Team Topia is raising on a convertible note at a $10 million valuation. On its surface, this price seems a bit high for Team Topia’s current level of traction. The company only generated around $532,000 in revenue last year and has been growing slowly over the last 10 years. But Team Topia seems to have bounced back from 2020’s COVID-19 slowdown and is on track for more impressive growth. The company projects hitting $1 million in revenue in 2021. This funding round should allow Team Topia to develop new products more quickly to expand its market potential. All in all, Team Topia’s $10 million valuation seems a bit high, but this is arguably justified by its recent growth and near-term potential.

The market for sports management software is relatively niche, valued at $5.4 billion in 2020. Notably, though, the market is growing rapidly. Analysts project a 14.8% compound annual growth rate over the next five years. 

At present, Team Topia is only serving the market for swim team management software specifically. Swimming is a niche sport, at least in the US. Only 1% of kids between six and 12 years old participated in team swimming in 2020. The same year, 12.2% and 14.8% of this age group participated in baseball and basketball respectively. 

At this point, Team Topia has extremely narrow market potential within swim team management software. Even if SwimTopia became the sole swim team management solution in the US market, Team Topia could probably only generate a maximum of tens or maybe hundreds of millions of dollars. To serve a larger market, Team Topia must expand into other sports, but other niche sports like gymnastics won’t expand market potential by much. In this narrow sports management software industry, Team Topia will likely experience only modest growth.

Team Topia founder and CEO Mason Hale is a software developer and designer. Hale holds a BS and MS from The University of Texas at Austin. Before founding Team Topia, he had more than a decade of experience as a technology leader. He served as the chief technologist for frog design for more than eight years, leading the development of software solutions for top-tier clients like Microsoft, General Electric, and T-Mobile. 

The Team Topia team also includes Director of Sales and Marketing Elli Overton and Vice President of Engineering Chris Bonser. Overton is an Olympic swimmer from Australia and worked as a swim coach for about nine years. She previously founded two swimming education businesses and has been working for Team Topia for about six years, systematically growing the company’s customer base. Bonser has more than 20 years of engineering experience and has served in successive technology leadership roles at a variety of high-tech companies. Bonser’s speciality is single-page applications. 

The Team Topia team is small, but it is relatively well-balanced across business disciplines and engineering. Most notably, the team lacks a dedicated set of software developers. Hale has been Team Topia’s lead engineer since the business was founded 10 years ago. Now he and Bonser co-lead the vast majority of product development. Increasing engineering capacity is one of the main reasons for this raise, and Team Topia has already posted a new engineering opening after receiving early investment commitments. If Team Topia can expand technical capacity, the company will be well-positioned for growth in coming years.

Team Topia’s true competitive moat is formed by its loyal customer base. The company has less than 2% churn, which is very unusual for a software-as-a-service business. Customer reviews are positive, and SwimTopia seems to have genuinely revolutionized swim team management for many of its clients. Team Topia is clearly skilled at conducting market research and building features that delight customers. That strength, combined with the company’s decade-long position as a beloved innovator in this industry, is difficult to displace. 

But overall, Team Topia’s SwimTopia software is not well-differentiated. While the software offers a comprehensive suite of features, each one individually is not especially complex (scheduling, parent communications, etc.). The product is not too visually striking, either. It probably wouldn’t be difficult for a competitor to build a more compelling alternative. It’s also not clear that Team Topia will enjoy its favorable churn rate and other advantages when it moves into new sports verticals like gymnastics or track and field.

Team Topia was founded in 2011 and has been growing somewhat steadily over the last decade. However, revenues slowed during 2020, likely due to the COVID-19 pandemic. In 2019, Team Topia was going strong with $886,300 in revenue. In 2020, revenues dipped to $532,970. Arguably, even that level of revenue was impressive during a year when many sports leagues were canceled entirely. In 2021, Team Topia appears to be back on its growth trajectory. The company projects hitting $1 million in revenue this year. Given 2019’s meager net loss of $119,799 and Team Topia’s compact team, the company may be approaching profitability. 

Team Topia’s revenue growth is likely driven by the strength of the company’s customer base. Team Topia has more than 1,800 paying swim team customers and more than 180,000 parents signed up with a SwimTopia login. About 85% of SwimTopia clients convert to a paid subscription from their free trial, and only 2% of clients churn each year, which is strong for a software company.

It’s taken 10 years for Team Topia to grow to this point, but the company has clearly been managed efficiently. Team Topia has only raised $630,000 from a strong roster of investors, three of whom sit on its board. It has launched three products, acquired a competitor, and grown to be a market leader in swim team management software with a lean team. Somehow, founder Mason Hale has wound up with only a 46% ownership stake through this fundraising, which is somewhat concerning. But overall, the company is performing quite well given its small team and minimal capital raised.

Team Topia is a relatively low-risk investment given that its product is fully developed and is generating a good deal of revenue from loyal customers. With more than a decade of operating history, investors can trust that founder Mason Hale knows how to manage a company. Financials are one of the biggest areas of risk to consider, namely because Team Topia’s revenues declined significantly between 2019 and 2020. The dip was expected, though, due to the COVID-19 pandemic, and Team Topia seems to be back on track with strong growth this year. Team is also a risk. Team Topia only has four team members and minimal engineering capacity. This risk should be mitigated if Team Topia invests a good deal of this funding round into hiring technical talent.

Team Topia has a long track record of building products that satisfy its users. With $1 million in projected revenue this year, the company’s flagship SwimTopia product is clearly doing something right. But Team Topia may not be able to grow much beyond this level. 

Swim team management software is an extremely niche market. SwimTopia faces competition from several established companies that offer products better suited for the more lucrative customer segment of professionally managed club and NCAA swim teams. Team Topia’s additional growth plan — offering additional products for other niche sports — is unproven. It may or may not follow a similar pattern of success solely in the low-value recreational segment. All in all, it’s just not clear that Team Topia has a path to continue posting strong growth and delivering attractive returns for investors in these extremely narrow markets.

Team Topia is an example of a successful small business that has enjoyed sustainable growth as a result of efficient management. The company has a lean team and has been focused on delighting clients with a specialized product. Team Topia has built a loyal customer base that delivers predictable recurring revenue, even sustaining more than $532,000 in annual revenue during a devastating global pandemic. 

The question is whether Team Topia can continue innovating to unlock additional value from professionally managed swim teams and other niche sports markets like gymnastics. All investors can do is assess the pattern of the company’s operations over the last decade, and those signals are positive. With backing from strong investors, a founder with deep technical leadership experience, and a sterling reputation among clients, Team Topia has many of the ingredients necessary to enjoy continued success.

Team Topia is a sports team management software company. Thus far, the business has been built around a single product, SwimTopia, which helps parents and coaches manage swim teams. In the future, Team Topia hopes to continue deepening its ability to serve the swim team market and introduce new products that serve other niche sports like gymnastics or track and field. With a projected $1 million in revenue this year, a well-rounded founding team, and strong retention metrics from existing clients, Team Topia’s progress thus far indicates that these future endeavors could be successful. 

But Team Topia’s growth paths involve niche markets that don’t necessarily unlock hundreds of millions in revenue potential. While the company’s decade of growth has been steady (with the exception of 2020), it has also been slow. It’s not clear that continued slow growth can justify Team Topia’s $10 million valuation and provide returns for investors. Overall, Team Topia has been rated a Neutral Deal. 

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

Analysis written October 12, 2021.