Pops is raising through a convertible note offering at a valuation cap of $25 million. Investors have the benefit of a favorable interest rate of 8% and a 20% discount rate. While these terms are beneficial for the investor, a $25 million valuation cap is still quite high in comparison to other startups currently seeking funding. Additionally, Pops has seen limited revenue thus far, so the valuation is not justified by financial performance either. This kind of high valuation notably isn’t particularly unusual for a medical technology company. Balancing the favorable investment terms against the high cap, Pops scores far above average in the price metric.

The US blood glucose monitoring device market is limited but growing steadily, coming in at a size of $4.8 billion and expected to rise at a CAGR of 7.6% over the next eight years. While this size and growth rate would be more than sufficient to support Pops’s goals for growth if it had little in the way of direct competition, competitors are already firmly entrenched in this space. 

Companies such as Dexcom and FreeStyle Libre have already recognized the need for less invasive glucose monitoring, designing products specifically for that purpose. Even involving an AI in the glucose monitoring process is not unheard of. One Drop has put forward a glucose monitoring system that uses AI to predict glucose levels ahead of time, although this notably differs from Mina’s supportive functions. Pops is far from alone in this market, which limits the company’s ability to claim a significant niche for itself. The market score for Pops is below average as a result.

CEO and co-founder Lonny Stormo holds an MBA in general business from Arizona State University. He worked his way up through the ranks at Medtronic for thirty years, spending the last decade in a variety of vice president (VP) leadership roles. In his last years at Medtronic, he started down the path to Pops by creating Birch Narrows Development. Under Birch, Stormo founded Pops and left Medtronic to focus on this startup full-time.

Co-founder and Vice President of Research and Development Dan Davis has been working with Stormo on Pops since the Birch Narrows Development days. Davis spent a decade working with 3M Filtration, managing a lab of chemical scientists in developing products for the drug and environmental analytics markets. Davis then took over leadership of struggling company Lawrence Sign and evidently turned it toward success, though the business closed down somewhat ignominiously a few years ago (more than a decade-and-a-half after Davis’s role there). Following this venture into business ownership, he moved back into leadership as a director and VP in a few industrial manufacturing companies, brought on to “turn businesses around” toward profitability, before focusing his full attention on Pops.

Co-founder and Vice President of Operations Curt Christensen, like Davis, got his start at 3M but spent considerably longer there — more than four decades. In his time there, he served in manufacturing operations and quality management, specializing in managing processes and the supply chain.

This three-man leadership team with expertise in medical operations is balanced out by CFO Nancy Ness, Customer Success Director Stephanie Toomey, and VP of Business Development Nancy Phillips. Overall, the Pops has a fair mix of skills, though there are no notable investors or advisors listed for the company. This results in a middle of the road team score.

While blood glucose monitoring devices do not make up not an exceedingly large market, it is an extremely crowded one. Amazon and other marketplaces are absolutely flooded with testing devices ranging in price from $10 to $50. Pops is similarly priced with the welcome kit selling for $20 and a pack of pop-in test strips for $30.

One notable advantage for Pops is its 15 approved patents and further 16 pending. The company has also overcome some of the obligatory regulatory hurdles by obtaining FDA approval for its product and getting published in an upcoming report from the American Diabetes Association. That said, while its product is more convenient than some competing options, there are other choices with decisive advantages, like not requiring a blood draw or using near-field communication (NFC) technology. Still, the psychological support from AI assistant Mina could prove to be a useful differentiator in the coming years to set Pops apart from those competitors. However, it remains to be seen how effective Mina will be, so the differentiators score for Pops is low.

While the company has a long way to go to reach profitability, it has made strides recently. The company saw $28,684 in revenue in 2020, up from $5,994 the year before. In the first few months of 2021, it also saw 90% month-over-month user growth, which is good traction for a company at this stage. Thanks to successful fundraising, the business has secured $7.7 million in funds from venture capitalists and others prior to this raise. As of now, Pops has been selling through Amazon and is still working to secure significant partnerships to bolster distribution. Due to growing revenue and strong signs of early traction, the performance score for Pops is quite high.

Investors should also be aware of a large quantity of long-term debt ($1.7 million). While it’s not unusual for startups to have debt, Pops’s assets are barely higher than its long-term debt, and this raise comes with significant financial risk. If the company is unable to secure ample funding in this round or does not see its revenue grow substantially this year, it could struggle in the coming months.

Since Pops faces a crowded and limited market with limited means of distribution, its room for growth is narrow. As is true in every industry, competition drives prices down. For Pops, this keeps its margins so narrow that profits are probably going to be tight, and an exit may be unlikely. Even as an increasingly-geriatic population and higher rates of diabetes expand the market, Pops needs to fight for every user it can get. With a product that looks very similar to the competition, it may be difficult for the company to stand out enough to grow.

While Pops faces significant obstacles, it is headed up by an experienced team with expertise in operations of this kind. The UI on its website is attractive and intuitive, which bodes well for its future software development as well as outreach potential. The team has also managed to secure several revenue-generating contracts. If the company can keep it up and expand its sales and marketing game, Pops could see its revenue grow in the coming years.

Pops is a medical technology company bringing a two-part solution to the day-to-day hassle of diabetics’ blood monitoring: the Mina AI program and the Rebel meter. Mina engages patients in a supportive manner that lets diabetics manage their own health, and the Rebel device is less obtrusive and painful than some competing options. In its early distribution through Amazon and its domain, Pops has begun taking in limited revenue.

However, Pops finds itself a new player in a market quite crowded by low-cost competitors. While it is heavily patent-protected and comparably priced, it may not be of sufficiently high quality to stand out dramatically from its competition. In addition, finances are something of a concern for Pops as the highly capital-intensive nature of development means its long-term debts are close to eclipsing its assets. On top of that, Pops’s valuation is a bit high for its early stage and limited room to grow.

While Pops faces barriers to profitability, it possesses some strong tools to overcome those challenges. Its leadership team is fleshed out with highly experienced subject matter experts, and it secured contracts and passed some regulatory hurdles to get FDA-approved. Though it’s not a likely candidate for a quick exit, Pops has the potential to see substantial revenue growth if it performs well. In addition, favorable terms for investors could somewhat make up for a high valuation cap. Therefore, Pops is a Neutral Deal.

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

Analysis written by Benjamin Potts.