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Security type: Convertible Note
Valuation (cap): $6.5 million
Minimum investment: $1000
Where to invest: SeedInvest
Deadline: July 10, 2020
Dear KingsCrowd member,
As startup investors, we look at a lot of variables…
Is the startup disruptive?
Does it disrupt a sector that’s never been disrupted before?
Is it 10x better than its nearest competitor?
Is the startup addressing a large market?
Does it have good metrics?
Is there a path to monetization?
Is it scalable?
And can the management team execute?
The startup I’m introducing you to today is a rarity. It answers all of these questions with a resounding yes.
That alone should prompt any startup investor to invest in this deal. But this startup is more than just a great investment. It brings dignity to one of the most difficult times of our lives. And we should all invest in that.
A Space That Needs Disrupting
The funeral home business hasn’t been disrupted for hundreds of years. It’s largely mom-and-pop businesses (86% of the industry is independently owned) that have been operating the same way for their entire existence. And they often use a never ending series of upsells designed to extract as much money as possible from grieving families.
The last thing anyone needs to deal with when a loved one passes away — or is about to pass away — is a used car salesman who’s more concerned with getting one extra dollar than with helping someone through an overwhelming experience.
In fact, I’m so disturbed by the business practices in this industry that I’m going to have some tough discussions in the near future with some loved ones. I want to make sure they’re prepared in advance. And that nobody can take advantage of them.
It doesn’t have to be this way. And Solace, an Oregon-based deathcare startup focused on cremations, is committed to changing the way this industry does business. And make no mistake — funeral homes are a business.
Massive Profit Potential
The last time a large, fragmented sector dominated by local players was disrupted by a startup, it made early investors insanely wealthy. I’m talking about Uber.
In its earliest incarnations, Uber brought dignity to the taxi industry. Taxis were notorious for not picking people up, taking the longest route possible to their destinations, terrible cars, terrible service, an awful customer experience — and for not caring enough to fix any of these problems.
The only thing they cared about was maximizing profit even if their customers suffered. Uber disrupted the industry by giving customers the experience they wanted.
Mike Wallace and Oren Walsh were two of the early investors in Uber. Each invested $5,000. When Uber went public last year, their shares were worth $24.8 million apiece. Shawn Fanning’s $25,000 investment turned into $124.1 million. And the list goes on.
I’m not saying Solace is going to become the next Uber. But it does have the potential to disrupt the $19 billion funeral parlor business ($5 billion of which is in cremations) the same way Uber did with the taxi industry.
Solace can deliver a better, more dignified customer experience. It can build a national brand where none exists. And it can do it significantly cheaper than the incumbents.
A Better Way
According to the National Funeral Directors Association, about 56% of the people that pass away will be cremated this year (Note: This projection was made prior to the COVID-19 pandemic). By 2025, that number is expected to rise to about 64%. And by 2030, about 70% of the people that die in the U.S. will be cremated.
There are some regional differences in cremation rates. More people are cremated in coastal states than the interior of the country. And on the west coast, cremation rates top 80%.
The median cost of a cremation (that includes picking up the body and the actual cremation) is about $2800. Once a funeral and viewing is included, the median cost is $5150.
Most of the “sales” for funerals and cremations are done in person. And the process for obtaining death certificates can be cumbersome. Fax machines and typewriters are still the norm in the industry.
Solace takes a different approach to deathcare. It’s a direct-to-consumer service that handles all the details for a cremation. Solace picks up the body, brings it directly to where it will be cremated and returns the ashes to the family (or ships them if outside of the Solace service area). Solace also digitizes the process of obtaining a death certificate. Its website and dedicated customer care team help people navigate the entire process (minus the viewing or service — for now). And it does it all for $895.
That’s 68% cheaper than a funeral home cremation. And 83% cheaper than a cremation with a service.
Even at that lower price point, Solace’s gross margins are solid at about 47%. And the margins should go above 50% as Solace scales.
No Middlemen and Better Service
Like most good startups, Solace eliminates middlemen. Most funeral homes contract out cremations. But Solace picks up the deceased and takes them directly to the people performing the cremation. That helps Solace bring down costs.
Bringing down costs is only part of Solace’s mission. The other part is to change the way cremation services are sold.
It starts with a website that walks clients through the process. Solace customers can research the process from the privacy of their home. This digital experience eliminates salespeople hovering over them — trying to get them to buy a service they don’t want.
The critical second step is the Solace Care team, which has been handpicked to compassionately help clients deal with making cremation arrangements. Solace deliberately avoided hiring anyone with connections to the existing deathcare industry. They didn’t want to repeat the mistakes the industry has been making.
Instead they hired people with empathy. People who are good at helping in a crisis or stressful times. People that worked in medicine or childcare.
And Solace manages this team carefully. It carries the emotional burden for the company, and it’s critical to Solace’s success. Solace makes sure the Care team takes plenty of breaks and doesn’t burn out.
Every part of the Solace operation is as well thought out as this — including its growth plan.
All Eyes On California
Solace currently operates in two markets — Portland and Seattle. In 2019, Solace generated $130,000 in revenue. It’s on track to double that this year. And using the proceeds of this raise, it wants to expand into California next. California has the biggest cremation market in the U.S. About 68% of the people that pass away in California are cremated. Solace is targeting a Q4 launch there. And it has already drawn interest from the market.
If it’s successful in California, Solace will move into other states. The long term goal is to gain 10% market share and help facilitate 220,000 cremations per year. If they succeed, they’ll generate more than $200 million a year in revenue based on cremations alone.
Solace also wants to expand into the urns business (a popular request from their current customers) and helping families organize their own celebrations of loved ones.
Solace has successfully proven it can work in Seattle and Portland. Now its team needs to execute moving forward. And fortunately for investors (and Solace), this team is very good.
I know because I spent several hours on the phone talking to them.
Solace’s two co-founders, Keith Crawford (CEO) and David Odusanya (CCO) are Nike alum. They helped build the Air Jordan brand. And they’ve brought Nike’s customer-first ethos to the deathcare space. COO Jeremy Frank is an operations wizard. He’s a Nike veteran too. But he’s also worked at Deloitte and Allstate. His command for operational detail is impressive.
This team has bootstrapped Solace so far. Now the startup is poised to take off. That makes it a terrific time to invest.
How to Invest
Solace is raising up to $1.2 million on SeedInvest. If you don’t already have a SeedInvest account, you can sign up for one here.
Once you verify your account and are logged in to SeedInvest, visit the Solace deal page.
Then click the invest button. Enter the amount you want to invest, starting as low as $1,000, and proceed through the required steps. Be sure your investment is confirmed, then you’re good to go.
This opportunity, like all early-stage investments, is risky. Early-stage investments often fail. Solace might need to raise another round of funding in a year or two, if not sooner.
If it executes well, this shouldn’t be a problem. But that’s a risk worth considering when investing in early-stage companies. The investment you’re making is NOT liquid.
Expect to hold your position for five to 10 years. An earlier exit is always possible but should not be expected.
All that said, I believe Solace offers an attractive risk-reward ratio.