Iris is currently raising via a SAFE (with no discount) at a $20 million pre-money valuation. This valuation is quite high in comparison to other early stage startups currently seeking capital. Furthermore, Iris is still pre-revenue, so its financial performance cannot justify a $20 million valuation. As a result, the price score for Iris is very low.

In the US alone, the revenue opportunity for the brokerage space comes out to about $187.2 billion. Between 2016 and 2021, the industry averaged a 4.5% growth rate per year. More specifically, the online brokerage market is worth $14 billion. It is expected to grow 5.9% this year to reach a size of $14.8 billion. Iris is currently focused on the smaller online trading market, where it will face established competition. The combination of a slow market growth rate and hefty competitors limits the obtainable market for Iris. If the company is able to expand into the more general brokerage space, it may be able to carve out a significant niche. But for now, Iris faces many hurdles in its target market. Thus, the company scores below average in the market metric.

At the helm of Iris is co-founder, CEO, and CTO Brian Schardt. Schardt has close to five years of software engineering experience at various companies, including Walmart Labs. He has also worked as the associate director of engineering at Warner Music Group, and he founded a musical instruments company early on in his professional career. Although one of Schardt’s software engineering positions was at an early crowdfunding platform, he has little other experience that pertains directly to investing or finance. His past entrepreneurial endeavors and technical background help to balance this gap and make him decently qualified to be CEO and CTO of Iris.

Co-founder Christopher Josephs is focused on growth at Iris. Josephs also works with two sports-related startups. He co-founded Customsportssleeves in 2017 and has been a co-owner of Nekton Sport since 2019. Josephs also worked as a financial analyst at New York Presbyterian Hospital for around a year. While his experience founding another startup could help him grow Iris, Josephs does not have other strong qualifications.

The third co-founder at the company is COO Aditya Lingampally. Previously, Lingampally was a principal at Oliver Wyman and a managing partner at Cordiff. He once worked as a senior consultant for West Monroe Partners, and before that, he was a team lead at Advocate Health Care. 

Aaron Langley is co-founder and director of engineering at Iris. Previously, Langley was employed as a software engineer at Glidewell Dental. He held the same role before that at Parcel Pending, and prior to that, he was employed as a chemistry lab assistant supervisor at Thomas Aquinas College. 

Scott Schardt is the final co-founder and head of engineering at IRIS. He has around 2.5 years of experience in software engineering and development and one year of experience as a business process consultant.

With the five co-founders’ combined experience, Iris has a strong foundation. Both the CEO and the head of growth have previous entrepreneurial experience, which bolsters Iris’ growth potential. And the team is fairly balanced with both technical and business-savvy founders. Overall, Iris scores well above average in the team metric.

There are a great number of trading apps out there, so Iris’ concept is not unique. In fact, the prevalence of these apps points to a major concern for Iris — defensibility. The barriers to entry for building apps is quite low, and Iris has no patents to defend its system. However, Iris has worked to set itself apart from basic trading apps. The ability for Iris users to see what other users are investing in and to copy their trades is a big differentiator. The social aspects are also a nice addition and help set the firm apart from big players like Robinhood. The only meaningful player today that comes close to this is Public. Overall, Iris’ differentiation scores above average.

Iris is still pre-revenue, and that alone is a big challenge for investors to overcome. On the other hand, the company does have a functioning platform and users. According to Iris, it has 47,000 users on its platform, including 11,000 monthly active users. It took the company nine months to grow to that point. Iris has also integrated with some major brokerage firms, allowing it to connect the accounts of more than 4,700 of its users. More than $175 million worth of investments have traded through Iris’s platform this year, and the company looks set to continue that growth moving forward. However, because of the absence of revenue at this time, Iris scores below average in the performance metric.

All things considered, the risk profile of Iris is low. The main areas of concern are in the market, team, and investment terms. Iris is operating in a highly regulated industry. It will need to adapt to changing rules while also providing a positive experience for its users. From a team perspective, Iris is unusual for having a large number of co-founders. With so many co-founders, there is a risk that it will be difficult to maintain a unified vision for the company. Additionally, if one or more co-founders were to leave Iris, it could struggle to replace them (and shares of the company would likely be affected as well). Finally, investors should be aware that Iris is offering a SAFE with no discount. The lack of discount makes the investment terms less attractive for investors. With a $20 million valuation and no revenue, the company is also overvalued in this round.

For a pre-revenue company, Iris’ valuation in this round is quite high. The company will need to thoroughly prove its product-market fit and solidify its business model in order to justify the lofty valuation it has set. While the company has shown some early traction by gaining thousands of users, it remains to be seen if the Iris platform will have staying power. Iris will also need to balance adapting to market regulations and creating an engaging user experience, especially since the platform’s social aspect is one of its main differentiators. Given a lack of defensibility, big name competitors like Robinhood could easily replicate Iris’ main advantage. Iris needs to move quickly and show significant success in a short period of time to secure its market niche.

It is impressive that Iris has gained nearly 50,000 users in its first nine months of operations. Combining a social aspect with online stock trading is a clever move that sets Iris apart from established competitors. The company has also completed the difficult work of developing a backend system that integrates with other brokerages. From here, the company can focus on growing its platform and creating defensibility. With a strong team of both technical and business-minded founders, Iris could be in the right place at the tight time to conjoin investing and social media. 

Iris is combining social media with stock trading to allow users to follow and copy their friends’ investments. Iris is operating in a highly competitive space with a significant degree of regulation. That said, firms that can navigate those waters will be rewarded handsomely. In addition to having a large market to appeal to, the company has the advantages of a low risk profile and standing out among its competitors. 

On the other hand, Iris is raising at a high valuation for a pre-revenue business, and the business does not have much in the way of defensibility. Although the market is large, it is also growing slowly. Balancing these factors together, Iris 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.