optiPulse is raising capital by issuing common shares. However, the terms appear awfully steep. Investors posting the first $250,000 in commitments will receive a $32 million pre-money valuation. Investors who come in above that mark will have to accept a valuation of $42 million on a pre-money basis. For a company with substantially no revenue, this is exceedingly high. The company’s very low price score is in reflection of this unreasonable valuation amount.

While the price of the company is high, the market opportunity is significant. According to one source, the global wireless connectivity market was worth $53.17 billion in 2019. By 2027, it should nearly triple to $150.38 billion. This implies an annualized growth rate of 13%. A second source pegged the market opportunity in 2018 at $46.1 billion and estimated a 12.5% annualized growth rate for it through 2027. This would mean that, by the end of our forecast period, the industry would grow to $127.9 billion. A third source estimated the market opportunity at $69 billion in 2020. With a 15.4% annualized growth rate anticipated for it, the industry should expand to $141 billion by 2025. It’s not just the market size and market growth that makes this an attractive prospect, though, but also the fact that this market opportunity looks basically guaranteed to play out. Internet access is the future for all parts of the world, and to assume anything other than attractive growth and a large market for the foreseeable future would be unwise. As a result, optiPulse’s market score is strong.

Just as the market opportunity for optiPulse is attractive, so is the team. At the helm of the company is John Joseph. He is one of its co-founders as well as its CEO. Previously, he was the founder and an inventor of the Light Engine as well as the vice president of TriLumina. The company worked to create a laser array that can act as a single source for transmitting information. Before that, he was a director of marketing at OptiComp where he focused on various laser prototypes. Prior to that, he was a senior process engineer at Novalux. His emphasis there was on the fabrication and development of high-power, single-mode NECSEL laser devices. 

The second key person at optiPulse is Mathis Shinnick, the company’s second co-founder and COO. He previously served as an executive board member for the New Mexico State Workforce Board. There, his efforts involved workforce development within the state. He has also served as a principal at NexGen Aviation Capital, an aircraft investment management firm. Lastly, he was the founder and CEO of Hanserd Holdings, an investment management company. None of these experiences relate directly to what he is working on today, but the experiences are relevant because they all demonstrate leadership experience and a diversity in thought. 

Finally, Doctor James Lott works as optiPulse’s CTO and is also its third co-founder. He performed research on semiconductor materials and devices at Technische Universitat Berlin, where he also taught courses on physics and photonics. Prior to that, he worked as CTO at VI Systems GmbH. His position there involved leading research product development, technology management and strategy, and developing photonics products. Lastly, he was a principal engineer in the Materials Laboratory at Intel Corp. It is also worth noting that, among other degrees, he holds a PhD in electrical engineering.

Between these three co-founders, the main team members at optiPulse exhibit strong technical expertise, impressive leadership experience, and past entrepreneurial endeavors. Thus, the team score for the company is very high.

Another area in which optiPulse excels involves differentiation. Simply put, there appears to be no other valid technology like this today. Companies rely on building costly telecommunications towers to spread internet service to their users. In population-dense areas, this can be extremely costly. One solution to help bring down that cost involves adding cell site backhaul to existing industry equipment. However, that is an iterative improvement as opposed to a revolutionary innovation. The idea of using light to beam network connections has large wide-ranging applications too. If done properly, it can even serve the US military. Having access to high-speed internet anywhere across the globe is an appealing and valuable prospect. With multiple patents and what looks to be revolutionary technology, optiPulse scores extremely high in the differentiators metric.

While optiPulse may have scored highly on the topics of market, team, and differentiation, the same cannot be said of its performance. Admittedly, the company has gotten the aforementioned contracts with the US government. It also has eight patents assigned to it as well as six provisional patents and some foreign filings. On the other hand, its financial picture is a problem. The company generated no revenue in 2018. In 2019, revenue was just $25,000. Because it is still in the minimum viable product stage, it’s safe to assume that revenue will be nothing or close to it for 2020, 2021, and perhaps part of 2022. At the same time, the company continues to lose money. In 2018, it generated a net loss of $1.27 million, and in 2019, it generated a net loss of $651,829. Operating cash flows followed a similar trajectory, coming in at -$1.12 million in 2018 and at -$450,580 in 2019. However, there is some encouragement to be had from the fact that the company has secured funding in the past and that it has a low monthly burn rate. Balancing all these factors together, optiPulse’s performance score is just slightly above average.

Right now, investors should be aware of the risks involved. Any sort of “revolutionary technology” always risks failing. Given that optiPulse has yet to fully bring its product to market, that risk is especially present. The company also has a new CEO, and management shake ups at early-stage firms can always be problematic. In addition, the valuation for this raise is astronomical given the company’s traction.

Just as there are some bearish items for investors to consider, there are bullish ones as well. Frankly, the market opportunity looks really impressive. The differentiation of the product is clear, and the team is very solid. It’s great to see so much intellectual property with the prospect of more patents being awarded to it over time. This developing defensive moat could help to stave off the competition. There is also an added benefit that this technology, if it can be deployed in the way management envisions it, could have a major impact on the world in a manner that can be easily described as positive.

Although the internet has become widely available in recent decades, there are still billions of people without access due to reasons such as high infrastructure costs, low density, and poverty. Using its patented technology, optiPulse offers a potential solution. Based on all of the data provided, it seems pretty clear that optiPulse is an attractive prospect. That said, there are plenty of risks involved, and the price is not particularly appealing. On the positive side, the product is differentiated, patented, and could well make a difference in the world. Because of these factors, optiPulse 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.