Last week, we glimpsed at the valley of death that we expect to face by the end of the year as our current funding runs out and operating costs remain higher than sales, despite sales growth. This week, we’ll look a little closer at the flower at the edge of the valley, and the green fields accessible, if we survive across the valley of death. We need to paint this picture in detail for possible investors at Slush, but we can take a look at some of the building blocks already now.
We soft-launched LUPO with pre-orders at the Worldcon75 event in Helsinki in August, but didn’t really have cards for sale until early September, when we started sales in Amazon UK and Amazon US. The graph above shows simply weekly unit sales x 20€/unit x 52 weeks as the annual run rate revenue projection based on actual weekly unit sales. The dotted line is a second order polynomial projection of current sales to the next two months, i.e. the first two months used to predict the next two months. This is a fairly realistic projection, knowing that the holiday present buying season is coming up in both of our Amazon marketplaces and we also have several B2B sales leads that we are working on. We are currently at approximately €100 thousand run rate and expect to reach €400 thousand run rate by the end of the year.
To put these numbers into perspective, Peter Thiel bought 10% of Facebook for $500 thousand in 2004 at a time, when Facebook’s run rate annual revenue was $150 thousand and the number of employees was seven. Of course, that valuation was not based on the ad sales alone, but the competence and drive of the founder, the growth story of the maybe half million active users Facebook already had with a clear network effect of every new user making the service more valuable to every existing user, which made the potential longevity of the growth believable. By the time of Facebook’s IPO in 2012, Thiel’s $500 thousand investment was worth about $1.7 billion.
LUPO is no Facebook, but let’s take a look at some things that LUPO is instead.
First, we have a team of six, half of them with teacher training from Finland, so our pedagogical pedigree is sound. We also have solid game design and business experience from the founders and advisors.
Second, we already have our first product out with proven traction and a growing number of positive reviews both from consumers and professional game review sites. You can take a look at the Amazon listings to see some of the reviews.
Third, our current market is scalable. Our customers are from two segments: consumers and teachers/schools. Both of these segments are huge worldwide and also huge in our initial target markets of Finland for validation and English-speaking markets for initial scaling up. We are currently addressing the growth opportunity in the following ways:
- Online, while we have no marketing budget, we do invest most of our Amazon revenue in Amazon’s sponsored products, meaning that Amazon places LUPO as a possible game of interest, when Amazon users are browsing some better-known game with some shared attributes. This is currently scaling quite well and could obviously be accelerated with more advertising money. Card games are in the midst of a renaissance in the US and UK, so while we are starting from scratch, the potential market size is a sizable portion of all families in these markets so easily tens of millions of units.
- In addition to English, we are already talking to publishers interested in LUPO for other large language markets.
- We are also actively talking to distributors to enable retail store availability of LUPO first locally here close to Helsinki already before Christmas, later in other markets.
- EdTech remains where we are coming from, so obviously teachers and schools remain the second major market that we are addressing. This market is a lot slower to capture than the consumer market with sales cycles of ten in the range of 6 – 12 months. That said, we already have near commitments to card sales that can double our existing sales in a matter of weeks, hopefully before Slush, and we are working on several partnerships in the US, UK, and India with local companies, who have existing direct sales channels to schools and who can also act as value added resellers in the sense that they can provide teacher trainings as a complement to the card sales.
Fourth, rather than focusing on a single product concept or customer segment, we are focused on a key 21st century skill, creativity, which will remain in demand at a time when artificial intelligence is about to make most rote knowledge application jobs irrelevant. This makes it relevant not only to families and schools, but also to B2B trainers. We are already in the concept development phase of a digital game, which is an evolution of the current card game with current learnings incorporated and faster scaling enabled from day one.
We’ll continue working on this story in the coming weeks ahead of Slush. In the meantime, if you are interested or know someone who might be interested in joining our ride, get into contact and let’s start talking.
Until next week!
Author: Nouri Mikko Werdi