Edify.ai is offering a Crowd SAFE at a valuation cap of $12.5 million with a 20% discount. This price is moderate for an early-stage company and slightly below average when compared to other startups currently raising funds. It represents a revenue multiple of 27.7 times based on Edify.ai’s 2020 revenue, which is decent for a software-focused company. The discount on this round also helps ensure a fairly good deal for investors. Due to all these factors, the price score for Edify.ai is strong.

Employee health and safety (EHS) software is a small share of a rather niche market, however essential it may be. A report by Verdantix estimates that EHS software will reach a size of $1.47 billion in 2021. The market is predicted to grow at a 11.5% CAGR to reach $2.5 billion in 2026. Until very recently, workplace safety was primarily a paper-driven process each business handled internally. That’s beginning to change with companies like Edify.ai. Innovation is focused on developing new software and shifting from on-site management to Software-as-a-Service models. Lower costs driven by innovation have made it easier for small- and medium-sized companies to invest in these systems.However, the market is still developing, and the full market demand for these services is still being determined. This uncertainty and small market drives Edify.ai below average score in the market metric.

Edify.ai CEO and co-founder Cory Linton holds an MBA in finance and marketing from Columbia Business School and is a longtime specialist in management of software companies. Linton spent nine years at Microsoft, ending in a role as executive communications manager. After his time at Microsoft, he spent 12 years in the management of School Improvement Network in Salt Lake City. Climbing from vice president of sales and marketing to COO, he helped steer the business to greater heights and an eventual exit. Linton also holds five patents, though none appear relevant to Edify.ai.

Co-founder and CTO Brian Kennedy holds a BS in computer information systems from DeVry University. Kennedy’s credentials are a little more obscure than Linton’s. He started out in Arizona as a developer for Travelbridge, which collapsed in the dot-com bust. He began in the startup space by co-founding Desert Rain Software in 2003 and started his own business, Kennedy Computer Consulting, in 2008. He also served as CTO and one of the founders for CloudLink ERP Solutions. In early 2015, he founded Willow.ai, a more generalized artificial intelligence offering he still manages today. Kennedy is a self-taught coder.

Beyond the co-founders, Edify.ai has three other key team members. Technical software skills are covered by Software Engineer Scott Johnson. Customer Success Manager Bonnie Bartleson brings a key client-facing focus to Edify.ai. Lastly, Collin Anderton supplies managerial and operational knowledge to his role in sales and strategy. 

Overall, the Edify.ai team brings an encouraging balance of technical and managerial skills together. Co-founder Linton has helped bring another business to a successful exit, an experience which bodes well for Edify.ai. Kennedy also brings ample entrepreneurial knowledge, and some of the co-founders’ skill gaps have been filled by the other key team members. Due to this strong talent mix, the team score for Edify.ai is very high.

The main advantage that Edify.ai has is the lack of dominant market players in employee health and safety (EHS) software. That’s not to say there aren’t emerging competitors, including startups like Worklete that are also employing artificial intelligence to improve worker safety. On a more direct level, SiteDocs and EHS Insight are among other systems offering digital versions of paper management. Both of these companies offer more comprehensive software solutions than what Edify.ai has developed. The main distinction that Edify.ai appears to have is its use of artificial intelligence. Both SiteDocs and EHS Insights allow businesses to create custom forms for documenting workplace incidents. Both also enable companies to review data and analytics associated with their workers and incidents. These are services which Edify.ai is also offering, resulting in little product differentiation for the company. Additionally, the startup also holds no patents for its software. Even if Edify.ai were doing something drastically different from its competitors, it has very low defensibility at this time. Although Edify.ai is entering a young market with little established competition, it has yet to create anything substantially different from what is readily available. Thus, the market score for the company is middle-of-the-road.

Edify.ai has seen consistent and steady growth thus far. The business took in $445,759 in 2020 revenue with $421,203 in cost-of-goods-sold. This revenue is up 271% from $120,000 in 2019 revenue. In building up this business, Edify.ai has taken on just over $1 million in short-term debt and $745,300 in long-term liability.

Edify.ai has managed to generate decent traction through a pandemic that led many businesses to tighten their belts. Current customers include a Fortune 50 technology company building data centers, a large construction insurance brokerage, and several top general contractors. The software has more than 1,400 paid monthly users as of Q2 2021. In addition to forming some unnamed partnerships for expanding its business within existing customers (perhaps a justification for a lack of marketing among the leadership team), Edify.ai has raised $700,000 in prior funds through friends-and-family raises. 

Due to the company’s increasing traction and growing revenue, Edify.ai scores well in the performance metric.

The risk profile for Edify.ai is average for a startup investment. The main area of concern is the company’s financials as Edify.ai holds a fair amount of debt. There is $1 million in short-term debt, and Edify.ai saw less than half that in its most recent year of revenue. Another concern is the company’s currently low margins. As a software company, Edify.ai should be able to operate as a high margin company. However, in 2020 it only achieved a 5% margin on its cost of goods sold. That figure is extremely low and casts doubt on the company’s ability to achieve profitability.

Additionally, Edify.ai also faces a market risk. As an early mover in an emerging market, the company could struggle to find enough demand for its products. Employee health and safety is also a highly regulated sector. Edify.ai will need to remain nimble and adapt to changing laws and rules in order to be a force in the market. 

Lastly, the company also faces time challenges. In particular, Edify.ai is likely to have a long sales cycle due to its business-to-business model. Obtaining and onboarding new clients will be a time intensive process for the company, and this will push the timeline for profitability further out.

In any market as small as employee health and safety software, there is limited room for a startup to dominate. Digitizing health and safety forms is a valuable service to provide — but not a particularly innovative one, nor one that can’t be duplicated by competitors in a narrow market. User questionnaires collected digitally and analysed through the power of artificial intelligence could be quite useful, but they don’t provide ample differentiation or defensibility on their own. A patent shield or notable proprietary innovation would go a long way to ensuring Edify.ai could maintain its presence in the space. 

In a business world seeking to digitize and streamline processes, Edify.ai is offering a platform for preventing incidents and tracking employee safety. Though the software has some defensibility concerns, it is appropriately differentiated from existing pen-and-paper options. Results from customers indicate that construction companies are saving money and time, which bodes well for future traction. Edify.ai has also seen growing revenue, and it has a well-balanced team leading it. 

Edify.ai is a software-as-a-service (SaaS) company offering businesses access to artificial intelligence-based platforms that help manage their workers’ safety. Edify.ai’s software aims to save businesses substantial amounts of money by predicting and targeting which individuals are most at-risk. The platform is primarily intended for construction companies, which tend to have high risk of worker injury, but Edify.ai plans to expand to worker’s compensation and other areas as it optimizes its software.

The business has seen a consistent and considerable rise in revenue and traction in the past couple of years, and its growth appears likely to continue. The business has a Fortune 50 tech company as one of several customers and has more than 1,400 paid monthly users. The business does hold significant short-term debt, however. In addition, while the digitization of safety management does make for a differentiated product, there are some defensibility concerns for a product in a somewhat narrow market. Therefore, Edify.ai is a Neutral Deal.

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

Analysis written by Benjamin Potts.