Throne would be a better investment opportunity at a lower valuation cap. Its $16 million valuation cap is high for a startup that generated just $7,500 in revenue last year. But Throne is making progress. It started generating revenue in March from its two clients and has a unique product. Therefore, while investing at this valuation cap is more expensive than it should be, it’s still a reasonable deal. And investors can hope for a great return. United Site Services, the leader in portable bathrooms in the U.S., is currently worth $1.15 billion. Even if Throne achieves a valuation seven times lower, investors could still get a 10x return on their investment.

Before the 1970s, public bathrooms were more common in the U.S. For the most part, urinals were free, while people who wanted to use stalls would have to pay. This “pay toilet” arrangement often meant that women had to pay to use public toilets while men did not, which sparked a political backlash. So U.S. cities removed public bathrooms due to protests against paid toilets — as well as due to low municipal budgets. Today, the U.S. has only eight bathrooms for 100,000 inhabitants, which puts it at the same level as Botswana, Poland, and the Netherlands. And the few public toilets we do have in the U.S. are often misused for sex work, sleeping, or drug use, which makes many people avoid using them. 

Some municipalities are trying to increase the amount of public bathrooms in their territory. New York City already has 16 bathrooms for 100,000 inhabitants, which is double the national rate. But the city is still pushing for more, having passed a bathroom bill in October 2022 to build new bathrooms in areas that need them.

Knowing all of this, assessing the U.S. public bathroom market can be difficult from an investor’s point of view. Throne’s main market is controlled by cities, which means that each municipality is a different market with a different political orientation and different priorities. However, the current low density of American public bathrooms and the traction shown by cities like New York shows that there is potential for Throne’s product to succeed.

The other part of Throne’s market — renting bathrooms to private companies — is even more complicated to figure out. To me, it is a shot in the dark. The company is creating a new market, so demand is difficult to assess. But this is the case with most innovative startups — and part of the risk that investors take when they invest in unique startups.

Throne’s team is close to complete. CEO Fletcher Wilson previously founded a medical device company called InterVene. The company is still running and has a new CEO, which demonstrates that Fletcher has solid entrepreneurial skills. Co-founder and Vice President of Engineering Ben Clark worked with Fletcher at InterVene as an engineering consultant. His skills are perfectly suited for leading Throne. And co-founder and Chief Operating Officer Jessica Heinzelman has relevant experience in growth, strategy and partnerships, which are also great skills to have on a founding team. 

One key employee, Vice President of Operations Shyanne Telfer, is crucial for Throne. She previously worked at Uber in operations and logistics. Her experience in the high-growth rideshare company is an asset for Throne as she is used to running operations in a company that serves customers in distributed locations.

However, the Throne team is missing a key member. I believe that Throne’s best market is municipalities. So I’d like to see the team hire someone who has governmental connections or who is used to prospecting with cities. With that final addition, Throne would have an all-star team.

Throne is a pretty affordable product for cities. I cannot share exactly how much the company charges on a monthly basis to respect the confidentiality Fletcher asked me to keep, but I can assure you that the monthly cost per bathroom — which includes cleaning, water refilling, and waste disposal — is radically cheaper than installing typical public bathrooms.

The big difference is that typical public bathrooms require cities to dig into the ground to install underground water, electricity, and waste disposal connections, which are expensive operations. According to Fletcher, most public bathrooms cost around $100,000 each. I have found public bathroom prices per unit can range from $80,000 to $500,000 — with some in San Francisco being as expensive as $1.7 million. Throne, on the other hand, uses trucks to refill the toilets’ water and empty the waste. Each unit uses a low amount of energy and is entirely powered by solar panels. Therefore, Throne’s bathrooms do not require underground connections and can be installed anywhere.

Throne’s toilets can serve anybody with access to a phone number. By simply scanning a QR code or texting a number, a user receives a code on their phone via SMS. After spending a certain amount of time in the bathroom, the user will be notified that their time is up. If they don’t leave, the door will first open slightly to incentivize the user to vacate the bathroom. The door will finally open completely after another short period of time if the user hasn’t left yet. This system seems efficient to me as it respects the user’s privacy while acting against improper bathroom use. 

Throne bathrooms are smart and easy to install. They are far cheaper than bathrooms connected to the grid and the city’s pipes like Portland Loo. And they’re far more attractive and comfortable than the dreaded porta potties of United Site Services.

Throne has deployed in about 20 locations in Washington, D.C. in the last two years, and its units have been used around 15,000 times. Having demonstrated the product-market fit of its bathroom, Throne designed its third generation of ADA-compliant bathrooms. It has been generating recurring revenue from paid contracts with Capitol Riverfront in D.C. and Fairfield, Virginia since March. The company is generating a few thousand dollars a month from these contracts already. This is a good head start for the company.

I’m not convinced that Throne’s growth strategy is a good one. CEO Fletcher Wilson told me that the team targets its prospects by finding news stories about municipalities trying to improve their public bathroom situation, then reaching out to those municipalities. The problem with that strategy is that it is passive and hardly scalable. It might be a cheap strategy early on, but at some point Throne will have to improve its customer outreach strategy.

Investing in Throne also involves risks. As it is a disruptive solution, it involves adoption risk. Throne wants to lease its bathrooms to municipalities, but decision-makers might prefer traditional toilets to avoid the risks of an unknown product. Throne also wants to lease its bathrooms to businesses employing cab drivers, delivery drivers, and other employees who don’t have access to an on-site bathroom. But these companies might not want to spend money on bathrooms if workers are already accepting work conditions with difficult bathroom access. Finally, Throne is a capital-intensive business since it must build its units before leasing them. Therefore, this deal also presents funding risk.

Throne’s smart, connected bathrooms are well-differentiated from other solutions — both from a cost and quality perspective. I especially appreciate its business model. Leasing toilets to municipalities is innovative. Most importantly, targeting businesses is a smart move. Companies with delivery drivers and other mobile workers are not currently providing bathrooms for their workers. They can pay Throne to access toilets if municipalities are not interested in the service. Throne could then lease a small piece of land, install its bathroom on it, and charge several companies for the right to use the same bathroom. 

Throne’s bathrooms also have an environmental upside. Its system runs entirely on clean solar energy and uses less water than traditional bathroom flushes. Throne’s product is cheaper, smarter, more convenient, more environmentally friendly, and safer than other public bathroom solutions on the market.

Throne’s smart, connected bathrooms could be revolutionary. As with any disruptive and unique innovation, it may be difficult for the company to convince municipalities and businesses to adopt its product. It is also difficult to predict exit opportunities for the business as it has such a unique product and is essentially creating a new market (as well as operating within a difficult-to-define existing market). But Throne’s bathrooms check all the boxes of the ideal public bathroom. I wouldn’t be surprised to see Thrones popping up in cities soon. Despite the risks, Throne fits the bill for investors who want to back innovative products.

Report written by KingsCrowd Senior Investment Research Analyst Léa Bouhelier-Gautreau on May 15, 2023.