🪨 This startup is going after Hallmark

Greeting cards are a stale, uninspiring business.

Wooh - felt good to get that off my chest.

But seriously, growth has completely stagnated with forecasts expecting less than 1% growth in the coming years.

Not exactly a market that gets investors chomping at the bit.

However, it's still a $20B industry, and a David & Goliath storyline is emerging between Hallmark and a novel startup called Ink'd Greetings. Ink’d is letting you invest in their startup, so let’s see if it’s a good idea.

Here's what you need to know:

• 👋 Meet n Greet the Industry: Where the greeting card industry stands now

• 🪨 David vs Goliath: Ink'd Greetings is taking on 1,258 Hallmark stores

• 💰 Cards on the Table: Here's what I'm doing with this investment

MEET N GREET THE INDUSTRY

Every single second, 206 greeting cards are sold in the US.

Annually, this comes out to 6.5B cards. It's driven by numerous holidays + special occasions that happen throughout the year.

The industry is massive, but not growing.

And a few key players control the majority of the market. Hallmark has established itself as the de facto leader of the greeting card industry. While Hallmark is the top dog, it's failed to innovate its greeting cards segment. Instead, it's invested heavily in content production to expand horizontally.

The lack of focus has resulted in several operational challenges for Hallmark.

For starters, Hallmark's design-to-market time is concerningly slow. It takes Hallmark a whole year to take a concept and roll out the design on their shelves.

This makes it impossible to incorporate current events + trends into their designs - likely why you didn't see any Taylor Swift/Travis Kelce Valentine's Day cards on the shelves this year.

There's also a considerable amount of waste in the greeting card space. Once Christmas passes, no one is buying Christmas cards. Hallmark is often saddled with leftover cards that they need to trash after each holiday.

Hallmark hasn't really innovated, mainly because they haven't had to. The slow industry growth rate hasn’t enticed many competitors to enter into the space.

Well, until now.

DAVID VS GOLIATH

Hallmark in a box…

Ink'd Greetings is the brainchild of a husband-wife duo out of Stanford University. Andrew Ekmark, the CEO, hates greeting cards. His wife Sammi can't get enough of them.

Together, they're eliminating the inefficiencies that Andrew hates and weaving in the greeting card magic that Sammi loves.

Their unique approach is to roll out a 'greeting card vending machine'.

Their touchscreen kiosk instantly prints greeting cards onto high-quality cardstock, and customers can select from an unlimited number of designs. With this approach, Ekmark is banking on several advantages over a traditional store like Hallmark.

Their kiosk costs them between $7,000 - $15,000, which means they can roll out new locations without a ton of upfront capital

In stores like Target, the greeting card section can take up 400 square feet. The Ink'd kiosk stands at just 9 sq ft, allowing them to place these machines pretty much anywhere

As an unmanned kiosk, the cost of labor is substantially better than a standard brick-n-mortar store

Lastly, zero waste: if the card isn't bought it isn't printed! Another positive to profit margins.

Additionally, Ink'd Greetings has innovated with the cards themselves by allowing the option to 'print' gift cards directly onto the paper. This is done by printing a QR code onto the back - users can scan to add funds to their digital wallet.

Not only does this provide convenience to the customer, but Ink'd makes additional revenue off of this feature. The consumer pays a flat fee of $1.50, and the retailer of the gift card pays Ink'd 2-15% of the gift card amount.

Consumers seem to really like this feature, Ink'd has seen a 40% conversion rate for the gift card option.

To date, Ink'd has rolled out just one pilot kiosk. Located in a mall outside Phoenix, the machine generated $32,000 in revenue by selling over 1,500 cards. While impressive, there's a few callouts here:

The pilot was conducted in November - Jan, a peak time for greeting cards

The $32k includes amounts loaded onto gift cards - most of this goes immediately goes to the retailer the gift card was purchased for

Still, the one machine brought in roughly $3,500 in profit. That's an annualized amount of $14k on a V1-edition of their machine.

I see it entirely viable to scale the company's presence given the small, inexpensive, & autonomous nature of the kiosk. Ink'd claims to be in discussions with retailers like 7-11 who are interested in rolling this out to their sprawling retail footprint. A partnership could very quickly bring hundreds of additional kiosks online in a short matter of time.

Hallmark has 1,500+ stores, massive brand recognition, and a long head start.

But so did Blockbuster, and Redbox came in and ate their lunch.

Redbox ultimately got disrupted by streaming providers, but I don't think the same fate will repeat with Ink'd. The sentimental nature of greeting cards leaves me confident that there will always be a market for physical cards.

CARDS ON THE TABLE

Will I be investing…

Ink'd Greetings is raising a round on StartEngine at a $19.9M valuation. Truthfully, I think the valuation is high vs the traction they have. Anything over $12M should have revenue traction to back it up, and Ink'd only has its 3-month pilot.

The offering is also issuing common stock, which we know from last week's article is not preferred. I don't think this matters as much because there won't be much value in the underlying assets of the company should things not work out. Meaning, common AND preferred shareholders will likely end up with nothing if Ink'd goes belly up.

Now - I think Ink'd has a promising future and hopefully these negative scenarios won't ever come to life.

I really like the unit economics of each machine - it's a Hallmark vending machine that doesn't need to pay expensive employee wages. This enables competitive pricing (cards are $3) and ~80% profit margins.

Hallmark has 1,508 stores across the US - each of these locations needs to be in a high-traffic area that can support a store's square footage, rent, and employee costs. Ink'd kiosks don't have these constraints and can be placed almost anywhere.

I think Ink'd could realistically be rolled out to 2,000 locations, especially if they tap into retail partnerships. And if each machine produces $14,000 in ARR, Ink'd is looking at $28M in potential yearly revenue.

While I'm not thrilled at the valuation of this round, I do see a clear path to revenues that could support & surpass that valuation.

The Ink'd team was able to roll out their first machine 5 months following their first investment check. I think their small team operates quickly & effectively, giving me faith that they are the right people to bring this to life.

I am comfortable with the risks in this one and will be investing. If you want to check out their investment page, I'll link it below!