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Author
Bulla Romero, Edith Natalia
Froment Castellví, Julio Emilio
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Abstract
Scanny Fanny is a startup project within the technology industry and with a total addressable market as big as 2 billion people potentially. It is an app in which users can scan with an incorporated camera the food items in their kitchens, and then the app would automatically generate recipes based on these food items identified. This food identification process is achieved by using the novel food recognition technology provided by Bite.ai.
To our knowledge, our competition are mainly apps and websites in which users or web visitors can type in the things they have in their kitchen, to later see a list of potential recipes. Nevertheless, we haven’t found any app neither website which levers on the recent food identification technology; therefore, we believe we have an opportunity to enjoy momentary first mover status, which we would take advantage to eventually build an in-app social network. Also, by being earlier than other competitors, we would capture more user feedback which would allow us to develop a further unique service tailored to our market needs. Even in the case that there is an app already leveraging on this technology, this is a novel blue ocean which is huge in size, so we believe there is still a big opportunity laying ahead.
This startup project can become very profitable and enjoy high and sustained growth rates for a long time but is critical that the app is successful in the marketplace. Our strategy to start acquiring users is to launch a digital marketing campaign just after the launch of the app, to create awareness, teach people our value proposition and start building a user base. We have estimated that the user acquisition cost through direct digital marketing would be 41,37€/user. Besides this scalable per user cost, we must consider fixed costs which are mainly wages, hardware and software licenses. By contrast, the expected revenue per user is estimated to be 1,24€/user for a given year. If we set lifetime value (LTV) at 5 years and consider a cost of capital equal to 10%, we obtain an LTV of 4,71€/user. Nevertheless, we are expecting that the app will be well received by our market, and that user advocacy will be a significant driver to compound the userbase size, which would ultimately lead to a profitable scenario with tremendous growth prospects, while enjoying high gross margins thanks to our strategy to build sustainable competitive advantage and next to nothing marginal costs. We are indeed expecting to become profitable by the fifth fiscal year (year 4 in the financial projections), and by the sixth year (year 5 in the financial projections) to already enjoy a net profit margin at around 75%. The funding needed for the startup project is 900.000 euros. From this amount, 100.000 euros would be funded by the cofounders and executors: Natalia and Julio. For the other 800.000 euros, we plan to obtain it from venture capitalist investors. At least during the first six fiscal years, we have no plans of borrowing money since we are expecting to become profitable only after four years and these profits can be very volatile. So, for the long term survivance of the firm, we believe is better a 100% equity capital structure while in startup phase. We have estimated the firm’s value to be 5.3 million euros, which means we must sell 14.92% of the equity to get the extra funding needed from the VC investors.
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