech tends to require a lot of capital. Furthermore, Delee has very little short-term debt and no long-term debt. The company’s balance sheet yields a healthy 100-times asset-to-debt ratio. This ratio greatly reduces investors’ risk in the event of bankruptcy. In addition, a potential value of more than $2.5 million in pre-orders is also a great indicator of Delee’s future revenue. Therefore, Delee receives a high performance score.

Delee has a below-average risk profile overall. Time risk stands out as the greatest risk, as the company could potentially take a long time to scale production. Delee has completed its prototype and is ready for commercialization. However, the raise page doesn’t indicate that Delee has a clear production and manufacturing road map, which is concerning. Sales and distribution may also be impacted if Delee draws out scaling its production for too long, since there would be fewer products to sell.

Delee previously raised a $1.07 million maxed-out offering round on Republic that ended in April 2020. The deal terms for the round were a SAFE with a $10 million valuation cap and no discount. Investors from that prior round will convert their SAFEs to equity shares for the current round. The previous round on Republic received a Deal to Watch rating by the KingsCrowd investment team.

Delee’s current preferred equity round has a valuation of $22 million, which yields a 120% increase compared to the previous SAFE round. In addition to the valuation increase, the current round’s preferred equity investors should be aware that their shares may be diluted. Since the last round, Delee has reached several milestones. The company has improved the capabilities and reliability of its prototype and completed the commercial version of the circulating tumor cells isolation and imaging device. Delee also expanded its partnership with medical institutions and increased the number of processed patient samples. This milestone should help Delee in future clinical trials. The company also hired additional team members in preparation for its commercial launch.

Overall, the milestones that Delee has achieved justify its increased valuation. The current round’s investors still have the potential to make a valuable investment. Therefore, Delee maintains its Deal to Watch rating.  

Delee’s current hurdle is commercialization, which consists of manufacturing, marketing, sales, and distribution. Without successful commercialization, it would be difficult for Delee to bring its product to market. In addition, isolation and analysis of circulating tumor cells is still a relatively new practice and is largely unknown to those without a medical background. Therefore, Delee will need to play the role of an educator for the early adopters in the market. This role requires a bigger marketing effort and expense, which hinders the company’s profitability. Furthermore, Delee has yet to acquire FDA clearance, which is necessary for the company to expand its market to hospitals beyond research purposes.

Detecting cancer early can save lives and money, which is escalating demand for early cancer detection tools like Delee’s. This demand is driving a rapid growth of the cancer diagnostic market. Delee is capitalizing on this opportunity with its device, which isolates and analyzes circulating tumor cells. Delee’s founders are a balanced team of experienced business and technical experts. The company also has a robust research and engineering team dedicated to product development, which should help Delee provide a better product than its competitors. Many articles have featured Delee’s technology for its proof of concept. Its medical devices are further validated by more than $2.5 million in pre-orders. In addition, even though the company is pre-revenue, a strong balance sheet gives investors peace of mind. If Delee continues with its progress, it could become a solid mergers and acquisitions target for biotech or pharmaceutical companies.

Delee is a cancer detection platform that isolates and analyzes circulating tumor cells (CTCs). The isolation and analysis of CTCs can greatly improve early cancer detection and treatment. Delee is currently in a post-protype and pre-revenue stage. There are some concerns about obtaining FDA clearance and finally reaching the market. However, Delee has reassuringly received more than $2.5 million worth of potential value in pre-orders.

Delee is operating in a fast-growing market due to the escalating demand for early cancer detection and more effective treatment. Furthermore, the company’s founding team is composed of both business and technical experts, which are an ideal combination. In terms of Delee’s financial health, a strong balance sheet helps protect investors. In sum, a thriving market, a solid team, and a healthy balance sheet make Delee’s current round an attractive investment. Therefore, Delee has been rated a Deal to Watch by the KingsCrowd investment team.  

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Zee Zhong, September 23, 2021.