Devialet raises $106 million

Any names on this list jump out at you?

"The round was led by Ginko Ventures, but also included Foxconn, Korelya Capital, Groupe Renault, Sharp Corporation, Playground Global, Naver, Roc Nation, Future French Champions, CM-CIC Investissement, and BPI France. The company noted that many of the investors were sought out not just for financial reasons, but also strategic and geographic ones."

"With the new money, the company says it hopes it introduce its sound technology to cars, televisions, as well as Internet of Things devices. In addition, the company will continue to open smaller, immersive stores like the ones it has in Hong Kong and Singapore as well as larger flagship stores beyond the ones it currently has in Paris, London and New York City."

Someday everyone will own Devialet.
 
It will be interesting to watch how Devialet develops over the next few years. I hope its not the new "Bose", with how they seem to want to focus on marketing and having their own stores etc.
 
Prof, I can only agree. This is waaaay too much financing for the size of the segment they are in. They are trying to do an "Apple", but that model works for a more disposable kind of budget (in the 100s of $$). When you get into the thousands and tens of thousands, the potential market shrinks (the inverse of) exponentially!

Add to that real competition that exists in that space ( we all know the names: Dartzeel/Goldmund/MicroMega for cheaper, Kii audio, Lumin, Active Kefs, Spatial, etc) I cant see where the big return on investment will come from! The space is limited.

Granted their stuff looks good and is slick/sleek and has competitive SQ, but to me they are pretty maxxed out already. Devialet is on the expensive side for what you get....people will pay only so much for WAF. LoL
 
Yes, perhaps, but enuff to guarantee a decent return on $106, on top of the more than €50m invested already?
 
Nikhil said:
+1 ... I was wondering about the same thing.
How much do you think is the cost of money on a deal like this?
Click to expand...

These guys are equity investors not providing credit so the cost of equity is measured by how much of the company they gave up for this round and in terms of a corollary to an interest rate on debt financing, Ke (cost of equity) in finance is typically measured using CAPM model [Ke=Rf + B * (Rm -Rf)].

B (beta) hard to measure since it's private but given risk of business I would say 2 (I.e., 2X as volatile as market(

Rf = 2.3% on 10-yr here in US

Rm - Rf (also known as equity risk premium) typically measured over long period and estimates range in the 4-7%

Let's use midpoint of 5.5%

So plugging in various estimates you get 13.3% which for a company like Devialet with it's risk profile I would say is a bit on the low side.

If I were discounting the cash flows accruing back to equity investors in a deal like this, probably use at least 15% to compensate for risk profile

Not sure if that helps you but that's how investors look at cost of equity
 
wisnon said:
Prof, I can only agree. This is waaaay too much financing for the size of the segment they are in. They are trying to do an "Apple", but that model works for a more disposable kind of budget (in the 100s of $$). When you get into the thousands and tens of thousands, the potential market shrinks (the inverse of) exponentially!

Add to that real competition that exists in that space ( we all know the names: Dartzeel/Goldmund/MicroMega for cheaper, Kii audio, Lumin, Active Kefs, Spatial, etc) I cant see where the big return on investment will come from! The space is limited.

Granted their stuff looks good and is slick/sleek and has competitive SQ, but to me they are pretty maxxed out already. Devialet is on the expensive side for what you get....people will pay only so much for WAF. LoL
Click to expand...

Well looks like they are going to try to get into more consumer-oriented devices if they are going after car stereo systems, IoTs, and cheaper consumer audio devices. That would expand addressable market way beyond our niche high-end audio space. So looks like they are going to take the technology in high end and roll it into more consumer-oriented mass market products. That's what attracts $106 mill in equity and why you have big consumer players like Foxconn (contract manufacturer for Apple) and others like Sharp putting money in here.
 
Chris...

That is the normal formula for an established business, no?
I see this more as a late stage venture cap, given that the high end audi segment is no where big enough to support the return requirements they would demand for this new tranche of financing.

Recall they got 40m euros last round and started with like 10m euros in seed funding.

There must be a B-Plan with breakout scenarios into new, bigger market potential segments. Dunno...autos, home cinema, pro audio, computers, mobile audio....you name it. However their prices are on the high side right now and the tech is not that different/ superior...so I dont yet see why the investor hubris. Perhaps they have revolutionary tech that only the investors saw in DD?
 
In summary...I dont see any indication if different tech that can steal share left right and center for these lower consumer prices. Mass market pays in the 100s not thousands or 10s of thousands. Besides Apples major advantage is owni g and controlling their ecosystem. Interesting times ahead....pass the popcorn
 
wisnon said:
In summary...I dont see any indication if different tech that can steal share left right and center for these lower consumer prices. Mass market pays in the 100s not thousands or 10s of thousands. Besides Apples major advantage is owni g and controlling their ecosystem. Interesting times ahead....pass the popcorn
Click to expand...

After an initial buzz, I never read anything more about select Apple stores selling Phantom speakers. Has anyone seen Phantoms in their local store? I thought I read a recent blurb about their retail director (Angela Ahrendts) leaving but now I can't find it. That would be huge news so I probably remembered wrong and someone else is leaving Apple. She is the one who brought Phantoms to the stores.
 
Obviously getting into car manufacturers audio they will sell loads of equipment. But, for car manufacturers to want to put your product in their car then the consumer must have some name recognition. And other than audiophiles, nobody has ever heard of Deviolet. And audiophiles is not a big enough group.

They are going to have to market the name just like Bose did. And to do that they need a system under a grand and sell at Best Buy.
 
As far as return of investment - I would say that we would be talking about 30% or higher. This is at best a high risk venture.

Not that they can return that, but to get equity investors there has to be a way to dangle that return out to them.

Right now mezz investors (and they are much more secure than equity investors) are demanding returns in the teens.
 
the professor said:
Obviously getting into car manufacturers audio they will sell loads of equipment. But, for car manufacturers to want to put your product in their car then the consumer must have some name recognition. And other than audiophiles, nobody has ever heard of Deviolet. And audiophiles is not a big enough group.

They are going to have to market the name just like Bose did. And to do that they need a system under a grand and sell at Best Buy.
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That will create challenges for dealers. I'm already getting too many calls asking me to compare "Bose to Phantom" and "Sonos to Phantom." I especially love the "uhhh....is that thing good for a boat?"


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the professor said:
Edit cut
They are going to have to market the name just like Bose did. And to do that they need a system under a grand and sell at Best Buy.
Click to expand...

Then audiophiles won't buy. :rolleyes::roflmao: I am not sure it is possible to swim in two ponds at the same time. :skeptical:

One option might be a second brand name. e.g. Scion/Toyota/ Lexus.
 
Mike said:
That will create challenges for dealers. I'm already getting too many calls asking me to compare "Bose to Phantom" and "Sonos to Phantom." I especially love the "uhhh....is that thing good for a boat?"


Sent from my iPhone using Tapatalk
Click to expand...

In Germany they are cutting at least certain dealers out of the Phantom distribution, in order to sell direct online.

To me that sounds an awful lot like aiming for the mass market.


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wisnon said:
Chris...

That is the normal formula for an established business, no?
I see this more as a late stage venture cap, given that the high end audi segment is no where big enough to support the return requirements they would demand for this new tranche of financing.

Recall they got 40m euros last round and started with like 10m euros in seed funding.

There must be a B-Plan with breakout scenarios into new, bigger market potential segments. Dunno...autos, home cinema, pro audio, computers, mobile audio....you name it. However their prices are on the high side right now and the tech is not that different/ superior...so I dont yet see why the investor hubris. Perhaps they have revolutionary tech that only the investors saw in DD?
Click to expand...

Yes...that's what I meant in my comment that they must be seeking to expand beyond the niche high-end audio market to be able to "sell" investors on their prospects. There's no way you can raise $106 million (let alone $20 million) if you are going to stay focused in the high-end audio market. I also don't think players like Foxconn and Sharp would come in on the investment if there isn't a mass-market play being made here. And so, if you are going to go mass market into portable audio, the audio in your car, internet of things type products, etc...than the price points they will be charging will also have to come down. $2K+ for the Phantom for what most non-audiophiles will view as a wireless speaker is way too expensive when most of the competing products are in the $50-$300 range (never mind the difference in quality of sound which you could argue the non-audiophile will have a harder time appreciating). So the question is what is the mass-market play they will be going after.

I agree with you, I think the investors here are taking a flyer. Now it looks like there are 11 or 12 investors in this consortium and assuming they all put an equal amount in (not likely but just for sake of assumption) that means less than $10 million per investor. For all these players this is an insignificant amount. Having said that though, no matter how much they put in, even if it was $1 million only, it's not like anyone is in the business of investing $1 million without caring whether they are going to get a return on their money and more importantly whether they are going to get their money back at all. So I am sure they have done their diligence and we are not privy to what Devialet has put in front of them as the opportunity. So I am skeptical but we are flying blind here as there is not much info from the press release.
 
the professor said:
As far as return of investment - I would say that we would be talking about 30% or higher. This is at best a high risk venture.

Not that they can return that, but to get equity investors there has to be a way to dangle that return out to them.

Right now mezz investors (and they are much more secure than equity investors) are demanding returns in the teens.
Click to expand...

Totally agree. Typically VCs have 30%+ IRR thresh holds to justify investing in early stage businesses (which are all high risk by definition). Devialet has a history of operating in the high-end audio segment with interesting technology. The question is what have they "sold" investors on here in terms of their entry into the "mass market." What is untested and hence very risky is Devialet's product strategy in the mass market and whether they will know how to operate in that very different segment (distribution channels, OEM relationships, pricing, marketing, scaling of operations, etc...) all very different and hence very risky for these investors to take on.
 
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