Rerouting Wireless Technology
New Recommendation: Gryphon

By Adam Sharp, Co-Founder, First Stage Investor

Most of us don’t think twice before connecting to a wireless network. But there are real and emerging threats that come with this ubiquitous technology.

Gryphon has built what may be the most secure and functional wireless router available.

Gryphon has everything I look for in a great startup investment. It has built a superior product in a huge market, is operating in a lean, cash-efficient manner and has assembled a top-notch team.

The Gryphon wireless router uses artificial intelligence and machine learning technology to help guard against malicious attacks.

Applying these technologies to security allows the system to learn over time and develop stronger protections by combining data (anonymously) from all units.

Gryphon’s router also has parental controls, allowing parents to block inappropriate content.

In addition, parents can set time limits for specific devices, ensuring that kids don’t spend too much time on electronics.

There’s even a “pause internet” button, and parents can review their children’s browsing history. These features address major concerns of parents worldwide.

The Gryphon router is controlled through a mobile app. Users can easily block adult content and control access to their network. This is a major advantage over most routers sold today, which have clunky interfaces that are difficult for less tech-savvy people.

Gryphon’s app and smart software should give the company a big leg up on competitors.

The router itself is also a cutting-edge piece of hardware. It contains three radios, providing strong coverage.

It is also capable of “mesh networking,” meaning it can connect with multiple devices and smartly deliver Wi-Fi across larger areas than traditional models can. Mesh networking capability may make the product more attractive to small businesses.

On top of all the technical goodies, the product itself is gorgeous.

It has a sleek and refined design. The team put a lot of work into designing a highly functional and sharp-looking piece of hardware.

If the team can gain traction in this lucrative market, Gryphon will make an attractive acquisition for leading hardware companies such as Intel and Cisco. The product recently launched at $199. (It should be available on Amazon in the near future.)

The company offers ongoing security packages and additional optional services, such as virtual private networks, to create recurring revenue.

Network protection is free for one year, then goes up to $9.99 a month. Parental and access controls are free forever. Here are some of the reasons I believe Gryphon is poised for success. The company…

• Maintains a lean business, with most employees and contractors working for equity
• Has a detailed distribution and marketing plan
• Employs seasoned Wi-Fi sales executives who are ready to go
• Brought a hardware product to market with less than $1 million in 18 months
• Sports a beautiful product design
• Solves two growing problems for Wi-Fi users: security and parental controls
• Is an attractive acquisition candidate
• Boasts a team that has invested and has serious “skin in the game”
• Uses machine learning and artificial intelligence for both security and parental controls
• Features an easy-to-use app
• Saw its pre-order campaign on Indiegogo deliver on time
• Secures recurring revenue through support and services.

Leadership and Team

Gryphon was founded two years ago by wireless industry pros John Wu and Arup Bhattacharya.

Together, these two have more than 50 years of experience in the field. They have worked at leading firms, including Motorola and Novatel Wireless.

John helped build the world’s first digital mobile phone at Motorola and was lead engineer on a very successful wireless hotspot product called MiFi. He has also authored 18 patents.

Arup is a seasoned developer who worked with John on the MiFi hotspot product, leading software development on the project.

He was also an executive at PortalPlayer, which developed the chips used in iPods and was acquired by NVIDIA.

I spoke with John on the phone and came away extremely impressed by his confidence, knowledge and business savvy. It is clear that he’s passionate about this product and wants to build a superior, more secure wireless router. He is exactly the type of founder I like to invest in.

The team has invested its own funds in Gryphon and is not taking salaries for the most part. This demonstrates confidence in the product.

This team has the experience and drive to make this product a success. Its members have worked together in the past and left their lucrative positions to build a product of their own.

Gryphon has also proven its ability to generate positive press from major outlets like Engadget.com.

This startup has assembled a small but dedicated team of experts and brought a product to market in only a year and a half. It just obtained FCC approval, the last hurdle before going to market.

This is a truly impressive feat. Gryphon has shown incredibly efficient use of capital. This startup is lean and mean, and it’s executing at a very high level. Its team is rock-solid.

Intellectual Property

Gryphon is actively pursuing multiple patents on its technology. Here’s an excerpt from its SeedInvest profile…

Successfully submitting patents requires experience and dedication. Fortunately this team has the knowledge and drive required to pull this off.

How You Can Help

If you’re in the market for a secure wireless router, consider buying a unit.

Simply go directly to Gryphon’s site. I will be purchasing one and am looking forward to the parental controls and added security.

If you do buy one on Amazon when it becomes available, leave a positive review. Achieving success here is critical for products today.

Make it genuine and descriptive. If you find the app easy to use, mention that. Compliment the parental controls or security features.

Also consider sharing your Gryphon experience on social media sites like Facebook and Twitter.

How to Invest

First, you’ll need to register for an account on SeedInvest.com if you haven’t already. Fill out all the fields and confirm your account via email. (Note to new users: We have known the team at SeedInvest for years now, and we trust its platform.)

After you’re registered and signed in to SeedInvest, navigate to this page: www.seedinvest.com/gryphon/seed.

On the page, click on the blue “INVEST” button. Select how much you want to invest, and follow the directions to submit your payment.

Deal Summary

The valuation on this deal is extremely fair at a $7.5 million cap.

Company: Gryphon

Industry: Wireless hardware

Investment type: Convertible note (will convert into shares in the future when certain conditions are met)

Valuation: $7.5 million cap (the most your investment will convert into shares at)

Interest rate: 5% (you’ll receive 5% interest on your investment, usually when it converts upon future financing)

Minimum investment: $500

Portal: SeedInvest

Risks and Notices

Gryphon is an early-stage startup. All such investments are inherently risky.

You should expect to hold this investment for five to seven years or longer. An acquisition is possible before then, but ideal early investments take years to reach an “exit scenario” such as an IPO.

While I believe this deal offers an excellent risk-reward ratio, never invest money you can’t afford to lose.

Your investment will convert into shares at a valuation of no higher than $7.5 million. Expect payment of 5% interest at that time and not before. ■

investment strategy

Finding the Super (Unsexy) Startups

By Andy Gordon, Co-Founder, First Stage Investor

It’s one of the hardest things to do as an investor.

Maybe the hardest.

Even professional investors have trouble doing it.

But if you can…

Then you’re putting yourself in line to make the same gains that Uber, Airbnb and a few dozen other companies gave to their earliest investors.

What makes these companies so special?

It’s the one thing they have in common that made it difficult for investors to back them.

This same thing also allowed their early investors to pocket unusually large gains.

But those investors had to invest first.

More Than a Feeling

The fear of missing out (FOMO) is more than a feeling.

Fact is, successful venture capital investors sometimes pass on hugely profitable opportunities. The examples are endless. VCs call these missed opportunities their “anti-portfolio.”

It has all the companies that are now worth hundreds of millions of dollars or, even more painful, billions.

“Coulda, woulda, shoulda,” but they didn’t.

The Wall Street Journal lists 169 unicorns. These are the startups valued at $1 billion or more that are still privately held and have at least one VC firm as an investor.

But I’d say any startup with a valuation of more than $100 million has “made it.”

So you can add hundreds more successful companies to the universe of startups that investors have passed on.

Here are just a few “coulda, woulda, shouldas”…

• What’s better than investing in Airbnb at a $1.5 million valuation? One investor who spurned the startup said, “We decided not to take this to the next level… We’ve not been able to get excited about travel-related businesses.” (From an actual rejection email to founder Brian Chesky.)
• Finnish startup Supercell is one of the leading gaming companies in the world. But eight years ago? It was just another company struggling to survive. Robert Dighero of Passion Capital said no to an early funding pitch. His friend said yes. Tencent bought the company for $8.6 billion in June 2016. Dighero made nothing, but his friend? He made a cool 4,000X.
• Chris Sacca of Lowercase Capital dropped the ball on Dropbox. His reason? “I passed on Dropbox because I had already been using what became GDrive and told the founders Google would crush them.” Dropbox sports a valuation of $10 billion.
• Christian Hernandez of White Star Capital rues the day he passed on calendar app Sunrise. It eventually was sold to Microsoft for more than $100 million. “It’s a beautiful calendar app, but it’s just a calendar app,” he said at the time.

What was the real reason these smart, professional VC folks didn’t invest?

These quotes only hint at it. But I believe I know why.

It’s because they were unable to do the hardest thing. Investors aren’t the only victims. Founders are too. Think of it as the flip side of FOMO.

Founders Know All About This Special Trait

Founders love their genesis stories. The ones they love most of all?

Being rejected by dozens (even hundreds) of VC firms when seeking their first big investors.

And why not?

It makes for a great rags-to-riches story. Some of the most successful startups in recent memory were rejected dozens of times. Consider…

• Adaptive Insights – rejected 70 times
• Pandora – 30 times
• Thredup – 27 times
• Nutmeg – 45 times
• Hotmail – 20 times
• Automated Insights – 173 times (before getting acquired after its Series B round).

And the list goes on.

How could so many investors – professional investors – not see the immense potential of these startups?

They all have excuses… usually some version of not liking the idea. Or liking the idea but just not being able to pull the trigger. Or feeling the startup just wasn’t good enough.

I don’t buy it. And I suspect they don’t even realize the real reason…

They just couldn’t do the hardest thing.

There’s no shame here. Not many investors can. But the very best?

They know exactly what I’m talking about.

And most of them – as hard as it is – can do this.

The Super “Un-Companies”

What’s so hard about recognizing a trend that’s constantly been in the news? NOTHING.

What’s so hard about getting excited about a technology everybody says will change the world? (Robotics, anybody?) NOTHING.

What’s so hard about envisioning a future where everything is delivered to your doorstep – either via self-driven vehicles or drones?

NOTHING.

On the other hand…

It’s hard to get worked up over the “un-companies.”

The ones that are untrendy, unexciting and unappreciated.

These companies are usually the first to meet a need.

But in meeting that need in a very unusual, surprising or not easily understood way, they have trouble attracting investors.

Their founders typically have a deep and visionary understanding of the problem they’re addressing.

But, again, because that understanding can go against how most people view the sector, industry or market they’re addressing, it’s not easy to understand or accept.

Such founders not only reject how the legacy companies do things but reject other startups’ approaches.

Put another way, they’ve found a much different and better way of addressing a pain point or solving a problem.

As I said, it’s not easy to spot these visionary companies.

I’m getting better at it. I’m still not where I want to be.

And I hope I never feel complacent about this.

Because if you can be rushing in when other investors are staying away, it means you have insights very few others share.

It takes a certain amount of courage to act on a belief that no one else understands, never mind puts money into.

How I’ve Changed (And How You Can Too)

Years ago, when a founder made a pitch I didn’t get, I didn’t invest.

I’ve completely changed my approach since then.

I stay on top of most technologies, so if a founder is telling me something I’ve never heard before… if I don’t completely understand their thesis… or if I can’t appreciate the advantages their idea or technology brings…

Well, that’s exciting.

The biggest successes with the biggest financial rewards are also those companies that reinvent how we communicate, travel, eat, work and entertain ourselves.

The Twitters, Instagrams, Spotifys, Pinterests and Slacks.

So I want to learn more. And I do.

Of course, the trick here is not just to be contrarian. It’s to be contrarian and right.

For Adam and me, it’s more than just gaining familiarity with a startup’s proposed solution. We try to develop a deep understanding of the problem and the solution.

So then, if we’re as excited as the founder is, that means something.

A Look at Three of Our Unconventional Portfolio Holdings

We traveled down this road in three of our recent recommendations.

It took an independent-minded approach to fully appreciate these startups.

The recommendations I’ve given you spell out my reasons to invest.

What follows takes a little different perspective. It focuses on what makes them different.

20/20 GeneSystems. This company’s founder, Jonathan Cohen, chose a path less traveled.

Dozens (possibly even hundreds) of other companies glommed on to DNA sequencing as their cancer-detection technology of choice.

While still under development, the technology is cutting-edge and full of possibilities.

Or so we’ve been told in about a million articles: “The next big thing,” they say.

20/20’s technology focuses on antigens, substances that cause an immune response in the body.

And get this: The basic medical technology has been around for years.

20/20’s critical innovation is putting a machine-learning layer over the test results that significantly improves accuracy.

Unsexy? You bet.

Attracting a big investing crowd? Absolutely not.

But we recommended it after taking a deep dive into the effectiveness of antigens as biomarkers (medical signs that can be accurately measured).

Home61. This company is changing almost everything that the legacy real estate firms do.

The technology it’s using isn’t futuristic. It’s a little bit of this and a little bit of that, including algorithms. Frankly, not that exciting.

But consider that homebuying is one of the last vestiges of the old and tired way of conducting business. And it’s a massive market: More than 60% of the U.S. population owns homes.

It affects a lot of people.

Not understanding the huge impact Home61 can have is the updated version of “not getting” Uber.

Sickweather. Tracking illnesses and certain cancers like meteorologists track the weather is a neat idea, but it’s hard to understand its potential impact.

And it’s easy to jump to the conclusion that it’s not impactful.

But the way the world is trending is heading right into Sickweather’s wheelhouse. Everything we do and see and experience will be turned into a data point.

The effects are mind-boggling. In this brave new world, the ability to geo-locate and predict the direction (and severity) of illnesses will be huge.

Who will be following Sickweather’s forecasts?

For openers, try hospitals, clinics, healthcare NGOs, pharmas and medical device companies – really any organization in the medical field – not to mention the elderly, the very young (or their parents), the chronically sick and scores of healthy individuals.

Not keeping up with the “sick weather” will be unimaginable two to five years from now.

Imagining the Future, Reshaping the Present

But right now, it’s pretty much the opposite.

We may find it very hard to imagine sickness tracking being ubiquitous.

The problem? The future we imagine looks too much like the present we live in.

For this reason, of these three companies, Sickweather was the most challenging to envision in a future world – a place I’m convinced will be dominated by real-time data encroaching into our daily routines.

But seeing opportunities on the edges of a market is what Adam and I do.

Whether it’s speculative platforms or new technologies the crowd isn’t excited about (or even knows about), we want to take advantage of the best of those kinds of contrarian opportunities.

It’s where the biggest profits are. Listening more to yourself and less to the noise of the crowd is not easy to do.

But it’s worth trying. ■

q&a

Moving Toward Liquidity

Q&A With Mark Lynn, Co-CEO and Co-Founder of DSTLD

By Andy Gordon, Co-Founder, First Stage Investor

We’ve written quite a bit about DSTLD’s impressive growth and future plans recently.

But this is the first time we’re writing about perhaps the most exciting development of all…

DSTLD is aggressively pursuing liquidity options for investors in 2018.

We tell you this with a note of caution. It may not happen. But after a long talk with Mark, I can tell you DSTLD is very serious and is making headway.

The best news? Shares in its current round go for only $0.50. And its raise doesn’t close until March 23.

Mark gave me his thoughts as to why the company is moving in this direction… and why now.

If you’re looking for insights into how founders approach the mega-questions of growth, sustainability and the endgame – a liquidity event – then there’s plenty to chew on below.

Andy: The IPO question revolves around the when and how. Anything you can tell us regarding DSTLD’s plans?

Mark: We’re talking to lawyers and bankers about this. But, Andy, I hope you understand, we can’t reveal a whole lot right now. There are laws I have to respect.

Andy: Of course. But since you’ve already told me you’re pursuing liquidity options, can I ask, “Why now?”

Mark: That’s an interesting question. A lot of it comes down to how we see the company’s future.

Do we want it to be a growing part of a much bigger company via a buyout, or is there another path to move forward?

We’re very excited about our year-on-year nearly 100% revenue growth – not because we think it’ll attract bigger companies wanting to buy us out but because our growth record to date gives us a way to become that bigger company if we choose to go down that path.

Andy: How so?

Mark: We can’t share specifics, but we’re looking at all the options. We think the timing is right.

Andy: Really? It seems early in a way. Just when you’re hitting your stride, you may be going public.

Why not wait and reap the rewards a much bigger DSTLD could bring?

Mark: You’re right. We are hitting our stride, doing a lot of good things.

For example, we just brought onboard a terrific entrepreneur, Hil Davis. He was a co-founder of J. Hilburn, a successful luxury men’s clothing company.

He’s helping us solve many of our sourcing and inventory problems. Things are coming together quite nicely. We see a bright future.

Andy: And part of that future is doing a major equity raise?

Mark: There are a lot of exciting things we could do with the money, like acquiring small companies, a “build and buy” growth strategy, doing on a small scale what we see companies like Walmart do on a bigger scale.

We see a number of smaller companies getting bogged down in a kind of purgatory.

Their lead VCs won’t invest because they’re not cash positive, but they are growing at a nice clip, which we find very intriguing.

Andy: That could propel the company forward in a dramatic way, yes?

Mark: It’s a possible way to avoid getting stuck in the $50 million to $100 million revenue range and break out into billions of dollars of revenue.

Andy: That’s thinking big…

Mark: We want to choose a path that creates long-term value. It’s down the road but something we’re always thinking about.

Andy: Nothing wrong with thinking big. I appreciate your thoughts on your near and not-so-near future plans.

Mark: Thank you, Andy. We’re very excited about some of the very interesting options opening up for us. ■

chart of the month

Chart of the Month

Low Profile, Big Gains

By Allison Brickell, Managing Editor

In Andy’s piece on “untrendy” startups, he warns investors not to ignore the unpopular kids. Not all successful startups hop aboard a powerful trend and ride into the sunset in a fiery blaze of glory. Some find success by tackling big-picture problems using less exciting solutions.

Case in point: In a study of capital-efficient startups, TechCrunch found a number of companies that didn’t raise much in their pre-public fundraising rounds but ended up with impressive numbers.

For example, fashion company Stitch Fix raised just $42 million in venture capital funding. After its initial public offering, its valuation rocketed to $2 billion. Roku raised a little more than $200 million and ended up with a $4.2 billion valuation.

SendGrid, an email delivery service, raised $80 million. After it IPO’d, its valuation hit $1 billion.

As Andy said, it’s hard to get worked up over the “un-companies.” But when you recognize the potential a quality startup possesses – even if it focuses on something you don’t personally find exciting, like streamlining a judge’s paperwork process – you can set yourself up for a handsome payday.

Take 20/20 GeneSystems, one of our recent recommendations. The healthcare company focuses on reducing cancer mortality through early detection. 20/20 has created an innovative machine-learning approach to generate accurate test results, but the basic technology underlying its method is not new – it’s been around for years.

In addition to tech companies, the TechCrunch piece ranked life science companies in a similar fashion, listing the amount of venture funding received and post-IPO/acquisition valuation.

It found venture-backed life science companies tend to pursue IPOs at a higher rate and earlier stage of development than tech companies do.

It also found 4 out of 5 of the most successful life science companies on its list focus on therapies or diagnostics for cancer patients.

Of course, nothing is guaranteed in the world of startup investing. But this is yet another encouraging indicator to add to our long list of positives for 20/20 GeneSystems.

The TechCrunch piece concluded by echoing Andy’s sentiment.

In a startup environment where investors continue to chase unicorns and mega-rounds, it’s worth noting that the largest returns don’t always go to the most predictable candidates.

We couldn’t agree more. ■

You’re cordially invited to join Adam at an investing seminar this coming October 1-2 on beautiful Kiawah Island, South Carolina.

As a guest speaker at The Oxford Club’s 2018 Private Wealth Seminar, Adam will share crypto insights you won’t want to miss. In addition to Adam, you’ll hear from The Oxford Club’s Chief Investment Strategist Alexander Green, Chief Income Strategist Marc Lichtenfeld and Emerging Trends Strategist Matthew Carr.

Here’s your chance to be part of an exclusive group of like-minded investors for a spectacular financial retreat where these investing minds dissect the strongest sectors for protecting and growing your wealth. For all the details – and to save an additional $300 on registration – simply visit www.oxfordclub.com/pws2018.

P.S. Adam will also be speaking at The Oxford Club’s Private Wealth Seminar in Whistler,
British Columbia, this coming July 23-24. To meet him at the summer Private Wealth Seminar, visit www.oxfordclub.com/whistler2018. The July meeting is nearly sold out – so don’t delay!