Leap Club is raising a Crowd SAFE at a $10 million valuation with no discount. Those aren’t particularly favorable terms for investors, particularly given Leap Club’s early stage. The company  generated no revenue in 2019 or 2020 according to its Form C, and its WhatsApp-driven interface isn’t very proprietary. There doesn’t seem to be a strong justification for this relatively high valuation, so Leap Club’s price rating is low.

India’s organic food market is relatively small but growing rapidly. Indian consumers spent roughly $815 million on organic food in 2020, but the market is expected to grow at a CAGR of 24% over the next five years. That figure represents all of India, though, which is a huge country. Leap Club’s delivery system is still very localized and manual, so the company won’t be able to serve all of India anytime soon. That reduces its obtainable market size significantly, as does competition within the grocery delivery market in India.

Despite aggressive market growth, Leap Club is still catering to a niche segment of customers who are interested in organic produce and wealthy enough to pay the price. Plus, Leap Club is currently limited to serving customers in Delhi and might not be able to scale to other populous cities very quickly. While Leap Club’s market rating is one of its highest, the score is middle-of-the-road.

Leap Club was founded in 2019 by Shubham Bansal and Divish Gupta, both engineers and graduates of the Indian Institute of Technology (IIT), Delhi. Bansal graduated with a bachelor’s in engineering physics from IIT, then obtained a master’s in energy management from Ecole Polytechnique Fédérale de Lausanne in Switzerland. Since then, Bansal has worked as an analyst, researcher, and data scientist for various energy companies in Europe and India. Gupta has a similar background. After graduating from IIT with a dual bachelor’s in electrical engineering and master’s in information and communication technology, he worked as a product designer. Both Bansal and Gupta reportedly lived in an organic farming community for two years where they saw  organic produce’s potential to impact the Indian market. 

Bansal and Gupta have solid technical experience but little expertise in the specific industries of agriculture or consumer technology. More importantly, neither has a business background. Sales, marketing, finance, and other core disciplines don’t seem to be in either co-founder’s skill set. Those are some concerning experience gaps, so Leap Club’s team rating is low.

There are many grocery delivery startups in India, so Leap Club is competing in a very crowded space. The company’s key differentiators are its high-quality organic produce offerings and its WhatsApp-based user interface. However, it’s not clear that Leap Club’s execution of these differentiators is excellent enough to make the company truly stand out. Leap Club doesn’t give evidence that its organic produce is truly top of the line, and given increasing demand for organic produce in India, larger companies with better supply chains will likely incorporate more organic options in the future. While Leap Club’s WhatsApp functionality seems somewhat unique, it also doesn’t seem to be that high-quality or defensible. It would be easy for other companies to build basic WhatsApp chatbots like Leap Club’s. 

That said, Leap Club does seem to have located key selling points to appeal to wealthy consumers in Delhi. Convenient, high-quality grocery delivery is a reasonable differentiator, particularly in India’s nascent market. That’s why Leap Club’s differentiation rating, though moderate, is one of its highest.

According to its audited financial statements, Leap Club did not generate any revenue through April 20, 2021. That doesn’t align with the company’s raise page, which states that Leap Club was bringing in increasing revenue week-over-week since January 2021. Giving the benefit of the doubt that the latter is true, Leap Club has been experiencing solid revenue growth in the past few months. After generating just $1,000 per week just after launch, Leap Club was apparently making roughly $5,500 per week in late April for an approximate monthly revenue of $22,000. Those results aren’t exactly explosive, but they’re decent. In its audited financial statements, the company reports it had around $24,000 in operating expenses as of April 2021.

Beyond financials, Leap Club reports roughly 1,000 monthly active customers with a 20% weekly retention rate. Average order values hover around $10, and the company makes about 30% gross margin from each order. That’s not a very high gross margin, likely due to the company’s manual order fulfillment and delivery method.

Leap Club is still a very young company, so there isn’t a great deal of performance data to analyze. Based on what is available, Leap Club seems to be growing at a moderate pace but doesn’t have excellent margins. All in all, the company’s performance rating is relatively low.

At this point, Leap Club is a fairly risky investment. The company’s audited financials report zero revenue through April 2021 and losses of around $24,000. Based on that limited operating history, prospective investors should note a great deal of financial risk from this opportunity. In addition, investment terms aren’t particularly favorable. With a relatively high valuation and no discount, investors would be gambling that Leap Club can grow enough to generate a solid return on investment.

Leap Club is still a very early-stage company and has yet to prove that it has staying power. Organic grocery delivery is a solid idea in India, where farm-fresh produce is steadily becoming more popular and grocery startups are flourishing. However, it’s not clear that Leap Club is executing this idea well enough to carve out a niche in the market. The company’s WhatsApp-based user interface is great for convenience but doesn’t offer excellent user experience, and it isn’t very defensible amid a sea of competitors looking to command market share. It also seems that each grocery basket delivery requires a lot of manual effort from Leap Club’s founders or small team, which raises concerns about scalability. 

All of these concerns might be the result of a relatively inexperienced founding team with little expertise in business operations or management. Grocery delivery is a very logistically complex industry and requires a strong focus on improving margin and acquiring customers. The founding team doesn’t seem to have those strengths.

Investors should also note the company has additional financial risk, as its performance has been lackluster. And its claims of 2021 revenue on the Wefunder raise page do not match its audited financial statements. 

Despite Leap Club’s Y Combinator credentials and moderate early traction, it’s just too soon to say whether this business is differentiated or well-managed enough to scale across India.

Leap Club was selected for Y Combinator’s W21 cohort, and that honor alone is a strong positive signal for the company. Y Combinator’s deeply experienced team of venture capitalists and startup advisors clearly saw something in Leap Club, and so far the company hasn’t proved them wrong. According to its Wefunder raise page, Leap Club has grown revenues steadily week-over-week since January 2021. Roughly $22,000 in revenue per month is a solid accomplishment for a young company operating in an emerging market. 

Moreover, the principles at the foundation of Leap Club’s business model and value proposition are solid. The demand for organic produce is clearly increasing in India. A WhatsApp-based interface is the easiest way for customers to order groceries, which likely increases order frequency. Last-mile delivery costs can be reduced over time with more customers in densely populated areas. At its core, Leap Club is a sensible business that seems to be meeting a growing market need in the world’s second most populous country. Though the company is still very young, investors could profit by getting in early.

Leap Club is a Y Combinator-backed organic produce delivery startup in India. Customers can use Leap Club’s WhatsApp chatbot (or the company’s website) to order a variety of farm-fresh fruits and vegetables and receive the delivery in less than 12 hours. The company has roughly 1,000 monthly active users and is making around $22,000 per month. With continued focus on improving gross margin and scaling to additional neighborhoods in Delhi and beyond, Leap Club has the potential to scale rapidly. 

On the other hand, Leap Club’s key differentiators (high-quality organic produce and a WhatsApp-based ordering system) might not be that defensible in the crowded Indian grocery delivery industry. It’s also concerning that the Leap Club founding team has no business or entrepreneurial experience, which will be essential to acquire new customers and streamline the supply chain. Therefore, Leap Club has been rated a Neutral Deal. 

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