Key Stats: WhiteClouds on Wefunder
Number of Investors
|Likelihood of Max|
To date and as of September 5th, WhiteClouds has raised $161.2K
The Whiteclouds team has been selected as a “Top Deal” by KingsCrowd. This distinction is reserved for deals selected into the top 10% of our deal diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to firstname.lastname@example.org
You can also check out our Founder Profile with Whiteclouds Co-Founder & CEO, Jerry Ropelato HERE.
Our latest Top Deal rating is a company that provides 3D printing as a service (3DaaS) to corporations for both the purpose of developing prototypes and finished products for consumers in a rapid and cost effective manner.
The Market Opportunity
3D printing may have lost some consumer cache, however it is becoming more prevalent as a mechanism for manufacturing prototypes and consumer products because of its manufacturing flexibility and cost efficiencies.
To provide some perspective consider this. On small batch product orders, an injection mold, which has historically been a key way of prototyping and creating manufactured products can require an upfront $10K investment just for the mold.
Whereas a 3D printed product can cost just the price of the material, since there is no need for a specialized mold. If the materials cost $20, then the print could cost just $20, instead of $10,020. Molds are replaced by software and thus cost are drastically reduced. On product batches below 1,000, 3D printing is immensely more cost efficient.
In fact, the global 3D printing market is estimated to become a $30B to $33.5B market size by 2022-2023, up from $7.9B in 2016 driven in large part by its foray into more consumer / finished products as the quality of 3D printing improves.
The growth in 3D printing is also growing because of its ease of application across multiple industries such as medical procedure prototyping, architectural design, toys and more. With its prevalence growing thanks to enhanced 3D manufacturing capabilities the need for more service providers is quickly growing.
Proto Labs is one such provider, which currently has a $4.2B valuation cap on over ~$375M in 2017 sales. This organization is focused both on industrial design and providing support in material application mostly for prototyping. However, there is still a wide market gap for finished product manufacturers in the 3D printing arena that is just now being met by WhiteClouds.
If you do a search of 3D printing providers you will see that the vast majority of competitors in the market are focused on industrial prototyping applications. End-products, however are lacking competitive options.
WhiteClouds is providing the first 3D printing as a service solution that enables organizations to easily order both prototype products as well as consumer products with no in-house design or 3D printing expertise. With rapid delivery on high-end customized color parts both big and small, the team has found an ability to service multiple verticals with beautiful end-products.
There are three key components to the value that WhiteClouds provides over any other 3D print manufacturers.
First, the team focuses on end-products whereas most competitors focus on prototyping. Second, the team provides 3D design support for companies that lack these capabilities in-house. Lastly, the team is focused on creating really large objects. In the words of Jerry Ropelato, Co-Founder & CEO of the organization, “Years ago, we used to think in terms of inches. Now we are finding more and more demand in terms of feet.”
With the ability to provide large scale, high quality colored 3D printed objects designed in-house, WhiteClouds has become the 3D printing service in the cloud that handles all components of developing finished products that look good and don’t dent the bank account.
Think medical models, architectural models, interior models and data visualization to name a few applications. WhiteClouds has the single largest full-color 3D print capacity in the world.
So why is this so powerful? With a market niche as the only large scale service provider of high quality 3D printed end-products, we think the team can command a premium price point while maintaining low customer acquisition.
The Business Model
Speaking to the point about commanding a premium price point, Jerry has stated that the average order size is $4,233 and the gross margins on those orders is 67%. For a manufacturing company, this is exceptional.
Part of the reason we think the customer acquisition cost will be low is because of the fact that they have such a unique market positioning. However, this is further strengthened by the teams investment in SEO (Search Engine Optimization) and SEM (Search Engine Marketing).
Although this may sound like nothing more than a marketing gimmick, Jerry Ropelato has shown an ability to convert an effective SEO and SEM strategy into a business called Purch that commanded over $100M in revenue utilizing a similar strategy. Though unconventional to hear about in the manufacturing space, Jerry has shown an ability to execute at a high level with this customer acquisition strategy before.
In fact the team has cut the sales cycle from, “6-12 months a year ago” to “days and weeks,” says Jerry. Significant improvements in acquiring customers can be attributed to an investment in SEO and SEM. Additionally, the lifetime value of customers is improving with 65% of monthly run rate revenue coming from repeat customers.
This is a positive signal of WhiteClouds being able to drive long term profitability as they build long standing relationships through the service aspect of the business.
With $2.29M in 2017 sales and over $3M in assets, we think the $20M valuation cap is justified. For those concerned about the $5.4M in long-term debt on the balance sheet at the end of 2017, we attribute that to significant investments into building out its large scale manufacturing capabilities as well as its acquisitions. Both of these investments will help to defend the long term differentiated moat of the organization.
With organizations transacting between 2 and 2.4X revenue in this space and with Proto Labs currently trading at 10X current revenues we think there will be opportunities for PE or strategic buyouts in 3 to 5 years in the $150 to $175M valuation range.
The team is also being strategic in acquiring businesses that compliment or expand its 3D printing offering including Sandboxr and 3DPlusMe. Sanboxr helps to build out its gaming product arm, while 3DPlusMe helps with WhiteClouds personalization offerings.
The Founding Team
Jerry Ropelato who is the Founder & CEO of WhiteClouds was also the Founder & CEO of Purch from 2010 to 2013, which became the largest tech media company with over 100M monthly unique visitors. This company also generates over $100M in annual sales utilizing many of the same methods of SEO and SEM that WhiteClouds is now utilizing to grow its business. Jerry, has been an innovator in tech for over 30 years in total and comes with the type of pedigree VCs and PE shops look for.
The fact that he has turned to the crowd for investment speaks to his vision of seeing where the investment markets are headed, but the opportunity to invest in him as a retail investor is tremendous. It should also be noted that he has already raised a successful $1M round from the crowd on Wefunder just a couple of years ago.
Joey Skinner, the COO of WhiteClouds also comes with a long tenure working in the manufacturing / software world including stops at Brooks Automation, AutoSimulations, Inc, and MySchedule.Net in product, VP and C-level positions.
This is the type of team that knows how to execute and build companies and we do think this experience in the management ranks helps to de-risk the investment. Although it has taken Jerry and his team took longer to find their footing then they would like in building WhiteClouds, they seem to have found their market positioning after experimenting and investing in tech, SEO/SEM and company acquisitions over the past 4 years.
The Recommendation: TOP DEAL
With an exceptional C-Level team in place, market traction, heavy investment in building a defensible moat and a focus on high margin, service oriented 3D-print offerings in the finished products category, we think WhiteClouds has built a business that can command an above average investment return upon acquisition over the next 3 to 5 years.
Management is poised to build and sell its 3DaaS company after finding its stride over the past 6 months both from a customer acquisition as well as repeat customer standpoint. For these reasons, we think this is a Top Deal that is a lower risk investment than most traditional “startup” we analyze, but it still provides a meaningful upside.
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.