ViscoSoft is currently raising at a $50 million valuation. The company’s 2020 revenue was $30 million, which yields a 1.67x revenue-to-valuation multiple. This revenue multiple is on par with the average for public home-furnishing companies. In addition, the company has generated more than $95 million in revenue since inception. A $50 million valuation is also in line with other growth stage startups currently raising capital online. Solid historical performance and a reasonable revenue-to-valuation multiple justify ViscoSoft’s current round valuation.

ViscoSoft primarily operates in the US home bedding market, a $17 billion industry. It is a very competitive space, and the home bedding market has been growing at a compound annual growth rate of 9%. On a macro level, the boom in the housing sector has driven demand for home bedding, and interest in customizable smart mattresses is growing. Mattresses are driving the overall bedding market — at a global level, the mattress segment is expected to be worth  $28.9 billion by 2025. Therefore, ViscoSoft operates in a large market with continued growth and high potential. 

Co-founder and CEO Gabriel Dungan holds a bachelor degree in business administration from University of North Carolina Kenan-Flageler Business School. Before ViscoSoft, he worked briefly in business development and merchandise. He has spent the last nearly 15 years dedicated to ViscoSoft, where he leads the company’s business strategy and general operations.

Co-founder and Chief Product Officer Rick Wo holds a textile engineering and design undergraduate degree from Donghua University in Shanghai and an MBA from Southbank University in London. His LinkedIn profile only lists his time at ViscoSoft, but the company’s raise page claims he has more than 20 years spent in manufacturing and design. Wo’s network in China has likely contributed to the company’s material sourcing and supply chain process. 

Co-founder Matthieu Witkowski serves as the president of ViscoSoft France. He has a degree in business administration with a focus on marketing and entrepreneurship from University of Southern California’s Marshall School of Business. Witkowksi spent about a year in project management for ready-made home products prior to ViscoSoft. 

The rest of the ViscoSoft team covers corporate finance, marketing, and engineering functions. As a direct-to-consumer brand, ViscoSoft lacks sales experts. In addition, not enough team members seem to be working on product research and development. While running a lean team can save on company expenses, team expansion can propel the company’s long-term growth and scale. Overall, ViscoSoft has strong founders but seems relatively short-staffed. 

ViscoSoft is targeting consumers who prefer affordable mattress toppers over more expensive mattresses. This go-to-market strategy is not unique or defensible. The cheapest ViscoSoft mattress toppers start at $159.95. However, it’s easy to find similarly priced mattresses from online distributors such as Mattress Firm and Wayfair. Since one of ViscoSoft’s selling points is supposed to be affordability, it is problematic to have mattresses available at similar prices to the company’s toppers. 

ViscoSoft is also integrating sensor technology into its smart mattresses to create a smart sleep experience. This technology will observe consumers’ unique sleeping habits and provide insights for the most optimal sleeping conditions. The integration will connect with home devices and wellness software. However, the technology is still under development, and that development is moving more slowly than some competitors. Ghost SmartBed already has products with similar features in the market. In addition, this feature will also drastically increase the cost to manufacture the products, further deviating from the already weak go-to-market strategy. Overall, ViscoSoft does not stand out in terms of differentiation. 

In 2020, ViscoSoft generated more than $30 million in revenue. While the revenue growth is stagnant, it is still respectable considering the economic contraction caused by the pandemic. Since 2015, ViscoSoft has secured more than 500,000 direct consumers and generated more than $95 million in lifetime revenue. Most importantly, ViscoSoft is currently profitable. 

In addition to great revenue, ViscoSoft has received positive product reviews. The company rose to be a top-250 seller on Amazon, receiving close to 10,000 reviews and a 4.5 star rating on the e-commerce platform. Furthermore, Good Housekeeping has granted ViscoSoft the “Best Bedding” award for 2021. Overall, ViscoSoft has excellent revenue and reviews.    

ViscoSoft is a well-established company, and an investment in it comes with a low risk profile. Financials are the largest area of concern. The company has $8.5 million in short-term debt, a concerningly high figure. Furthermore, the company’s short-term debt has exceeded its total assets. Thus, ViscoSoft does not have sufficient capital on hand to meet its short-term obligations, increasing the chance for default. The success of its current and future rounds becomes critical to eliminate this risk.    

ViscoSoft faces tremendous competition. Its go-to-market strategy of offering mattress toppers for cheaper than new mattresses does not have enough competitive advantage to be differentiated from the industry leaders. The company is operating in three markets globally. To be successful, ViscoSoft requires substantial expansion in its sales and product development staff. In addition, the significant short-term debts will likely hinder the company’s growth, as immediate capital will likely flow into creditors’ hands to avoid risks of default. The company may fail if there is insufficient funding from its current or future rounds.

With a $50 million valuation, ViscoSoft offers a great deal for current investors. Solid revenue performance and a strong consumer base over the past four years justifies the price tag. In addition, ViscoSoft operates in a large market with high future growth potential. While the home bedding industry is a competitive market, it is not a winner-take-all playing field. Furthermore, ViscoSoft has strong founders with deep connections in three major markets — US, China, and Europe. Most importantly, the company is profitable. Even though the margin is small, profitability is still rare and admirable in the online private market. If ViscoSoft can maintain its revenue performance and profitability, the company could be a good acquisition target from many industry leaders.    

ViscoSoft Group is a mattress topper and bedding products company. While ViscoSoft is developing a smart mattress topper technology, its current product does not offer strong differentiation. This could affect its ultimate potential within such a crowded market. Operating in several countries, a larger team of sales and product experts will be necessary going forward. Furthermore, the company’s short-term debts are handicapping its immediate cashflow. 

However, ViscoSoft had solid performance for the past four years. The company has generated more than $95 million in lifetime revenue and secured more than 500,000 direct customers. This achievement resulted in positive Amazon reviews and an award from a notable publication. In addition, ViscoSoft’s founders have industry experience in some of the largest markets — US, China, and Europe. More impressively, the company reached profitability during an economic downturn. A fair valuation on its current round also sweetens the deal. Therefore, ViscoSoft is a Deal to Watch at this time.

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Analysis written by Zee Zhong.