Warehouse Exchange
About this raise
Warehouse Exchange, with a valuation of $20 million, is raising funds on StartEngine. The company has developed a tech-driven platform to connect renters with warehouse owners. Warehouse Exchange provides quick and flexible warehousing solutions for users to match their business needs and helps warehouse owners monetize their underutilized spaces. The business has over 18 million square feet listed across 35 states and generated $3.2 million in revenue in 2023. Dan Pimentel and Jonathan Rosenthal founded Warehouse Exchange in July 2016. The current crowdfunding campaign has a minimum target of $124,000 and a maximum target of $1.24 million. The campaign proceeds will be used for marketing, research and development, and inventory.
Investment Overview
Committed $129,375 :
Deal Terms
Company & Team
Company
- Year Founded
- 2016
- Industry
- Business Services, Software, & Applications
- Tech Sector
- Distribution Model
- B2B/B2C
- Margin
- Low
- Capital Intensity
- Low
Financials
- Revenue +27% YoY
- $3,083,020
- Monthly Burn
- $177,867
-
Runway
- 1.5 months
- Gross Margin
- 36%
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Synopsis
Warehouse Exchange provides a platform that connects businesses needing storage space with warehouse owners who have unused capacity. The company facilitates a marketplace for flexible warehousing solutions, allowing businesses to find and rent space as needed. Warehouse Exchange primarily serves companies that require adaptable storage solutions, including logistics firms, retailers, and manufacturers, as well as warehouse owners looking to monetize their underutilized spaces.
The problem Warehouse Exchange addresses is the inefficiency in the warehousing sector, where many facilities have unused space while businesses struggle to find storage that meets their specific needs. Traditional warehousing contracts often require long-term commitments and lack flexibility, which can lead to higher costs and inefficiencies for businesses with fluctuating storage demands.
Warehouse Exchange's solution is a tech-driven platform that allows users to quickly find and rent available warehouse space across 35 states. The platform provides a streamlined process for matching renters with warehouse owners, offering a more flexible and cost-effective approach to storage. This model enables businesses to pay only for the space they use when they need it, optimizing their storage expenses.
In everyday terms, consider the challenge of finding a storage unit for personal belongings. Often, individuals must commit to a fixed size and duration, even if their needs change. Similarly, businesses face the dilemma of securing storage space that might not align with their dynamic inventory requirements. Warehouse Exchange provides a solution akin to an on-demand storage service, where businesses can adjust their space usage based on current needs, much like renting a flexible-sized storage unit for a short or long term.
Price
Warehouse Exchange is raising funds through a Convertible Note offering. This security type includes a valuation cap of $20 million and a discount rate of 20%. Additionally, the Convertible Note carries an interest rate of 4%. These terms provide investors with the potential to convert their investment into equity at a favorable rate in future funding rounds, subject to the valuation cap and discount.
For investors considering the exit potential, achieving a 10X return would require Warehouse Exchange to reach an exit valuation of approximately $200 million. This calculation does not account for dilution, which could affect the final return. To reach such a valuation, the company would likely need to significantly increase its market presence and revenue, potentially expanding beyond its current operational scope across 35 states. Warehouse Exchange's current revenue multiple is 6.49x which is quite reasonable for a software startup with millions in revenue.
Market
The North American warehousing market is valued at approximately $359.2 billion, with a projected growth rate of 7.2%. This growth is driven by increasing demand for flexible and scalable storage solutions, fueled by the rise of e-commerce and supply chain optimization. Businesses are seeking efficient ways to manage fluctuating inventory levels, creating opportunities for platforms that offer adaptable storage options.
Warehouse Exchange is positioned to capitalize on these trends by providing a platform that connects businesses with underutilized warehouse spaces. This aligns with the market's shift towards more flexible storage arrangements, where traditional fixed-term contracts are becoming less desirable. Such trends can positively impact Warehouse Exchange's growth prospects by increasing demand for its services.
However, the company's offering primarily appeals to businesses with specific needs for short-term or variable storage space, potentially limiting its reach within the broader market. While this focus allows Warehouse Exchange to serve its niche effectively, it may also restrict the company's ability to capture larger segments of the warehousing market.
Team
Dan Pimentel co-founded Warehouse Exchange in 2017, bringing his experience as the former CFO/COO of startup Hub TV to the venture. As a co-founder, Pimentel also serves as the CFO of Warehouse Exchange, contributing to the company's growth and development. His expertise in finance and operations has been instrumental in shaping the company's business model and strategy.
Jonathan Rosenthal, the other co-founder of Warehouse Exchange, has an extensive background in logistics, investment, and entrepreneurship. He is the CEO of Saybrook Management and has held numerous leadership positions throughout his career. Rosenthal has served as the Chairman of the Board at Taylored Fulfillment Services, Executive Chairman at Gateway Logistics Technology, CEO at ESP Logistics Technology, and CEO at the Harbor Performance Enhancement Center. He has also been involved with government advisory roles, including serving on the U.S. Department of Commerce Sub-Committee and as an Advisory Committee Member for the Port of Los Angeles Sustainable Freight. Rosenthal's diverse experience in the logistics and supply chain industry has been crucial in establishing Warehouse Exchange as an innovative platform in the warehousing sector.
Differentiation
Warehouse Exchange operates in a competitive landscape with several notable players in the warehousing and logistics space. Competitors such as Flexe and Stord offer similar platforms that connect businesses with available warehousing space. Flexe is a larger company with a broad network of warehouses and a focus on providing scalable logistics solutions. Stord, while smaller than Flexe, emphasizes integrated logistics services, combining warehousing with fulfillment and transportation.
In terms of company size, Warehouse Exchange is smaller compared to these competitors, which may impact its market reach and resource availability. However, its focus on monetizing underutilized warehouse spaces allows it to offer potentially more cost-effective solutions for businesses seeking flexible storage options. The pricing model of Warehouse Exchange is centered around transactional fees, which can be advantageous for businesses needing short-term or variable storage without long-term commitments.
The customer demographics targeted by Warehouse Exchange include businesses in logistics, retail, and manufacturing sectors that require adaptable storage solutions. These customers often face challenges with fluctuating inventory levels and seek efficient ways to manage their storage needs. Warehouse Exchange's platform is designed to cater to these specific requirements, providing a marketplace that aligns with the dynamic demands of its target audience.
Performance
Warehouse Exchange reported a revenue of $3.08 million for the most recent fiscal year, up from $2.42 million in the prior year. This represents a year-over-year growth rate of approximately 27.5%. The increase in revenue indicates a positive trajectory in the company's ability to attract and retain users on its platform, reflecting demand for flexible warehousing solutions.
Financially, the company faces challenges with its monthly burn and cash reserves. The most recent monthly burn rate stands at approximately $178k, while the cash on hand is $275k. This financial position suggests a limited runway, emphasizing the importance of securing additional funding or accelerating revenue growth to sustain operations and continue scaling efforts.
Warehouse Exchange's total assets at the end of the most recent fiscal year were valued at $1.01 million, with liabilities totaling $3.7 million, comprising both short-term and long-term debts. The net income for the year was a loss of $2.13 million, compared to a loss of $2.57 million in the previous year. This reduction in net loss demonstrates some improvement in managing expenses relative to revenue generation.
Risk
Warehouse Exchange faces several specific investment risks that potential investors should consider. One significant risk is the company's structure as a two-sided marketplace. This business model requires substantial capital and is challenging to establish successfully. It demands a critical mass of both renters and warehouse owners to thrive. Additionally, there is often only room for a few dominant players in such markets, increasing competitive pressure.
Another notable risk is the part-time involvement of the founders, Dan Pimentel and Jonathan Rosenthal. Part-time leadership may impact strategic decision-making and operational efficiency. It can also hinder the company's ability to respond swiftly to market changes or seize potential growth opportunities.
Warehouse Exchange's current financial runway is a concern. The company's most recent cash on hand was reported at $275k, paired with a monthly burn rate of approximately $178k. This low cash reserve indicates a limited runway, which could pose liquidity challenges if additional funding is not secured or revenue growth does not accelerate as expected.
Bullish Outlook
Warehouse Exchange's bullish outlook is supported by several positive factors. The North American warehousing market, valued at $359.2 billion and growing at 7.2%, presents substantial opportunities for expansion. The company's platform effectively addresses the demand for flexible warehousing solutions, aligning well with market trends driven by the rise of e-commerce and supply chain optimization needs.
Warehouse Exchange's niche focus on monetizing underutilized warehouse spaces provides a unique competitive advantage. By offering a flexible, transactional pricing model, the company can cater to businesses with dynamic storage requirements, setting it apart from competitors with traditional fixed-term contracts.
Despite the part-time involvement of its leadership, Dan Pimentel and Jonathan Rosenthal bring considerable industry experience, which is instrumental in guiding the company's strategic direction and growth. Their expertise is a valuable asset in navigating the complexities of the warehousing marketplace.
Growth drivers for Warehouse Exchange include potential expansion into new states and markets, leveraging emerging technologies to enhance its platform's capabilities. This could increase its market reach and customer base, driving significant growth.
Financially, the company has demonstrated strong revenue growth of 27.5%, from $2.42 million to $3.08 million, reflecting its ability to capture market demand. Although cash reserves are currently low, the company's growth trajectory indicates a capacity to secure additional funding, which could bolster its financial health and support future initiatives.
Bearish Outlook
Warehouse Exchange's bearish outlook is influenced by several notable factors. In the competitive landscape of warehousing and logistics, the company faces significant challenges from larger competitors like Flexe and Stord, which may possess more extensive networks and resources. This relative disadvantage could impact Warehouse Exchange's ability to acquire and retain a broad customer base.
The leadership structure is another area of concern. With the part-time involvement of Co-CEOs Dan Pimentel and Jonathan Rosenthal, strategic agility and rapid response to market dynamics may be compromised. This could hinder Warehouse Exchange's ability to execute growth strategies effectively in a fast-paced environment.
From a financial perspective, the company faces constraints with its current cash reserves of $275k against a substantial monthly burn rate of $178k. This financial position indicates limited runway and an urgent need for additional capital to sustain operations and growth efforts. The high revenue multiple of 6.49x, compared to industry benchmarks, suggests potential overvaluation, making the investment terms less attractive to potential backers.
Growth inhibitors include potential technological hurdles in enhancing the platform's capabilities and capturing a larger market share. Additionally, the company's focus on a niche market segment could limit broader adoption, restricting its growth potential. Without significant innovation or expansion into new markets, Warehouse Exchange may struggle to maintain its growth trajectory, further impacting investor confidence.
Executive Summary
Warehouse Exchange operates a platform that connects businesses needing flexible storage solutions with warehouse owners who have unused capacity. The company primarily serves logistics firms, retailers, and manufacturers seeking adaptable storage arrangements. This aligns with the growing demand for dynamic warehousing solutions driven by the rise of e-commerce and supply chain optimization.
The company is raising capital through a Convertible Note with a valuation cap of $20 million and a 20% discount rate. Warehouse Exchange reported a revenue growth of 27.5%, increasing from $2.42 million to $3.08 million. However, its financial health shows challenges, with a high monthly burn rate of $178k and cash reserves of $275k, indicating a limited runway.
In the North American warehousing market, valued at $359.2 billion with a 7.2% growth rate, Warehouse Exchange competes with firms like Flexe and Stord. The company's focus on monetizing underutilized spaces offers a niche advantage, although its smaller size may limit broader market capture. Its transactional pricing model appeals to businesses needing short-term storage solutions.
The leadership team, with Dan Pimentel and Jonathan Rosenthal at the helm, brings relevant industry experience but operates part-time, which may affect strategic agility. This structure presents risks, especially in a competitive two-sided marketplace requiring full-time commitment to navigate growth effectively.
From a bullish perspective, Warehouse Exchange's alignment with market trends and its niche focus provide growth opportunities. Conversely, the bearish outlook highlights financial constraints and leadership involvement as potential inhibitors to scaling. The company's ability to secure additional funding and expand its leadership could determine its future success.
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Company Funding & Growth
Funding history
- Total Prior Capital Raised
- $5,000,000
- VC Backed?
- Yes
Close Date | Platform | Valuation | Total Raised | Security Type | Status | Reg Type |
---|---|---|---|---|---|---|
03/23/2025 | StartEngine | $20,000,000 | $129,375 | Convertible Note | Active | RegCF |