Underweight Deal: An Augmented Reality Keyboard That Fits Like a Glove

Key Stats:

Summary

Today we are diving into the latest company to seek money from the crowd on StartEngine: Tap Systems, Inc. What follows is an analysis of the pros and cons of both the company’s overall prospects as well as the pros and cons of investing in this fundraising round. 

Tap Systems has created a wearable tap device that supplements augmented reality applications. Tap allows the users to write texts, control devices, and send commands by simply tapping their fingers on any flat surface.

Problem

The company believes Tap to be the missing link that is preventing the adoption of virtual reality, augmented reality, and extended reality on a large scale. The proprietary device can assist users in adopting new technologies and sending commands accurately, privately, and quickly.

Tap Systems claims that the device is user-friendly, accurate, fast, ergonomic, and customizable. However, from what we can tell, actual results differ materially from these claims. First and foremost, it is not as easy as mentioned to learn the Tap Alphabet – not unlike learning a new language. There is a distinct number of fingers and finger taps to be used for each letter or character.

Additionally, despite being the product of three full years of research & development, the Tap technology is not well advanced in our estimation. From preliminary product reviews, we found that the taps do not get registered oftentimes, and can also get misinterpreted.

It seems likely that Tap Systems will need to undergo further technological advancement and development before the product Tap becomes widely usable and acceptable. That said, all early technologies bring with them the inevitable “bug.” That the company is experiencing a few hiccups this early in the game does not mean future success is impossible. 

What follows is our analysis of this fact, as well as the company marketing plans and market potential. We will conclude with our final rating as well as the reasoning behind this recommendation. 

Management

Tap was co-created by founders David Schick and Sabrina Kemeny. Both have laudable engineering chops beneath their belts.

Schick is the noted inventor of a digital dental x-ray technology that is used in countless dental offices across the country. He is also the founder of a former publicly traded corporation, Schick Technologies, which was taken private in a 2005 transaction that valued the advanced dental technology maker at approximately $670 million.

Just as impressive is Ms. Kemeny’s previous claim to fame as the co-inventor of a image sensor chip used in almsot every digital camera in the world today. She also happens to be the former CEO of Photobit which developed the aforementioned sensor chip technology before being completely sold to Micron Technologies.

We love that two successful technology entrepreneurs are at the helm of Tap. However, we wish to note that previous success does not guarantee future results. Dental and photo technologies are one thing – praying people away from their keyboards with a augmented-reality gadget is quite another.

Market

According to estimates, the market for wearable display technology is expected to reach 200 million units by 2023. Tap Systems is banking on this estimate with its own projections for the marketability and usability of its product.

However, it is quite uncertain how a wearable tapping device fits into the wearable display market. Users are expected to use wearable watches (think the Apple Watch) extensively; however, the use of a wearable tapping device like Tap remains questionable. Simply put: There’s nothing out there quite like it today. 

Sending commands to a digital device through conventional means like a keyboard and mouse is more convenient and user-friendly as compared to a wearable tapping device.

Financials

A financial analysis of Tap Systems starts at the top — with it’s valuation. It goes without saying that a $19.5 million is nothing to sneeze at. It also happens to be much more than the average equity crowdfunding valuation. That said: There is some evidence to back it up. This is no mere idea-stage enterprise. The company’s Form C lists $2.83 million in assets (over $350,000 of which is cash and cash equivalents) and revenues over its previous fiscal year 2018 of over $760,000.

Before you walk away impressed, any felt optimism should be tempered with the business more than $1.7 million long-term debt load and net loss for FY 2018 of -$1.86 million. Such large losses are to be expected for any early-stage business (it costs money to market a new product after all) but it’s worth noting for any investor or any one of the company’s 13 current employees.

Is this business worth more than $20 million? We are less than optimistic. We’ve been to enough electronics trade shows and Mall-based Brookstone retailers to know that not every viable gadget or technology finds success in the minds of consumers.

The Rating: Underweight Deal

Based on the drawbacks outlined above, we are assigning Tap Systems the rating of an Underweight Deal.

The market, technology, and usage of Tap Systems’ product seem questionable. And in our estimation, Tap Systems is not quite there yet with its basic technology which seems to be leaving much to be desired for the most open-minded of early adopters. Even if the technology is perfected, it’s not hard to imagine this becoming a very niche product — perhaps eventually acquired for its marketability as a fun gadget rather than a game-changing AR device. A hefty $19.5 million valuation tips the scales for us — at least for now. 

Bottom line: The unique selling proposition of Tap is that users get the ability to type wherever and whenever without the effort of lugging along their keyboards. However, the product fails to do just that and, until it is perfected, the company will be hard-pressed to reach escape velocity. 

If you have any questions regarding the underweight rating of Tap Systems, you can reach us at hello@kingscrowd.com.