Smardii is raising through common equity at a pre-money valuation of $12 million. The product has definite potential, but this represents a slight over-valuation for a pre-revenue startup. The product has already undergone significant development, but it just isn’t at a far enough stage for this valuation to be justified. 

Smardii isn’t planning to address all of the adult diapers market. Its device works with existing incontinence garments rather than replacing them. However, the incontinence protection market is a good proxy for estimating Smardii’s market potential. One estimate put the North American adult diaper market at $4.4 billion in 2020, with an annual growth rate of 6.7%. That market isn’t huge, but considering the inevitable long-term rise in demand for elder care, that trajectory will be going up for some time. Smardii’s overall market potential is moderate but not particularly promising.

Co-founder, Director, and Chief Medical Officer Dr. Mathieu Gaddini received his doctorate degree from Aix-Marseille University. After obtaining his medical degree, he spent almost 11 years in general practice. He was a medical assistant in large nursing home groups and a large hospital group in France. His experiences have ranged across various patient ages. His education and decade of experience have certainly qualified him to lead the medical side of Smardii.

Co-founder and Director Vikram Mehta spent 20 years working with Wall Street clients, including large private equity and hedge funds. He left his longtime position as part of Wall Street in 2020 to focus full-time on Smardii. However, his background in finance makes it unclear what relevant experience he brings to the company apart from general financial expertise. 

Co-founder, former CEO, and current Member of the Board Sebastien Gaddini received his law degree from Paul Cézanne, which would eventually become part of AMU. Gaddini spent 18 years working in corporate law, and no doubt it is his influence which pushes Smardii’s emphasis on avoiding neglect and abuse lawsuits. He was working with Smardii full-time until recently, when a new, unspecified long-term project caused him to leave the CEO role.

Co-founder and Director Alpesh Patel is a serial entrepreneur and was an early investor in Smardii. Little information is available about Patel aside from the information given on the raise page.

Chief Revenue Officer John Welch received his bachelor’s degree in medical technology from Framingham State. Welch holds three decades of experience in healthcare and medical products, and his experience and connections are valuable for Smardii. He is a recent addition to the team, less than a year into his role. Principal Engineer Edward Mebarak is partly committed to Smardii but also to Cordis, another medtech startup. Finally, Chief Financial Officer Spiro Leunes has a master’s degree in taxation from Pace University and has two decades of experience in accounting and finance. 

In sum, the Smardii leadership team has a range of very complementary skills. Very few, if any, expertise gaps are present at this time.

Smardii has focused intently on developing its product to the greatest extent possible rather than establishing a large customer base. The Smardii device has two patents pending, has been piloted, and is FDA-compliant. The device won a Top 10 position at the NASA iTech Challenge in 2020. It is easy to use and operates for 90 hours on a four hour charge. It competes with offerings such as drysmart and Wonderkin, which also offer smart-tech-enabled incontinence protection. The primary difference with Smardii is that the device can be attached to any existing incontinence protection. Competitors largely require that users swap to their devices entirely, and the technology of competing devices are inside the diaper rather than transmitters on the outside that attach to strips. Smardii’s potential for monitoring other care metrics such as falls and body temperature could also further differentiate its solution. Smardii’s focus on development has resulted in good defensibility and decent product differentiation.

As a pre-revenue company, much of Smardii’s success has come through product performance and networking. The team has formed strategic partnerships through letters of intent with 10 long term care providers representing 25,000 bedst. Additionally, 250,000 beds worth of clients are in the sales queue. Since piloting the technology, Smardii has cut down on its cost of goods sold by 10x and conducted thousands of hours of live resident testing. In its pilot program, Smardii reduced night sleep interruptions by 50%–100%. It detected urine and stools with 99.9% accuracy and saved staff hours of check-ins. So far, evidence points to a high-quality product with positive results. However, the company produced losses of $2.1 million in net income in 2020. Smardii will need to produce revenue soon in order to make up for these numbers.

Risk associated with an investment in Smardii is significant. A major area of concern is the startup’s financial situation. Smardii is still  pre-revenue despite incurring massive costs since its 2016 founding. Specifically, the company has more than $1 million dollars in short-term debt and -$2.4 million in net income for 2020. While the company claims that it has improved its cost of goods sold, there is no definitive evidence of that yet. Smardii needs to bring in revenue, reduce debt, and improve its margins in order to progress financially.

However, it may take Smardii significant time to begin generating revenue. The company is targeting nursing homes as its main customers, which results in a long sales cycle. Medical facilities are not known for quick pivots, and Smardii will need to convince potential customers to adopt its solution. This obstacle also means it will likely take a long time for the company to scale its distribution and network of clients. The longer it takes for Smardii to find customers and generate revenue, the more risk investors in this round will bear.

It has been more than five years since Smardii was founded, and its product is still being tested. While it has secured partnerships, growth has been slow, and there is still no revenue. It’s one thing to avoid bringing a product to market before it’s ready, but funds for further development have to come from somewhere.

Additionally, the company is slightly overvalued for being pre-revenue and holds $1 million in short term debt. The adult diaper market is small. And though the meager $4.4 billion adult diaper market is just a proxy, Smardii’s actual market is likely even smaller. Finally, none of the founders appear to be fully committed. While a lack of commitment is likely the fiscally responsible decision, it is also a risk. 

Despite financial and time concerns, Smardii really does seem to have a necessary and high-quality product. The Smardii device is set apart from other offerings in its reusability and portability. Positive feedback and a tech award indicate that the device is likely to be popular and effective. By taking a compassionate approach to a very real problem, Smardii stands to do very well in its target market once it actually reaches that market. Finally, the team, though lacking in commitment, is full of career professionals with years of very complementary experience.

Smardii is a medical technology company that has created an Internet of Medical Things device for monitoring incontinence. The device, which connects to an accessible portal, attaches easily to existing incontinence protection garments. The device took Top 10 in the NASA iTech challenge, and early feedback has been very positive.

Despite its extensive testing and pilot programs, Smardii has not come to the market in earnest yet. It has taken in no revenue and is overvalued in this round. In addition, as money is an ongoing concern, the Smardii team is operating on a part-time basis and has never had an exit. The adult diaper market also isn’t huge, though it is growing. 

Smardii has, however, secured 10 partnerships with long term care providers and has a sales funnel with a predicted $10 million in monthly revenue. The device has been tested for thousands of hours in resident and laboratory settings. Once the product does come to market, it ought to do very well. Therefore, Smardii is a Neutral Deal.

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Analysis written by Benjamin Potts.