Ember Fund

Ember Fund is raising via a Crowd SAFE with a valuation cap of $80 million and no discount. In 2021, the company registered a revenue of $1.4 million, which yields a valuation-to-revenue multiple of 57x. This is overvalued when compared to the financial technology sector, which has an average multiple of 15x. In comparison, Coinbase, a cryptocurrency exchange platform, had an average valuation-to-revenue (or price-to-sales) multiple of 12x through 2021.  

Ember Fund grew its revenue by 4.5x from 2020 to 2021, so its valuation could become justified if it maintains the same level of performance over the next few years. However, Ember Fund is overvalued for the current round.

Ember Fund operates in the cryptocurrency asset management market. It is a rather small market that’s estimated to be worth $486 million in 2022, with a rapid 21.5% compound annual growth rate (CAGR). Ember Fund’s global app allows individuals to invest in cryptocurrency, decentralized finance (DeFi), or metaverse index funds. The app manages investments for users by providing hedging strategies, which can mitigate risk. 

The market is growing rapidly because a growing number of retail investors want to invest in these spaces while reducing their risk. Cryptocurrency is an especially volatile investment. Ember Fund’s platform responds to that demand by managing portfolios and lowering the risk. This is very valuable to investors who want to get in the market but don’t know how to or don’t have the time to do research on each individual coin. 

Market capitalization is a good indicator of the worth or potential of cryptocurrency. And Ember Fund is helping its users get in on a very large market opportunity. The global cryptocurrency market capitalization, which is the number of coins in circulation multiplied by the coin prices, stands at $1.2 trillion. And it has been growing strongly at an average rate of 175% year over year since 2017. The growing demand for digital currencies is due to several reasons, including strong security, low transaction fees and big profit potential. Additionally, cryptocurrency has been gaining popularity in developing countries with unreliable central financial institutions. As cryptocurrency continues to grow, the demand for investing platforms will grow along with it.

Lastly, Ember Fund’s app has also recently expanded to include metaverse and DeFi index funds. The global metaverse market was worth $47.5 billion in 2021 and has a 39.5% CAGR. The global DeFi platforms market was worth $13 billion in 2020 and has a 43.8% CAGR. Ember Fund also plans to add a non-fungible token (NFT) index fund in 2022. The global NFT market was worth $1.6 billion in 2021 and has a CAGR of 22.1%. Investors will likely want to invest in these quickly growing markets, which would increase Ember Fund’s market opportunity. 

Overall, Ember Fund is operating in a small market of cryptocurrency asset management. However, as it keeps expanding to include other digital assets, its targeted market size will expand as well. If Ember Fund can capture a fraction of these markets, it will generate a huge revenue stream.

Ember Fund CEO and co-founder Alex Wang holds a Bachelor of Arts in economics from the University of California, Berkeley. Prior to Ember Fund, he founded Carapace Wetsuits, a company that manufactures custom-fit wetsuits. Wang sold the company after four years of operations. His prior exit experience is a huge asset, since it increases Ember Fund’s chances of exiting successfully. Wang also has four years of managerial experience. He worked as a senior product manager for Alliance Global, a company providing strategic growth and development services for e-commerce companies. At GumGum, an artificial intelligence vision company, he served as a product manager. 

Second co-founder and CTO Guillaume Torche holds a master’s degree in computer engineering from the University of Technology of Compiègne. He has more than seven years of experience in engineering and machine learning. Prior to Ember Fund, he also worked at GumGum as a backend lead and data engineer.

Third co-founder and CIO Mario Lazaro holds a computer science degree from the University of Zaragoza. Lazaro also held software and engineering positions at GumGum for more than four years. There, he held managerial roles, such as expanding and leading a team while also helping grow revenue. His versatile skills are helpful for a fast-paced startup. 

Overall, the founding team has complementary skills and strong managerial experience. The founders’ shared work history suggests they already have a strong rapport, which is a positive signal for investors. Founders who know each other before starting a company are more likely to be able to collaborate and make group decisions more easily. However, it’s a concern that the founders don’t have experience in cryptocurrency or financial technology, although this could be justified because the cryptocurrency space is quite new.

Other than the founding team, Ember Fund has strong team members focused on engineering, product, and growth. And although the founding team might lack a financial technology background, the company has a network of advisors in the financial technology and cryptocurrency industry. For example, Advisor Rena Shah is the head of operations and strategy at Trust Machines, an app that aims to bring bitcoin to consumers and has raised more than $150 million. Ember Fund has other network advisors at notable companies such as The Honest Company and Airbnb.

Ember Fund also works with social media influencers as distribution partners, including Nicholas Merten. Merten has a cryptocurrency YouTube channel with more than 515,000 subscribers. Marius Kraemer, a Quora bitcoin writer, is also a distribution partner for Ember Fund. He has more than 67,000 followers. Both social media influencers could generate significant traction for Ember Fund.

Altogether, Ember Fund has a strong and diverse team. The founders appear well qualified to bring the company to an exit.

Ember Fund faces a few indirect competitors and a lot of direct competitors in the cryptocurrency investing space. Ember Fund is not the first company to create cryptocurrency index funds. Bitwise offers a cryptocurrency index fund for the largest cryptocurrencies. The biggest difference is that Bitwise is mainly for accredited investors, while Ember Fund allows anyone to invest with as little as $10. Two of Bitwise’s funds are now publicly traded, allowing retail investors to invest. But most of the company’s indexes are privately funded, so non-accredited investors miss out on investing early on. Accredited investors can also use Ember Fund. But Bitwise does offer a lower management fee of 2.5% compared to Ember Fund’s 3% to 4% annual management fee.

Another competitor is the cryptocurrency exchange Gemini. In addition to offering investments in individual coins, the exchange also offers users the option to invest in the DeFi Pulse Index fund. But Ember Fund provides a number of different digital asset portfolios in one platform. 

Ember Fund’s indirect competitors include other broker exchanges and apps such as Coinbase, Binance, and Crypto.com, which let retail investors buy and trade cryptocurrencies. Coinbase has more than 98 million users and $7.4 billion in 2021 revenue. Coinbase lets users create their own cryptocurrency index funds. However, unlike Ember Fund, it is not managed by investment professionals and so it still poses a risk. Ember Fund’s fees might be a bit higher than competitors because it charges recurring fees. Ember Fund charges 3% to 4% in annual management fees. Other platforms, such as Coinbase and Gemini, charge one-time transaction fees ranging from 0.5% to 4.5% depending on payment method. 

However, Ember Fund differs from the others by providing the opportunity to invest in both individual coins and diversified portfolios. The portfolios save investors time, especially for those who want to enter the cryptocurrency market at a lower risk or those who don’t have time to research every individual coin.

Ember Fund has multiple portfolios, including cryptocurrency, decentralized finance (DeFi), and metaverse index funds. According to CEO Alex Wang, Ember Fund mitigates digital asset investing risks by using a network of in-house analysis to build indexes, advising through artificial intelligence, and partnering with financial institutions to build models. The indexes also rebalance monthly depending on the market capitalization of each coin. All of that ensures high-quality investing, and many other platforms don’t provide the same level of risk management.  

Ember Fund users’ cryptocurrency coins are stored in a private wallet that neither the company nor third parties can access. This offers users a layer of security in case Ember Fund gets hacked. In contrast, a lot of Coinbase users can use either custodially held wallets or private wallets. This poses a risk to investors. In the event that the company goes bankrupt, investors could lose access to their holdings. Digital asset investments, unlike traditional investments, are not insured by the Federal Deposit Insurance Corporation. This also applies to other exchanges, such as Gemini. The only downside to Ember Fund’s private wallets is that if investors cannot access their wallets, Ember Fund cannot recover them.

Lastly, Ember Fund’s technology is not very defensible. Cryptocurrency apps, especially those with a large user base and revenue, can easily create index funds of different portfolios. Even though the company has filed a joint patent with Evite for gifting Ember Fund portfolios, its central idea is replicable. Index funds are not hard to create. 

However, what makes Ember Fund stand out and one of the reasons for its success is its accessibility. According to CEO Wang, Ember Fund is customized to each individual user depending on their location, use frequency, and interaction with content. Overall, Ember Fund strongly stands out among competitors.

Ember Fund’s performance has been very strong over the years. Between 2020 and 2021, its revenue increased by 355%, going from $305,821 to $1.4 million. Its revenue has been 95% higher than its cost of goods sold, which is much better than the financial industry average of 5.1% to 40.5%. According to Ember Fund’s Form C, the company seems to owe $1.5 million in both long-term and short-term debt, which would make the company’s total liabilities $3 million. However, a close look at the company’s offering circular shows Ember Fund has total liabilities of $1.5 million. That amount was duplicated in the long-term and short-term debt sections. And secondly, according to CEO Alex Wang, $1.4 million of these liabilities came from commissions for third-party investors who wanted to invest in cryptocurrency. This has been recorded in the debt section because Ember Fund would need to invest it later for the third-party investors. Therefore, Ember Fund’s liabilities currently stand at $148,000, which includes loans from the founders themselves and credit card payments. 

In 2021, Ember Fund recorded a net loss of almost $1.6 million, a 194% increase from its $541,610 loss in 2020. Nevertheless, as of 2021, the company can survive for 20 months without generating any income. This indicates that Ember Fund is in stable condition, as companies usually only need six months of runway to have a good standing. It is also important to mention that, according to CEO Wang, the net income loss in 2021 is a result of the company paying a one-time mining gas fee, which is used to pay cryptocurrency miners for blockchain transactions. However, as of February 2022, Ember Fund improved its technology and no longer pays mining fees, so it predicts it will be profitable in the future.

Ember Fund has already raised $6 million, partially from a crowdfunding round and also from notable angel investors and venture capital firms, such as Anthos Capital. Ember Fund is also backed by David Yeom, the CEO of Evite, a very well-known digital platform for scheduling events and delivering electronic gifts. Ember Fund has also partnered with Evite and filed a joint patent to enable Ember Fund portfolio gifting between friends and family. The partnership can add a stream of revenue and also earn Ember Fund more customer traction due to the popularity of Evite.

The company has more than 125,000 active daily users and has an invested customer retention rate of more than 80% after 12 months. This is above the average for the banking industry, which is around 75%. This shows that Ember Fund has built a loyal customer base. Ember Fund also has excellent average ratings in both the Apple store, with 4.6 stars from 1,200 reviewers, and the Google Play Store, with 4.2 stars from more than 6,000 users.

Overall, Ember Fund has performed very strongly since its founding in 2018. The company has been able to deliver a high-quality product that has caught the attention of many investors, partners, and customers. 

Ember Fund is a low-risk investment. The main risk for Ember Fund investors comes from this round’s investment terms. A Crowd SAFE is riskier than common or preferred equity if there is a subsequent round. If the next round’s valuation is lower than $80 million, investors’ shares won’t increase in value. This would mean they won’t be rewarded for investing early, despite taking on additional risk in doing so.

Another risk is the market. The cryptocurrency market is very volatile because it is influenced by many factors. Cryptocurrency has only existed since 2009, so it’s not firmly established. The lack of regulations also poses a market risk. Some countries restrict or prohibit cryptocurrencies, including China, which affects how far Ember Fund can expand.

Ember Fund’s last round on Republic ended in March 2020. Since then, the company’s valuation increased by 16x, going from $5 million to $80 million. This is justified, as its revenue grew by 812x from $1,710 in 2018 to $1.4 million in 2021. Although the company didn’t meet its revenue projection of $1.5 million in 2020, achieving close to that in 2021 is still a huge accomplishment. On the other hand, Ember Fund’s 2021 income declined to a net loss of $1.6 million. However, according to CEO Alex Wang, Ember Fund will no longer pay gas fees. In the coming years, this should lower the company’s expenses and help its net income recover.

The team also grew from four members to 10 members with diverse and balanced skill sets. The product has also improved a lot. In the previous round, users were only able to invest in 13 cryptocurrencies. Ember DeFi now offers 15 cryptocurrencies. The company has also launched a metaverse index that captures the top 16 metaverse projects, which is rebalanced  monthly. According to Ember Fund’s website, the metaverse index has earned 41.9% in returns.

Another big milestone the company achieved is raising about $5.3 million in capital from notable investors and three different venture capital firms. The company has also managed to secure a partnership with Evite and file a joint patent that allows users to gift Ember Fund portfolios to family and friends. This partnership will likely bring Ember Fund more customers and revenue in the future.

Lastly, Ember Fund is developing a business-to-business-to-consumer channel that will allow big investment managers to use the app and build portfolios. Although this is still undergoing testing, it could become another revenue channel for Ember Fund. Because of the accomplishments and consistent growth Ember Fund has achieved, it still stands as a good investment opportunity and thus remains a Top Deal.

Ember Fund operates in the global cryptocurrency asset management market. The market is estimated to be worth $486 million in 2022, which is small compared to other industries. Since Ember Fund is valuing itself at $80 million in such a small market, it may be pricing investors out of decent returns. Secondly, the cryptocurrency market is volatile, which could impact Ember Fund’s market opportunity. Several countries, including China, have banned cryptocurrency transactions, and it is possible that more countries will ban cryptocurrencies in the future. This is mainly because it is a new market, and it might take time for institutions and countries to build trust in cryptocurrency.

Lastly, Ember Fund’s technology is not very defensible. Even though the company has a patent-pending technology, bigger apps can easily launch index funds focused on cryptocurrencies, decentralized finance, or the metaverse. Gemini’s DeFi Pulse Index is an example of a diversified digital asset portfolio that offers the same concept.

Ember Fund operates in a market that’s growing rapidly at an annual rate of 21.5%. This is largely because of the growing market capitalization of cryptocurrency, which signals that more people are investing in cryptocurrency. It’s also important to mention that Ember Fund has recently expanded beyond cryptocurrency to decentralized finance and the metaverse, which means it now has bigger market potential. It also plans to expand to non-fungible tokens in 2022.

Although cryptocurrency is volatile, it could be an advantage for Ember Fund. The company’s app reduces the risk of investing in cryptocurrency through a diverse portfolio managed by professionals, so it could attract more risk-averse customers. Ember Fund’s portfolios also have a track record of high returns, which makes them even more attractive to customers. 

Ember Fund also has users across the globe. Even if some countries might ban cryptocurrencies, others might adopt it, especially in emerging markets such as El Salvador. Therefore, Ember Fund will still likely have a wide market. Even with economic volatility and uncertainty, Ember Fund grew its revenue by 355% from 2020 to 2021 and expanded its customer base.

Ember Fund has a very strong team. Even though the founders might lack blockchain or financial technology experience, founder and CEO Alex Wang brought a previous company to an exit — a promising signal for investors that he is capable of doing the same for Ember Fund. Ember Fund is also supported by a network of notable investors, advisors, and venture capital firms.

Lastly, Ember Fund has a strong vision. The company is expanding its business channel to serve asset managers. And according to the founder, it is also building a model to understand users’ behaviors and how they interact with content. This will allow the app to customize content based on each user’s level of knowledge. In the future, the app will also provide educational content.

Ember Fund is a financial technology app that allows retail investors to invest in several diversified digital asset portfolios, including cryptocurrency portfolios. By investing in index funds, users are able to invest in multiple different projects, which mitigates their investment risk. Ember Fund is currently valued at $80 million and has a valuation-to-revenue multiple of 57x, which makes it overvalued. 

However, Ember Fund operates in a market that is rapidly growing at a rate of 21.5% year over year. Ember Fund also recently expanded beyond cryptocurrency to target  the decentralized finance and metaverse markets. One of Ember Fund’s co-founders has a prior exit, which demonstrates that he is capable of bringing Ember Fund to an exit as well. The company also has a strong network of advisors in the financial technology industry to guide it throughout its operations. 

Ember Fund has growing revenue and good traction, with a growing customer base and strategic partnerships. The company is also backed by notable venture capital firms and has managed to raise $6 million from investors, both accredited and non-accredited. Lastly, since Ember Fund’s last round that ended in 2020, it has added new portfolios, expanded its team, and grown its revenue. For those reasons, Ember Fund has been rated a Top Deal by the KingsCrowd investment team.

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

Analysis written by Yasmin Sharbaf, May 24, 2022.