Development Stages:
- Pre-seed with a Direct-to-Consumer (D2C) model.
- Series A with a Business-to-Business (B2B) model.
Highlights:
- Sportswear for competitions, with no local retail stores.
- Growing consumer trend towards health and wellness.
- 10 years of experience manufacturing sportswear domestically and internationally.
- No strong top-of-mind awareness in Vietnam for the company’s sportswear.
- Sales process: Purchase fabric (raw materials), outsource manufacturing (OEM), and sell B2B.
- Advertising: Placed at suppliers where the company purchases fabric; manufacturing outsourced to home-based businesses in rural areas to reduce labor costs.
- 6 distributors: 1 in the north, 4 in Ho Chi Minh City, with RIKI itself being the primary distributor.
- Online sales for the past 3 months: Not yet active on TikTok due to inability to deliver within 24 hours and the time required for printing.
- Large market with significant growth potential.
Value Proposition:
- Focus on sportswear.
- Product features: Breathable, moisture-wicking.
- Lightweight: Approximately 120 GSM (100 grams for size M, L).
- Smooth fabric surface: Prevents chafing during long-distance athletic activities.
- Competitive pricing.
- End-user price: VND160,000 – VND300,000.
Future Financial Plan:
- Revenue target: VND200bn in 2025, VND300bn in 2026.
- EBITDA margin: 17%.
Deal Structure:
- Investment: VND15bn for 10% equity, resulting in a post-money valuation of VND150bn.
Founder’s Plan for Funds:
- 50%: Allocated to product development/R&D and expanding warehouses in the North and Central regions.
- Retail expansion: To capitalize on the growing popularity of sports like pickleball and badminton.
Sharks’ Perspectives:
- Shark Thái: Stated that investing too much in a factory would be a mistake. Offered VND15bn for 30% equity.
- Shark Minh: Declined the investment due to a perceived lack of growth potential.
- Shark Vân: Declined the investment due to a lack of focus on branding and an export-oriented model.
- Shark Bình: Warned the founder about potential challenges in the D2C model from local factories or Chinese manufacturers. Offered VND15bn for 25% equity, citing the success of Cool Mate as a precedent.
- Shark Hưng: Offered VND15bn for 15% equity with performance-based clauses. If the company doesn’t meet its KPIs (2024, 2025, 2026), the founder must buy back Shark Hưng’s shares at a rate 3.5 times the annual interest rate of state-owned banks. If the KPIs are met, the buyback price is 1.9 times the base interest rate.
- Shark Bình finalized the deal at VND15bn for 15% equity, with a condition to shift one-third of the focus to e-commerce. This resulted in a post-money valuation of VND100bn.
Overall Assessment of the Deal:
- There’s no past financial data, only future business plans. I’m guessing it’s a Series A round, but I’m not sure.
- Riki has been manufacturing for 10 years, but the founder is young. I think this is a second-generation business, with the parents having started the company. Manufacturing is tough work, and people in that industry tend to be a bit conservative.
- There’s no past financial data, but the sharks didn’t press the issue. This is strange; usually, they’re very interested in what a company has achieved in the past. They only presented the future financial plan and a 17% EBITDA.
- If my guess about this being a second-generation business is correct, I think Riki should consider selling 51-70% of the factory to a foreign company. They can use it as their supply chain for global distribution and retail. There are many investors looking to buy textile factories. The rest of their time and the family’s experience should be focused on shifting to a D2C model like CoolMate, with Shark Bình’s support.
- CoolMate was successful because: a) The CEO used to work at an audit firm, so they understand fundraising and capital structure. They also started a retail company before. b) The CEO spent 1.5 years building the supply chain from the beginning. c) The CTO has experience leading teams in ERP, website, UX/UI design, etc. d) The CMO understands end-users, is creative, and is good at driving traffic to the website. The CTO and CMO are co-founders who don’t compete with the CEO for power. That’s why I think they’re a dream team. It’s not easy to find founders and co-founders like that in Vietnam, especially when they’re skilled and willing to work for a low salary until the company grows. Many Vietnamese teams have tried to copy CoolMate, but few have succeeded because they couldn’t assemble a dream team like that from the start.
- Why are Chinese products so cheap? Because they focus. When they really focus on something, they do it at the lowest cost. In Vietnam, we tend to be greedy and want to do everything at once. This leads to high operating costs and limits growth and competitiveness. CoolMate is very focused. But it takes a lot of experience to let go of other opportunities. It’s easy to add more, but it’s harder to let go and reduce FOMO (fear of missing out).
- Because of that, Shark Bình will have to work hard to help Riki change their mindset and approach. Whether they succeed or not will depend on many other challenges, and of course, it will take time to see. Also, for B2C, Riki needs to understand consumer needs. CoolMate’s CMO does this very well, but families that do B2B are usually weak in this area. B2B has high costs, requires selling large quantities, and involves price competition. B2C requires a deep understanding of the market and the ability to meet customer needs.
- Basically, Riki and Shark Bình will be co-founders of a new business. I think Riki should completely separate themselves from the factory/distribution system, even sell 51-70% of it. Use that money to focus on the new business, not just 1/3 of their focus as Shark Bình suggested, but 100%.
- On the other hand, if Riki still wants to focus on distribution, they should build a larger factory in the future to reduce costs and continue to do contract manufacturing for foreign companies. This will ensure a stable output for their factory and production lines.
- Regarding D2C sportswear, CoolMate is already doing it very well. Riki will have a hard time beating CoolMate’s position as the industry leader. CoolMate has already announced their financial structure, so they are not afraid of competition. Whatever Riki can do, CoolMate can do it cheaper. They have a valuation of VND1,000bn and they haven’t even thought about going global yet, so they should take their time. FYI, I have a friend who sells T-shirts in the US for USD20mn a year. Riki should consider that market. While CoolMate hasn’t gone global yet, targeting other mature markets would be a smart choice. Even so, they still need to focus 100%.
Anyway, congratulations to Shark Bình and the founder. I predict this deal will be challenging for the shark.
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