Is this startup the next Theragun... or Theranos??

Most reputable historians classify the world as having two distinct time periods: before Theragun, and after.

The massaging tool became an overnight hit and quickly ballooned up to $365M in annual revenue by just its 3rd year

Fitness equipment can be a super viral category, for two main reasons.

• Athletes are always looking for something new to give them an edge over their competition

• Usage by pro-athletes gets televised to millions of households

I came across a startup that I believe could have the same virality as Theragun, with potentially more staying power. That startup is Calibre Biometrics, and their mission is to make everyone look like Bane unlock the data in your breath.

In this article, I will take a deep dive on Calibre Biometrics and discuss the investment potential behind their raise.

Before getting into it, I do want to note that I reached out to Calibre with a series of clarifying questions. After 26 days of waiting, I have been unable to get a response to my questions. I did my best to navigate this investment review without that information.

Business Model

In its current state, Calibre has a simple business plan. There’s no subscription plan, no portfolio of products with different pricing tiers - they have one product that they sell for $400.

The product is a lightweight breathing apparatus that extracts health & fitness data with every breath. If you’ve seen visuals of athletes running on a treadmill in a lab with a big tube coming out of their mouth, this device is essentially the pocket-size version of that.

The device connects to your phone to provide real-time tracking of 20+ health/fitness metrics as you exercise.

Calibre sells its device directly to consumers through its website. We do not know what their current margins are (I asked), but I would assume they are decently high on a $400 purchase price.

I assume this is the case since the product is lightweight, small, and made primarily out of plastic. I would very roughly estimate that their margins are somewhere in the 60-75% range.

I do like that this is a highly-visible product - anyone wearing one will be a walking advertisement for the product, which could help reduce their new customer acquisition costs.

Total Addressable Market (TAM)

I mention Theragun as a comparison, because that is the best case scenario for a fitness product. Theragun’s parent company did nearly $400m in revenue in 2021 and recently raised $165M from investors. And that is all despite the fact that dozens of copycats have essentially cloned Theragun’s product.

Calibre’s high-tech device won’t have as much trouble with copycats, but it will almost certainly not reach the scale of Theragun. Recovery products can apply to all, but granular breath data will likely only appeal to the top tier of competitive athletes.

There are approximately 500,000 athletes in the US that are competing at the collegiate or professional level. We can probably notch that figure down to 400,000 after removing less competitive athletes and non-applicable sports like golf & baseball.

Selling each of those 400,000 athletes a $400 Calibre device would put the potential market at $160M. There might also be a niche market with regular people who are just really into fitness & exercise, like people that train for Iron Man’s, etc… we can round up to a flat $200M to account for those people as well.

A $200M TAM is quite small - if Calibre corners 10% of this audience, we’re still only looking at $20M.

Calibre has loftier goals than that however. The company wants this to be more than a fitness device, it wants people to measure the data in their breath for general health purposes as well.

This would put roughly 58M Americans into their scope, as the device could then be used to monitor the health of anyone over the age of 55. Applying the same calculation to that larger audience would spit out a TAM of $23B, a much healthier size.

For now, I am using the $200M mark as a more grounded figure, as there are certain hurdles the company faces for tapping into that larger market.

Competition + Risks

Calibre has a slew of risks, and some that carry legitimate concerns. The two most obvious ones to me are demand + competition from Apple.

The first is simple, we do not know if consumers even want this product. The startup has no documentation of sales history (I asked). Health + fitness products are also highly subject to fads, so strong sales in a year is not an indicator of longevity

The 2nd major risk is competition from Apple, specifically through their Apple Watch. Apple has made a marked move into health & fitness tracking through this device and is continuing to roll out new health-related features.

I inquired (unsuccessfully) about the specific data Calibre records in an attempt to cross-compare with what Apple is able to provide. From reading their pitch page, it seems like many of the metrics Calibre tracks are available through the Apple Watch (although some Apple metrics are estimated and not precisely measured)

Apple’s price point is comparable and its integration with the iPhone makes it a really difficult product to compete against. Calibre will therefore need to find health metrics consumers desire that the Apple Watch cannot track, which is a tall order.

The final risk I’ll call out is that in order to open up the TAM to a health-tracking audience, they’ll need to go through FDA approval. Odds of approval are not guaranteed, and without it the market size would remain too small.

Founder Strength

Calibre is led by Udi Meirav. A PhD Physicist from MIT, he certainly has the background & respect to be successful in this space. However, we’ve seen a significant stumble in an easy fundraising task - answering investor questions.

Not answering investor questions is alarming in its own right, and results in lost investment. To me, losing out on easy investment dollars is an indication of poor executional awareness from a CEO.

Furthermore, I asked several pointed questions such as his compensation structure. The Form C indicates that he is paid a whopping $280,000/year, but that this balance is accruing passively and not cash that is actively being extracted from the business.

I have not seen a compensation package like that before, and it’s a hefty sum even if it’s not being taken out of the business right now. As these questions are left unanswered, it negatively impacts my perception of this investment.

Exit Potential

I think the chance of achieving an exit are somewhat low. Potential acquisition partners seem limited, and I foresee it being extremely difficult to go public with their TAM challenges.

Valuation

Calibre is valued at $22.5M. While there was likely a lot of R&D that was involved, their lack of sales history makes this a bit of a steep price to pay. Given the limited upside I see for this company, I don’t think I’m willing to pay for it at that price.

OVERALL RATING - 29/100

• Business Model (10/20)

• TAM (5/20)

• Competition + Risks (3/20)

• Founder Strength (6/20)

• Exit Potential (2/10)

• Valuation (3/10)

While this one caught my attention and showed initial promise - the risks are too high, upside too low, and I have many important questions that remain unanswered. As such, I have decided to pass on Calibre Biometrics.

If you enjoyed reading this, I send out emails like this on a weekly basis. You can subscribe for free below to start receiving this email every Monday morning.

This content should not be considered investment advice. I am not recommending any investment products in this newsletter and all opinions expressed are solely my own.