NoBaked Cookie Dough is raising an equity offering at a $9 million valuation. Given the company’s 2020 revenues of $1.75 million, a $9 million valuation represents a fairer revenue multiple than is often seen for similar businesses raising crowdfunded rounds.Thus, NoBaked’s price rating is above average. 

While ready-to-eat raw dough has become trendy in recent years, the market for such products is still quite small relative to traditional food segments. The refrigerated cookie/brownie dough segment was worth just $571.8 million in 2020. The category showed 9.3% growth over 2019 but is still a niche market compared to the overall cookie industry at $9.3 billion. 

Additionally, many established treat companies have launched lines of ready-to-eat dough. Ben & Jerry’s “Snackable Dough” line apparently generated $12.8 million in revenue in its first year on the market, and Nestlé Toll House (probably the most widely-recognized option for traditional pre-made cookie dough) is also offering ready-to-eat dough in grocery stores. The presence of this entrenched competition reduces NoBaked’s obtainable market share within an already niche market significantly. Consequently, the company’s market score is its lowest across all five metrics.

NoBaked was founded by Megan and Jimmy Feeman, a husband-and-wife team. Megan, NoBaked’s CEO, launched NoBaked in 2017 after working for a couple years out of college in the music industry. Jimmy joined the business shortly after as COO, leveraging a few years’ experience in business and finance. 

The Feemans have built an impressive brand with meaningful growth over the last several years, but they are both relatively inexperienced in the working world. Because the founding team has only a few years of work history after college and no specific expertise in startups, consumer brands, or the food and beverage industry, NoBaked’s team score is low. 

NoBaked Cookie Dough indicates on its raise page that its products are distinct from competitors in that they are specifically designed to be ready-to-eat, with none of the bitter aftertaste or grainy texture that supposedly plagues competitive products. It’s difficult to verify whether that claim is correct. Either way, the average consumer probably won’t be able to tell the difference between NoBaked and other ready-to-eat cookie doughs as they approach the dough section of the grocery aisle. NoBaked seems to offer little concrete product differentiation from competitors. 

However, NoBaked does seem to be operating under a somewhat unique and potentially successful hybrid business model. The company was seeing success from its in-person scoop shops until the pandemic hit. Despite COVID-19, the brick-and-mortar shops still generated more than half a million dollars last year. To sustain itself during the pandemic, NoBaked launched a healthy e-commerce business through its website and Amazon. That part of the business grew explosively to more than $1.1 million in sales over the course of the year. Now, NoBaked plans to attack the distribution market with the aim of selling dough in grocery stores nationwide in the near future. NoBaked is positioned to generate solid revenue from each of these channels, which does offer an advantage over single-channel competitors. Nonetheless, NoBaked’s differentiation score is still just middle-of-the-road. 

NoBaked’s best selling point is its performance in recent years, despite the toll of the global pandemic. Just two years after its founding, NoBaked generated almost $800,000 in 2019 with a net loss of almost $300,000. Given COVID-19, you’d expect a primarily brick-and-mortar company to suffer. On the contrary, though, NoBaked had its best year ever in 2020, generating $1.75 million and inching closer to profitability with a net loss of roughly $111,000. 

NoBaked’s 2020 boom was due entirely to the company’s pivot to e-commerce. Relatively few people were buying NoBaked online in 2019. The company generated a little more than $110,000 from online sales that year. In 2020, NoBaked’s e-commerce sales from its website and Amazon generated more than $1.1 million, dramatic growth in the face of dire circumstances. NoBaked Cookie Dough’s year-over-year growth and dramatic increase in higher-margin online sales — particularly given the pandemic — is very impressive. The company’s performance rating is above average due to these factors. 

NoBaked Cookie Dough has grown meaningfully over the last year, even though you couldn’t have faulted sluggish growth during COVID-19. However, it’s not clear that the company has significantly more room to grow. Brick-and-mortar sales from NoBaked’s five locations (two company-owned, three franchised) are solid, but they won’t lead to explosive growth. E-commerce channels might be oversaturated. The company may have already garnered the majority of customers willing to buy ready-to-eat cookie dough in their direct-to-customer (DTC) blitz last year. Distribution channels offer a semi-promising new source of revenue, but the ready-to-eat cookie dough aisle is already a bit crowded with incumbents like Ben & Jerry’s and Toll House. NoBaked is competing within a relatively niche market, meaning it needs to secure a major portion of the market to see solid returns. 

Ultimately, NoBaked’s products just aren’t that differentiated in a niche, competitive space. Companies like Ben & Jerry’s and Toll House have the manufacturing capacity to pump out jars of cookie dough at low prices, and they likely stand out as the trusted options for the small number of consumers who actively look to buy ready-to-eat cookie dough. There’s a good chance that NoBaked is nearing the ceiling of its revenue potential.

NoBaked Cookie Dough’s traction over the last year, COVID-19 and all, is very impressive. Young brick-and-mortar companies faced extremely dire circumstances when lockdowns began last March, and NoBaked doesn’t seem to have had e-commerce infrastructure built up to immediately pivot to online sales. It seems that it was pure grit and hustle that won the company more than $1 million in DTC sales over the course of 2020. Investors should be attracted to any founding team that shows that keen entrepreneurial spirit. 

In 2021, NoBaked can settle back into its core physical scoop shop business and continue franchising to open more locations in the Midwest and beyond. Plus, the company plans to take funds from this raise to explore wholesale distribution to grocery chains nationwide. Distribution could provide a stream of revenue that likely isn’t gigantic but could be a healthy supplement to in-store and online sales. NoBaked has hopefully already navigated the most difficult year of its existence, and there’s blue sky ahead to continue scaling. 

NoBaked Cookie Dough sells ready-to-eat cookie and brownie doughs that taste like homemade but are safe to eat. The company was primarily focused on physical scoop shops in the Midwest, until COVID-19 forced a pivot to online sales that turned out to be very lucrative. With a record $1.75 million in revenue in a pandemic year, there’s potential for NoBaked to expand to wholesale channels and continue succeeding. 

On the other hand, NoBaked’s products aren’t very well differentiated, and the market for ready-to-eat cookie dough is still quite small. While the company has had strong early traction, there’s a risk that NoBaked has already achieved most of its potential. Investors could struggle to reap a return at this somewhat high valuation. Therefore, NoBaked has been rated a Neutral Deal. 

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