DRONEDEK is issuing common shares in the business, priced at $2 per unit, with a minimum investment per participant set at $100. The company’s pre-money valuation for this raise is set at an astonishingly high $123 million. Due to this extremely high valuation, DRONEDEK’s price score is exceedingly low.

The market that DRONEDEK operates in is difficult to estimate. It’s clear how attractive the last mile delivery space is, but this business is so unique that data is difficult to come by. Instead of relying on analyst estimates, it might be best to look at the size of the market in the US if the firm were to achieve complete saturation. This would involve it installing itself into the 139.64 million residential addresses and 32.5 million commercial addresses across the country Together, this works out to 172.14 million addresses nationwide. 

It is unclear what kind of revenue DRONEDEK can expect to generate per customer. For its first full year of operations, it believes it will be capable of landing 73,166 customers. That year, the company projects sales per customer of $145.84. This works out to nearly $10.7 million in sales — but investors should take any projection as nothing more than an educated guess. Applying this figure to our 172.14 million addresses figure, we arrive at a market opportunity for the company of $25.1 billion annually. Having said that, this is based on the assumption that customers will see and appreciate the value proposition offered. Because of this uncertainty and the fairly small market size, DRONEDEK’s market rating is below average. It is also indicative of the size, likely growth rate, and slow progress the company will probably have in getting customers to adopt its mailbox. 

The team behind DRONEDEK fares better than the price of the deal or the market opportunity. At the helm of the business is Dan O’Toole, the company’s Chairman and CEO. Previously, he worked as a CEO and Managing Broker for Striker Realty Group. Before that, he was employed as the CEO of Facility Maintenance, a commercial maintenance services firm. Neither of these positions — despite being high-level leadership in nature — are all that relevant to what DRONEDEK is working on. 

Next in line is Richard Ohrn, the firm’s CFO and Treasurer. At present, Ohrn is the Owner at CFO Solutions Partner. This consulting firm focuses on helping companies improve their operational and financial condition. Before that, he worked as the Project Director for Cogent Analytics. There, too, he focused on optimizing client companies, but this time from a data analytics perspective. In addition, over the years Ohrn was employed as the CFO of both Diamond Management and Columbia Management. Given his past CFO roles, he seems to be a solid pick for the same role at DRONEDEK. 

A third person worth mentioning at DRONEDEK is Torrey Bievenour. At present, Bievenour works as the company’s CTO. Past work includes being an Advanced Manufacturing Engineer for Acuity Brands. He also worked as the President of Polar Spectrum where he provided engineering consulting services for the creative industry. These engineering positions should make him a decently qualified member of the DRONEDEK team. This is especially true since what the company is building is mostly a physical. Last but not least amongst the members worth mentioning is Greg Beriault. He is employed as DRONEDEK’s Chief Security Officer. In the past, he has had some relevant roles, like when he served as a Security Consultant for the NFL. He also worked as an Internal Audit Manager for CNO Financial Group. Most recently, though, he has been employed as the Owner and Chairman of Floor Coverings International of Carmel. 

The DRONEDEK team seems stable and well-rounded, though somewhat lacking in relevant industry experience. The company’s team score is middle of the road as a result.

Differentiation is the one area that DRONEDEK appears to really excel in. It is, surprisingly, not the only smart mailbox firm. One other noteworthy player in the space we discovered is Valqari. Having said that, the wide range of options offered by DRONEDEK — including heating and cooling features, ticketing, recording features, and more — seem to be what makes the business different. In addition, Valqari seems to be positioning itself as a local contact point for neighborhoods and businesses. DRONEDEK’s vision appears to be more on all potential end-users. Additionally, DRONEDEK has secured patents for its technology, strengthening it against future competitors. Thus, the company’s differentiators score is its highest across all five metrics.

Just like the issue of price, performance is an area where DRONEDEK does not look appealing. The company has yet to generate any revenue, and it is still in the prototyping phase. More likely than not, it will take a couple of years to become commercially viable. This is never a great thing for investors to deal with, especially with a valuation as hefty as this one. It increases the likelihood of a large down round in the future. Although the company’s founder has been working on this project for years, the business recorded just $4,000 in expenses during the first four months of 2020. Besides this $4,000 entry, the business’ balance sheet is empty, with no assets listed as of the end of that period. Due to the lack of any revenue or potential customers, DRONEDEK’s performance score is very low.

Right now, there’s a lot to be bearish about regarding DRONEDEK. For starters, the valuation is off-the-charts high. Incoming investors are getting virtually none of the business. The company is likely a couple of years away from a true commercial launch, and it will likely face a down round between now and the time it does launch. Another issue is timing. Drones are still being worked on and this company needs that technology to be widely implemented in order for its business model to be viable. Until that time, DRONEDEK is waiting for the industry to catch up to it. On top of this, we have the very real possibility that this may not be the direction the market is headed. Last mile delivery is a real and attractive trend. But it’s difficult to imagine property owners spending money on a drone delivery pad that can keep their pizza warm for the 30 seconds they are walking down the walkway to grab it. Throw in the fact that the industry opportunity is on the small side, and it’s hard to see a great deal to like about this business.

Just because there’s not a lot to like about the business doesn’t mean that everything is negative though. DRONEDEK does have a very differentiated product. If, by chance, the firm can survive long enough for drone delivery to become the norm — and if they can price and market their product and services effectively — it could have some potential. More likely than not, customers will gravitate toward a simpler, cheaper product. But for the high-end customers this could be a decent opportunity in the years to come. 

Taking everything we know about DRONEDEK and the opportunity it presents, we can say that the business is interesting. But the opportunity might not be right for most investors. Management has mispriced this round horribly. Plus, the firm has virtually no real traction besides what work has been done on its prototype. Because of the downsides investors have to contend with here, DRONEDEK has been rated an Underweight 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.