Smart Snow Solutions
Manufacture a cloud-control snow remover.
Raised to Date: Raised: $750
Aggregate Commitments $
Equity - Common
Rolling Commitments $
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Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
This week we are diving into a crowdfunding deal that doesn’t look as promising as it sounds: Smart Snow Solutions. With a product already patented and ready to move to the development stage, the company plans to manufacture a cloud-controlled snow remover named “Snowmax”.
Image Source: Smart Snow Solutions via StartEngine.
Simply put, it allows consumers to operate their snow remover from the comfort of their home using a smartphone, laptop or desktop through the magic of ‘the cloud’ (no, not the clouds that brought the snow). The concept itself sounds innovative, creative and useful. After all, who wouldn’t want a robotic snow blower taking care of the driveway the morning after a big snow?
Smart Snow Solutions has a very optimistic vision. The manufacturing and marketing company is developing an unconventional snow remover designed to eliminate the hardship of shoveling snow. It is envisioned to allow commercial and residential users to operate the machine, Snowmax, using an application, while sitting inside their house. Therefore, the users will not have to go through the physical hardships of going out in freezing temperatures, risking slips and falls and spending hours removing snow from their driveways and walkways.
Although the optimism and vision appeal to us, we have valid concerns regarding the practicality of the application. The product is also expensive. It is critical to determine if the product is actually worth the cost. It is also uncertain whether the product will be manufactured or not, since it is still technically in the development stage. After weighing the potential benefits against the costs, competition and other factors it was clear that there should be cause for concern.
We will examine the potential drawbacks of the idea and the company, to determine whether it is advisable to invest in this company through crowdfunding. The purpose to provide a perspective to the small investors who might end up risking their hard earned money in this crowdfunding deal.
Smart Snow Solutions- Raising on StartEngine
The major drawback regarding Smart Snow Solutions is the level of uncertainty surrounding it. The company does not have an operating history, clients or revenues. The product is only in the idea stage. Funds raised through crowdfunding will solely be used to develop the prototype.
Although Snowmax is patented, it is not certain whether the patent or the intellectual property of the company is enforceable and effective. Any bet on Smart Snow Solutions will be based on the assumption that the intellectual property rights are secure, the company will be able to manufacture and sell the product and will be able to generate sufficient revenues to keep it afloat. At this stage, the chance of success is very limited. It’s not hard to imagine a competitor changing the design slightly and avoiding the company’s patent. After all, for every Coca-Cola there’s always a Pepsi.
Moreover, even if the company can raise the maximum sought in this offering, it will still need additional funds to be able to start manufacturing operations. The process of the commercial development of the machines may require bank loans, future sales of securities or some combination thereof. This isn’t necessarily a problem per say, but it’s something that brings with it a slew of additional questions and risks in our view.
Another potential risk is that snow removal is a mature industry. There are numerous competitors in the market, which are financially and geographically better positioned than Smart Snow Solutions.
Companies like John Deer and Toro have been in the market for a long time. As a result, they have a strong capability of developing similar products especially if it proves viable. It is possible that these competitors may bring similar products to market before Smart Snow Solutions. It is also possible that given how long it will take Smart Snow Solutions to launch Snowmax, competing products could make Snowmax obsolete, even before it is launched.
One of the most critical matters of concern is the high cost of the Snowmax itself. The company plans to sell it for $3,495 per unit. A quick survey of the market revels that this is very expensive and not cost-effective given the benefits. We hate shoveling snow (KingsCrowd is based in Boston, afterall) just as much as the next person – but not that much.
There is no assurance that users, especially residential ones, will be willing to pay that a high price for a product that they can do without. People have been shoveling snow for many years. Potential users must ask themselves if the product is necessary. We have to imagine that, more often than not, their answer will be no. Even if they would be willing to use the product, the associated cost will likely be prohibitive.
Astronomical Growth Expectations
The growth expectations of Smart Snow Solutions still appear to be inflated. As noted previously, the company has not yet developed the prototype. Nevertheless, according to the company’s Form C Filing, management expects to sell precisely 28,613 units in the first year of full production (An oddly specific production number). The net profit projections of over $57 million for the first year of operation appear to be extraordinarily optimistic and, at best, randomly chosen. Why not a $75 million profit? Or a conservative $25 million? We are left to wonder…
The company also expects to achieve a targeted market share of 0.15% within the first year of production and 0.75% by the fifth year. At the same time, net income by year five is expected to be about $176 million.
Our recommendation is that Smart Snow Solutions is an underweight deal.
For investors looking for high returns on their investments in crowdfunding deals, Smart Snow Solutions has many hurdles to get over – not the least of which is the company’s own rosy financial projects.
Although the idea is creative and appealing, the actual product may not be able to generate the anticipated interest and sales, thanks to its own high price point. Conceptually it sounds great, but we have to imagine the vast majority of consumers won’t be willing to spend a fortune removing snow from their driveways.
It is possible that the projections may turn out to be correct. However, the probability of this occurring seems low especially in the face of well-financed competition like John Deere. For the vast majority of crowdfunding investors it is not currently advisable to risk money due to the numerous uncertainties and risks associated with this venture.
If you have any questions regarding the underweight rating of Smart Snow Solutions, you can reach us at firstname.lastname@example.org.