Since I am not familiar with Springvest at all, it would be interesting to see some data/sources on this. Where does the information about the 33% fee come from? If that is true, it certainly sounds very steep.
The steepness of the fee depends on the valuation of the offering from the entrepreneursâ perspective.
I just took a quick look at the latest offering prospectus/investment memorandum (NewIcon, page 26 [edit: page 19 of the investment memorandum, page 26 of the PDF]). I double-checked, and at least the following costs are disclosed there: arrangement fee: âŹ485,000, subscription fee 3-4% = âŹ150,000-200,000, value of options âŹ947,554. It is possible that some fee was missed or not disclosed in the prospectus. The company receives âŹ4,520,000 in its account from the offering, meaning that depending on the perspective, the costs are a maximum of 36% on top of that.
One could, of course, also calculate it such that investors pay âŹ6,152,554, of which the company receives âŹ4.52m = 73.5%, so calculated that way, the costs would be under 30%.
From the entrepreneurâs perspective, an (overly) high valuation is not always a positive thing, especially for a startup (unless the entrepreneur sells their own shares at the same time). Specifically, securing follow-on funding (from sources other than Springvest) can become quite impossible, which has been the fate of almost all Springvest clients so far⊠On the other hand, if the company is certain that this funding round is the last one, then the highest possible valuation is naturally to the companyâs advantage.
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What do you think about NewIcon and its open share issue?
NewIcon seems to be unfortunately loss-making and funding has been sought multiple times (e.g. 2017, 2019, 2023), but is a turnaround finally on the horizon, or will things continue as they have so far?
Share issue 2019: Springvest
Share issue 2023: Springvest
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Iâve been following for a few years now, and things seem to be improving all the time, with sales picking up at an accelerating pace. I am confident in the current situation and the management.
Earnings are also heading in the right direction, but the continuation of this positive development will require those big deals to materialize and successes elsewhere as well. The industry is growing rapidly, however, and automation is certain to increase.
Based on this thread, I must come across as quite negative since Iâm always here shooting down these crowdfunding companies 
I havenât followed the company, but looking quickly through the numbers, I donât understand how one can reach such a conclusion.
In the latest materials, the entire history has been neatly cut out and started from 2021, so they can once again start drawing a nice-looking hockey stick.
The reality is that as early as 2018, the company had revenue of over âŹ7M, which is much more than the predicted(?) nearly âŹ6M for 2022. Though even during those peak years of 2018-2019, they were posting losses of over two million a year even then. So theyâve been stagnating for five years now, making big losses, and thatâs why they need more investor money every couple of years as it just keeps burning. The only thing indicating a better future is the growth curve drawn by management; there seem to be very few grounds for why âjust nowâ would be the moment it takes off when it hasnât really taken off in the past 10 years. Of course, they have pockets full of excuses ranging from COVID to the war in Ukraine, and these would be a bit more credible if the company had been growing strongly before them, but thatâs not true either. They are clearly counting on investors having short memories, and to me, this looks like another âWelloâ situation where they think they have the worldâs best technology/product, but it doesnât seem to sell, or at least not at a price that would yield a reasonable return.
And Eka canât come here and say, âSeppo, you just donât understand these fast-growing scalable software companiesâ . This is not fast-growing, not scalable, and not primarily a software company. In a business like this, you should be able to achieve some reasonable resultâat least breakeven or close to itâwith a revenue of âŹ7M. Then they come and explain that âbut we are investing so much in R&D.â Well, those investments arenât showing up as growth. The fact that the industry is growing doesnât help much, and the existence of a billion-dollar global market doesnât help if you canât tap into it.
âFool me onceâŠâ
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My post was poorly reasoned, and @SijoitusSeppo was right to point it out.
My view is based on the companyâs investor relations communication and information received at annual general meetings (AGMs).
A high percentage of the customer leads previously mentioned by the company have led to deals, and as an optimist, I still view the currently communicated major accounts as quite strong. This is, of course, a strong gut feeling. We have been involved since 2016. It is true that the company uses COVID-19 to justify the dip, but the company communicated quite early on that they couldnât meet customers and that deal-making had stalled.
In my opinion, the company is not a software company but rather a high-tech company. The equipment they manufacture is highly advanced in terms of automation and, of course, also contains a lot of software.
A company must believe that the product they sell is the (worldâs) best for the customerâs needs; if the company didnât believe this, it would be a âred flag,â and if an investor doesnât believe in this potential, itâs best not to invest. I agree about the pricing, and it could obviously be better, even though investments have been made in new product development. Deals have been made at an accelerating pace since the 2020 dip, and the currently communicated accounts support the continuity of growth. Of course, these involve uncertainties, and as with everything, no deal is 100% certain until itâs finalized, so the management and the company still have plenty to prove. Everyone, of course, forms their own view, but this is how it looks through the eyes of this owner. Over these seven years, there have certainly been feelings of both disappointment and success.
Some general thoughts as an early-stage investor and a follower of the discussion.
Often, companies are lumped together too simplistically based on their need for capital. Itâs a completely different thing to develop software, equipment, let alone primary production like recirculating aquaculture systems (RAS) for fish. Software development can be achieved with relatively modest equipment investments and can reach sales quickly; building equipment requires significantly more capital for facilities and production tools, and reaching sales takes longer; and finally, the recirculating aquaculture example requires massive initial capital and takes years before production is scaled up. The situation flips as things progress: a software developer must constantly increase development inputs, as must an equipment manufacturer, but the equipment manufacturer doesnât necessarily need to invest rapidly in fixed assets; a recirculating aquaculture plant operates with stable costs after ramp-up, but growth can only be achieved by putting a lot of money into expansion. In between these, there are numerous different versions. In every case, you have to think about how the capital journey will unfold in that companyâs future and how many more share issues you expect the company will still need. Some communicate an estimate of the number of share issues right from the start. Itâs a bit of an oversimplification to say the numbers are bad so itâs hopeless; itâs worth digging a bit deeper, but criticality shouldnât be forgotten, and you should challenge your own thoughts, for example, by writing here on the forum.
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Of course, a company has to believe in its own technology/actions; thatâs not what I meant :). However, itâs a completely different matter whether an investor should believe that story when the facts (=the numbers) tell a completely different story over the long term.
My point in that software company comment was that this kind of customized equipment manufacturing scales very poorly. Sure, there might be some economies of scale in design, but even those are quite limited because solutions are heavily customized for each client. Then thereâs all the manufacturing and on-site installation, which practically doesnât scale at all. So, if you canât get this anywhere near profitable with âŹ7M in revenue, the evidence is pretty poor that it would be any kind of gold mine even if revenue doubled or tripled. On top of that, there is no evidence whatsoever of such growth. For goodnessâ sake, the company was founded back in 2007; youâd think there would have been enough time by now to prove that growth, even if designing and building equipment takes a bit longer, etc. So, in my opinion, this isnât some âearly-stage investmentâ that is just developing technology, but a long-established, mature company (the market leader in Finland) that isnât growing, is chronically loss-making, and isnât viable without constant additional funding from investors.
And no matter how much they ride the health tech and innovative solutions wave, it looks like pretty basic bulk automation to me; there might be some specific approvals/certifications required in this field, but technically these donât seem like anything extraordinary. The business model is also clearly poor and seems to be based largely on new equipment sales/installations alone, since almost half of the revenue can suddenly vanish in a single year (2019->2020), meaning there probably isnât much recurring business there.
Here are the historical figures from Finder, as I couldnât manage to find them in the marketing materials.
So there has indeed been a bit of a recovery from those depths since 2020, but Iâll emphasize that in 2022 we are still significantly below 2019 levels, and the growth from 2018->2019 (=before COVID during a peak cycle) was a modest +4%.
Maybe with such a superficial look Iâm missing some very essential âthis time is differentâ point about the companyâs situation, but to me at least, this seems like quite a âhope and prayâ case.
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Well, hereâs a somewhat interesting case on the Invesdor platform again, amidst all the coffee companies and office hotels:
https://www.invesdor.fi/kierrokset/6691a223-f4d8-40f0-b521-a72ee22b49fd#/
They make plastic from wood-based raw materials, with softwood pulp as their main raw material. Their business model is to own and develop the technology used to produce this material; the company doesnât manufacture the material or the final products itself, but this happens through industrial partners.
The main product at the moment seems to be a packaging bag aimed at the food-to-go market:
Theyâve managed to get a couple of real âbig namesâ on the board:
https://woodly.com/press_releases/woodly-prepares-to-scale-its-technology-globally-strengthens-its-board-with-two-business-professionals/
Among the owners are a couple of high-caliber players:
Iâm posting this here to spark some discussion before I dive deeper myself and make a decision on whether to invest. Iâm especially interested in bearish views. @SijoitusSeppo do your magic.
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Without looking into the company further, I asked a couple of acquaintances from the forest industryâs R&D side, and it was a total rejection. Apparently, the plastic is cellulose acetate, which is not a new invention at all. At least for now, the product is not suitable for coating paperboard, for example. Additionally, the product is only partially bio-based and does not biodegrade. The bio-content is ~40%, meaning over half of the product is fossil-based. There are also challenges in recycling.
At least the bio-content of 40-60% can be inferred from the two TĂV stars in the image above.
So, the points mentioned above are not my own view, but things heard from âgas station talkâ and industry conferences, and should be taken with a heavy pinch of salt.
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I have to disappoint you a bit, as I lack the competence to assess the potential of this âcompletely new kind of wood-based and carbon-neutral plasticâ in any capacity. So, I wonât comment on whether something new and revolutionary has been invented here, but I will just say that generally, one should take a companyâs own hype about how it has completely new and revolutionary technology with a fair amount of skepticism.
A few very miscellaneous observations after a quick browse, however:
The first time I almost snorted my drink through my nose was when the introduction already said
Our goal is to achieve a 15% global market share of plastics
Not even of a certain product segment or plastic type, but apparently of all plastics used in the world in all its different forms and applications. Statista seems to say that by the end of the decade, the global plastic market will be 810 billion; we only need a measly 120 billion for Woodly, so weâre not dealing with any small goals here.
The company apparently has one product so far (WoodlyÂź W100 series granulate) and one (Finnish) customer (Amerplast), and the product is usedâto put it a bit bluntlyâfor one application (as a wrap for fresh products like bread). And sales havenât exactly taken off with this product either:
Current customers filled their stocks in late 2022, which is why sales in 2023 have so far developed at the same pace as the previous year.
So itâs quite optimistic to forecast almost 70% growth for this year when the start of the year has seen zero growth.
The previous âŹ2M funding round was apparently in 2019:
Back then it was:
The goal is to get the new types of packaging onto store shelves as early as this year.
This was delayed by 3 years, which provides some perspective for future product launches.
It looks like they are raising a maximum of âŹ2M now. A loss of -âŹ1.7M is forecast for this year and the same for next year. There was about âŹ1M in cash at the end of 2022. So another share issue is coming by next year at the latest, even in the best-case scenario.
The company was founded back in 2011, so when product development has taken ~10 years, itâs no wonder that even though there are money-men like Ollila on the board, theyâre no longer interested in pouring more into this machine; instead, someone else should fund this fun now.
I always get the feeling with these ârevolutionary innovationsâ that if, for example, this really was a completely revolutionary thing, wouldnât an industrial player in the field like Stora Enso or HuhtamĂ€ki etc. easily lay down a few measly millions and buy the whole technology for themselves, or at least finance it by buying a large stake in the company. The fact that when no one who actually understands the subject seems to grasp what a great invention this is, they then ask for money via crowdfunding from people who have no competence to evaluate it. @Kyllitati69 presented expert comments on the technology quite well there, and they werenât very flattering.
This money pit doesnât pass Seppoâs sieve either. 
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Iâve been reading through Woodlyâs materials and they are indeed painting some pretty wild visions for the future A few thoughts below:
- The concept is quite interesting, but it inevitably raises the question: why are they seeking funding this way when there are top-tier players in the industry in Finland who would also have the appetite for investment if the technology has potential?
- As @SijoitusSeppo mentioned above, we already have HuhtamÀki on the stock exchange, a top-tier firm in this field.
- So why would I put money into this instead of HuhtamĂ€ki, which already has a solid track record (and which could buy this technology in the future if itâs truly promising, etc.)?
Overall, the vibe I get from this is that they are trying to hang on and scrape together a bit of cash from wherever they can just to last long enough to sell this to someone else. If it succeeds, you might make a bit of money, but itâs mainly the big owners getting a chance to cash out.
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Hello, we are organizing an investor meeting for everyone interested on May 8th at Valo Hotel & Work in Helsinki. The Finnish-language segment will be held both on-site and online simultaneously. The event provides an opportunity to receive more information about Woodly as an investment and to hear about our future plans. Welcome! You can register here: LinkedIn
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For me as well, by far the biggest red flag is why itâs necessary to go after the wallets of the general public when the board and top 10 owners are full of wealthy individuals who wouldnât need to reach very deep to pull together a measly 2 million.
The exit strategy will also get more complicated down the road when the shareholder base consists of a stubborn group of households. Itâs a shame I didnât have time to join and ask about this. Would it be according to protocol to ask @Jaakko_Kaminen directly: why crowdfunding instead of a directed issue?
The second biggest red flag is the aforementioned cash runway. My own calculations made the same observation: more money will still be needed here. Itâs fine for growth investments, but Iâm no longer interested in financing working capital.
By the way, does anyone remember at what valuation Kakkonen, Puttonen, and the other big-money partners came in?
I asked the new Bing to dig up the basic key figures for plastic raw material manufacturers, which look like this:
| Company | Revenue (2022) | EBIT (2022) | EBIT% |
|---|---|---|---|
| Nidhi Enterprises | $6.7 million | $0.8 million | 11.9% |
| Kamal Polyplast | $8.5 million | $1.2 million | 14.1% |
| Flame Retardant Plastic Granule Market | $1.5 billion | $0.3 billion | 20% |
| PlasticKar | $20 million | $2 million | 10% |
| Ahd Thermoplastics Industries | N/A | N/A | N/A |
| Shanghai Info New Material Technology | N/A | N/A | N/A |
| Median | $14.25 million | $1.6 million | 13% |
| Average | $379.05 million | $76.4 million | 14% |
In light of these peer figures, this doesnât look completely impossible if that kind of growth is achieved. Letâs imagine, for example, that in a few years sales are over 10 million and 10 percent can be taken as distributable in âcash cowâ mode. With the dilution happening now, that would mean a 10x PE and about 1x EV/Revenue.
Of course, the major risk remains that sales of over ten million might never be reached (or that drastic dilution occurs before those numbers are hit).
Anyway, I think thereâs a good story here, the drivers are in place, and I especially liked the CEOâs demeanor. I think achieving a 10% market share in Finland within a year of the first product launch is a promising performance.
As for HuhtamĂ€ki, in my opinion, a raw material producer like this doesnât fit HuhtamĂ€kiâs portfolio at all. Instead, HuhtamĂ€ki could perhaps be a potential buyer for Woodlyâs plastic, since about a fifth of HuhtamĂ€kiâs raw materials are still reportedly plastic. This would, however, fit very well into the portfolio of a wood processor. For example, UPM seems to be a direct competitor with its BioVerno product â and it seems to be just as difficult to break through in a big way in that field, even with the muscle of âNalleâ and Pesonen in the background.
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Hi @Roope_K and thanks for the question/comment. We are building Woodly into a brand recognized by consumers, so crowdfunding is a relevant way for us to raise funding as it also serves as a marketing campaign. The companyâs major shareholders are also participating in this round.
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What relevant data supports the assumption that crowdfunding pricing provides better visibility into the consumer landscape than conventional brand advertising (Google, Meta, TikTok, etc.)?
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Isnât this of interest?
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On the other hand, is there any data suggesting that conventional brand advertising is better? I would say that both methods have diminishing marginal utility, so my guess is that the company also engages in more conventional brand advertising.
Crowdfunding provides better visibility in the consumer market than, for example, VC funding. Building a consumer brand is long-term work that requires utilizing many different marketing methods. At the moment, our most important single marketing tool is the Woodly logo on all packaging.
Iâve recently started looking into investing in unlisted companies myself. I should mention that I donât use services like Indesdor and Springvest; instead, I receive several company presentations every month directly via email. These arenât public rounds but are instead aimed at professional investors, and the minimum subscription is typically a five-figure sum. Due diligence has already been carried out by a larger investor, and only the top 5% of companies are presented to co-investors.
If interest is piqued, the companies usually organize a Teams meeting where they provide more detail about the company, and potential investors can ask the management questions. The rounds are typically filled within a few weeks. There is a wide variety of companies on offer, from early-stage startups to âboringâ million-euro industrial companies. What they have in common is that they are seeking funding for growth. Compared to private equity funds, the benefit of this model is that there is, in principle, no fixed term for the investment, so the company doesnât have to be sold off in a bad market.
On the downside, the investments are highly illiquid; typically, selling shares is prohibited in the shareholder agreement. This is reflected in the valuations; an industrial company growing profitably at tens of percent per year might have a P/E ratio of 6, or a profitable gaming company a 3 
Iâve put a bit of money into a few of them now, but for the sake of diversification, I need to get over a dozen of these into my portfolio. The amounts invested are still only a few percent relative to my own balance sheet; my finances wonât collapse even if they all went bankrupt. But this is certainly a much more interesting game than investing in listed companies.
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