X Wine Railroad

Early Stage

Offering train excursions to popular wine regions in California

Analytics

Raised to Date: Raised: $0

Aggregate Commitments $

Platform

Wefunder

Start Date

01/27/2021

Close Date

03/17/2021

Min. Goal

$50,000

Max. Goal

$250,000

Min. Investment

$100

Security Type

Convertible Note

Funding Type

RegCF

Series

Seed

Valuation Cap

$4,000,000

Discount Rate

25%

Rolling Commitments $

Status
Not Funded
Reporting Date

03/17/2021

Days Remaining
Not Funded
% of Min. Goal

0%

% of Max. Goal

0%

Likelihood of Max
Not Funded
Avg. Daily Raise

$0

Momentum
Not Funded
Create a free account today to gain access to KingsCrowd analytics.
Location

Henderson, Nevada

Industry

Travel and Hospitality

Tech Sector

Non-Tech

Distribution Model

B2C

Margin

High

Capital Intensity

High

Business Type

Life Style

X Wine Railroad, with a $4 million valuation cap, is raising crowdfunding on Wefunder. The company offers train excursions to popular wine regions between Los Angeles and Santa Barbara in California. The business is all female-owned and operated. Dianne David founded X Wine Railroad in 2017. The current crowdfunding round has a minimum raise of $50,000 and a maximum raise of $250,000, and the proceeds will be used for purchasing seats from Amtrak, salaries, marketing, and reserves for the full season of runs in 2021. X Wine Railroad generated $1.1 million in revenue and $624,000 in profits in its first year of operations in 2018. The services are expected to reopen in 2021 after service suspension due to COVID-19.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$0

$1,040,494

COGS

$0

$76,730

Tax

$0

$0

 

 

Net Income

$-102,458

$624,054

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$0

$11,599

Accounts Receivable

$349,573

$460,308

Total Assets

$849,573

$987,845

Short-Term Debt

$16,695

$51,522

Long-Term Debt

$0

$0

Total Liabilities

$16,695

$51,522

Financials as of: 01/27/2021
Create a free account today to gain access to KingsCrowd analytics.

Upgrade to gain access

Pay Monthly
Annually (Save 17%)

Edge

$12.42 /month
billed annually
Free portfolio tracking and KingsCrowd's quantitative ratings on all raises.
Plan Includes:
Everything in Free, plus
Company specific KingsCrowd ratings (excluding risk)
Advanced company search ( with ratings)
Markets page filters and historical industry data
Get Edge Annual

Edge Pro

$41.58 /month
billed annually
Full site access including KingsCrowd's qualitative analyst reports.
Plan Includes:
Everything in Edge, plus
Full access to detailed Analyst Reports (e.g. Top Deal, Deal to Watch, Neutral, and Underweight)
Search and filter based on Analyst Reports
In-depth risk ratings for every raise
Get Edge Pro Annual
Already a member? Log in here.

Ratings KingsCrowd Startup Rating Methodology Article

Analyst Report Analyst Report Methodology Article

Synopsis

California is one of the world’s largest wine centers. The state is responsible for 81% of all wine produced in the US, and it’s currently the fourth-largest wine-producing region in the world. In 2019, the state’s 4,200 bonded wineries produced 242 million cases of product. More than 20 million tourists travel to the state’s wineries each year, spending an aggregate $7.2 billion there. This naturally represents an attractive opportunity for any companies interested in the industry. One great example of such a firm is X Wine Railroad.

Initially founded in 2016, X Wine Railroad was built on the basis of a simple idea. Its mission is to provide tourists the opportunity to take an opulent railcar trip from Los Angeles to scenic Los Olivos. The 351-mile journey takes place along the California coastline and treats its visitors to a full day of food and fun. For a ticket price of $399, plus a $15 handling fee, X Wine Railroad treats its customers to breakfast, dinner, wine tasting, and a roundtrip journey. At Los Olivos, customers are treated to a brunch and given the opportunity to explore the old-fashioned town. The business also provides a ‘special’ gift to each of its clients. In all, the company features at least 400 wineries on its revolving menu.

For the most part, management operates on a B2B basis, marketing to group planners, corporations, and special parties. However, customers also have the ability to sign up and pay through the company’s website. It is unclear if management has plans to generate revenue in other ways.

When trips resume in April 2021, X Wine Railroad will be operating just the one rail line. However, they have plans to establish similar trips to all five of the state’s wine-producing regions. These plans include a Sonoma line and a Santa Clara Valley line. It is unclear where on its 2022 to 2025 timeline these expansion efforts fall, but they could mean attractive growth for the firm.

X Wine Railroad’s current Wefunder raise has been rated a Neutral Deal by the KingsCrowd investment team.

Price

In order to push the venture forward, X Wine is looking to raise capital through a convertible note subject to a 25% discount to the company’s future value. For the first $100,000 invested into the deal, the company is asking for investors to accept a pre-money valuation of $2 million. This will increase to $4 million for all other investors. In the meantime, the note will continue to accrue a 10% annual interest rate. This pricing — even at the full $4 million — is quite low, especially for a company with some revenue history behind it. Thus, X Wine Railroad’s price score is its strongest across all five metrics.

Market

The market opportunity for X Wine Railroad is difficult to dissect. There is no reliable data specifically on the railroad wine tasting market or even the broader wine tasting market. Insomuch as wine is concerned, though, California is the space to play in. The total value of wine sales from output in the state totaled $43.6 billion in 2019. This was up 6% compared to one year earlier. Annually, California ships $1.36 billion worth of wine, representing 95% of all US wine exports and amounting to 41 million cases. That amount still leaves 201 million cases for domestic consumption.

There are some issues facing the industry though. According to one source, there’s an oversupply in the industry, which could lead to some wineries closing down over time. There’s also a change in consumer preferences occurring over time. Millennials, for instance, are far more likely than older generations to consume cannabis, beer, and liquor. As a result, millennials actually consume less wine than older generations do. What’s more is the fact that peak wine consumption for most people comes between the ages of 58 and 61. The average baby boomer in 2021 will be 66 years old, and as they retire they are becoming more frugal just like their millennial counterparts. This shrinking demographic of wine drinkers will further limit the potential audience for X Wine’s trips. Due to the highly localized and specific market niche that X Wine is targeting, the company’s market score is its lowest across all five metrics.

Team

At this point in time, there are three key members on the X Wine Railroad team. The first of these is Michael Barron, the company’s Chairman and CEO. At present, Barron is also the Chairman and CEO of United Rail / Las Vegas Xpress. This is a party excursion / charter train between Los Angeles and Las Vegas. While working for that business, Barron has garnered valuable leadership and financing experience. In fact, that firm has raised around $50 million to secure their route. In the past, Barron was also the CEO of three different mortgage-related businesses. One of these was Liberty Capital Asset Management. That company focused on the acquisition and management of defaulted mortgage loan pools. The second was Shearson Home Loans, a $1.3 billion mortgage bank with 237 offices across 33 states. In both of these, he was also the company President. The third, where he held only the position of CEO, was Virtual Mortgage Network. None of these have any real relevance with regards to his current work beyond demonstrating robust leadership experience.

Dianne David is next in line as X Wine Railroad’s President. Prior to working there, she was the President of Las Vegas Xpress. She has also served as Director of Asset Development at X Rail Enterprises. There, her work revolved around the maintenance of rail stations and the company’s passenger fleet. She also worked alongside Barron at Liberty Capital Asset Management and at Shearson Home Loans. At both firms she was the company’s Vice President. The third key person at X Wine Railroad is Wanda Witoslawski. At present, she is the business’ CFO. In the past, she served as CFO of both United Rail and Las Vegas Xpress. She also worked as a Controller at Liberty Asset Capital Management.

It is clear that the roles all three individuals played at rail-oriented companies do add value and much needed industry experience. Thus, the team score for X Wine Railroad is above average.

Differentiators

On the topic of differentiation, there’s a lot that needs to be discussed. Conceptually, X Wine Railroad is not a difficult business to set up or run. Investors may think that the company having a specific route makes it immune to competition, but that would only be true if the company owned that route. Instead, the business piggybacks off of Amtrak. Back in 2018, Amtrak would connect third-party cars to its system and haul them for a fee. In 2019, the company stopped doing this. Between that and COVID-19 in 2020, X Wine Railroad had to take a two-year break from generating revenue. The company has since worked out a deal with Amtrak using that company’s own railcars, but there exists a differentiation problem even here. Amtrak offers its own program for wine tasting through Amtrak Vacations. Packages start at $1,899 per person, but are for nine days as opposed to X Wine Railroad’s one. Two of those days also involve the services of one of X Wine Railroad’s other competitors: Napa Valley Wine Train. There are also plenty of other options that don’t involve railroads. One example is Beau Wine Tours, which provides wine tours across the state using luxury vehicles. Due to the difficulty the company has in truly distinguishing itself from its peers, X Wine Railroad’s differentiators score is below average.

Performance

Performance is particularly tricky with a firm like X Wine Railroad. In 2018, for instance, the business did really well. According to management, the firm generated revenue of $1.04 million. Its profits for 2018 totaled $625,054, and its operating cash flow was $11,170. In 2019, though, the Amtrak issue caused revenue to come in at $0. As a result, the company generated a loss of $102,458, and its operating cash outflow was $11,600. Financials have not been provided for 2020 yet. But from what management said about resuming operations this April, it’s safe to say that last year looked very much like 2019. This inconsistency is a big red flag, but it’s also understandable. What’s more worrisome is that the company’s reliance on Amtrak complicates things. At present, Amtrak looks to be a competitor as well as a service provider. 

Another issue on performance is that the company’s 2018 income statement is likely incorrect. The gulf between earnings and operating cash flow is the first tell on the matter. Looking at the firm’s cash flow statement, we see that the bulk of the difference went to two different asset categories. These were the firm’s other current assets and other assets. These amounts were $210,585 and $328,500, respectively. The other current assets category relates to accounts receivable. Sadly, we don’t know much about these receivables, so it’s hard to tell if the accounting there is right or not. For a business that generates sales from tickets sold, though, it’s hard to imagine that receivables would be long-lived. And yet, they are. By the end of 2019, accounts receivable had declined only modestly to $349,573. What kind of receivables in a ticket-based business would take so long to unwind?

The bigger issue, though, is the amount that went to other assets. Based on the data provided, the only ‘other assets’ the $328,500 could have gone to would be Goodwill. That is a long-term asset, not a short-term one. As such, it does not get reflected in changes to working capital. Instead, cash brought in would flow out as an investing activity. This may be appropriate for that cash, but in the best case it’s in the wrong part of the cash flow statement.

Although not all of the above issues were captured by our ratings algorithm, X Wine Railroad’s performance score is still below average.

Bearish Outlook

At present, there are some bearish items for investors to consider here. X Wine Railroad’s lack of differentiation is one. The financial statement issues disclosed are another. Inconsistent revenue caused by disruptions that could, in theory, happen again, also need to be considered. The market is difficult to understand, and it’s clear there are already strong players in the space. One of these is even a firm that X Wine relies on for its existence. Additionally, the company faces major limits on scalability, since the concept seems to be very specific to California.

Bullish Outlook

Just as there are bearish indicators, there are bullish ones too. For starters, you have the low price X Wine Railroad is asking investors to accept. The company also has a decent management team in place that has some relevant experience. When the company was operating, its revenue looked robust. And if it can expand into five markets, the potential for shareholders down the road could be significant. The firm is also operating in the prime market that exists in the US. There is a certain benefit to existing in the area of peak performance.

Executive Summary

Taking all of the data we collected together, it’s clear that X Wine Railroad is an intriguing company. No, it will never be a multi-billion-dollar firm. It’s not that kind of business. If it succeeds, it could go on to be worth many, many millions of dollars, but the tradeoff is the expected stability of the business model. This point is emphasized by what happened the past two years. But if management can secure the firm and guarantee that the business remains operational, it could be appealing. Even so, there are risks involved, and because of the degree of them, X Wine Railroad is a Neutral Deal.

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

Analysis written by Daniel Jones.

Create your first portfolio

Create your very own investment portfolio on KingsCrowd.

Now you can track all of your startup investments in one place utilizing our state-of-the-art portfolio tracker tools. To begin, create your first portfolio below.

Add to portfolio
X Wine Railroad on Wefunder
$
Platform: Wefunder
Security Type: Convertible Note
Valuation: $4,000,000

Follow company

Follow X Wine Railroad on Wefunder
View on Wefunder (Closed)
Bullish / Bearish
You're Bullish on X Wine Railroad on Wefunder

Thank you for your vote on X Wine Railroad on Wefunder

Bullish / Bearish
You're Bearish on X Wine Railroad on Wefunder

Thank you for your vote on X Wine Railroad on Wefunder