Pops is offering equity at a $17.9 million valuation. This price is too high for Pops’ current level of revenue. The company only generated $163,164 in revenue in 2021. That revenue implies a revenue-to-valuation multiple of more than 100x, which is absurd for the vast majority of early-stage companies. While Pops has built an impressive brand and holds a number of patents on its diabetes management system, those assets simply aren’t worth almost $20 million by themselves. The valuation for this round is not favorable for investors.

Given the massive number of diabetes patients in the US and abroad, it’s unsurprising that diabetes care is a huge market. One specific market segment within the broader diabetes landscape is diabetes devices, a market that Pops is playing in with its app-plus-device diabetes monitoring system. The global market for diabetes devices was valued at $28.3 billion in 2021. It’s growing at a decent but unremarkable clip of 6.2% annually over the next several years, taking the market to $48.8 billion in 2030. 

The diabetes device market already has a number of established competitors, including FreeStyle Libre and Glucose Buddy. It’s also highly regulated, so companies have to navigate both product-market fit and legal requirements. Still, Pops could certainly capture a great deal of value within the market. The company could also easily expand into other verticals to build up its addressable market size. Pops already has plans to expand into weight control, hypertension, and high cholesterol management. These widespread conditions result in billions of dollars spent each year. All in all, Pops is operating in a large market and has the potential to establish a healthy niche for itself.

Pops was co-founded by CEO Lonny Stormo, Vice President (VP) of Research and Development Dan Davis, and VP of Manufacturing Curt Christensen. Each co-founder has decades of experience in his respective field, and they have decades of combined experience in the healthcare industry. 

CEO Lonny Stormo worked at leading medical device company, Medtronic, for 30 years. His roots are in engineering, but he held a number of roles in design, operations, product management, and more. He left his role as VP of cardiac connected care and diagnostics quality to found Pops. 

VP of Research and Development Dan Davis offers similarly impressive qualifications. Davis worked at 3M, which manufactures products ranging from building materials to medical supplies, for 10 years as a lab manager where he oversaw the development of medical devices and drugs. After leaving 3M, he spent 20 years bouncing around various operations and manufacturing roles, both inside and outside of the medical industry. Most recently, Davis served as the VP of operations for Nolato Contour, a medical equipment company. 

VP of Manufacturing Curt Christensen is Pops’ third highly qualified co-founder. He spent almost 40 years at 3M in manufacturing operations and quality control, leaving 3M only to start Pops. 

Beyond those three co-founders, Pops employs at least four other employees with backgrounds in medicine, customer success, sales, and operations. All in all, this is a large and well-rounded team that has an impressive slate of co-founders. Each of Pops’ three co-founders would be qualified to run a medical device company on their own. The combination of their decades of experience across product development, operations, and manufacturing makes them a formidable team.

Pops is well-differentiated from competitive diabetes management solutions. First of all, most competitors offer generic finger pricks or continuous glucose monitors that are cumbersome and even painful to use. These options feel behind the times, without connections to smartphones and other integrated health technology. There are a few devices that are more advanced, but many don’t seem as user-friendly as Pops’ system. They’re often branded as conventional medical devices, with uninspiring designs and basic app functionality. Among Pops’ competitors are FreeStyle Libre, OneTouch, and Glucose Buddy. 

Pops has focused on creating a diabetes management system designed for the modern consumer. The Pops brand is reminiscent of modern consumer startups, and the app is similarly well-designed. Pops’ glucose monitoring device, the Pops Rebel Meter, is simple and functional. It is supposedly about 20% smaller than classic meters, making it more convenient and discreet. The Pops Rebel Meter requires no assembly, attaches to the back of patients’ phones, and communicates automatically with the Pops app via Bluetooth. The app provides reminders, includes useful information, and uses numbers in a simple way for a user-friendly experience. Mina, the personalized AI coach, helps motivate users to adopt healthier behaviors and manage their conditions. With 15 patents issued and seven more pending, Pops has strong defensibility for its combined app and device system.

This company has a clear point of view on how to liven up the medical device market, and diabetes is only the beginning. By expanding into weight management, hypertension, high cholesterol, and more, Pops has the potential to bring consumer-focused design, usable app technology, and functional medical equipment to tens of millions of patients. Overall, Pops stands out among competitors.

User growth and revenue seems to be where Pops is lacking, and those are vitally important metrics. Pops only generated $163,164 in revenue in 2021. While income was up year-over-year from just $28,684 in 2020, it’s still very low. To date, Pops has raised nearly $10 million from various raises, including a Series A round and a crowdfunding round on SeedInvest in 2021. However, Pops is burning money rapidly. The company lost a whopping $2.4 million last year. Clearly, Pops hasn’t yet been successful at generating a large number of users, whether direct-to-consumer or via business-to-business (B2B) intermediaries. 

While those figures are concerning, Pops has achieved a number of other milestones. The Pops diabetes monitoring system is FDA-cleared and vetted by a clinical study, which indicated that Pops reduced A1c levels by 17%. The company has received 15 patents on elements of its diabetes management system, with seven more pending. Pops boasts a number of B2B customers, ranging from Best Buy to PreferredOne (even though those contracts aren’t yet generating much revenue). It claims a 100% client retention rate over three years, indicating current customers are enjoying the Pops experience. Furthermore, Pops has gained attention in numerous publications, including Forbes, MedCity News, and Star Tribune. While all of these achievements haven’t yet paid off in terms of revenue, Pops Appears to be on the right track. Overall, Pops has a tricky mixture of promising traction and unimpressive financials. The company will need to improve its product monetization in order to prove to investors that it can continue growing.

Pops is a medium-risk investment opportunity, almost solely due to its financials. Pops is operating like a growth stage company, with almost $2 million in total expenses. However, Pops’ revenues are not those of a growth stage company. Revenue of $163,164 with $2 million in expenses is not a winning formula. Pops clearly needs to generate revenue quickly, or it will be stuck on a constant treadmill of fundraising, further diluting the stakes of founders and existing stakeholders. That isn’t a good sign for prospective investors.

Pops raised a previous crowdfunding round on SeedInvest that closed in August 2021. Its valuation in 2021 was set at $25 million, making the current raise a down round at $17.9 million. While the company has managed to significantly increase its revenue from $28,684 in 2020 to $163,164 in 2021, this still results in an overambitious revenue-to-valuation multiple of more than 100x. The valuation decrease is notable especially considering the stronger performance metrics. Pops was overvalued at the last round and continues to be overvalued despite improvements in revenue. 

Since its last round, the International Journal of Health, a peer-reviewed journal, confirmed that the Pops system resulted in a 17% improvement in blood sugar levels and proved Pops’ efficacy. Pops also secured Best Buy as a business-to-business customer, cleared Australian regulations, and launched in Australia through Zurich Insurance Group. While Pops’ valuation and financials are unimpressive, it has taken some firm steps forward in terms of traction. Finally, the team has grown slightly from eight to ten members.

It’s rare to find a team of Pops’ caliber, a well-developed brand, and a product that has already been proven effective. But no matter how attractive those elements are, the harsh reality is that Pops simply isn’t generating enough revenue and is spending far too much money. The company has already raised almost $10 million from a number of raises, but Pops isn’t anywhere close to profitability. In fact, Pops’ net income declined sharply in 2021, going from a net loss of less than $1.7 million to more than $2.4 million. 

Poor revenue performance isn’t necessarily fatal for Pops, since one might assume that all of this time and capital burn will ultimately pay off. The biggest problem with this current investment opportunity is the price. At$163,164 in 2021 revenue, Pops should not be raising at a $17.9 million valuation. This is a classic case of a company that has already raised too much money at inflated valuations and keeps raising at high valuations before actual traction justifies it. With that in mind, this might not be a good time to become a shareholder of Pops.

While Pops’ revenue performance is poor, the company has the potential to revolutionize diabetes care. One look at Pops clearly indicates a company that has put years of thought and effort into branding, product design, medical clearance, and partnerships. In each of those areas, Pops seems to have made all of the right choices. It’s easy to imagine the Pops diabetes management system becoming the modern standard of diabetes care for increasingly tech-savvy generations. 

Plus, Pops has an exciting opportunity to expand in numerous directions. One of the company’s major questions is how much to market directly to patients versus going all-in on business-to-business partnerships. Either path could be effective. Then there’s the potential to expand into other conditions, including hypertension, high cholesterol, and weight management. In this way, Pops is reminiscent of Noom, a buzzy weight loss app startup. Once Noom nailed a psychology-informed method for counseling weight loss, it expanded to treat stress. Noom is reportedly exploring an initial public offering at a valuation of $10 billion. If Pops can achieve even a twentieth of that scale, investors will be very pleased.

Pops is a diabetes management company offering an integrated app and glucose monitoring device. The Pops system is far more tech-forward and user-friendly than most diabetes devices. It’s also been FDA-cleared, patented 15 times over, and proven effective by a clinical study. Each of the three co-founders is highly qualified, giving Pops a formidable team. The market opportunity is large, and Pops could easily expand its offering into weight loss, hypertension, and more. As Pops ramps up to generate revenue, it could be on an exciting track to revolutionizing self-care for diabetes and beyond. 

However, Pops’ profit and loss statement is rough. The company only generated $163,164 in revenue in 2021. That amount is far lower than one would expect based on the other successful milestones Pops has achieved. The company’s net loss was roughly $2.4 million last year, a sign of uncontrolled spending before finding product-market fit. Especially at a high $17.9 million valuation, investors might not be able to stomach the risk. Therefore, Pops has been rated a Neutral Deal. 

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

Analysis written on May 12, 2022.