A significant investment, and an Augmented Reality Deal, all in a week
Last week, KABN Systems NA Holdings Corp. (KABN:CSE) received subscription agreements for C $2,970,000 investment. 9 million shares issued at $0.33 with half-warrants at $0.37. Read the full release here.
The whole team, in particular CEO Ben Kessler and President David Lucatch, worked extremely hard over the past many weeks to liaise with the investor, a U.S. Family Office and foreign investors, to assist with their analysis and become vetted as innovators.
These investors focus on undervalued tech investments and creating long term strategic partnerships. This is why they were prepared to pay roughly twice the value of the common stock to make this partnership happen. Any sophisticated investor knows you are really making an investment in a team. The concepts, in particular Liquid Avatar (liquidavatar.com) are unique and innovative. But the investment at its core is in the Management Team and the belief of successful execution.
In the famous words of Michael Dell,
“Ideas are a commodity. Execution of them is not.”
Speaking of Execution — the very next day an Augmented Reality (AR) agreement was announced
KABN announced the very next day a partnership with a Europe-based Augmented Reality pioneer. The press release is very detailed so I will provide analytical support rather than repetition.
This deal is symbiotic to KABN’s core business and this partnership makes a ton of sense. The key point is that KABN will ultimately have an enhanced product suite. To use a B-school term, this is potentially first-mover advantage. Companies are scrambling to catch up. Geo-location, and seamless interaction with existing retail and mobile platforms and data monetization will enhance the product suite that KABN has already spent years developing. This will equally benefit consumers and businesses. Read the full release here.
1.) Internet usage up 25% because of the global pandemic.
- According to the Wall Street Journal, a few days after the pandemic hit, internet usage was up more than 25% compared to January
2.) Amex buying Kabbage
• Terms were not disclosed but Barron’s reported that the deal was for US$850 MM
• They are only buying the people, IP, technology and other infrastructure; the deal does not include the loan portfolio
• This demonstrates that the true value of this startup is in its people, not its loans
• Data pools are the new loan portfolios.
3.) Unicorns emerge again — AirBnB files confidential IPO prospectus
• We wonder as to the valuation implied by the $18 BN proposed market cap
• I plan to provide an update once the Prospectus is no longer confidential.
4.) Reality about the markets Year-to-Date
• The TSX Composite is down 3.2%
• TSX Venture (a proxy for the CSE) is up 27.7%
• NASDAQ is up 22.8% — obviously lion’s share is technology equities
• Within the S&P TSX Composite which I just mentioned was down 3.2% YTD, the Tech portion is up 64.4%.
In conclusion from these updates, lean, innovative, customer-and-retailer supportive technology is king and shows no signs of slowing down.
AR Primer and Key Stats
Primer — Augmented Reality (AR)
Augmented Reality is taking a user’s experience of a real scenario and layering on additional features to that experience. These days it refers to adding those additional features in a computerized setting, but its founding was pre-computers. In 1957, a cinematographer created the Sensorama, a box which the user would enter, where sounds, vibrations, additional visuals and even smells would be added. Fast forward to today, and AR has come to mean three things: the user is: 1. experiencing real and virtual worlds, 2. real-time interaction, and 3. accurate 3D registration of virtual and real objects. Wow that was easy to explain. There will be a test later.
A few fun facts about AR and why it should matter to you. I’d like to offer an analogy. It’s a bit like Cannabis when that was going into the initial opening period, when the growth in the businesses catering to this new market was enormous and the potential was limitless. Then we see with increased competition, the weaker players eventually are exposed and you see a retraction.
An important difference is that AR, when implemented correctly, will garner stickier (mind the pun) customers because of the integration with long-term partners and the importance of data. This will still require immense attention to execution and security.
The proliferation of AR is becoming more apparent. You can see the anticipated explosive growth in AR utility and usage over the coming immediate future.
Key Stats and some interpretation by me.
1.) Insane growth rate.
• Global market for AR was ~US$1.8 BN in 2018 and expected at ~US$198 BN by 2025
• I calculate that implies a CAGR (compound annual growth rate) of 96%
2.) It’s already adopted, and plays into transactions
• Approximately 70MM users are now expected to use AR at least once per month
• The number of mobile augmented reality users is expected to hit 3.5 BN by 2022
3.) Possibly as big as mobile, soon.
• Jack Dorsey of Twitter and Square fame said awhile back, to paraphrase, “why are we referring to them as “smartphones.” There’s no such thing as a “dumb phone” anymore.
• In a survey of 200 senior startup executives, 39% said AR will be as ubiquitous as smartphones by 2025.
Well that’s all I’ve got for now. An amazing week for a truly visionary business that is not afraid to dive with confidence into uncharted waters, headfirst, because they know they can swim.
Have a good week — Tom
© 2020 Thomas Kennedy. All rights reserved. See Disclosure Statement