The Hydrogen Group did not provide a valuation for itself in this round. In order to estimate a valuation for the company, KingsCrowd referenced the number of shares listed on the company’s cap table and the share price for this raise. The resulting number is $5.86 million. For a seed raise, this valuation is reasonable. The company is still in a pre-product stage, so there is no revenue to base a multiple on. The Hydrogen Group’s price metric is its lowest but is middle-of-the-road overall.

Though the US trucking industry is massive, it would be misleading to base the Hydrogen Group’s market opportunity on its size. The company’s total applicable market is only a small portion of the industry. That said, the US freight and logistics market as a whole is growing annually at a rate of 3.2%, and local freight trucking is growing at a rate of 6.3%. The market for diesel engines is similarly sized — it’s currently estimated at $8.25 billion and is growing at an annual rate of 6%.

The Hydrogen Group’s market opportunity can be estimated by multiplying the purchase price for each of its units by a share of all the trucks on the road. Multiplying $15,000 by 5% of Class 8 trucks in operation results in a size of around $2.93 billion, which is decent. Given the market’s slow growth and limited size, the market score for The Hydrogen Group is around average.

The Hydrogen Group has six co-founders. President and CEO Armand Dauplaise has a breadth of experience across multiple industries in the past four decades. None of his positions have been in spaces relevant to US freight or diesel engine design. He worked in local leadership roles across various retail and fast food companies, then served in leadership for an assortment of businesses in the 90s and 2000s. His most prominent role was as president and CEO of Bio-One Corporation, a nutritional supplement company. Dauplaise was removed from his role at Bio-One after accusations of financial mismanagement. An SEC allegation that he participated in fraud was settled. He has since worked as chairman of Omni Alliance Group, a chain store consultant, and then as president for now-defunct Palm Tree Mobile Billboards.

Inventor and director Timothy Watson has an Automotive Service Excellence certification and is a licensed Class 8 truck driver. However, he has placed little information about himself online, so it is difficult to assess his experience beyond this. Apart from Dauplaise, Watson is the only other full-time co-founder at The Hydrogen Group. 

Director Roger Bess brings expertise in trucking and entrepreneurship to the leadership. He worked for more than 30 years at Caterpillar before founding Roger Bess Trucking (it’s unclear if this business is still in operation). Bess also founded SBG Logistics, which seems to have partnered with Roger Bess Trucking. 

Director Roger Hawkins received a Bachelor of Science in PE teaching and coaching from Tarkio College. He worked for more than 30 years at a branch of the YMCA in West Volusia where he eventually rose to be CEO and president. Hawkins left that position in 2007 and does not appear to have any other work experience.

Doctor John Lamar received his PhD in aerospace engineering from Virginia Tech. Dr. Lamar worked for 43 years at NASA’s Langley Research Center in experimental wind-tunnel and flight. Following his departure, he has worked as an independent consultant for aeronautical and aerospace engineering services. At The Hydrogen Group, he is fulfilling an engineer consultant position. While his role with NASA brings considerable acclaim, he appears to hold no relevant experience in diesel freight. 

Finally, Investor Relations Manager William Murray has a BS in international business and finance from the University of Colorado Boulder. Murray got his start in the army as German language specialist and has significant management experience with consulting firms. He has spent the last 12 years in investing, first as the CEO of Christian Angel Capital Network and currently as a certified US capital global advisor at US Capital Global Advisors Association.

The Hydrogen Group boasts a large roster of co-founders. There is ample leadership and managerial experience across the team, and at least two members have previous trucking experience that they can draw on. However, none of the co-founders appears to have worked with diesel engines or on fuel efficiency projects before. There is also a skill gap in terms of product development, sales, and marketing. Overall, The Hydrogen Group’s team score is just slightly above average.

The Hydrogen Group has no direct competition. There seems to be no other companies providing hydroxide solution boxes to retrofit existing diesel engines. Competition instead comes from manufacturers of replacement vehicles, both electric and hydrogen-powered. While existing brands like Hyundai and new brands like Nikola are working to bring electric trucks to market, the technology and infrastructure aren’t ready yet.

Hydrogen-fueled vehicles are another replacement possibility for diesel engines. Hyzon Motors has begun producing hydrogen fuel cells at two US factories, expecting to start full production in the fourth quarter of 2021. Even so, infrastructure isn’t ready for hydrogen vehicles yet. The Hydrogen Groups solution does not require companies to invest in entirely new vehicles, making it a much cheaper alternative to electric or hydrogen trucks. 

The company has secured three patents, the last approved in late June. This provides The Hydrogen Group with a strong defense against competitors who might try to replicate its technology. Assuming its solution works as well as the company claims, The Hydrogen Group can claim a first mover advantage in the market. Due to all these factors, The Hydrogen Group scores extremely high in the differentiators metric.

The Hydrogen Group is still in the minimum viable product stage and has not yet begun taking in revenue. However, the company has operated efficiently through its research and development phase and has only accrued $86,000 in liabilities. It has also received ample prior investments — more than $1.8 million total with $640,000 of that coming from friends and family. Its proof of concept is complete at this point with three patents secured. It plans to enter the market later this year and will begin by offering Hydrogen on the Go to large corporate truckers and independent contractors. The company has not established any partnerships to facilitate this.

Balancing the company’s lack of revenue against its efficient use of funds, The Hydrogen Group scores around average in the price metric.

The Hydrogen Group has an elevated risk profile. From a product standpoint, nothing like Hydrogen on the Go has been accepted by the market. The company has also only completed a prototype, so the device is unproven in real-world application. Both of these factors contribute to product-related risk. 

The Hydrogen Group stands out for having six co-founders, many of which are not fully dedicated to the company. Such a large number of co-founders contributes to a team risk, since it may be difficult to keep the vision for the company unified amongst so many perspectives. Furthermore, none of the founders have any past exits. This inexperience with growing a startup may hamper their efforts to grow The Hydrogen Group into a major market mover.

Time and financials are the two highest areas of risk for The Hydrogen Group. The company is moving from a pre-product phase to the full sale and distribution of its device. This transition will take time, especially given that the business model is a business-to-business (B2B) one. B2B transactions usually come with a longer sales cycle, adding more time to The Hydrogen Group’s operational development. All of these factors will likely result in it being at least months, if not years before the company begins to see significant revenue. This creates financial concern, as a lack of revenue will force the company to accrue debt and/or pursue more fundraising in the future. 

The Hydrogen Group’s technology is not well explained on its raise page, which is concerning for investors. In addition, there are huge differences in efficiency and emissions between diesel vehicles produced before the 2010s and vehicles after. It is unclear whether Hydrogen on the Go offers similar benefits for both older diesel engines and newer, more efficient ones. There is also a lack of information on the fees and challenges of installing the device, details which are central to The Hydrogen Group’s business operations. With so many unknowns, many investors may struggle to fully assess the company’s technology and its potential.

The market also appears to be skeptical about hydrogen fuel, as hydrogen fuel stations remain limited to California. Hydrogen on the Go doesn’t use hydrogen fuel, but it does carry that association. Market skepticism could transfer over, increasing the difficulty for The Hydrogen Group to prove its product-market fit. In addition, while the founders are numerous, none of their records show strong expertise with diesel engines or fuel efficiency. Only two of the six co-founders are working full time at the company, showing a concerning lack of dedication. It’s questionable if The Hydrogen Group will be able to successfully scale, manufacture, and secure a market niche for itself.

After years of testing, research, and development, The Hydrogen Group has secured three patents and demonstrated fuel savings of 27%. This is a dramatic improvement over existing diesel engines. The Hydrogen Group is also moving into the market years ahead of some competitors. Nikola, for example, won’t be producing electric trucks until 2024. Assuming the Hydrogen Group makes it to market this year, it could become a leader in fuel efficiency tech. Even after widespread adoption of electric vehicles begins, there will likely exist huge fleets of diesel vehicles for decades to come. This product will offer a cheap retrofitting option. Offerings like Hydrogen on the Go don’t appear to be offered anywhere else, and the tech is patent-protected. Thanks to limited cash burn, the Hydrogen Group has also managed to keep its liabilities down.

The Hydrogen Group is coming to the diesel engine space after seven years of research and development. Its Hydrogen on the Go device utilizes a solution combining distilled water with potassium hydroxide. The mix causes diesel engines to run cooler and increases octane. As a result, the product reduces exhaust emission and fuel consumption. 

Hydrogen on the Go is patent-protected and comes at an appealing price point. Rather than splurge on electric or hydrogen-fueled trucks that are years away, companies can purchase a device that pays for itself in 12 months. However, there are some gaps and inconsistencies with this raise that are cause for concern. The company’s leadership isn’t impressive, and company ownership is split between six co-founders, only two of which are full time. The company doesn’t provide a valuation for itself, and market scaling is going to be a real challenge selling business-to-business. Still, a potential first-to-market advantage and an opportunity for businesses to cheaply improve on environmental standards are both appealing. Therefore, the Hydrogen Group is a Neutral Deal.

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

Analysis written by Benjamin Potts.