KC Underweight Deal: Growing Organically But Not Financially

Summary

Today we are taking a deep dive on one of the newest equity crowdfunding deals over at Mr. Crowd: Organic Living, Inc. The company provides organic vegetables and fruits, along with landscaping services and gardening consulting for customers with a backyard garden of fruits, vegetables, and herbs.

The founder of Organic Living, Jai McFall, has been an organic gardener for over 50 years and has translated her knowledge, experience, and skills into Organic Living. In a way, she is the business. McFall/Organic Living teaches individuals to grow healthy and nutritious food in their backyards and community supported agriculture gardens. The company also supplies healthy plants and soil conditioners to customers.

Organic Living brings with it a vision of restoring quality of health through organic food consumption for all. The company offers a 7 Steps to Vitality Program to provide customers with the knowledge, skills, tools, and training to go organic.

Laudable goals aside, we are of the opinion that what most would consider to be a hobby doesn’t always make for a profitable business. More on that later.

Organic Living was founded in 2010. Even after being in business for over 8 years, the company is still losing money and profits seem a far off dream. Moreover, the products of Organic Living, including superfoods for plants and multi-functional tonics for pets, are not quite differentiated from anything a competitor could offer.

Below we expand upon our concerns regarding Organic Living in detail. As always, investors should assess the future potential of any company before investing their hard-earned money.

Organic Living: Raising on Mr. Crowd

Losing Money

Organic Living has been operational since 2010. Even after being an operating business for about eight years, the company is still generating losses.

For the financial year ended December 31, 2017, Organic Living reported net revenue of $25,147 and a net loss of $8,125. The net loss has reduced as compared to the previous years; however, the company has failed to demonstrate steady financial growth.

The company plans to use the proceeds of the crowdfunding on the purchase of a wellness center, a garden center, and a mineral mine, and for the installation of irrigation systems and a professional kitchen. We are doubtful that the company will be able to generate expected returns on investment considering the poor past performance.

Lack of Differentiation

The products and services offered by Organic Living include seminars & lectures, consultations, soil testing, Brix testing, and organic herb and vegetable plants and soil mineralization products. Our concern is that the products and services are quite generic and not differentiated enough to set them apart from competitors.

Due to the absence of differentiation, the products may not be able to achieve consistent profitability. This is the age-old problem of any commodity-based business. To raise prices and make a profit only serves to attract competitors.

Everyone Needs a Hobby?

Organic Living helps its customers to find affordable and sustainable alternatives to mass market plants, vegetables, and fruits. It helps them give control over where their food comes from and a trust that the food has been grown under organic standards. It also offers landscaping services and organizes workshops for those who want to learn organic farming.

In essence, Organic Living is an extrapolation of gardening as a hobby. It assists people with interest in gardening and organic farming through its products and services. It’s also worth noting that as a learning-based gardening evangelist, Organic Living’s job is to teach others to garden on their own. Once this knowledge is acquired, they’ll no longer be in need of Organic Living’s services.

Uncertainties

Organic Living is also subject to the risks associated with crowdfunding, in general. The valuation of the company is based on a limited operating history and a rosy view of the future.

We are unsure of how the valuation was determined. We wonder how a business that is generating losses on tens of thousands of dollars in revenues after years of operations with limited signs of future growth, and lack of differentiation could be worth $2 million.

Losses are common with early stage companies but given Organic Living’s lack of p rofitability in parallel with its labor intensive, local business model shows minimal opportunity of providing returns to investors with the current offering structure.

Rating

Due to the lack of a favorable financial history, lack of growth, and lack of differentiation of the products, we have assigned the rating of an Underweight Deal to Organic Living.

The company has not been able to generate meaningful revenues or profits in spite of being in the business for about a decade. The future does not look promising, either. To top it all, the products and services offered by the company lack uniqueness and differentiation. We would advise investors to exercise caution with this deal.

If you have any questions regarding the underweight rating of Organic Living, you can reach us at hello@kingscrowd.com.