Lil’ Libros is raising capital via preferred equity at an $11 million valuation. This amount is a fair valuation, given the company has generated more than $5.5 million in total revenue since launching in 2014. Lil’ Libros was able to generate $1.7 million in 2020 revenue alone, reflecting consistent year-over-year growth in revenue over the past six years. Currently, Lil’ Libros has a revenue-to-valuation multiple of 6.41x. That multiple is appropriate for a consumer product goods company. Furthermore, a valuation of $11 million is also reasonable when compared to other growth stage startups raising capital online. Lil’ Libros’ current funding round is attractively valued.

In 2021, the US children’s book publishing market was worth $2.5 billion and was growing at 2.1% for the year. It appears that children’s books publishing is a relatively small market that isn’t growing much. This market also contains many competitors, creating less momentum for market growth due to an oversaturation of competition.

Lil’ Libros might be able to capture a good percentage of the market share due to diversity and inclusion initiatives. An increasing number of parents will likely want to buy stories representing characters from all ethnicities, giving Lil’ Libros a competitive advantage. However, it’s not clear if these trends will be enough to set Lil’ Libros ahead, so the company’s market potential is limited at this time.

Lil’ Libros co-founder and CEO Ariana Stein received a bachelor’s degree in international business from California State University, Dominguez Hills. She was also a part of the thirteenth cohort for Goldman Sachs’ 10,000 Small Businesses program. She has experience working in real estate management and previously founded her own animal transportation company. 

Co-founder and COO Patty Rodriguez comes from the media world, as she has worked on the radio show On Air with Ryan Seacrest for more than 15 years. She also previously founded a jewelry company called Mala. 

Neither founder has prior publishing experience. However, Stein and Rodriguez have successfully built up the Lil’ Libros team over the past seven years. The company now has eight full-time employees, most being minority women. The team includes editorial, illustration, warehouse management, and financial roles. Furthermore, the team is efficient and has a diverse skill set, enabling the company to grow significantly. 

While the Lil’ Libros founding team has limited past experiences, the progress already made in building the company and overall team prove their skills. This team is strong and well-rounded.

Lil’ Libros faces a highly competitive market. Some of its direct competitors include Holiday House, Arbordale Publishing, and Flashlight Press. Although the children’s media publishing market is highly crowded and oversaturated, Lil’ Libros has made significant strides in establishing a unique brand supported by strong traction and high quality. Its emphasis on representing Latino culture and characters in fiction appeals to parents seeking diverse stories for their children. The company’s branding is very compelling, sporting more than 300,000 followers across all social media platforms and more than 1.2 million average monthly social media impressions. While these are encouraging signs for the company, Lil’ Libros is not strongly differentiated from its competitors in terms of business model or product. Lil’ Libros’ emphasis on Latino-focused children’s books can easily be replicated by other legacy publishers. It could be easy for Lil’ Libros’ books to be overlooked by consumers, especially in such a competitive space. A strong brand is the only differentiator that Lil’ Libros can really rely on, and that may not be enough to set the company apart in the market.

Lil’ Libros has an exceptional track record in its revenue and growth thus far. The company has been profitable for the past two years and maintains an 18% year-over-year growth rate in revenue. With $5.5 million in gross revenue and $1.7 million in revenue in 2020 alone, the company’s consistent and steady rise in profit is very encouraging for potential investors. Notably, the company’s short-term debt increased from $208,171 to $265,061. This debt isn’t particularly alarming, however – especially since Lil’ Libros is now profitable.

Lil’ Libros has sold more than 1.5 million copies of its books with nearly 45 books published thus far. The company has received very positive reviews for its products on Amazon and on its site. Furthermore, Lil’ Libros has phenomenal brand recognition and a strong social media following. It has been featured in The New York Times, CNN, Forbes, and more. Target, Barnes & Noble, Amazon, and more than 2,500 independent retailers are all distributors of Lil’ Libros children’s books. The ratio of lifetime value per customer to customer acquisition cost is at 90.9x, which is top tier. 

Lil’ Libros’ next goal is to expand its publishing catalog by 60% as well as launch a subscription catalog. This strategy should be an excellent way to maintain the company’s trajectory for long-term success. All of these factors echo Lil’ Libros’ excellent performance thus far.

Lil’ Libros is a relatively low-risk investment. It has had consistent year-over-year revenue growth and has been profitable for the past two years. The company’s long operational history provides a sense of stability and opportunity for long-term growth. 

However, Lil’ Libros is operating in a crowded market, and the company’s emphasis on Latino culture and characters isn’t very defensible. It could be easy for bigger publishers to replicate the company’s strategy, which would increase Lil’ Libros’ direct competition. This risk is offset by the fact that the company’s branding, traction, and overall customer loyalty is strong, reflecting a reliable company with a high chance of continued successful growth.

Lil’ Libros’ success depends on its ability to remain competitive. Although the company has consistent growth and strong customer loyalty, it operates in a highly competitive and saturated market. The company needs to find ways to maintain its competitive edge even if other publishers begin producing books focused on diversity and inclusion. Furthermore, it needs to secure a significant niche in a market that is growing quite slowly. Unless the children’s book publishing market sees a period of increased growth in the near future, Lil’ Libros could struggle to grow. Additionally, Lil’ Libros’ short-term debt increased from $208,171 to $265,061 in 2020, a 27% increase. The company is still expanding its offerings and operations, so an increase in debt isn’t unusual. However, Lil’ Libros will need to eliminate debt, remain profitable, and continue scaling – a tricky balance in a crowded market.

Lil’ Libros has shown amazing growth and traction thus far. The Latino-inspired children’s book publishing company was created by two Latina mothers who experienced firsthand the lack of cultural representation in children’s media. This strong origin story for the company makes it more attractive to customers and investors alike. The concept for the company has been validated by great financial performance over the past six years.  Lil’ Libros’ mission-driven values and branding are also supported by its positive customer reviews. The company has a strong social media following as well as impressive customer loyalty. Its ecosystem of excited and loyal customers is vital to the strength and growth rate of the company. 

Lil’ Libros also offers encouraging signs for continued growth. The team is already well-rounded with diverse skill sets represented across roles. The company has seen strong year-over-year revenue growth and has achieved profitability for two years running. Plans to expand its publishing catalog as well as creating a subscription service indicate that Lil’ Libros is focused on maintaining its growth. These factors combine with a favorable revenue-to-valuation multiple in this funding round to present a promising opportunity for investors.

Lil’ Libros is a children’s book publishing company focused on presenting Latino-based stories and content. The company aims to increase representation in children’s media by working with multicultural authors and by publishing bilingual books.. Its goal is to diversify children’s books across the country. Lil’ Libros has already sold more than 1.5 million books and garnered coverage from major publications. 

Lil’ Libros is positioned in a small market with a slow growth rate. The company’s emphasis on culturally diverse children’s books can be easily replicated, which could easily increase its direct competition. These factors may limit Lil’ Libros’ ability to grow beyond its current success. 

However, Lil’ Libros has overcome these challenges by growing and maintaining a strong and loyal customer base. The company’s social presence has a highly engaged audience, and it has received significant media attention as well. Both of the founders have experience running a company, and the rest of the team has a diverse set of skills. Lil’ Libros is growing steadily and has been profitable for two years running. Considering its strong financial performance, the current funding round’s valuation is fair.  If the company is able to maintain its level of growth and traction as it executes its future plans for expansion, it will be primed to become a dominant player in the children’s book market. Therefore, Lil’ Libros has been rated a Deal to Watch at this time. 

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

Analysis written by Feven Solomon, December 16, 2021.