Dragon Fodder: Disruptive Tech w 10x Growth in 2019…I feel I have a fiduciary duty to give a quick preview of this business as an advocate for the Canadian Small Tech Space. These are the type of businesses that we should be jumping over to get a piece of as public investors at the ground floor of growth when the majority of the wealth creation has been in large VC funds and this is a rare example where you have a chance to get a piece of it in the public market.
Here we Go;
Investing Alongside a Dragon
This gets overlooked in so many of these small cap businesses; the people that are behind them. You have Bruce Croxton of Dragons Den and Round 13 Capital in the stock and they own >28M shares of the company and if you include the debentures, you are investing alongside one of the most high-profile Canadian Tech investors who owns >30% Economic Interest of the company. Not bad company to keep.
Board & Management Team – Skin in the Game
The pedigree of this management team and board also is highly impressive, combine that with the fact that the significant skin in the game they have with stock and options in the company. I want to hit a key point here, not only do they have significant stakes in the company they have been buying in the open market at higher prices. – AS RECENT AS THIS MONTH AT .10/SHARE!!!
It’s one thing to be granted shares its another to see them putting their hard-earned cash back into the business.
Stephen Taylor, CEO – 8,261,422 Shares (Total economic interest 10,018,706 shares or aprx. 10% of company)
Other Management – Economic Interest 15,969,680 Shares or aprx. 15% of company
Board of Directors – Economic Interest 14,972,410 or aprx. 15% of company
So, between Insiders and Round13 Capital they have controlling interest in 70% of the company!!! Where else are you going to find that kind of conviction.
IndiVideo & DigitalReach SaaS Platforms
This is where the value of the business is and where growth has gone parabolic where I think there is at least 2x the value of the stock is.
DigitalReach – You have a core digital media business growing 5 – 10% generating $90 – 100k/month in high margin recurring revenue. Annualized Revenue is $1,200,000 (Assigning a 4.0x Sales valuation gets to $4,800,000 value or 0.048/share)
IndiVideo – This is where the growth has gone parabolic, the adoption of the Customer Experience Management trend is just getting going. The big value comes from the customer data collection and the decision analysis decision making that can be overlaid on it to drive measurable results and engagement.
Just go to their website and watch the presentation about how their IndiVideo drives massive engagement increases which results in large increases in conversations and funds contributed. These deliverables makes the payback on the software almost instantaneous and the ROI it drives would be significant. This model is expandable across so many verticals, I think they have just scratched the surface here especially when it comes to the interactivity of the platform.
This is great but let’s talk numbers, Since January Monthly Recurring revenue has gone from $10,000/month to going to exit July with a rate exceeding $120,000/month. THAT IS 10X GROWTH IN 7 MONTHS!!!!
So, let’s be conservative and consider ex growth and just look at the value of the platform today. Annualized Run Rate Revenue is $1,440,000 (Assigning a 4.0x Sales valuation gets to $5,760,000 value or 0.058/share) – AND YOU GET THE ACCELERATING GROWTH RATE FOR FREE!!!
WAIT, we already have calculated a value of 0.106/share yet the stock is 0.08/share…
And, you still have a $2,000,000M service side of the business that alone has an impressive margin profile running 40 – 50%. (Assigning a 1.0x Sales valuation gets to a $2,000,000 value or another 0.02/share).
So this is 0.126/share of value within this business with a hidden Gem in IndiVideo that has already grown 10x this year alone. This stock has to be revalued so much higher.
Private v Public Markets
We are at such an odd point in capital markets, where there is so much money going into Private Market VC funds chasing growth at all costs where there is secular growth and valuations have been inflated the point where they are so much more expensive then many publicly traded equivalents. Especially names in the junkyard of the TSXV
If you look at BlueRush peer group of companies in the private markets, Sunday Sky, Vidomoo & Vidyard that have been raising funds from some of the biggest names out there. Between the three of those private companies they have raised a cumulative total of $145,000,000 USD or $190,000,000 CAD!!!!
Then I look at BlueRush that has raised a total of $3,300,000 and are putting up 10x growth within its IndiVideo…it’s just so impressive.
Take Individeo alone, you could easily spin off and package it with a nice bow and slide deck as a separate entity and raise money in the private market or take it public at a 5 – 10x Sales multiple and people would be jumping over each other to get a piece of it.
That would result in a value for the IndiVideo business of $7,2000,000 - $14,400,000 or on a per share basis anywhere between 0.07 – 0.14/share value. Call it 0.105/share at the midpoint, conversion price of convertible debenture that Round13 Capital participated in 0.105. Coincidence….Possibly….Maybe Not.
In Conclusion
We have a business backed by some of the smartest minds in Canadian Tech that have big skin in the game with a hidden Gem in IndiVideo growing 10x. With a base valuation of the business today 0.125/share with the free upside optionality of the explosive growth on IndiVideo Platform.
Just follow the Monthly Recurring Revenue for IndiVideo. Using our 4x Sales metric every further $10,000/monthly recurring revenue run rate adds 0.005/share to the valuation. Not hard to make the case to get to a value of 0.18 – 0.20/share stock price if IndiVideo gets to a $200,000/month pace by calendar year end….
Upside here is massive.
Just look at VPY.V – another high margin recurring business that is burning so much cash that trades at 10x sales… I think I am quite conservative here using a 4.0x Sales figure for BlueRush.
Lets see what happens, first disruptive tech name I have gotten excited about in some time.
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