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Jetson AI

Voice-first SaaS platform for e-commerce, restaurants, and hotels

$95,500

Raised from 201 investors

Min: $25,000

Max: $107,000

Security Offered

Convertible Note

Minimum Investment: $100

  • Previously raised ~$1.3 million from angel investors

  • Signed partnerships with Amazon Pay and Delivery.com

  • Signed letter of intent with Volara, a hospitality software solution used by Marriotti, and a large consumer goods company

  • Contract with GolfPay to offer golf tee-time services via voice command to consumers

Executive Snapshot

Jetson AI is a voice-first SaaS (Software as a Service) platform that aims to upgrade the smart speaker and voice assistant experience with greater intelligence. It provides artificial intelligence (AI) technology for businesses to use or integrate into their own systems to process voice ordering through smart speakers such as Amazon Alexa and Google Home. By allowing consumers to speak naturally, Jetson sees an opportunity for its voice technology to create a frictionless customer experience in the areas of e-commerce shopping, restaurant food ordering, and hospitality engagement. While Jetson is still in the early stages of its technology, it has secured a contract with GolfPay to process voice orders for tee-time reservations and has several letters of intent (LOI’s) with companies such as Blue Chip Marketing (on behalf of a large consumer goods company) and Volara (a hospitality software solution used by Marriottii). Jetson has also partnered with Amazon Pay through its Global Partner Program as well as Delivery.com, an online platform for on-demand food delivery from local restaurants.

The company previously raised ~$1.3 million from angel investors to build out its patent-pending voice technology and build a pipeline of business leads. The company plans to use the proceeds from this round of financing to add more product features and increase its sales and marketing efforts as it looks to onboard more customers and increase transactions processed through its system.

Terms

Investment Terms

Security Type: Crowd Note

Round Size: Min: $25,000 Max: $107,000

Discount: 20%

Valuation Cap: $8 million (or $6 million)

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 non-voting preferred stock (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price per unit paid for Preferred Stock by investors in the Qualified Equity Financing or (B) the price per share based on a $8 million or $6 million valuation cap. Please refer to the Crowd Note for a complete description of the terms of the Crowd Note, including the conversion provisions.

Perks

Investors that purchase the first 25,000 Crowd Notes, and thereby fund the first $25,000, will receive Crowd Notes with a conversion provision based on a $6 million valuation cap instead of an $8 million valuation cap. That means, in connection with an equity financing of at least $1,000,000, the company has the option to convert the Crowd Note into non-voting preferred shares (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price per share paid for Preferred Shares by investors in the Qualified Equity Financing or (B) the price per share based on a $6 million valuation cap (instead of $8 million).

Overview

Opportunity

The eCommerce market is growing rapidly in the U.S., reaching $517.6 billion in 2018 after experiencing 15% year-over-year growth.iii eCommerce growth has been driven by technological advancements, convenience, and increasing online retail channels through which businesses can sell their products.iv One technological trend that has the potential to further drive eCommerce sales is the increasing prevalence of smart speakers (e.g. Amazon Alexa and Google Home). As of January 2019, approximately 66.4 million Americans owned a smart speaker, up by 39.8% year-over-year, representing 26.2% of adults.v Sales conducted through smart speakers utilize voice technology, whereby consumers can have intelligent conversations with AI devices to order products and services. While the voice technology market is still in its infancy, the number of users ordering through voice technology is expected to experience strong growth in the coming years as technology and consumer trust improves. By the end of 2019, approximately 22.7 million Americans are expected to use voice technology to purchase goods, up by 31.5% from 2018.vi

Founded in 2017, Jetson AI is a voice-first SaaS platform designed to enable businesses to sell their products and services through intelligent voice technology such as Amazon Alexa and Google Home. Jetson’s technology makes it possible for consumers and voice assistants to have multi-step conversations in which voice assistants can accurately respond to various customer requests as well as securely process transactions. It utilizes machine learning algorithms that continually learn based on customer interactions. Businesses can either integrate the technology into their existing systems with a self-service dashboard or use the newly released Jetson application program interface (API) to build custom voice technology solutions.

Press

Product

The company’s goal is to facilitate voice-orders between consumers and businesses. The process of ordering a product through a Jetson integrated system is as follows:

  • Customer tells their smart speaker they would like to place an order.
  • As the customer is ordering, the Jetson system is able to answer product questions and make recommendations using its AI and based on product information saved in the Jetson dashboard.
  • Once the order is finished, Jetson asks the customer to confirm their order.  
  • Customers can then authorize payment through Jetson Pay, where their payment information is kept on file. Some customers may choose to add a dual authentication method to authorize each transaction.
  • Orders are then sent to a business’s dashboard where they can accept the order.
  • Once an order is accepted, it is moved to “in progress” on the dashboard.
  • Product is prepared for delivery or pickup.
  • Customer receives product.
  • Business marks the order as “fulfilled” in the dashboard.

Jetson’s voice technology aims to add commerce capabilities to voice assistants by enabling multi-step conversations which allow a user to explore a menu or catalog of customized products and perform transactions in a natural and unconstrained manner. Its technology utilizes artificial intelligence to conduct intelligent conversations with consumers on behalf of a business. This artificial intelligence is based on the neuro-linguistic processing of systems such as Google Home and Amazon Alexa. Additionally, the company has developed a proprietary machine learning algorithm to offer a more sophisticated AI system which can perform deductive reasoning and complete other complex actions. The machine learning has been developed to learn from each conversation with users and continually self-improve. It also collects voice metadata on the backend of the system to introduce a greater level of accuracy and better interaction over time.

Above image is an example. Company does not currently have a partnership with Chipotle.

To begin offering voice commerce features, merchants must set up their Jetson dashboard. The dashboard is a self-service dashboard which operates similar to Shopify. Merchants create their own workspace where they can input business information such as hours of delivery, hours for pickup, and business classification. Merchants can also upload their products, product descriptions, pricing, modifications for each product (e.g. color or size), and custom dialogue for each product. The Jetson system then pulls the item details from the dashboard when conversing with consumers.

Jetson and Enterprise

The company currently offers two versions of its technology, Jetson and Jetson Enterprise. Jetson is the base version of the voice technology that comes in the form of a self-service dashboard. It comes with the features necessary to process voice transactions and integrates with voice assistants like Alexa and Google Home. The Jetson dashboard’s features are controlled and viewed through the dashboard.

Features of Jetson include:

  • Dialogue customization
  • Upload of menu items or products
  • Integration of merchant payment providers
  • Customer insight and analytics
  • Dedicated support
  • Fraud analysis
  • Processing of all major credit cards

Jetson’s Enterprise offering provides clients with licensing and integration of its tools into existing client operations. Jetson can provide companies with full end-to-end integration, hybrid integration, or its micro service API and reference designs enabling companies to develop their own systems with Jetson technology. In addition to all the features provided by Jetson’s dashboard, Enterprise also provides companies with API access, kiosk and IoT integration, the ability to integrate with enterprise resource planning (ERP), point-of-sale (POS), property management systems, and volume-based pricing on merchant fees.

Integrations/Multichannel Ordering

Jetson’s technology is platform agnostic and currently can be integrated with communication channels such as Alexa, Google Home, Slack, SMS Text, and mobile apps.

Jetson Pay

With Jetson Pay, Jetson aims to unify payments across all devices and channels for conversational commerce. It can link consumer payment accounts across various systems such as Alexa, Google Home, and other smart speakers and virtual assistants. This provides consumers with the ability to pay for all voice transactions with Jetson Pay rather than having to input new payment details for each purchase. Payments can be configured to use a dual authentication system whereby consumers receive a text message to their phone to verify a purchase prior to completing the transaction.

Use Cases

Jetson envisions three initial use cases for its technology.

Restaurants

Clients can offer easy voice ordering for pickup and delivery and enable intelligent conversational ordering.

Retail

Clients can use Jetson’s dashboard to offer voice ordering for delivery and pickup. Clients can also manage out of stock inventory and calculate shipping and tax on orders.

Hospitality

Clients can enable guests to order room service and request items through voice commands, enabling guests to have a personal concierge for their stay. 

Intellectual Property

Jetson has filed for a provisional patent covering its speech recognition ordering system, voice authentication method, and Jetson Pay. This patent is still awaiting an outcome from the U.S. Patent Office. Additionally, the company has filed its patent under the Patent Cooperation Treaty, with the aim of protecting its technology worldwide.

Use of Proceeds and Product Roadmap

Jetson anticipates using the majority of proceeds from this raise (70%) on salaries for existing and new personnel, with the remaining funds going towards marketing and sales efforts (20%), and general working capital (10%). Positions Jetson plans to hire in the coming months include:

  • Engineers: With the addition of several engineers to Jetson’s team, the company hopes to facilitate more partnership integrations and make improvements to its core technology.
  • Product Support: New product support employees will be responsible for onboarding new clients and ensuring customer success.
  • Marketing Manager: The addition of a marketing manager to the team will help Jetson focus its digital marketing efforts as it looks to scale its business.

Approximately 20% of the proceeds from this raise will go towards marketing and sales efforts. Jetson aims to provide the marketing manager with capital to implement a digital strategy. The strategy will include items such as:

  • Targeted Facebook, Google, and LinkedIn ads with a focus on small business owners
  • Content creation such as infographics, blog posts, and social media content
  • Upgrade existing sales and business development tools (e.g. HubSpot)
  • Attend industry tradeshows

The remaining funds (10%) will go towards general working capital as the company looks to increase flexibility as it expands.

Product Roadmap

Throughout the rest of 2019, Jetson plans to improve its product technology and work on integrating its technology into third-party platforms.

Q3 2019

  • Dashboard (v2.5)
    • Image Support
  • Scalable Natural Language Understanding (NLU)
    • Price and Description Check
    • Reordering Failure
    • Intelligent Search

Q4 2019

  • Dashboard (v3)
    • Shopify Integration
    • Amazon Pay Integration
  • Phone Integration
    • Nexmo Integration
  • Kiosk Integration
    • Zivelo Integration
  • Automotive Integration
    • Amazon Echo Auto

Beyond 2019, Jetson anticipates continuing to develop its product features as well as broadening its customer base in the e-commerce, hospitality, and food delivery industries.

Business Model

Currently, Jetson focuses on selling its technology to small- and medium-sized businesses in partnership with go-to-market partners. It distributes its technology online, through its direct sales force, and through a variety of indirect distribution channels such as value-added resellers and partners. The company offers three different pricing models for its technology:

  • Jetson dashboard month-to-month subscription
  • Jetson dashboard annual subscription
  • Enterprise customization

Jetson’s initial target customer base includes restaurants and eCommerce retail sites. Pricing includes a flat monthly or annual fee (i.e. Software-as-a-Service) and a licensing fee. Licensing fees are a flat percentage of each order placed through Jetson. The licensing fee was conceived as a way to license the intelligence system back to all users, aiming to continually provide them with a smarter AI that offers a better user experience.  

Merchants fees are charged to vendors at the point-of-sale. Jetson currently uses Stripe; so merchant fees are paid to Stripe. Merchants can set up their Jetson dashboards with their own Stripe account in order to process payments.  

User Traction

In June 2019, Jetson signed a contract with GolfPay, a software company for booking tee-times, to integrate its voice-powered technology into GolfPay’s system. The technology is intended to provide GolfPay with the ability to offer voice-powered tee time bookings and payment options to its customers. Through the Jetson and GolfPay API, GolfPay plans to allow users to search tee times by location, course, price, and date. Users can then accept or send invitations for a round of golf and pay for or cancel a reservation. The company anticipates it will begin to generate revenue from this contract in Q3 2019.

Since inception, Jetson has signed letters of intent (LOIs) with Blue Chip Marketing and Volara, among others. As part of its LOI with Blue Chip Marketing, Jetson’s voice commerce technology will be used by a large consumer goods company (with Blue Chip Marketing facilitating) at one to two major pilot locations. The pilot is intended to gather user feedback, collect data, and for product enhancements. Once the pilot program is complete, Jetson AI and Blue Chip Marketing will discuss the next steps needed to incorporate Jetson’s core technology into the buyer’s platform. The pilot is intended to begin in Q3 2019.

As part of its LOI with Volara, Jetson’s voice technology is intended to be used for a three-year period after the launch of its first pilot. The intended use of the technology is to provide new and existing hotels with the ability to offer voice powered in-room service ordering through a smart speaker or other voice-enabled connected device.

Jetson has also entered into partnership agreements with Amazon Pay and Delivery.com. As part of the Amazon Pay Global Partner Program, Jetson’s technology can be used by merchants in the Amazon Pay program to offer their customers a voice channel for purchasing items. As part of its partnership agreement with Delivery.com, merchants and users on Delivery.com can use Jetson’s technology to order and process deliveries by voice and Jetson receives a percentage of revenue share on each order.

Historical Financials

Jetson began generating revenue in January 2018 and has generated $7,559 in total revenue since inception. Revenue has primarily come from custom projects for clients (e.g. integrating technology into existing systems) and orders through a trialed business-to-consumer (B2C) app. While the B2C app provided helpful insights into consumer voice ordering behavior, Jetson has decided to focus on developing its core technology rather than the B2C app for the time being. Future revenue is expected to predominantly come from the sale of Jetson’s SaaS platform.

Through June, Jetson had incurred $492,502 in total expenses in 2019, up by 210.26% over the same period in 2018. Expenses thus far in 2019 had increased when compared to 2018 due to increased payroll expenses and the testing of an in-store retail concept for Jetson technology between October 2018 and January 2019. Since Jetson decided not to move forward with the in-store retail concept in Q1 2019, expenses have returned to similar levels seen in Q2 and Q3 2018. In 2018, Jetson incurred $759,178 in total expenses. 2018 was the first year in which Jetson began incurring expenses.

Expenses in 2019 can largely be attributed to payroll, rent, and the testing of the in-store retail concept for business development. Payroll has been the largest expense line item thus far in 2019 as the company has been focused on product and business development. Thus far in 2019, Jetson has averaged ~ $43,800 per month in payroll related expenses. The company currently has seven employees. Between October 2018 and January 2019, Jetson leased and developed retail space at a third-party location in New York City to test an in-store retail feature for its technology. The technology was meant to augment or replace in-store assistants. However, after trialing the program the company decided to focus its efforts on developing its core technology and a SaaS platform. Expenses year-to-date in 2019 can be broken down as follows:

Expenses in 2018 can largely be attributed to payroll, rent, and the testing of the in-store retail concept for business development. Payroll was the largest expense line item in 2018 due to Jetson bringing on staff to develop its technology and business development functions. Over the course of 2018, payroll expenses averaged ~$33,500 per month, spread across 9 team members. Expenses related to the testing of the retail concept was the next largest line item. Jetson incurred expenses related to the concept in October and November 2018. Expenses in 2018 can be broken down as:

Through June, Jetson has incurred a net loss of $487,375.05 in 2019, a 114.95% increase over the same period in 2018. In 2018, Jetson incurred a net loss of $750,684 for the year. Its net loss increased through June in 2019 when compared to the same period in 2018 due to a substantial increase in expenses as it ramped up its product and business development. Jetson does not anticipate achieving profitability for approximately 18 months due to an expected ramp up period in sales and continued focus on product and business development.  

As of June 27, 2019, Jetson had $53,545 in cash-on-hand. Thus far in 2019, the company has had an average monthly burn rate of $81,476. Following this crowdfunding offering and concurrent seed round, the company believes it should have enough liquidity to execute its business plan for 18 months. The company intends to work towards profitability by increasingly devoting its resources to improving its technology and sales and marketing efforts.

Industry

According to DigitalCommerce360, consumers spent $517.6 billion online with U.S. merchants in 2018, representing 15% year-over-year growth. Of total retail sales in 2018, Ecommerce represented 14.3%, up from 12.9% in 2017 and 11.6% in 2016. Amazon alone accounted for 40% of all eCommerce sales in 2018. Ecommerce sales represented about 51.9% of all retail sales growth, the largest share of growth for purchases made online since 2008. According to data from the top 59 online U.S. marketplaces, approximately 40% of eCommerce sales came from mobile devices.vii

There are several reasons why eCommerce is growing at a rapid pace, including:viii

  • Mobile Adaptivity: Technological advancements such as voice-activated shopping and better connectivity have caused a surge in mobile shopping revenue and improved customer experience.
  • Omnichannel Retailing: Businesses have evolved to interact with their customers through multiple channels such as websites, email, social media, and physical stores.
  • Convenience: The ability to purchase goods 24/7, 365 days a year without downtime for bad weather or holidays enables customers to shop whenever they want from the comfort of their home.
  • Greater Range of Offerings: With the capability of low overhead costs for online sales, eCommerce can reduce the cost of operations which enables some businesses to transfer these costs to price-sensitive consumers and focus on product offerings.
  • Individualized Products and Services: Sophisticated algorithms enable businesses to offer more personalized recommendations to customers.

 The food and beverage industry has also undergone substantial changes in recent years due to the proliferation of internet access and ability to order food online. Approximately 90% of Americans either hate or feel ambivalent towards cooking, according to a study by Harvard Business Review.ix As a result, the market for dining out recently surpassed the market size for buying groceries. Regardless of technological advances, many Americans simply value the convenience of bypassing cooking to get their meals. While dining out eliminates the need for cooking and cleaning, it also presents its own inconveniences, such as the time and effort needed to get to the restaurant, order food, and interact with waitstaff.x However, several alternatives to dining out and cooking at home have grown in recent years, namely meal deliveryxi and pre-ordering food so it is ready upon arrival at the restaurant. Approximately 32% of millennials use mobile pre-ordering and they are less likely than older generations to eat out, preferring to order their food for off-site consumption. Further, 53% of millennials say their visits to a restaurant are influenced by digital technology. Restaurants are beginning to respond to changing consumer habits. While only 26% of restaurants in a recent study offered mobile point-of-sale technology, 59% said they planned on adding the feature over the next year.xii

Another trend that has the potential to further increase online sales is the prevalence of smart speakers. As of January 2019, approximately 66.4 million Americans owned a smart speaker, up 39.8% year-over-year from 47.3 million in 2018. Approximately 26.2% of adults in the U.S. now own a smart speaker. Amazon Echo is the largest player, with 61% of the market, followed by Google Home at 24%. Increased use of home speakers has subsequently led to an increase in the use of mobile virtual assistants such as Siri and Google Assistant.xiii

According to a recent report by OC&C Strategy Corporation, the market size for voice commerce was valued at $1.8 billion in the U.S. and $200 million in the U.K. in 2017. The average annual spend for voice shoppers in the U.S. today is $300 in the U.S. and £150 in the U.K. The report projects the voice commerce market size to reach $40 billion in the U.S. and $5 billion in the U.K. by the end of 2022. The report also estimates that voice shopping demographics tend to skew towards younger generations and affluent households with children. Consumers in the 18-39 age range account for ~70% of all voice shopping. Additionally, 61% of voice shoppers have children at home.xiv

Among the most popular items purchased through voice shopping in 2017 were groceries, entertainment, electronics, and clothing. One suggestion as to why groceries and entertainment were the two largest purchasing categories is due to their relatively low and stable price points – increasing their attractiveness to be re-ordered. However, clothing being the 4th largest category may suggest that voice commerce has the potential to reach across a wide range of product categories, including those that were previously considered “experience-based” products with high variability.xv​​​​

According to a report by eMarketer, some consumers are still nervous about the security of shopping with voice technology. As a result, voice shopping is currently best-placed to take advantage of consumers looking to reorder certain products with a simple command. However, as technology and consumer trust improves, voice shopping is expected to increase in users. By the end of 2019, approximately 22.7 million Americans are expected to use voice technology to purchases goods, up by 31.5% from 2018.xvi​​​​

Between 2008 and 2018, more than $4.14 billion was invested in the voice technology industry across 733 deals. Capital invested in the voice technology industry grew at a compound annual growth rate (CAGR) of 13.71% over the same period. In 2018, the median deal size in the voice technology industry was $2.2 million with a median post-money valuation of $15 million.xvii​​​​

Competitors

Clinc

Founded in 2015, Clinc is a conversational AI platform that enables enterprises to build virtual assistants. Its platform integrates with client systems and can be used across various communication channels such as iOS, Android, and Facebook Messenger. The platform also displays a dashboard providing metrics such as competency breakdowns, latency, activity logs, and analysis of user behavior and engagement. Clients can create multiple “personalities” on the platform to communicate with users. Example personalities include millennial and baby-boomer personalities. Clinc offers two different tiers of pricing, Enterprise and Developer. Pricing for each tier is quote-based. The Enterprise tier includes on-site training and unlimited production queries.xviii The company claims its revenue grew by 300% year-over-year in 2018, and its technology was accessible to over 30 million users. Customers include USAA, Ford, and Barclays.xix The company raised $52 million in May 2019 as part of its Series B round with participation from DFJ Growth, Insight Partners, Drive Capital, and Hyde Park Ventures. To date it has raised $60 million in total funding.xx​​​​

OrderScape

Founded in 2017, OrderScape is a voice-enabled search engine for delivery and take-out orders at restaurants. OrderScape enables customers to order food through Google Assistant or Alexa from restaurants operating in its marketplace. Through its technology, the company provides customers with full menu ordering, reordering, optimized upselling, search and browse features, push notifications, and answers to frequently asked questions. The company currently has 50,000 restaurants in its marketplace.xxi OrderScape has raised $140,000 in funding to date and its most recent round was at a post-money valuation of $6.14 million.xxii

Voicify

Founded in 2017, Voicify is a voice experience management software that combines voice optimized content management, cross-platform deployment, and voice-specific customer insights. Its Voice Experience Platform enables marketers to engage with their customers in a personalized manner and its Voice Content Management System (CMS) enables brands to deploy voice experiences across voice assistant apps. The Voice Experience Platform provides companies with a centralized location to manage their voice content across a number of smart speakers and devices. Supported smart speakers and devices include Amazon Alexa, Google Home, Cortana, and various chatbots across the web, SMS, and IM. Voicify also helps companies track user engagement, interaction, and how often users are returning. In May 2019, the company raised $2 million from Martech Ventures, bringing its total funding to date to $2.75 million.xxiii​​​​

Voysis

Founded in 2012, Voysis is a white-label voice AI platform that aims to create more intuitive, efficient, and personalized experiences between consumers and enterprise applications. The company uses proprietary speech recognition, natural language processing, and deep learning to power its customers’ intelligent AI platforms. The Voysis platform plugs in to its clients’ systems, utilizing their data and API to serve customers. Common features its clients use the platform for include voice enabled search features, refined search features, and transaction commands such as adding items to a cart, checking out, and checking order status. In February 2017, the company raised $8 million in funding led by Polaris Partners in a Series A round.xxiv

Team

Peter Peng

Founder and CEO

With over 11 years of experience leading companies in both software and hardware, Peter has a passion for crafting new user experiences surrounding emerging technologies. In 2014, Peter was one of the first in the world to lock/unlock a smart lock with Google Glass using voice and visual interfaces. His passion for the commercialization of AI through voice is what lead to the creation of Jetson, an intelligent voice commerce platform. Peter holds an undergraduate degree from the University of Central Florida.

Fong Wa Mui

COO

Fong Wa brings a unique mix of both entrepreneurial and corporate experiences to Jetson including meaningful roles within an impact investment fund, investment banking, an education nonprofit, and an executive conferences startup. She has extensive experience in the areas of business development and capital raising. Fong Wa holds an MBA from the University of Chicago and a BA in Communication from the University of Pennsylvania.

Past Financing

This raise is part of Jetson’s Convertible Note round in which it aims to raise up to $2 million in total. Money raised outside this platform will be through a convertible note with the same valuation cap ($8 million) and discount (20%).

Since inception, Jetson has raised ~$1.3 million in total funding. The funding has come in the form of:

  • A $100,000 convertible note in May 2019 with a $6 million valuation cap.
  • A $50,000 SAFE note in February 2019 with a 10% discount on the PPS in the next Qualified Round of Financing.
  • ~$1.15 million in common stock at a price per share of $0.3535 in 2018 from two separate investors valuing the company at ~$6.07 million.

Funds raised from the previous rounds of financing have mainly been used on product development and business development (e.g. tradeshows and building customer pipeline). Since its last raise in May 2019, Jetson has signed its contract agreement with GolfPay.

Discussion

Risks

The information provided herein is not intended to be, nor should it be construed or used as, investment, tax or legal advice, a recommendation to purchase, or an offer to sell securities of the company. You should rely on the offering statement and documents attached as exhibits to the offering statement when making any investment decision. An investment in the company is not suitable for all investors.

Investment Risk

An investment in the company is speculative, and as such is not suitable for anyone without a high tolerance for risk and a low need for liquidity. You should invest only if you are able to bear the risk of losing your entire investment. There can be no assurance that that investors will receive any return of capital or profit. Investors should have the financial ability and willingness to accept the risks (including, among other things, the risk of loss of their entire investment and the risks of lack of liquidity) that are characteristic of private placement investments. There will be no public market for the securities being offered, applicable securities laws will restrict any transfer of the securities, and the securities will not be transferable without the company’s consent.

Company Risk

The company’s industry is highly competitive, and the company may not be able to compete effectively against the other businesses in its industry. The company is subject to a number of significant risks that could result in a reduction in its value and the value of the company securities, potentially including, but not limited to:

  • Rapidly changing consumer preferences and market trends,
  • Inability to expand and maintain market acceptance for the company’s services and products,
  • Inability to gain access to international markets and comply with all applicable local laws and regulations,
  • Inability to achieve management’s projections for growth, to maintain or increase historical rates of growth, to achieve growth based on past or current trends, or to effectively manage rapid growth,
  • Inability to develop, maintain and expand successful marketing relationships, affiliations, joint ventures and partnerships that may be needed to continue and accelerate the company’s growth and market penetration,
  • Inability to keep pace with rapid industry, technological and market changes that could affect the company’s services, products and business,
  • Technological problems, including potentially widespread outages and disruptions in Internet and mobile commerce,
  • Potential costs and business disruption that may result if the company’s customers complain or assert claims regarding the company’s technology,
  • Failure to adequately address data security and privacy concerns in compliance with U.S. and international laws, rules and policies,
  • Performance issues arising from infrastructure changes, human or software errors, website or third-party hosting disruptions, network disruptions or capacity constraints due to a number of potential causes including technical failures, cyber-attacks, security vulnerabilities, natural disasters or fraud,
  • Inability to adequately secure and protect intellectual property rights,
  • Potential claims and litigation against the company for infringement of intellectual property rights and other alleged violations of law,
  • Difficulties in complying with applicable laws and regulations, and potential costs and business disruption if the company becomes subject to claims and litigation for legal non-compliance,
  • Changes in laws and regulations materially affecting the company’s business,
  • Liability risks and labor costs and requirements that may jeopardize the company’s business,
  • Dependence on and inability to hire or retain key members of management and a qualified workforce,
  • Ongoing need for substantial additional capital to support operations, to finance expansion and/or to maintain competitive position,
  • Issuance of additional company equity securities at prices dilutive to existing equity holders,
  • Potential significant and unexpected declines in the value of company equity securities, including prior to, during, and after an initial public offering, and
  • Inability of the company to complete an initial public offering of its securities, merger, buyout or other liquidity event.

Endnotes

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