Dear Startup Investor,
Everyone has their own reasons for getting into the startup game.
Some people want to make a difference and drive positive change. Others are here for the money.
It really doesn’t matter why you’re here – because we all share the same ultimate goal: growth.
Founding teams want their companies to expand and rake in millions of dollars in revenue. And angel investors want their portfolio companies to explode in value and produce massive returns.
But unless a company is scalable, its growth will always be limited – and margins will suffer as a result.
Here’s a simple example to show you what we mean:
Startup A is a new coffee shop. At the very beginning of its life cycle, the founders rent out one storefront, hire a couple of employees, and purchase enough machines and supplies to get started. But if this team wants their business to expand, they’ll need to spend more and more money as they grow.
With every new location, this company will need to rent out another space, hire more employees, and purchase more machines and more supplies. This will lead to razor-thin profit margins, since the difference between their total sales and their total expenses will be tiny. They can’t scale as quickly or as efficiently as something like a software company.
That’s not to say Startup A will never be successful. With the right team, the right business model, and a loyal customer base, companies with thin margins can still grow steadily (think: hotel chains, Starbucks, and other franchise structures).
But when you look at a company that’s built to scale, the difference is clear. Like…
Startup B is a social media platform – think something like Facebook or Twitter. While the upfront costs of developing their software and app are likely high for this startup (millions of dollars in some cases), they can quickly scale and lower their costs as the business grows. Here’s why:
Because their entire model is app-based, the team won’t need to hire hundreds of employees to manufacture a product, rent out space in a warehouse or distribution facility, or set up new offices around the world to bring their company to new markets. Once they’ve built the app, they can just distribute it infinitely.
That’s why software companies have such attractive profit margins: they don’t need to buy more supplies to make more of their app. As Startup B grows, the difference between total sales and total revenue will likely continue to expand – and those savings will funnel right back into their bottom line (and their investors’ pockets).
It’s important to remember that not every app, tech company, or software startup will be successful – and it’s still important to ask the same hard-hitting questions you would for any other startup.
But at the end of the day, we’re interested in recommending startups with the most airtight and capital-efficient business models. Which is why you need to check this one out today (before its raise opens to the public on September 1):
This gaming company has a three-fold market strategy – starting with physical board games and eventually moving into a digital-only streaming experience. It’s a rock-solid business model that reminds us of how Netflix transitioned to streaming back in 2007 (and that company’s market cap has soared by 15,906% since then).
Nearly 600,000 people have already downloaded and registered with this startup’s app – a built-in audience that can convert to paid users once the company launches its streaming service.
Here’s the best part: That existing audience represents $28 million in potential annual revenue. That means even if this company didn’t add a single new user to its app, they’re still expecting to rake in tens of millions of dollars per year.
In fact, the founding team already projects that their company will be worth $1 billion in just five years. And they won’t have to waste millions of dollars on overhead costs in the process.
You can hear from this startup’s co-founder and COO firsthand by heading over here. Daymond John and one of his closest associates put this founder in the hot seat and grilled him to make sure this was a deal worth checking out.
Their verdict? It absolutely is. And you still have the opportunity to invest today. Just click here to tune into a replay of this meeting right now.
We’ll be back soon with another update.
Until next time,
The Research Team