These are strange days. As I write, I’m watching the governor of Maryland announce the shutdown of restaurants, bars, movie theaters and other public places. Local governments throughout the country are taking similar measures to try to slow down the coronavirus pandemic.
Staying healthy and keeping your loved ones healthy should be your No. 1 priority now. You should follow the emergency guidelines of your state. Stay away from crowds. Practice social distancing. And keep washing your hands. Do all these things, and you’ll come through this challenging period just fine.
But I want you to come out the other end whole. And that means not only being physically healthy, but also financially healthy. The economy is struggling. The public stock markets are tanking. Now, more than ever, it makes sense to diversify away from public stocks to private stocks… from vulnerable public companies to much less vulnerable private startups.
By the time the startups you’re investing in now go public, this pandemic will be ancient history. You will look back and see that disruptive companies with exciting technology continued to grow. You will probably notice a few that went on to dominate their markets of choice.
Our daily life will go on. Yes, there will be constraints. But people and startups will learn to live with those constraints until, eventually, they’re no longer needed. While you need to make sure you’re taking care of current health challenges, you shouldn’t ignore your future financial security.
Which is why I’m determined to continue to give you the very best startup opportunities in this crisis. The one I’m introducing you today – Graze – easily qualifies.
Graze is this generation’s Roomba.
The maker of the robot vacuum cleaner Roomba, iRobot, was founded in 1990. It raised its first venture capital (a Series A round) in 1998. Shares cost $1.16 then. Roomba made its debut in stores in 2002. The company was priced at $24 per share when it went public in 2005. And last year, shares peaked at more than $125.
Those Series A investors who sold their shares at iRobot’s peak made a 107X profit.
IRobot built the Roomba during the early days of robotics technology. And robotics has made huge strides since then. Robots are in our warehouses and factories. They’re about to enter the kitchens of our restaurants and fast-food joints. In Japan, they’ve made huge inroads as pets.
When driverless vehicles become available, we’ll be using robots en masse. It’s going to be huge.
There are a good dozen companies vying for leadership in this space. It’s unclear which companies will win and which will lose.
But there is a really good way you can invest in robot technology… RIGHT NOW. The latest robot technology is being applied to an outdoor version of a Roomba-like product. But instead of vacuuming your living room, this robot will be mowing your lawn.
And make no mistake, this is a massive market ripe for disruption.
Commercial landscaping employs five times more manual laborers than agriculture does in the United States. And the industry hasn’t changed much over the past few decades. The mowers themselves have gotten bigger and more powerful. But commercial mowers are still gas powered. They still make a racket. And mowing still requires a lot of people.
The cost of labor, equipment and fuel makes landscaping a high-volume, low-margin business. And when we say low margin, we mean razor-thin margins. In the U.S., landscaping is a highly competitive industry. Companies compete hard on price, which drives down prices.
Enter Graze. It’s building one of the first electric, fully autonomous lawn mowers. And it’s selling them to commercial landscaping companies. Graze mowers will completely eliminate fuel costs for landscapers. They’ll reduce labor requirements by half. They will double or triple productivity by being able to run day and night. And landscaping companies will replace those razor-thin margins with much fatter ones.
Graze’s Robot Lawn Mower Could Soon Become a Common Sight
Graze’s mowers will cost slightly more than what commercial gas-powered mowers sell for. Users would also pay $1,000 a month for maintenance, localization connectivity and other services, like future upgrades. Graze says its mowers will last five years. At $30,000 per mower, the first-year costs for users is $42,000. The following four years add another $48,000 of costs for users – and revenue for Graze. That means over the course of five years, every mower Graze sells will generate $90,000 in revenue.
And this is where it gets interesting…
Two of the top 15 U.S. landscaping firms have agreed to purchase 400 mowers from Graze. That’s $36 million of revenue over the next five years. The two companies have also signed on as research and development partners to help build the product with Graze and take it to market.
This is NOT how it usually works. Startups typically have to scratch and claw their way to their first $1 million in revenue. And most startups fail to reach the $5 million mark in revenue.
Graze is set to reach $36 million in five years. That’s practically unheard of. And it makes it much more likely that Graze will survive its early years.
And Graze investors will reap the benefits of its extremely low prices right now. It’s a win-win-win proposition. Low risk, low price, high upside.
There are a couple of caveats here. Graze’s preorders are LOIs (letters of interest). There is no contractual obligation.
Also, Graze’s third and latest prototype should be ready in July. For revenue generation to begin in earnest this year, the prototype must meet the expectations of its two buyers.
The two companies will each get six units to try out. So there is still work to be done. Graze wants and expects feedback. And it will use that feedback to finalize a commercially ready product. If all goes well, Graze will begin to ship against the preorders before the end of the year.
The next iteration of the mower doesn’t have to work perfectly for Graze to succeed. But it does have to meet expectations. Will it?
Founder and CEO John Vlay says the prototype should exceed expectations. And Graze’s lead investor, Wavemaker, is very excited with the progress being made. It should know. The bulk of the engineering work is being done in Wavemaker Labs’ facilities. And it’s being led by a former senior engineer at NASA.
The technical risks are minimal. And the marketing risks are also low. Graze is in discussion with other large landscaping companies and is close to securing other preorders.
It’s very early in the game. But this is as good a start as could reasonably be expected.
So far, so good. But does Graze check off all of my “four M’s” – market, management, metrics and monetization?
Let’s take a look…
- It moves the needle in the landscaping market. Graze addresses real needs in a $54 billion a year U.S. market. Landscapers will be able to reduce four- to five-person teams to two people, achieve new efficiencies and undercut the competition on price. It’s also a rare first-to-market opportunity
- Graze will use a SaaS-like model to monetize. Because landscapers regularly purchase new equipment when their older machines stop working, Graze is adopting a software as a service (SaaS) recurring revenue model. The 400-mower preorder will eventually generate an annual recurring revenue (ARR) base of $5 million (see chart below).
From there, the sky’s the limit. This robotics as a service model is a close cousin to the SaaS model.
- Pipeline orders aren’t always the best way to judge a startup. But in this case, the orders are too big to ignore. Graze is pre-revenue, so metrics like profit margins, cost of customer acquisition, customer satisfaction and revenue growth fall under the “to be determined” category. But $36 million worth of preorders is nothing to sneeze at. It takes a great deal of the initial market risk off the table. That said, the absence of meaningful hard metrics means there’s a lot of hard work ahead.
- This management team boasts loads of experience. CEO and founder John Vlay spent 35 years with Jensen Landscape. For 11 years, he was Jensen’s chairman, CEO and president. He also oversaw Jensen’s sale to private equity-backed Monarch Landscape in 2016. He’s joined by Roman Flores, a former senior engineer at NASA. Roman worked on the Mars Curiosity robot team. Together, they make a formidable and deeply experienced team that is well-equipped to lead Graze to success.
Graze gets high marks in all four “M” categories. The market is big and needs an overhaul. Recurring revenue is my favorite kind of revenue, and Graze should quickly establish a stable base of annual recurring revenue. Graze has bagged two large customers at a fairly early stage. That’s a great sign the company is on the right path. It also gives the company a pathway to immediate monetization. And John and Roman have tons of experience. John’s is business focused. And Roman’s is in technology. It’s a classic pairing that should ease what can be a bumpy journey.
Now all you need to know is how to invest.
How to Invest
Graze is raising up to $10 million on SeedInvest. If you don’t already have a SeedInvest account, you’ll need to sign up for one. Once you verify your account and are logged in to SeedInvest, visit the Graze deal page.
Then click the button to invest. Enter the amount you want to invest, starting as low as $998, and proceed through the required steps. Be sure your investment is confirmed, and then you’re good to go.
This opportunity, like all early-stage investments, is risky. Early-stage investments often fail. The investment you’re making is NOT liquid. Expect to hold your position for five to 10 years. An earlier exit is always possible but should not be expected.
All that said, I believe Graze offers an attractive risk-reward ratio.