Hylio

Growth Stage

Autonomous drones for precision agriculture

Analytics

Raised to Date: Raised: $583,201

Aggregate Commitments $

Platform

StartEngine

Start Date

05/11/2021

Close Date

11/08/2021

Min. Goal

$10,000

Max. Goal

$1,069,996

Min. Investment

$200

Security Type

Equity - Common

Funding Type

RegCF

Series

Series A

Pre-Money Valuation

$35,000,000

Rolling Commitments $

Status

Active

Reporting Date

10/21/2021

Days Remaining

18

% of Min. Goal

5,832%

% of Max. Goal

55%

Likelihood of Max
unlikely
Avg. Daily Raise

$3,578

Momentum
warm
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Location

Richmond, Texas

Industry

Farming & Agriculture

Tech Sector

AgriTech

Distribution Model

B2B/B2C

Margin

Medium

Capital Intensity

Low

Business Type

Growth

Hylio, with a pre-money valuation of $35 million, is raising crowdfunding on StartEngine. The company makes innovative drone systems to automate agricultural processes. The automated drones of Hylio can be used by farmers to apply crop treatments directly to affected areas and increase their yields. Arthur Erickson, Nikhil Dixit, Mike Oda, and Nicholas Nawratil founded Hylio in 2015. The proceeds of the current crowdfunding round, with a minimum goal of $9,999.50 and a maximum goal of $1,069,995.50, will be used to accelerate the innovation rate and allow more producers to access the solution. Hylio has grown at the rate of 347% in year-over-year sales since 2019 and has customers across six countries.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$1,060,611

$254,038

COGS

$591,621

$94,390

Tax

$0

$0

 

 

Net Income

$84,542

$-94,309

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$156,651

$50,034

Accounts Receivable

$13,981

$49,334

Total Assets

$597,858

$367,807

Short-Term Debt

$194,284

$64,158

Long-Term Debt

$154,410

$149,027

Total Liabilities

$348,694

$213,185

Financials as of: 05/11/2021
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Analyst Report

Synopsis

The human population exploded during the last century, going from 1.6 billion in 1900 to six billion in 1999. This unprecedented population growth means less land is available to grow food As a result, agricultural advances have been centered around producing more with less. Innovations like genetically modified crops, pesticides, and new fertilizer techniques have resulted in far higher and more consistent yields

Still, farmers face new challenges in the 21st century that require yet more innovations in food production. From stringent government regulations seeking to protect consumers and the environment to declining prices threatening profit margins, farmers need all the help they can get.

Hylio seeks to bring the game-changing power of drone technology to agriculture. Its unmanned aerial systems (UAS) are developed in-house and provide farmers with floating, automated dispersal platforms for agrochemicals like pesticides. In addition to removing human error, drones offer several advantages for farming. They can spray precisely over broad areas and do not disturb the crops they fly over. Hylio’s backend system tracks every flight and can analyze fields to target “problem areas” for more efficient application of chemicals.

Hylio’s easy-to-use AgroDrones and AgroSol Ground Control software are already on the market and making a difference in farms across six countries. In the near future, it plans to launch subscription software upgrade services to offer customers more advantages over competitors.

Hylio’s current StartEngine raise has been rated a Neutral Deal by the KingsCrowd investment team.

Price

To enhance development of its product and expand its reach to producers, Hylio is raising capital through common equity at a pre-money valuation of $35 million. The valuation is high in comparison to other startups currently seeking funding. Although the company saw revenue of more than $1 million last year, this still is too low to justify such a high valuation. Thus, the price score for Hylio is below average.

Market

Hylio is targeting the global precision farming market that’s emerging from the rise of the Internet of Things (IoT). That market was valued at $6 billion in 2020 and is expected to grow at a CAGR of 13.1% over the next eight years. Most of its business comes from the agriculture drone portion of the market, which hovers around a limited $1.021 billion now. It could grow at a CAGR of 31.1% and reach as high as $5.19 billion by 2025. Thanks to providing every aspect of its crop-spraying service in-house, Hylio’s total addressable market share is larger than it otherwise would be. While the market isn’t particularly large, it is growing rapidly. This results in an above average market score for the company.

Team

Hylio’s growing team is headed up by four co-founders, all of whom are fresh out of the University of Texas at Austin. CEO Arthur Erickson has a Bachelor of Science in aerospace, aeronautical, and astronautical engineering with a specialty in atmospheric flight. While earning his degree, he worked as a field engineer with Laredo Energy, an oil and gas company based in Texas. Erickson was also an environmental engineer for Leggette, Brashears and Graham, Inc. His experience with both fracking and environmental standard compliance offers a broad perspective on responsible land management.

CTO Nikhil Dixit holds a master’s degree in architecture, computer systems, and embedded systems, also from UT Austin. Dixit started out while earning his Bachelor of Science with brief internships at semiconductor company Qualcomm and GPU design giant Nvidia. Between efforts to get Hylio off the ground, he returned to work for Nvidia as a computer architect. He left Nvidia in June of last year to focus on Hylio in earnest and is a driving force behind Hylio’s UAS technology.

CFO Mike Oda has been working as an entrepreneur since his pre-college days. He managed Pacific Arc, a small family business based in Texas that is a wholesale distributor for art and drafting supplies. He has a B.B.A. in finance and retains his leadership of Pacific Arc while he applies his experience to building up Hylio. 

Finally, COO Nick Nawratil holds a B.S. in aerospace, aeronautical, and astronautical engineering, and he worked providing utilities installation to the Austin region. He joined Hylio more recently upon graduating from UT Austin in 2017. 

All in all, the team represents a spectrum of logistics, engineering, and distribution backgrounds ideally-suited to startup management. As Hylio has grown, the UT Austin co-founders brought on three more team members in early 2019: Head of Media and Marketing Elisabeth Veerman, Operations Manager Salvador Ramírez, and Director of Sales Carlos Mercado. These supplemental team members are committed to other positions but help fill in some of Hylio’s experience gaps in development, engineering, and outreach.

Due to the wide breadth of skills and the presence of some entrepreneurial endeavors, the team score for Hylio is very strong.

Differentiators

It might be surprising for the average consumer to know that the agricultural drone market is somewhat saturated already. Trimble, for example, is a global provider of hardware, software, and services that sells unmanned aerial vehicles (UAVs) to agriculture and land surveys. Other providers include AgEagle Aerial Systems (apparently a client of Hylio), Yamaha Motor, and Israel Aerospace Industries. Many of these competitors are significantly larger and have been providing drones commercially for much longer than Hylio.

Costs of crop-spraying drones can range from $1,500 to $20,000, prices that are significantly lower than Hylio’s offerings. Hylio’s most expensive drone, the AG-122, comes out to $38,000, while the more modest AG-110 comes out to $22,000. There is no price advantage, first-mover advantage, or any patent protection held by the company. As a result, Hylio scores poorly in the differentiators metric.

Performance

Hylio has fully developed product offerings on the market and is satisfying customers. In 2020, Hylio took in about $1.06 million in revenue, more than quadrupling 2019 revenue of $254,038. This has built on $241,414 in previous investment, representing positive capital efficiency. Its assets-to-debt ratio is also quite healthy with $597,858 in total assets against $348,694 in total liabilities (just under $200,000 in short-term debt). It has also managed to secure a 46% gross profit margin, which is outstanding for an early-stage business. While its finances are impressive, Hylio has also smartly expanded outside the US to markets in Canada, El Salvador, Guatemala, Honduras, Colombia, and Ghana. With such strong early traction, Hylio’s performance score is above average.

Risks

Primary concerns around a Hylio investment are centered around its quality differentiation. It is unclear from public materials just how advanced Hylio AgroDrones and AgroSol are compared to competitors’ offerings. Hylio hasn’t won any research or innovation awards, nor secured any patents. It boasts that its software is easy to use and can seamlessly integrate with third-party map files. However, it doesn’t go so far as to claim a more proprietary product than, say, American Robotics, which proclaims itself the only company approved by the Federal Aviation Administration (FAA) to operate automated drones without humans on-site. If Hylio doesn’t manage to separate itself from the competition soon, the company may lose the opportunity to secure a market niche for itself. 

Bearish Outlook

With little to set itself apart from cheaper alternatives, Hylio is at risk of being shut out of greater potential for growth. Existing top competitors are likely to continue dominating the limited space in the agriculture drone market. Considering Hylio’s high valuation, the company will need to grow significantly in order to provide a return to investors. With so much competition and limited defensibility, such growth looks quite difficult for Hylio.

Bullish Outlook

Thus far, Hylio has demonstrated stellar traction across several markets with 347% growth in year-over-year sales since 2019. While that growth is unlikely to continue at its current rate, it could be enough to draw the interest of larger competitors for acquisition purposes. The space is ripe for it. American Robotics was recently acquired by wireless tech firm, Ondas. Hylio’s existing relationship with competitor AgEagle suggests such deals could be viable.

In addition, as the agricultural technology market grows, Hylio does have systems and relationships that could be essential. If it turns funds from this raise towards further innovation of its proprietary systems, it might even be able to rise above cheaper competitors as a higher-quality choice.

Executive Summary

Looking to a future where more population growth means more pressure on agriculture, Hylio is using drone technology to automate crop-spraying. Their RaaS (Robots-as-a-Service) solution provides farmers with precise and efficient agrochemical dispersal without risk of human error. This tech increases yields and lowers costs — the essence of good business.

Hylio has seen excellent traction across multiple countries and has developed its technology in-house rather than relying on partnerships with other drone manufacturers. It is also in excellent financial health. However, its services are somewhat pricier than existing market alternatives, and there is no hard evidence of superior product quality to justify the higher price. Combined with an absence of patent protection or proprietary innovations beyond competitors and a steep pre-money valuation, Hylio’s room for growth seems less than sky-high. Therefore, Hylio 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.

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Platform: StartEngine
Security Type: Equity - Common
Valuation: $35,000,000

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