KC Underweight Deal: Newest Player in Word-of-Mouth Advertising

$12.6M

Key Stats: Guru.Club on NetCapital

Post Money Valuation

$12.6M

Amount Raised

$27,660

Number of Investors

Not Known

Minimum Raise

$10,000

Maximum Raise

$106,992

Likelihood of Max Unlikely
Start Date

07/09/2019

Stop Date

10/16/2019

Days Remaining

0

Security Type

Other Security Type

Investment Minimum

$108

Deal Analytics

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Summary

Today we are diving into  the strengths and weaknesses of Guru.Club. The analysis that follows is meant to inform and aid investors in making an informed crowdfunding investment decision.

Guru.Club is an online marketplace that allows its members to buy products and post reviews in the form of Instagram posts and stories. For participating, the shoppers receive cash rewards, rebates, and store credits for the brands that they promote.

Guru.Club serves as a platform for brands to receive feedback  and promote their products through word-of-mouth advertising. In this way, Guru.Club assists direct-to-consumer brands ability to circumvent expensive marketing mediums and promote their products, while shoppers monetize their purchases, brand loyalty, and social media presence.

The business model of Guru.Club is based on a 15% commission on every item sold on their platform. Other revenue streams are in development, but not yet finalized.  

In our view, and as we shall expand upon below, Guru.Club’s business strategy raises some questions. We also have concerns regarding the team behind Guru.Club. The founder, Sam Malone, has been an athlete almost all his life and does not hold any relevant experience in founding or running a comparable business..

We here at KingsCrowd urge investors to exercise caution and perform due diligence before investing in Guru.Club. The company has its fair share of pros; however, the cons cannot be overlooked.

Business Concerns

1. Executive Experience

Guru.Club was founded by Sam and Joe Malone in 2017. The company’s executive team also includes Justin DeVuono as the Chief Operating Officer, Peter Marathas as the Chief Technology Officer, and Jimmy Marshall as the Head of Marketing.

In our view, the professional background of the management team of Guru.Club is largely not applicable to running a tech company in the mar-tech arena. Sam Malone, the Chief Executive Officer and Founder has been an athlete and players representative for an NBA player, but does not have industry experience in marketing or technology.

In our estimation, the team behind Guru.Club holds minimal experience in entrepreneurship, digital marketing, or branding. With minimal industry experience, founding experience or prior exits we worry about the capability of the team to execute.

2. Competition

Upon reviewing its target market, it’s our estimation that Guru.Club faces significant competition from many other startups. While guru.club focuses on letting any shopper become an influencer who can be compensated for their social media posting, competition from general influencer platforms is high. Competitors include the likes of IZEA, Traacker, upfluence and 62 other ‘leading’ platforms.

While guru.club has a slightly unique model with its focus being allowing individual shoppers to post who aren’t traditional ‘influencers,’ there is far too much noise in the space to get excited about this organization becoming a leader. While its channel partner, Shopify is beneficial to hopefully scaling sales it is far from a gaurantee of success. Shopify website users also have access to sign up one of the many influencer marketing platforms out there even if they aren’t a specific channel partner. 

3. Future based on Assumptions

The company is testing the waters as of now, and the future is based on a myriad of assumptions. This is true of any startup. But Guru.Club’s application is not yet launched, relationships have not yet been established, and brands have not yet been contracted.

Based on initial surveys, the company states that more than 100 brands have already expressed interest in collaborating with Guru.Club. Also, of the 1,000 men and women contacted, 97% say they would like to participate in Guru.Club to monetize their social media presence.

We are of the belief that “Talk is cheap.”The transition from intent to the signing of a contract is a long journey, and many dropouts must be expected along the way. The company will need to invest a lot of money in establishing, maintaining, extending, and expanding its business relationships with brands and shoppers.

4. Financial Performance

Since inception, Guru.Club has exhibited meager financial results. To date, over $600,000 has been spent developing Guru.Club without generating any sales.

Moreover, the company reported a net loss of $60,000 in 2017 and $520,000 in 2018. Guru.Club has a negative cash flow, negative income, and practically no revenue. Despite these less-then-stellar results the company  boasts a valuation of more than $12 million, which we think is above fair market value for the progress of the organization to date.

5. Funding Uncertainties

In addition to the above mentioned perils, Guru.Club suffers from the inherent risks of being an early start-up.  There is no guarantee that the company will be able to achieve its strategic goals and objectives. Bringing into question whether or not  investors will earn a resonable return on investment.

Also, the company may not be able to survive competition in the highly competitive market of mobile and online promotions and advertising. Guru.Club also does not have ample funds, and the funds raised through the most recent round of crowdfunding will not be sufficient to sustain its current business plan for long.

The Rating: Underweight Deal

Based on the risk factors and drawbacks in the business model of the company, we are assigning Guru.Club an Underweight Rating.

The background and experience of the founding team are unrelated to Guru.Club’s market and does not seem bolstered enough to manuever a relatively saturated market. With minimal funds on hand, and too little accomplished with capital raised to date, we think it can be an uphill battle for this team to raise the necessary capital to sustain moving forward. Lastly, the current valuation well over values what the company has accomplished to date and reduces the upside for investors despite taking on significant risk as an investor with a pre-revenue startup.

All in all, the offerings of Guru.Club fail to stand out in the competitive environment from a business and valuation perspective. Therefore, we advise investors to perform due diligence regarding the potential of the company and return on investment before investing their money.

If you have any questions regarding the underweight rating of Guru.Club, you can reach us at hello@kingscrowd.com.

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