HyperEngine is raising at a nearly $39 million pre-money valuation. This extremely high valuation is partially due to the company’s stage of development — the current raise is a Series A raise, rather than being seed or pre-seed. Additionally, investors will receive preferred equity, which is another favorable point. However, the stage and equity type cannot counteract the extremely high valuation. As a result, HyperScience’s price rating is quite low.

HyperSciences is engaging in several verticals at once — addressing the drilling, mining, tunnelling, and aerospace industries. Oil and gas drilling is a huge industry in the U.S. It’s valued around $232.9 billion in 2020 (despite recent market woes due to COVID-19). As for tunneling, the 2017 global market size for tunnel boring machines was $3.4 billion and may reach as much as $3.6 billion by the end of 2026, with a CAGR of 1.2% from 2021-2026. Finally, the global smart mining market reached $6.8 billion in 2019 and could reach more than $20 billion by 2025. 

These market sizes are significant, though their expected growth ratings are fairly middle-of-the-road. In HyperScience’s favor is the fact that it wants to market its technology to established players in these industries. Many of these companies are hungry for innovative approaches to cut costs and increase safety through automation — which HyperSciences promises to achieve. By embracing a B2B model, HyperSciences avoids the risk of competing directly with mature mining, drilling, or tunneling companies. Therefore HyperSciences’ market score is strong.

HyperScience is led by a team of three experienced business minds. Mark Russell is Hyperscience’s CEO and founder. He has a master’s degree in Aeronautics and Astronautics from Stanford, and he helped lead the Blue Origin’s Crew Capsule development program. His background in aerospace certainly makes him well-positioned to direct the company’s engagement with aerospace clients such as NASA. However, he also brings experience working with the types of mining projects HyperScience hopes to take over.

CFO Michelle Carbon started out in the mining industry and has experience in several areas of business development and planning that are useful for an emerging startup. Raymond Kominsky served as an interim COO for HyperScience for several years and currently serves as an advisor. His specialty is accessibility for complex products.

Two prominent HyperSciences advisors are Malcom Ross and Mike McSherry. Ross is a veteran with Shell. He brings experience in seeking out innovative approaches to energy through startups and is a member of the faculty at Rice University. McSherry is an entrepreneur, the CEO of Xealth, and has co-founded several businesses.

Overall, the leadership’s levels of experience in their target markets are quite high. This industry expertise is bolstered by advisors with entrepreneurial experience. Thus, the team score for HyperSciences is far above average.

Oil and gas drilling — HyperSciences’ biggest target market — is hardly a new and developing space. However, it is a highly competitive one, and HyperSciences’ possession of game-changing protective patents bodes well for their future performance. Early demonstrations of the technology show it to be far superior to what is currently being used by established industry players. 

Traditional drilling is a long and difficult process that requires large and sophisticated equipment, and specialists must be constantly on hand to watch for dangerous developments in the earth or machinery. HyperScience’s ram accelerator can drill up to 10 times faster than these traditional drills. CEO Mark Russell explains that while traditional methods use rotational drills, HyperScience’s drills rely on “‘digitally’ blasting into the rock in incremental pieces.” The company is also developing machine-learning tech to teach computers to manage the blaster without relying on human specialists. It’s a technology that is highly scalable and adaptable to many different fields. HyperSciences has worked hard to create a unique offering, as shown by its near-perfect differentiators score.

HyperSciences has performed fairly well among potential customers, securing small demonstration contracts and grants from industry giants NASA and Shell. The company has also entered into confidential contracts with “major” mining and energy corporations, and secured a Rare Earth mineral deposit to begin its own mining operations and expand its verticals. On a technological level, HyperSciences has secured the Geothermal Manufacturing Prize from the U.S. Department of Energy—one of 15 winners among 300 applicants.

As its technology is still in the experimental stage — and proper scaling and distribution is yet to begin — the company is sustaining net losses year after year. In 2019, HyperSciences took in just over $500,000 in revenue which, while a step up from almost $83,000 the year before, is absolutely dwarfed by expenses. HyperSciences’ net income in 2019 was -$5,680,777, following up on a net income of -$2,166,043 in 2018. While these are significant shortfalls, they are not unusual for a company on the verge of scaling this kind of expensive, experimental technology. It should also be noted that despite having taken on more than $3.5 million in short- and long-term debt to achieve their early success and set themselves up for future scaling, the company has shown a consistent ability to raise funds, with more than $9 million raised through investment and crowdfunding. 

HyperSciences’ ability to secure early contracts paired with its positive revenue growth have netted it a very high performance score.

HyperSciences’ experimental technologies show promise of unparalleled performance in several verticals — but have yet to secure large-scale contracts. The company also has a high burn rate and holds a million dollars in debt, which are both concerning for potential investors. In addition, the ongoing expansion of renewable energy sources and the short-term economic impacts of COVID-19 threaten the security of oil and gas markets. For investors to see a significant return, the company must follow-through on securing as many diverse clients as possible while also proving that their powerful technology can be made to produce at a high rate on a mass scale.

HyperSciences has hit several promising technological milestones so far that indicate a (literally) groundbreaking and reliable product. The company has proven its viability through long-term contracts with NASA and Shell. Already secured patents and a wide range of verticals bring further stability to HyperSciences’ business. It is well-positioned to obtain lucrative contracts and revolutionize the drilling, mining, and tunneling markets. 

HyperScience has been rated a Deal to Watch because of its growing reputation in the drilling and aerospace fields, its patent-protected technologies, and the strength of its team. While the company’s target markets are difficult to break into, HyperScience has already made progress. It is also mitigating risk by spreading out its technology’s applications among several verticals.

Investors do have cause for some concern — HyperScience’s notably high burn rate and outstanding debt are not encouraging. However, these factors are understandable, given the high capital intensity needed to develop industrial technology. HyperSciences is led by a solid team with relevant experience — it is likely those experiences will help the company as it seeks out new customers. If the company can continue to scale production and secure new contracts, it will be poised to achieve a strong market presence.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written by Benjamin Potts.