UNOMi’s investors will receive a note accruing a 5% interest rate per annum which will convert at the next round’s financing, subject to a discount of 20% and also subject to a valuation cap of $5 million. For the first $75,000 committed to the deal, this figure has been set at $4 million instead. Although the company — financially speaking — is not too far along, the price being sought by management is quite attractive. It is because of this that our system has rated the price of the firm near the high end of the scale.

There are both good and bad aspects to the market facing investors for a firm like UNOMi. On the good side, we have the fact that its space is particularly large. The broader global animation, VFX, and video games market is estimated, by one source, to be worth about $264 billion as of 2019. With a growth forecast of 2% to 3% per annum, it should grow to between $297.3 billion and $315.2 billion by 2025. Where in this space management focuses on will matter though. For instance, the VFX space alone is quite small. The same aforementioned source pegs that opportunity at just $3.5 billion, but with an annualized growth rate of 8%.

There are other forecasts regarding market size as well. One of them pegs the market this year at $270 billion. It’s projecting a 2% annualized growth rate. This implies, by 2026, an opportunity of $304.1 billion. Though these two sources indicate a market that is similar in size, not every forecast agrees with this. A different one we identified estimates the market last year was as large as $407.2 billion. With a 2.6% annualized growth rate, it should grow to $492.1 billion by 2026. It is due to the sizable nature of this industry that our system could not rate the market opportunity poorly. But the competitive nature of the space and the slow growth rate it is experiencing offset this some. Because of these factors, our rating system places a mid-range rating on the market as a whole for the company.

The core team running UNOMi is quite small but has some experience. Its co-founder and CEO, Obi Onyejekwe, previously raised $900,000 for a firm called Nito Inc. There, he and his team focused on 2D and 3D animation and integrating facial tracking with it. Terms were not disclosed, but in 2016 Nito was acquired by AOL. Before founding Nito, Onyejekwe worked as a Creative Director for Nickelodeon, BET, Dentsu America, and Tribal DDB. At this time, he also serves as the founder COO of Pirate Pixel Studio.  That firm engages in brand development for Fortune 500 companies and has been EMMY-nominated in the past for its work.  All of these various entertainment-oriented experiences will have certainly exposed Onyejekwe to situations that will be beneficial for not only starting and running a company like UNOMi.  

The other core member of the team is co-founder and Lead Software Engineer Arama M. Brown. Brown previously worked on developing software that analyzes live music using both machine learning and AI. The end result is the rendering of 3D worlds that ‘respond’ to the music. She also has served as the Lead Developer for OpenX. 

Onyejekwe and Brown both bring strong past experiences to UNOMi. However, they have not worked together previously, and beyond them, the team is still quite small. Thus, UNOMi’s team score is not extremely high, but it is still strong.

In this highly competitive space, it’s difficult to be different. UNOMi is relying on its 2D and 3D Lip-Sync technology as a main differentiator. This could go a long way toward creating value for animators, game developers, and more. You also have the other three services the company hopes to roll out in short order. Finding a company that hits all four services would be a challenge in the current market. However, there are still strong competitors out there — including Papagayo and Speech Graphics, neither of which was addressed by UNOMi. Each of these differs companies in terms of price and precise services offered, but it’s difficult to tell the extent to which UNOMi truly differs from these players. To get some glimpse of this, it’s important to dig into the Q&A section of the business’ filing. CEO Onyejekwe replied to one person asking about differentiators, and the answer really boiled down to two things: ease of use and overall quality.  A test involving 8 professionals in the space revealed that they preferred the accuracy and ease of UNOMi’s service over some of the aforementioned peers, which they described as being inaccurate. The test also concluded that competitors lacked many of the ‘advanced tools’ that UNOMi provides its users with.  

All of these combined make for a well-diversified business, especially for one so young. UNOMi brings a quality of ease that is appreciated by its clients. But this is balanced against the fact that its competitors are generally further along than it is and better-funded. Therefore, UNOMi rated slightly above average for differentiators.

Conceptually, UNOMi is an interesting business. The fact that its lip-sync service is in MVP stage is also encouraging. Sadly, though, its financial performance leaves the firm lacking. In 2018 the company generated nothing in the way of revenue. Revenue last year was a paltry $2,551. In 2018 the firm generated a net loss of $48,234 and it saw net operating cash outflows of $46,234. 2019 was even worse. That year, UNOMi saw its net loss come in at $138,863. Its net operating cash flows for the same window totaled $117,853. Though financial performance is lacking, the company does have some number of users for its flagship product. In addition, the firm has managed to raise a few rounds of capital successfully so far. Initial funding in 2016 totaled 32 thousand euros. Since then, the firm has received commitments for $357,000, excluding current commitments under this present round. The presence of early users and an MVP were balanced against the company’s lackluster financials to yield UNOMi an above average performance rating.  

While UNOMi is an interesting prospect for investors to consider, there are some bearish attributes to this deal. First and foremost is its negligible amount of revenue last year. Its net losses, surprisingly, aren’t all that bad considering how early stage the company is — but to see so little in the way of revenue is discouraging. It would be different if we saw sales ramping up. But on its filing page management stated that since launching their MVP in September of last year, total sales have been just $4,000. That covers the period through August of 2020. That implies just $1,449 in revenue so far this year. Another negative is how slow the industry is growing. 

Another concern is UNOMi’s choice to build out multiple products all at once. Most successful companies come out with one stellar service, launch it, grow it, and then rinse and repeat. By emphasizing so many things all at once, it illustrates that the team may have some issues. Management should, ideally, be focused on monetizing their first major release instead. Either they are not confident in their original product or they are trying to move too rapidly on diversifying their income streams.

Just as there are bearish considerations investors should be mindful of, there are plenty of bullish ones as well. For starters, management’s line of services do look to be impactful. And they will help to reduce development costs for animators and game developers if they work as anticipated. Though the industry it’s in is growing at a slow pace, even the smallest measure of the space shows a large opportunity for the company. This becomes truer with each new unique service the firm ends up launching. The management team, while small, has relevant and successful domain expertise. And there’s also the fact that the valuation cap being placed on the deal is far from bad given where the entity is in development.

On the whole, UNOMi is an intriguing company. Management has done well to envision and work on developing multiple key services for users. The business operates in an attractive industry and creates undeniable value for the parties it services. Yes, there are some issues with the business as we already stated, but these are not terribly worrisome relative to the positives. All of this taken together has led our team to rate this prospect a Deal To Watch.

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

Analysis written by Daniel Jones.