Before diving into Doughp’s valuation, investors should first note that the company’s gross revenue for 2022 was about $3.7 million. This is higher than the number reported on Doughp’s Form C, which was actually net revenue of roughly $3 million. Therefore, Doughp essentially had flatline revenue figures from 2021 to 2022 (roughly $3.7 million for both years). 

Doughp is raising at a $15 million valuation. That means that the company is raising at a valuation-to-gross-revenue multiple of around 4x. That is extremely enticing for investors as we rarely see startups with this much traction raising at valuations this low. Therefore, I believe that Doughp is undervalued and this round represents a great entry point.

At a $15 million valuation, Doughp will need to achieve an exit valuation of at least $200 million to $250 million for investors to see a 10x return in this round (accounting for dilution). 

The U.S. cookie dough market is worth $3.1 billion. While this is not a massive market, it is still large enough for Doughp to grow into a leading brand and become a $200 million company. If the company can reach $50 million in revenue, a 5x revenue multiple exit would lead to a 10x return for investors in this round. Given the success of Doughp thus far and its big retail launch plans in the future, I can certainly see this happening in the next five years. 

While the Doughp founding team doesn’t have prior experience in the consumer packaged goods space, they must be given credit for navigating the company to this point and through a major company pivot. Doughp used to exclusively operate in-person stores that ran much like ice cream parlors. Once COVID made that model impossible to continue, the company pivoted to selling the product online. And the team has done an AMAZING job with this. And beyond that, the team has managed to convince some of the most well-known (and tough to get into) retailers to purchase Doughp products. Given how successful the company has been thus far, I believe that Doughp has the team in place to continue guiding the company toward an acquisition.

When it comes to consumer packaged goods companies like Doughp, differentiation is very difficult to achieve. You can’t patent a recipe. So all investors can do is analyze the company’s traction and brand.

The competitive landscape is dominated by two legacy food brands: Nestlé and Pillsbury. However, these two companies’ products are seen as mega-processed and dangerous to eat (although they do have a few edible dough products). The opportunity for new brands like Doughp to enter the space has never been better, and the company has made quite a splash. Doughp is consistently ranked as a top edible cookie dough brand by many blogs. Its differentiation is in the brand it has created, and large retail players like Costco have taken notice. It also helps to have the backing of “Shark Tank” and its fan base for continuing to grow the brand. 

Doughp has had phenomenal traction so far. The company had $3.7 million in gross revenue  last year and is currently launched in 1,000 retail locations so far. This includes Costco (41 locations), which is notoriously difficult to get into. Other retailers include Target, Kroger (nationwide), and Harmons. For a consumer packaged goods company, potential acquirers want to see traction in both direct-to-consumer (online) sales and retail sales. Doughp has seen great success in online sales (propelled by two appearances on “Shark Tank”) and is now seeing excellent traction in the retail space. 

Doughp also has a strong mission to donate a percentage of sales to support mental health and addiction recovery centers. The company has donated more than $100,000 to these types of organizations to date. The charitable aspect of Doughp’s mission can serve to attract more customers, as many people may feel an emotional connection to the company’s purpose.

The cookie dough space is dominated by legacy companies like Nestlé and Pillsbury. Those are likely the companies you think about when you remember licking cookie dough off the spoon as a kid. Competing against players like this is obviously going to be very difficult for Doughp. 

Additionally, it must be noted that the company’s revenue did not grow at all from 2021 to 2022. According to the company, this is because Doughp was just beginning to prepare for a widespread retail rollout and cut down on its direct-to-consumer marketing drastically, leading to a flatline in sales. While I believe this is a valid argument, the static year-over-year revenue still contributes to Doughp’s risk profile. 

The beauty of consumer packaged goods companies is that they are very easy to analyze from an investment standpoint. Investors need to ask the following questions: Does the company have traction in both direct-to-consumer and retail environments? And has the company created a strong brand?

For Doughp, the answer is yes to both. The company generated more than $3 million in gross revenue last year and is currently selling in 1,000 retail locations so far — including Costco, which is notoriously difficult for new brands to get into. In terms of establishing a brand, Doughp has been ranked very highly on a number of online lists of best cookie dough (often No. 1). The company is becoming an established brand, and retailers like Costco are putting full support behind the Doughp vision. That makes Doughp a very exciting opportunity for investors like us.

Edible cookie dough company Doughp represents an opportunity to invest in an impressive consumer packaged goods company that has shown extremely solid traction both online and in retail stores. With a reasonable valuation, strong team, and great-tasting product, I believe that Doughp has the potential to become a 10x investment within the next five years. 

Report written by KingsCrowd Senior Investment Analyst Teddy Lyons on May 25, 2023.