Deal Abstract
https://www.seedinvest.com/ubitquity/seed
Blockchain company seeking to eliminate fraud and redundancy in real estate title records. Seeking $750k at a valuation of $2.5MM. Seeking to become the one definitive source of truth for records, would ultimately require buy-in from title companies, municipalities, and “custom clients.”
Decision
Yes. (Hypothetically.)
Why Investing/Passing
- Very reasonable valuation to buy equity.
- Technology risk is fairly low, though sales and packaging of plans becomes key. Having gotten AIC, the Brazilian government, and $280k in revenue for 2018 with annual burn of $120k, is more than nothing.
- Although real estate is generally a sleepy update, the growing ambition and investment in real estate tech companies, demonstrates great pressure on incumbents to adapt-or-die to new efficiencies.
The 11 Calacanis Characteristics
Passed/failed on 5/11.
| Check | Pass/Fail |
| 1. Syndicate lead has >5 years investing and >1 unicorn investment | Fail |
| 2. A startup that is based in SV | Fail: (Wilmington, DE) |
| 3. Has at least 2 founders | Fail: though it does have a COO |
| 4. Has product in the market | Pass |
| 5. 6 months of continuous user growth or 6 months of revenue. | Pass: $290k for 2018, $0 for 2017 |
| 6. Notable investors? | Fail |
| 7. Post-funding, will have 18 months of runway | Pass: Cash balance is $20k as of March, equivalent to 2 months of burn, so $750k would equal 75 months. That said, burn will go up as the company hires to accelerate growth. |
| 8. Proprietary technology? | Fail: applying for patent, but not very useful in tech companies |
| 9. Network effects? | Pass: this is 100% a network effect play |
| 10. Economies of scale? | Pass |
| 11. Great branding? | Fail: no UI/UX person on the team. That said, this is more of a B2B back-end sales product. |
The 7 Thiel Questions
- The Engineering question:
- Good: this company is not trying to “create” blockchain, but just trying to make a good interface for it. From the brief screenshot in the explainer video, seems like a basic, vanilla (not bad) CRUD (create, read, update, delete) app.
- Good: this company is not trying to “create” blockchain, but just trying to make a good interface for it. From the brief screenshot in the explainer video, seems like a basic, vanilla (not bad) CRUD (create, read, update, delete) app.
- The Timing question:
- Good: would be ideal if the company could raise money because it’s in the blockchain space. That said, there is definitely no Google of blockchain powered verified documents yet.
- The monopoly question:
- Bad: by definition, you only want “one source of truth.” Assuming that Ubitquity could become a privately owned medium of public records (much like Twitter is a privatized platform for near public communications) this would naturally default to monopoly.
- The people question:
- Bad: I see a founder who has experience in Blockchain, but ambiguous work history. The team has dev talent, and a COO. With burn of $10k/mth, this is fairly remarkable ($120k/yr for 3-4 teammates, so either founders are uncompensated, people are not working full time, or certain individuals are getting paid heavily in equity.)
- The distribution question:
- Bad: Sales of this product are going to heavily rely on the ability to win over key decision makers at title companies. The ability to get two clients is a positive trend, especially with $280k in revenue for 2018, but how replicable this is only time will see.
- The durability question:
- Good: if built the right way, this business is definitely durable. Title companies and municipalities are naturally risk-averse, so once the brand and security are proven it’ll be easy to sell.
- The secret question:
- Bad: why is real estate a particularly lucrative area for certified records to have outsized commercial impact?
- Bad: why is real estate a particularly lucrative area for certified records to have outsized commercial impact?
What has to go right for the startup to return money on investment:
- The owners of title companies realize that by automating and reducing error via blockchain adoption, they can lay off and save on labor costs for title checks.
- Ubitquity knocks it out of the park with ease of onboarding, security, and user experience. This way it acquires a reputation similar to Kleenex for tissues.
- Large real estate platforms like Zillow, Redfin, further go downstream in their businesses (see iBuyer phenomenon) and give further pressure to title companies to find ways to innovate. Alternatively, the company is good enough that it gets acquired.
What the Risks Are
- The infrastructure that has arisen for title checks: title lawyers, fees to lawyers who sue and prosecute on weird title stuff, title insurance, is too entrenched and thus adoption is slow.
- Creating a competing product to Ubitquity’s platform is easy, and the real bottleneck on growth is sales and distribution e.g. people who are incumbents with the right connections are in a better position to sell the promise of blockchain.
- Adapting the Ubitquity technology to new industries (non-real estate escrow/title) is not as easy from a sales packaging standpoint and the platform can’t adapt fast enough to become a general blockchain ledger company.