Founder Profile: The Super Flex Van For All Your Family Travel Needs

 
ModVans on StartEngine

Modern & modular camper vans.

Summary

ModVans is the kind of idea that some may think isn’t all that interesting from an investment perspective at first glance, but upon digging in to the business you will soon realize it may actually have some real legs and significant upside.

It’s rare these days that Silicon Valley startups actually have found any product market fit when pursuing seed funding. ModVans has already sold $2.4M in sales without really trying. And there is a lot more where that came from.

With their eyes on building a cash flow positive business that is well underway, a reasonable valuation and plans for an industry exit we think this startup has created a really intriguing value prop for investors worth considering.

And we think you will love the married couple founding team who represent their core customer. Check out PJ’s and Laura’s story below.


Kingscrowd
Pj, can you tell us a bit more about how you came up with the idea for modvans?

A few years ago, all the planets came into alignment and Laurie and I had an opportunity to take a month long vacation. We wanted to check out #vanlife. I was consulting in Phoenix at the time and it happens to be a good place to buy a used RV, so I bought one and we took a road trip.

We loved this style of traveling, but the RV was a beast to drive, guzzled gas and we had to pay to store it when we weren’t using it. We decided that we wanted a vehicle that could be used for camping, but was modern, reliable, easy to drive, fuel efficient, and could be parked in our driveway.

Nobody was building what we were looking for, so we settled by putting our names on a year+ long waiting list to have a custom camper van built. I had some extra time between consulting engagements, so while I was looking at the van in my driveway, waiting for my conversion appointment, I decided to see what I could get done on my own.

We had some novel ideas, like removable RV components so we could use the van for different things, safe and comfortable seating for when our kids or friends joined us, and a popup top to save space and add height for when we were parked.

At first, our friends were skeptical, but as I added more cool components, they began to see my vision and suggested starting a business selling camper vans. Other than a little bit of research, we didn’t do anything about it, but eventually the timing was right and we decided to give the business a try lean startup style. We quickly found product/market fit and jumped in with all 4 feet.

Kingscrowd
How do you think your tech background will play into you being the ceo of what is really a manufacturing company?

Because I am a tech guy used to learning about new things, I’m pushing high tech into both our product and our manufacturing.

On the product side, we look at every component from a new perspective. For example, our furnace, which is made in Germany and new to the US market, is extremely powerful, quiet and efficient and combines furnace and water heater functions. Our solar charging and battery monitor systems are state-of-the art and controlled and monitored via a Bluetooth smartphone app. Our stereo/GPS is an Android based touchscreen LCD unit that one day will be loaded with custom ModVans apps. 

In manufacturing, we use 3D CAD and CAM as much as possible. We cut a lot of parts with our CNC and we use vacuum infusion to make a super strong and lightweight popup top. We plan to use more high tech lean manufacturing as we grow.

On the business side, we applied lean startup principles to find product/market fit. We have adopted the Agile business processes I learned managing software projects to help us manage unknowns and rapidly incorporate customer feedback. Right now, we are utilizing equity crowdfunding to grow our business. Our employees enjoy some “perks” I’ve found helpful in motivating employees to perform at their peak like paid health care, free lunches and stock options.

I know a lot about sales and managing people and products, but I have a lot to learn about manufacturing at scale. We are finding that ModVans is easily able to attract and retain the type of employees we will need during our next phase of growth.

Kingscrowd
How large a market opportunity do you think exists for modvans. at $85k it is very much a luxury offering?

If you look at the ModVans pricing page, you can see that, when you take into account tax savings from a 2nd “mortgage” interest write off, using RV insurance instead of auto insurance, and financing over a longer peri od of time with RV financing, the monthly cost of a CV1 is below that of a typical family vehicle such as a minivan or SUV.

Very few people pay for new or (or relatively new) cars outright and we expect the CV1 to last a family many years, so we feel that the comparison based on monthly cost is valid. Based on this analysis, we believe that ModVans has a great chance to capture a portion of minivan, SUV and pickup truck sales – an enormous market. Already about half of our current sales are to to families (the other half are to more typical “adventure couples” that buy $85,000 camper vans).

If you consider just the $85,000 MSRP, Tesla has proven with its Model 3 that there are plenty of people willing and able to pay this price for a vehicle that is more than just a basic car that gets them from point A to B. Many of the people currently buying Model 3s are the same type of forward thinking, adventurous people who will buy ModVans vehicles (but don’t tell Elon!).

Kingscrowd
How does modvans differentiate from any other offerings on the market and how is this 10x better than other offerings in the space?

I think the competitive analysis chart on our StartEngine campaign page explains this best. In short, the uniquely modular nature and safe, comfortable 2nd row and optional 3rd row seating make the ModVans CV1 more versatile, and I wouldn’t use any of our competitor’s vehicles as a family daily driver.

On the design side, we compete directly with Airstream, but at about half the cost(!). Our modern 3D CAD and CNC based manufacturing goes hand in hand with our price advantage. We are also the only camper van manufacturer that has jumped through all the necessary, expensive, and time consuming hoops to offer car-like RV financing and nationwide extended warranties.

Kingscrowd
What kind of capex requirements are needed to build this business at scale?

For the next 12 months, we plan to scale our current manufacturing processes to the point where we are building 10 CV1’s per month. The tools we need, including our CNC and lifts, are relatively minor expenses, so for this phase of expansion most of the CAPEX will go directly toward headcount, rent for a larger shop, chassis, and parts.

We are hoping to raise the full RegCF $1 million towards this expansion plan. ModVans is currently cash flow positive, so if we can’t raise the full amount or raising it takes longer than anticipated, we still have the same goal, but hitting it might take longer than 12 months.

10 CV1s per month works out to about $10 million per year in revenue. Once we reach this goal, we will reassess our plans. Assuming it still looks like we can easily sell 100 CV1s per month, we will build a much larger factory and integrate more automation and other large scale manufacturing techniques.

Part of this planning will be to start estimating the costs involved with a more complicated expansion and our ability to access capital. I’m confident that we can get to 10 CV1s per month with $1 million, so a back-of-the-envelope estimate for 100 CV1s per month would be $10-$20 million, 1000 CV1s per month would take $100-$200 million, and so on.

Kingscrowd
You’ve quickly made several pre-sales. how are you acquiring these customers and what does your core customer look like?

Our customers include adventurous individuals, couples and families. The adventure family market is not new, but the CV1 is the first US vehicle designed specifically for it, so we initially expected that accessing this market would take time and education.

The adventure couple market is well established with other companies, such as Sportsmobile and Airstream, providing a variety of products over a period of many years. The CV1 offers unique capabilities even for the adventure couple and they are actively searching for products, so we thought we would initially sell mostly to adventure couples and educate and win adventure families over time. 

When searching for product/market fit, our first attempt was a Kickstarter campaign. That failed when Kickstarter wouldn’t allow a campaign to accept deposits and we felt it was unreasonable to expect people to front the full $65,000. Next we tried Indiegogo, but this didn’t work either. We initially found our sales mojo running $5 “for sale” ads on Craigslist.

This generated many, many emails and phone calls. Our goal to verify product/market fit was five orders, which we got very quickly. One Saturday, in a completely empty warehouse without any employees, Laurie and I did three demos using our “prototype” (my van) for two families and one couple, and we signed all three deals! After about two months, we had over $500,000 in orders and had to turn off all paid advertising just to keep sane.

Since then, sales have come in organically via word-of-mouth and mentions in the press. Our minimal marketing style led to $2.4 million in sales in our first 12 months (we just did not have the time or production capacity to encourage more orders)!

We sold all those CV1s using photos of our prototype, with no customer references or success stories and estimated delivery dates between 4 and 12 months from the time of order. One nice thing we’ve noticed is that at least half our sale s are to adventure families, so it looks this part of our target market won’t require as much effort as we initially expected. In short, our customers are seeking us rather than the other way around.

The production model CV1 looks way better than the prototype. We now have happy customers. Following our planned production capacity expansion, ModVans will have more CV1s available with earlier delivery dates. Given all these advantages over our initial sales efforts, we anticipate having sales that far exceed our production capacity for some time to come. 

If sales were to slow, spending just a little bit on Internet marketing could quickly refill our sales pipeline. If production capacity catches up to the low hanging fruit available with Internet marketing, we can market more traditionally through RV dealers, car dealers, exhibit at shows, etc..

Kingscrowd
What do your current gross margins look like and when do you expect to achieve profitability?

IMO, the key metric of “success” for a small business is positive cash flow, meaning you can keep the lights on and the employees paid. We reached this point last July. Like a high tech startup, we expect our biggest pay-off for investors to occur at the “exit” with a sale of the business or an IPO. To that end, our main focus is to balance growth with cash flow rather than on short term profits.

According to our CPA reviewed financials, ModVans was profitable in 2017, but that is because GAAP rules require revenue to be recognized when a sale is made. We deliberately temper things down by defining a “sale” as when our customer e-signs a sales order and makes a non-refundable deposit, but even with those restrictions we were “profitable” at the end of 2017. Customer deliveries and cash flow from operations started in June, and we were cash flow positive in July. By GAAP rules, I expect that we will be profitable for 2018.

Our planned gross margin is 33%, but our current effective gross margin is less because we offered a discount to our “early adopters” who were willing to buy an expensive vehicle from a new company with only a prototype and no customer references. Over time, we expect our profit margin to slightly exceed 33% because options have higher margins and we expect to offer and sell more options.

Kingscrowd
Who would be a potential acquirer of a business like this and are there any proxies for this type of acquisition?

This is our favorite example of an RV manufacturer that sold for $500 million after only 4 years in business: https://www.summitpartners.com/companies/grand-design-rv. Now that we are building a brand name through sales, PR, and our RegCF campaign, I think there are many companies that would “buy” vs. take a big risk and try to “build” once they see the size of the market opportunity. With positive cash flow, an easy sales process, and good prospects for growth, we have a good bargaining position.

Kingscrowd
Why have you decided to conduct an equity crowdfunding round and how do you think it will help you to grow the business?

We’ve been involved in the startup world for many years and have access to highly successful advisors and venture capitalists. After considering traditional seed funding vs RegCF, we decided on RegCF. Both paths require a lot of work and are to some degree mutually exclusive.

For ModVans, we stand to benefit long term from the exposure generated by by our  RegCF campaign – our investors will be our brand ambassadors, and even people that don’t end up investing might consider buying a CV1 or recommending it to their friends. Unlike a complicated B2B business, the ModVans business model is relatively easy to explain to “the crowd.”

Kingscrowd
Will you need to raise additional capital in order to achieve the end exit outcome and if so in what ballpark do you think that is?

Assuming we hit our plan of 10 CV1s per month, we should be an attractive acquisition target at $10 million per year in revenue, but probably too small for an IPO. To get big enough for an IPO, we will need to build a much larger factory and eventually introduce new RV models.

Based on raw data and the interest we see now, we conclude that the market can easily support over 1,000 ModVans built vehicles a month – if it were up to me, we’d skip the 100 RVs per month level entirely and raise $200 million to build a modern and modular factory to build our already popular modern and modular camper vans for everyone who wants one!


If I had to sum up PJ in one word it would be practical. When I met him while out in LA, it was apparent to me within seconds that PJ just gets business and how to do things the right way. He was able to quickly rattle off and explains all facets of the business model with ease and has a clear handle on how this company can drive returns for investors.  

With a business that has already proven to sell with little effort, health margins and a solid management team, I am very excited about the potential for ModVans, which I will admit I was skeptical about to start.  

There is a real opportunity for meaningful scale here and is worth taking a look at. Stay tuned to see if this team gets a coveted rating report from KingsCrowd. Invest HERE.


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About: Chris Lustrino

A Boston College Eagle for life, on a mission to democratize startup investing for all people at KingsCrowd, with a passion for Fintech, investing, social impact, doing well and doing good, and an avid runner, cyclist and writer.

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