SmartGurlz is raising at a $9 million pre-money valuation, without discount. The valuation reflects the company’s diversifying business offerings and bolstered reputation from appearances on various media outlets. This raise is a follow up on two small-scale seed rounds in 2019, the latter of which had a pre-money valuation of $7 million. The price increase is significant, in spite of the fact that gross margins and revenue both decreased last year. SmartGurlz’s price rating is therefore relatively low.

As primarily a toy manufacturer, SmartGurlz enters into a market that has experienced growth in recent years. From 2015 to 2018, the industry grew at an annual rate of 3.9%, with total 2018 sales of $1.6 billion. The pandemic has transformed the industry in ways that may offer openings for SmartGurlz over traditional toy retailers. As manufacturers that focus on film-based toys face revenue declines from delayed film productions, overall toy sales—particularly through online shopping—are increasing as parents resort to toys to occupy children stuck at home. However, it is still worth noting that educational toys are a smaller subset of the general toy market.

As a producer of toys marketed to girls — which uniquely address modern parents’ concerns about diversity and STEM education — SmartGurlz is uniquely positioned to carve an expanding niche for itself in this market. Furthermore, girls’ toys emphasizing STEM are becoming increasingly popular. The dolls are relatively expensive, however, coming in at a $100 price tag. Cheap imports of toys along with decreased levels of disposable income from COVID-19 might threaten future sales. Additionally, SmartGurlz faces much more established competition who could easily pivot to offer a similar product. As a result, the company’s market score on the lower end of the spectrum.

SmartGurlz is led by a strong team with. Sharmi Albrechtsen, CEO and co-founder, at the helm. Albrechtsen is a fellow at New York University and holds an MBA from the Copenhagen Business School. She has almost a decade of experience raising millions in grants for nonprofit organizations with the Ida Institute and has made a career for herself managing PR and communications. Her hard work to promote SmartGurlz has paid off, perhaps most significantly with an appearance on NBC’s popular show Shark Tank in late 2017. 

Co- founder Jesper Nissen serves as the company CTO and a member of the board. Nissen has decades of experience in tech industries, including VP of Operations with Weibel Scientific. Finally, Martin Pidel serves as CMO, building on years of experience working with the education and toy industries—including three years as the VP of Global Brand Marketing at Hasbro, an industry giant. 

Overall, the SmartGurlz team has strong industry experience. However, there is little past entrepreneurial experience among the co-founders, and the team has not worked together on past projects. Balancing this against industry expertise, SmartGurlz’s team score is middle-of-the-road.

While toys marketed to girls interested in STEM are growing more popular, major manufacturers of dolls and toys have yet to clamp down firmly on the market. Other dolls are just that: dolls, possibly with STEM-based accessories. However, SmartGurlz dolls are explicitly robotic and intended to teach coding and robotics to girls. The toys are also notably diverse, which may increase their target audience. These points would seem to serve as strong differentiators — however, it is not inconceivable for a competitor to produce a toy very similar to that of SmartGurlz. There are no patents or other intellectual property protecting the company’s products. Additionally, the hefty price tag on the dolls differentiates them in a way that does not help SmartGurlz attain new customers. Therefore, SmartGurlz’s differentiators score is its lowest.

SmartGurlz has had mixed success in recent years. While the company enjoyed a “bumper year” in 2017 with its Shark Tank appearance, revenue declined in 2019 — from $381,870 in 2018 to $303,840. That said, its new product has already sold out, and the company has experienced consistent growth overall. It plans to increase consumer sales to nearly $16 million by 2023, and its licensing offerings are growing as well. The launch of their Smart Buddies program also appears to have been successful despite the challenges of remote learning, and may result in significant revenue increases over the next few years. SmartGurlz’s high performance score is a reflection of this positive growth.

Investors should be wary of SmartGurlz recent revenue decreases, which indicate trouble ahead as the global pandemic affects the market in uncertain ways. Investors should also note that SmartGurlz holds more than $1.6 million in short-term debt and nearly $300 thousand in long-term debt. Neither these debts nor the revenue decreases are explained in SmartGurlz’s raise materials, which might indicate financial difficulties yet to be disclosed. The lack of transparency is concerning, and might hinder the company as cheaper imported toys continue to flood the market.

SmartGurlz holds a unique product, with powerful messaging that addresses a clear cultural need. If it hits the target minimum, the company will have 12 months of runway — reducing risk for investors and giving time for sales expansion. Furthermore, the company’s partnership with Pitsco to create the Smart Buddies Program comes at a time where education—particularly distance learning—are an economic priority. While the launch into the school system has been put on hold, 10 schools in Florida and Texas have been through the pilot program, which could translate to a significant entry into a $40 billion school market in 2021. Deals with school systems and licensing revenue could increase overall revenue by tens of millions of dollars in the next few years.

SmartGurlz is a toy company, manufacturing robotic dolls for girls to increase their engagement in STEM education and combat gender stereotypes. The dolls — riding on scooters and controlled through the companion “Sugar Coded” app for phones and tablets — teach girls how to code through games and lessons. SmartGurlz has also partnered with an education company to create the Smart Buddies Program, intended to teach thousands of young boys and girls how to code with a strong emphasis on diversity of representation.

While sales have been significant and the leadership is strong, there are worrying signs in the company’s recent past. Revenue and gross margins went down last year, and high levels of short-term debt have not been explained in public documents. With shifts in the market and possible undisclosed financial problems, SmartGurlz and Smart Buddies might fail to expand their revenue enough to grant investors significant returns. Therefore, SmartGurlz has been rated a Neutral Deal.

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Analysis written by Benjamin Potts.