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Offered by First Democracy VC

Cuddle Clones

Creating one-of-a-kind plush replicas of people’s pets

423%

Time to Invest

Security Offered

Convertible Debt

Minimum Investment: $100

  • More than 30,000 Cuddle Clones sold since inception

  • More than $7 million in revenue since inception

  • 275,000+ social media followers and 100,000+ email subscribers

  • Offers a 100% product guarantee


WEBINAR


Perks

$100: Free Cuddle Clones branded bandana

$250: 25% off a Plush Cuddle Clone

$1,500: 50% off a Plush Cuddle Clone

$3,000: One free Plush Cuddle Clone

$5,000: Two free Plush Cuddle Clones

Terms

Security Type: Crowd Note

Round Size: Min: $50,000 Max: $1,070,000

Valuation Cap: $10,000,000

Discount: 20%

Conversion Provisions: In connection with an equity financing of at least $1,000,000, the Company has the option to convert the Crowd Note into shares of a series of non-voting preferred stock, at a discount of 20% of the price per share of the new preferred stock sold in the equity financing, or a valuation cap of $10,000,000, whichever results in a lower conversion price. Please refer to the Crowd Note for a complete description of the terms of the Crowd Note, including the conversion provisions.

Overview

Opportunity

The Cuddle Clones® story began when Founder Jennifer Williams was lying down with her best pal in the world, her Great Dane Rufus. Jennifer thought to herself, “It would be great to have a stuffed animal of Rufus! Not a generic stuffed animal, but one that was 100% custom made to look just like him.” Several years later, after Rufus passed away, Jennifer decided that she would finally pursue the idea she had never quite let go of and, in doing so, honor Rufus’s memory. It was on this day in 2009 that Cuddle Clones was born.

Today, Cuddle Clones not only offers a unique, quality product to pet lovers everywhere but also gives back to the pet community whenever and wherever possible through pet-related causes and charities. A portion of the proceeds from each Cuddle Clone purchased goes to pet-related causes to help animals get the care and love they deserve. Cuddle Clones also offers a wide variety of custom pet products beyond stuffed animals and aims to become a place for pet lovers to indulge in their affection for and celebration of their pets. By making soft, adorable, customized stuffed animal versions of people’s pets, Cuddle Clones seeks to capture the bond between people and their pets.

Product

To build a Cuddle Clones stuffed animal, customers visit cuddleclones.com and simply upload photos of their pet, choose the stuffed animal’s position, submit any distinguishing features – such as scars or moles, and checkout. Depending on the pet, customers can choose the body position (sitting, standing, or lying down), mouth, ear positions, eye colors, and tail position. Dog and cat Cuddle Clones are usually between 13 inches and 24 inches in length, depending on the breed.








Cuddle Clones are handmade with premium plush materials, most commonly polyester and acrylic. Cuddle Clones also utilizes water-based airbrushing techniques to get certain color effects. Cuddle Clones offers a full refund to customers who are not satisfied with their product. Cuddle Clones’ other plush products include a custom plush replica holiday stocking, slippers, and golf club head covers custom made to look like your pet.








Non-plush products custom made to look like your pet include figurines, ornaments, necklaces, and even earrings. The company offers personalized pet memorials, including granite memorials, brass urns, and wood memorials, along with accessories such as custom collars. The company also offers the ability to create customized cartoons of your pet and put that “cartoonized” version of your pet on various products.








Use of Proceeds and Product Roadmap

Cuddle Clones intends to use the majority of proceeds from this round on the following:

  • Marketing: The company has seen a drop in the cost to acquire a customer since taking all digital marketing efforts in-house in Q3 2017. Consequentially the ROI on such campaigns has improved during that time. The company will invest in these existing campaigns with a portion of the investment raised in order to increase sales and maximize the capacity of their manufacturing workshop.
  • Product Expansion: This year’s new product launch includes new plush products and other lower-priced custom offerings that will provide a unique way to celebrate customers’ pets. These additional products are expected to increase the overall conversion rate and provide upsell and add-on opportunities to those customers buying plush products.
  • Increase Online Community: The company plans to increase engagement with its customer base on their website with additional interactive features, more pet and breed-specific content, and frequent contests and games. Users will also have an opportunity to submit a shelter for donation consideration, and search for local animal-related volunteer opportunities.

If the minimum $50,000 is raised, the majority of proceeds will be used for future wages ($36,500). If the maximum $1,070,000 is raised, the majority of proceeds will be used on general marketing ($400,00), future wages ($250,000), and general working capital ($250,000).

Business Model

The price for a dog, cat, or horse Cuddle Clones stuffed animal is $249. The price for a smaller stuffed animal, such as a rabbit or guinea pig, is $179. Customers can also pay extra to get expedited production. A typical plush Cuddle Clones order takes approximately eight weeks to process.

Cuddle Clones also sells many other custom pet products that range in price:

  • Other various plush products: $129 to 249
  • Figurines and ornaments: $89 to $119
  • Memorials: $89 to $139
  • Pet cartoon products: $5 to $50
  • Accessories: $19 to $40


User Traction

In all of 2017, the company sold more than 9,100 Cuddle Clones. The company has sold more than 30,000 Cuddle Clones since inception.


Historical Financials

2018 Metrics

In Q1 2018, the company sold 2,519 plush Cuddle Clones compared to 1,535 plush Cuddle Clones Q1 2017. That represents a 64% increase.

In Q1 2018, Cuddle Clones generated approximately $611,000 in revenue compared to approximately $394,000 in revenue in Q1 2017. This represents a 55% revenue increase. In Q1 2018, Cuddle Clones had a net loss of approximately $128,000 compared to a net loss of approximately $157,000 in Q1 of 2017, around a 23% improvement year-over-year.

In May 2018, Cuddle Clones released a new website that is more user friendly and mobile responsive compared to their old website. The company expects this improvement will positively impact overall company performance going forward.

Revenue

The company generated more than $2.2 million in revenue in 2017, compared to more than $2.5 million in revenue in 2016. The difference in revenue is the result of when the product was shipped and revenue was recorded. In 2015, Q4 orders were significant and resulted in delivery of those orders being pushed into Q1 2016 and thus the revenue for Q4 2015 orders was recorded in 2016. The company improved production and delivery in Q4 2016, which has helped improve the timeliness of financial reporting.

Expense Breakdown

In 2017, expenses totaled $2.4 million (~$1.3 million for cost of goods sold and ~$1.1 million for operating expenses). In 2016, expenses totaled almost $2.2 million (~$1.3 million for cost of goods sold and ~875,000 for operating expenses). In Q1 of 2018 the total expenses were $734,151 with COGS equaling $138,014 and operating expenses equaling $596,137. The company has invested in enhancements in the website and product development in Q1 that has made the percentage of operating costs a higher percentage than in past years.

Net Income

In 2016 and 2015, the company was profitable, with a net profit of more than $387,000 and $73,000, respectively. In 2017 the company began investing significantly in building a new website, enhancing other digital properties and assets, intellectual properties, as well as extensive product development. This resulted in a net loss of approximately $138,000 for 2017.


Press

HuffPost: Now You Can Clone Your Pet As A Stuffed Animal, If You’re Into That

Buzzfeed: This Toy Company Will Make A Stuffed Animal Replica Of Your Pet

CNN: Beloved pets meet their toy lookalikes

Gizmodo: This Site Will Make a Stuffed Animal Clone of Your Pet

Fox Business: Creating custom stuffed animal clones of your pet

The Meredith Vieira Show: Something You Should Know: Cuddle Clones!

Louisville Business First: Louisville's fastest-growing company to boost jobs by nearly 5X

The Lane Report: Cuddle Clones announces new Louisville home

Lifehacker: Cuddle Clones Are Plush Replicas of Your Favorite Pets

USA TODAY: Cuddle Clones makes toys that look like your pets

MSNBC: Cuddle Clones: How the e-commerce stuffed animal business grew

Louisville Business First: Louisville plush pet toy company merges with cartoon customizer

Industry

According to the 2017-2018 American Pet Products Association’s (APPA) National Pet Owners Survey, 68% of American households own a pet, equating to 84.6 million pet-owning households in the U.S. In 2017, pet industry spending hit a record high of $69.51 billion, up 4.13% from 2016. This growth is expected to continue, with pet industry revenue projected to reach $72.13 billion in the U.S. in 2018.i

Owners are spending increasingly more on their pets. As shown in the graph below, annual spending per pet has increased substantially. Annual U.S. spending on pets grew nearly 70% over the last decade – rising from $41.2 billion in 2007 to $69.51 billion in 2017.ii A big reason for this rise in spending is that nearly all pet owners (95%) consider their pets to be members of the family. Almost half (45%) of pet owners frequently or occasionally buy birthday presents for their pets, nearly one-third (31%) cook for their pets, a majority (71%) of owners let their pets sleep with them in bed frequently or occasionally, and almost two-thirds (64%) buy their pets holiday presents.iii

Millennials seem particularly proud to be labeled “pet parents.” According to ecommerce company Zulily, 82% of millennial pet owners had bought dog- or cat-themed merchandise to display their love for their pets. Even more (92%) purchased gifts for their pets, like toys, clothing, and treats. In fact, millennial pet owners are so devoted to their pets (per Zulily) that 71% said they would take a pay cut if it meant they could bring their pet to work on a daily basis.iv

Cuddle Clones is seeking to capitalize on the growth in the pet industry by creating many products made in your pet’s likeness targeted to pet owners. Globally, the market for stuffed and plush toys is projected to grow at a compound annual growth rate of 6.2% from 2017 to 2026 to reach more than $11 billion.v According to a report by The NPD Group, plush sales had the second highest annual growth rate of all toy categories in 2017 with a 6% increase, second only to the “Other Toys” category.vi


Competitors

Petsies: Launched in March 2016, Petsies is a spinoff of the stuffed animal company, Budsies. Customers send in a picture of their pet and the Petsies design team creates a custom lookalike stuffed animal. Petsies offers two different products: Huggables and Forevers. Huggables regularly cost $199 and come with soft, polyester fur, custom noses and eyes, and an airbrush touch up. Forevers regularly cost $249 and include premium, realistic polyester furs, specialty nose and eyes, and full airbrushing to match each pet’s markings.vii

The Shelter Pups: The Shelter Pups sells customizable cat and dog stuffed animals. Customers submit pictures of their pet (front and side views) so that the company can recreate a handmade felted version of their pet. A custom stuffed plush dog or cat costs $125, and the average turnaround time to fulfilling an order is approximately one to two weeks.viii The Shelter Pups donates a portion of profits to local animal shelters.

Team

Jennifer Williams, Co-founder and Chief Cloning Officer: Prior to founding Cuddle Clones, Jennifer spent 10 years as a benefits consulting actuary. Her last job before making the entrepreneurial leap was with PricewaterhouseCoopers. She is actively involved in the entrepreneurial community in Louisville and periodically develops financial models and does financial analysis work for other companies in the area. She lives with her husband, Danny, and two fur children, Izzy and Annie. Jennifer has a BS in Mathematics and Business from the University of Puget Sound and an MBA from the University of Louisville.



Adam Greene, Co-founder and Chief Marketing Officer: Adam’s background is in digital marketing, more specifically conversion rate optimization and integrated digital campaigns. He has a BA and an MBA from the University of Louisville and has most recently worked as a Digital Marketing Consultant for Humana Inc., a leading insurance provider in Louisville, Kentucky, as well as several other smaller companies prior to and during his involvement with Cuddle Clones.




Brennen Lawrence, Chief Executive Officer: Brennen is a driving force behind Cuddle Clones’ growth strategy that includes new products, market expansion, and building an organization to support the growth. His C-suite experience, collaborative leadership style, and operational experience have positioned him well for this role. Brennen has an MBA from Bellarmine University and BA from Western Kentucky University.




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