BlueStar is raising via a convertible note at a $24.2 million valuation with a 20% discount. In comparison to most other startups pursuing crowdfunding, this valuation is quite high. However, BlueStar’s recent revenue helps to justify the amount. Additionally, investors are being offered a 9% interest rate through the convertible note, which is very attractive. Thus, BlueStar’s price score is very strong.

In some ways, BlueStar couldn’t have picked a better target market. As we get better at keeping people alive longer, costs are stacking up. The global home healthcare market was valued at $281.8 billion in 2019 and is expected to grow at a CAGR of 7.9% from 2020 to 2027. The U.S. accounts for a relatively large percent of these expenditures — more than a third. 

As for the company’s focus on veterans, there are more of them than you might think. The U.S. has 18 million in total, almost half of which are over 65. Additionally, due to the Department of Veteran Affairs, the U.S. government could be a potential client or partner for BlueStar in the future. Due to this well-sized market, the company scored above average in the market metric.

BlueStar’s leadership reflects its prioritization of veteran leaders. The CEO and COO are both retired two-star Navy admirals, and the company has 14 generals and admirals on its advisory board. CEO Robert Wray, who holds a Masters Degree in Leadership from Georgetown, is a veteran of both business and the military. Wray — who served for nearly three years as president of the Board of Inspection and Survey in the Navy — has spent the last ten years speaking and writing on leadership through Saltwater Leadership. Before his stint in Navy leadership, Wray served as a VP with SAIC, a military contractor, and spent 8 years as president of a small energy firm called Powergy.

COO Gordon Russell has more than a decade of experience in various intelligence-based positions across the Navy and other bodies following years of administration with the University of Colorado. After serving for three years as Commander of NAS Fort Worth JRB, where he commanded 6,800 intelligence professionals, Russell retired as a Rear Admiral in 2014. 

Senior VP of Business Development David Coakley lacks his superiors’ military experience but did spend several years as a partner for VetLikeMe, a news publication for vet-owned businesses. A graduate of the George Mason School of Business, Coakley was also the owner of GovCon, an internet portal for government contractors. 

BlueStar has an expansive team for a startup with 11 registered employees. The team’s experience at the highest levels speaks to its engagement with veterans. Its health-specific expertise is somewhat delegated to the team’s younger members, such as CTO Preston Weir, who has experience working on medical alert devices, and Customer Service Director Maryam Parsa, who holds a degree in public health from the University of Maryland. Due to this wide range of experiences and expertise, BlueStar’s team score is quite strong.

BlueStar’s differentiation is something of a mixed bag. While the company’s significant recurring revenue stream has demonstrated a high-margin operation, its technology is hardly unique or irreplaceable. It is not patent-protected and could be easily duplicated by potential or current competitors seeking to undercut BlueStar in this space. 

One massive potential competitor is Johnson & Johnson. Johnson & Johnson’s Medical Devices Companies are oriented towards technology-based medical interventions, and the company also has a strong emphasis on support for military service. Another potential competitor is Medtronic, an Irish-American company with a focus on diabetes but a track record of dependable medical technology. 

BlueStar also faces significant emerging competition in the fields of telehealth and remote patient monitoring, including RescueTouch, Teladoc, and startups like Care Angel. Furthermore, BlueStar’s technology is potentially replaceable by new tech emerging into the market, which seems increasingly likely. Thus, the differentiators score for the company is slightly below average.

Despite its varied challenges, BlueStar’s performance numbers are good news for investors. Since its founding in 2013, the company has expanded to reach 5,000 customers and secured a significant recurring revenue stream. That translated to $1,880,775 in 2019 revenue, up from $1,717,013 the year before. While it’s good news for a startup at this stage to have this level of significant revenue, the company is still far from turning a profit. Net loss last year came in at $820,924, and the company’s short- and long-term debt increased by $329,786 and $1,189,583, respectively. However, BlueStar has also successfully built up assets, the value of which more than doubled from 2018 to 2019. 

Despite the accrual of significant debt, BlueStar’s strong revenue numbers are very encouraging. The company’s extremely high performance score reflects its impressive financial health.

On a more cautious note, investors should be wary of a startup with so little to distinguish itself in the way of differentiation. Measures like patent protection and unique innovations can really help a business establish itself as irreplaceable in the market, and BlueStar has none of these. 

Though recurring revenue is a big selling point for this investment, BlueStar’s high operating costs mean that it needs to significantly expand its intake, and operating costs are unlikely to diminish substantially as the rapid pace of technology causes the new to supplant the old. As competitors arise in this space and consumers are open to whatever the bigger names like Johnson & Johnson might present, BlueStar will need to significantly expand on its current base to stay relevant and reach profitable levels. This task could be much more difficult if BlueStar is unable to reach beyond the niche audience of veterans and government customers.

BlueStar is pursuing a high-margin market that’s growing, providing it with ample opportunity for success. The COVID-19 pandemic has actually accelerated the senior population’s migration to telehealth services, with even doctors saying they prefer it. BlueStar is positioned right at the intersection of dependable medical technology, the rising telehealth trend, and Americans’ desire for independence as they age. BlueStar’s planned fourfold expansion in 2021 doesn’t seem impossible, especially if its expanding offerings can reach consumers beyond veteran communities.

At the same time, that good PR can count for a lot. The government is a reliable customer, and a foundation of veteran consumers can provide a solid base for BlueStar as it expands into the telehealth sector. Assuming BlueStar’s reliable team can expand on its impressive revenue base, it stands to provide substantial returns to investors.

BlueStar SeniorTech is a medical services company providing various hardware, software, and services to enable at-risk seniors to live independently at home. These offerings include devices that integrate smart technology to monitor patient health and supportive mechanisms to compensate for dementia and other age-related declines.

BlueStar’s revenue growth is significant and impressive, and the company is positioned to expand on that early success in the coming year. However, poorly-differentiated technology and a constraining emphasis on services for veterans means the company could fail to appeal to a wider market or be surpassed by innovative new competitors. Therefore, BlueStar SeniorTech 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 Benjamin Potts.