Gilgal General is raising at a valuation cap of $10.5 million in exchange for a SAFE with no discount. This price is not particularly high in comparison to other startups currently raising capital. However, Gilgal General has generated no revenue thus far, meaning there’s little justification for this valuation. Because of this, the company’s price score is below average.

The annuity space is a large market. According to one source, the annuity industry was valued at $222.1 billion in 2016. This increased to $241.7 billion by 2019, implying an annualized growth rate of 2.9%. Due to the COVID-19 pandemic, however, the value of annuities written in 2020 declined to $219.1 billion. Meanwhile, the total value of deferred annuity assets in 2020 still remained high at $3.36 trillion. Globally, this space is certainly larger. Given the regulatory differences seen from country to country, though, it is safe to assume that Gilgal General will be US-centric for now. Balancing the market’s ample size against its slow growth rate, Gilgal scores just slightly above average in the market metric.

The one key individual at Gilgal General is its founder and CEO, Alexander Ampontuah. Prior to starting this business, Ampontuah served as the CEO and partner at Gilgal Global Capital Management, a business focused on quantitative global macro investment strategies. Prior to that, he was employed as a fixed income market and credit risk methodology expert at Deutsche Bank. Overall, Ampontuah has nearly 20 years of experience working in financial markets. Although this does not translate directly to the insurance space, it is still very relevant to Gilgal General’s current goals.

Ampontuah’s financial knowledge is balanced by two software engineers, Bo Qian and Cenray Gangadharan. According to his LinkedIn profile, Qian also currently works as a senior software engineer at Bloomberg, a position he has held since 2017. He also boasts more than 10 years of experience in various software development positions beyond his current position. Gangadharan has spent the last 11 years working at RBC Capital Markets, first as a software consultant and most recently as an associate director and risk framework lead (which he lists as his current position). Before that, he had various software consultant positions. Neither Qian nor Gangadharan list Gilgal General on their LinkedIn profiles, so it’s unclear what level of time commitment they have at the company.

Ampontuah’s financial expertise is well-balanced by the technical skills of Qian and Gangadharan. As a result, Gilgal General has a strong team score.

There appears to be no firm similar to Gilgal General on the market today, which is excellent news for investors. There are plenty of insurance companies that are theoretically competitors, but on the other hand, those same firms could also add value to Gilgal General by using its platform. The closest thing to competition would be insurers that sell annuities directly to their customers, but again, this represents just a small piece of the annuity industry. The main risk to Gilgal is another company choosing to replicate its platform and system, especially since the company has no patents. Balancing this low defensibility against the platform’s unique place in the market, the differentiators score for Gilgal General is very high.

At present, Gilgal General does not have a completed and monetized platform at its disposal. It does have at least eight major insurance companies that have decided to test it when it is ready. It also boasts a four-year contract with InterContinental Exchange for market data sharing. In addition, the company intends to file at least six patents in the near future. However, the business is not yet generating any revenue. It generated marginal losses in 2019 and 2020, and so far this year, it is averaging costs of $4,520 per month as of April. Because of this relatively weak traction, Gilgal General’s performance score is its lowest across all five metrics.

An investment in Gilgal General comes with a high risk profile. The first area of concern is product. It is unclear if the platform can be successfully completed. Even if it is completed and functional, it is uncertain whether consumers will actually utilize it. At the end of the day, its primary users will likely be older Americans, who tend to be the least adept at using technology. Unproven product-market fit is a major risk for the company at this. Additionally, the annuities market is a highly regulated one. Gilgal will need to adhere to the latest laws and regulations, increasing the difficulty of maintaining and operating its platform. Lastly, the company has no prior fundraising, so there’s uncertainty as to how well it will execute with the capital it receives in this round.

Gilgal General does not yet have a functional platform and has generated no revenue. These factors make its $10.5 million valuation unjustified. Although Gilgal’s idea is very innovative, it’s also very unproven. The company may struggle to attract users, as many older Americans may choose to find annuities in a more “traditional” way. Additionally, Gilgal’s advantage of a “no fee” structure for buyers could be only a temporary differentiator. If the company finds success with it, it’s likely that the industry will make commission-less sales the standard — thereby destroying Gilgal’s moat. Future regulatory changes could also create pain points for the company, as it will need to adapt its platform to stay compliant.

Gilgal General is offering a highly differentiated product that its competitors might actually want to use. This could make it an attractive buyout target. The founder is highly experienced in the financial services industry, and he has brought on experienced software engineers to provide technical expertise. The market the company operates in is significant in size, and the outdated annuity sales process creates a huge opportunity for disruption. Throw in its pending patents and the partnerships that it has in place, and it is easy to see how promising Gilgal General could be.

Gilgal General has the potential to shake up the entire annuity market. Its product is so differentiated that it might appeal to its competitors, and the market opportunity is significant. In addition, the company’s founder and CEO is highly experienced, and the company has several patents pending. 

On the other hand, investors should take note of the relatively high valuation. Although the industry is large, it is not expected to grow quickly. The platform is still incomplete, meaning true product-market fit is still unproven. In addition, Gilgal General’s financial performance is lacking, and having a single founder could be a potential risk. Altogether the company is a Neutral Deal at this time.

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

Analysis written by Daniel Jones.