#54 VICIO's Equity Extravaganza: a hearty investment or a half-baked scheme?
Diving into the controversial crowdfunding campaign of VICIO, the Spanish upstart burger chain, and the unsettling questions it raises for retail investors.
Welcome to the world of VICIO, a burgeoning burger chain that seems to be on a roll. Their latest move? A bold foray into crowdfunding. Their proposition? An enticing offer to their loyal customers to become investors for as little as 40 euros. But is this a genuine investment opportunity or a masterstroke of marketing artistry? We're here to chew on the facts. Join us as we take a bite into VICIO's crowdfunding campaign, savor its promises, and spit out the potentially unsavory bits.
This is an unusual post for us, but the widespread media coverage and our own sense of indignation over the lack of transparency and information during their campaign has driven us to pen this piece.
“Bulls don't read. Bears read financial history. As markets fall to bits, the bears dust off the Dutch tulip mania of 1637, the Banque Royale of 1719-20, the railway speculation of the 1840s, the great crash of 1929” - James Buchan
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1. VICIO's Meteoric Rise
VICIO didn't just fall onto the burger scene, they smashed into it. Conceived in the throes of a pandemic, this Barcelona-based brainchild of local entrepreneurs Aleix Puig and Oriol de Pablo “took advantage” of a captive audience and a rising trend in food delivery. They began their journey with a dark kitchen, serving up their signature burgers via delivery platforms, and soon their dishes were being devoured in homes across Barcelona.
As the pandemic's grip loosened, VICIO's foothold tightened. Armed with a masterful marketing strategy that harnessed the power of influencers, the brand's popularity soared. One of the co-founders, Aleix Puig, was even a Masterchef winner, which added an extra sprinkle of stardust to the already glittering VICIO brand. With smash burgers becoming a rage in Spain, VICIO's timing couldn't have been more perfect.
In 2022, they opened 10 additional restaurants between Madrid and Barcelona, and have plans to add another eight this year. As the brand grew, so did its community of loyal customers. But it wasn't just the public who were captivated by VICIO. The startup secured a whopping €17 million in new investment four months ago, with football stars Leo Messi and Antoine Griezmann apparently among the backers. This funding is set to fuel their ambitious expansion plans, and enhance their product, process, and technology offerings.
Despite their impressive growth, VICIO's journey raises some questions. Fast growth and popularity aside, are they really offering a sound investment opportunity? Or are they capitalizing on their popularity to draw in retail investors with little experience?
2. The Crowdfunding Spectacle
VICIO's latest venture is a crowdfunding campaign. It all started some weeks ago with a promotional landing page for the crowdfunding campaign. The page is as visually appealing as it is ambiguous. It lures customers in with the promise of becoming investors for as little as 40 euros. The potential rewards? As vague as their business plans. But the page is riddled with buzzwords and phrases designed to inspire a sense of urgency. Phrases like "Invest where investors invest" and "A brand that you've made great has to be yours" play on the emotions of potential investors, creating a sense of FOMO (Fear Of Missing Out).
The Q&A section of the landing page is equally evasive, offering little in the way of substantive information about the investment or the company's future plans. Questions like "Can I put 4 million in?" and "When will my money be converted into shares?" are met with answers that offer little clarity. The lack of concrete details about the business plan, financials, and use of funds is glaring. What's more, the urgency to invest quickly seems to discourage potential investors from taking the time to scrutinize the provided documents, if any.
Despite their impressive growth, VICIO's journey raises some questions. Fast growth and popularity aside, are they really offering a sound investment opportunity? Or are they capitalizing on their popularity to draw in retail investors with little experience?
However, this was merely an appetizer before the investment period was officially opened. Once the investment period commenced on the platform, the company would provide all the necessary information for investors to dissect the proposition.
However, and up until this point, we have no inkling of the business valuation, what their financial results look like, their plans for the capital, or a detailed analysis of their unit economics. Yet they're already asking you to register on the platform and to act swiftly when the investment period opens due to expected high demand.
In the days leading up to the opening, they were sending out emails in the same vein, offering tiny snapshots explaining the rationale behind the campaign (to make you a part of the company you supposedly love so much), or providing such detailed financial insights as this:
3. Crunch Time
The campaign kickoff was met with anticipation and intrigue, and we found ourselves scouring the solitary document provided with fervor. The document was a modest nine pages, predominantly populated with an assortment of legal clauses, the quintessential term sheet. The pre-money valuation was an eye-popping €100 million, yet the profit for 2022 was posted at a startling €-100,000. My bewilderment deepened.
We searched for more detailed financials, for a comprehensive income statement, a balance sheet, even a hint of unit economics, but our search was in vain. This was it:
There were no forecasts, no exit plan, nothing that would traditionally fill the pages of an investment prospectus.
The investor deck was not readily available, it had to be requested separately. Our expectations heightened, we thought this was where the curtain would be lifted and all would be revealed. Alas, upon its arrival, it appeared to be more style than substance. The deck was filled with a collection of slick, marketing-oriented slides, brimming with buzzwords and claims of 'operational excellence' and 'marketing expertise'. It was elusive, nebulous, lacking the substance we were yearning for.
Among the slides was one detailing projections up to 2024, introducing four key terms: revenue, operational EBITDA (might be the new gross margin?), global HQ EBITDA (seemingly the new operating pre D&A expenses?), and the group EBITDA. The simplicity was confounding. Subtract one from the other, and Voilà! It was an oversimplification that verged on being comical. The only clarity offered was a somewhat unsettling forecast that HQ expenses were set to double each year.
It's somewhat ironic that the CNMV, the Spanish regulator, is encouraging public companies to refrain from using terms like EBITDA in their financial reports, only for us to see something like this unfold.
Despite my reservations, the campaign seemed to be an unstoppable force. It had already surpassed €1 million in less than 30 minutes and showed no signs of slowing down. The round was extended, allowing for more capital to pour in. Among the sea of potential investors, some posed insightful and reasonable questions. Yet, the responses were sparse, often vague, and did little to quell the growing uncertainty.
It wasn't until two days after the capital had already been raised that a worthy response was finally offered:
Hello!
Many of you ask us about VICIO's valuation and our exit strategy. We thought it would be appropriate to make this update to clarify doubts.
Let's get to it.
Current Valuation vs Previous Round Valuation: You've asked whether there has been a jump in value from one round to another. And yes, from the last round to now there has been a leap in value. To be precise, by €17M.
However, the valuation of the €17M round was set in Q4 2022 and not in March 2023. With partners making disbursements of €9M, €7M, and €1M, it took a few months to do what is called "Due Diligence". In March, only the round was formalized and communicated. Many of you know that startup rounds range from 6 months to a year of work.
And you might ask: why this leap in value? During this time, we have opened 6 new restaurants, which add approximately €12M in ARR.
(Note aside, a burger restaurant speaking about ARR, this might be a joke)
In addition, we have successfully launched VICIO in 4 new cities, and today we are opening the 5th (Valencia), going from a presence in 2 to 7 Spanish cities. And, at the same time (perhaps due to the entry of certain well-known footballers), our social presence has been greatly amplified. The awareness of the VICIO brand is at a much higher level.
Today, VICIO is a larger company than when we received the Term Sheets from the previous round. In fact, we even believe, humbly, that this valuation could still be higher if we took as a reference (as many of you do) the Goiko operation.
Comparables: As for the comparison of Goiko's value that many of you mention. First of all, thank you to those who compare us with a case as cool as theirs.
First of all, it should be said that each company is a world unto itself. You mention, however, that when Goiko was valued at €150M (Q1 2018) it had 37 restaurants. Here, to make good comparables, I encourage you to (i) look at Goiko's 2017 turnover (ii) as well as the revenue per restaurant ratio. In this picture, VICIO comes out very well and you could even say that the valuation is substantially better than what L Catterton paid.
In Q1 2018 Goiko transacted at a value of €150M when it had just closed 2017 with a turnover of €22.8M. And VICIO is trading at €100M in 2023 when it comes from making €19M in 2022.
Possible Exit: The intention of the capital is not to hold the shares of the company ad-eternum. We will want to work on generating liquidity for investors later. As for what the formula will be, it is obviously too early to know and we are now focused on continuing to build.
As for the time horizon of the exit and at what valuation, it would be too presumptuous on our part to estimate a value and a horizon today. We believe, however, that it is good to share that we have institutional investors (Venture Capital) and that they intend to multiply their investment by 3-5x times in a time horizon similar to the one you propose (about 5 years). We will work and put all our effort into making this happen. But obviously, no one knows the future.
We hope that this update resolves all your doubts.
Thank you, greetings and to dispose.
Aleix and Uri
4. Hidden Traps
While crowdfunding campaigns can be a legitimate way for businesses to raise capital, they are not without risks, particularly for retail investors who may not be well-versed in the intricacies of equity investments. Let's delve into some of the potential traps and risks of VICIO's crowdfunding campaign.
First and foremost, one has to wonder why a seemingly successful and rapidly growing company like VICIO would turn to crowdfunding. Crowdfunding is often the recourse of start-ups and businesses that have trouble accessing traditional forms of financing. But VICIO paints a picture of a thriving business, with a burger served every 4 seconds and a community that extends far beyond 18 locations in 10 different cities. So why turn to its customers for capital?
Professional investors, such as venture capitalists or private equity firms, offer not only funds but also strategic guidance and industry connections. Their absence in VICIO's funding narrative raises questions. Is it because professional investors see something concerning in VICIO's business model or financials? Or does VICIO simply prefer the optics and marketing benefits of a crowdfunding campaign?
This brings us to our second point: is this crowdfunding campaign really about raising capital, or is it just a marketing stunt? The way VICIO's campaign is set up, with its low minimum investment threshold and emotional appeals, it seems more like a customer loyalty program than a serious investment opportunity. In reality, small retail investors are unlikely to see significant returns on their investment, especially given the risks and uncertainties involved.
Lastly, the lack of transparency is a significant concern. The investment packs offered by VICIO do not provide detailed information about the company's financials or how the funds raised will be used. This makes it nearly impossible for potential investors to make an informed decision. Without this information, investing in VICIO is essentially a shot in the dark.
Overall, VICIO's crowdfunding campaign raises more questions than it answers. Potential investors should be wary and remember that while the idea of owning a piece of your favorite burger joint might sound appealing, it's not without its risks and pitfalls.
5. A Whopper of a Tale
In conclusion, VICIO's crowdfunding campaign is a fascinating case study in the power of marketing and brand loyalty. It's easy to get caught up in the excitement of potentially owning a piece of a company you love, especially when it's packaged as attractively as VICIO's campaign.
However, it's crucial to remember that investing in a company, especially through crowdfunding, is not a decision to be taken lightly. It requires a deep understanding of the company's financials, business model, and growth strategy - information that VICIO has been notably reluctant to provide.
As we wrap up this analysis of VICIO's recent crowdfunding campaign, we'd like to leave you with a word of caution: investing is not a game. It's not about jumping on the latest trend or following the crowd. It's about making informed decisions based on concrete data, realistic projections, and a deep understanding of the business model and market.
VICIO's crowdfunding campaign might be dressed up in enticing language and promises of exclusive perks, but at its core, it's still an investment. And like all investments, it carries risk – risk that is compounded by the lack of transparency and financial details provided by VICIO.
We encourage all potential investors to approach this campaign with a critical eye. Ask the tough questions. Seek out the information that isn't being readily given. And above all, remember that your hard-earned money deserves a solid, reliable, and transparent opportunity – not just a tantalizing burger with a side of FOMO.
In the end, the decision to invest or not is yours to make. But remember: a good investor is an informed investor. Don't let slick marketing and the thrill of the moment cloud your judgment.
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References
VICIO’s landing page: https://compra.vicio.com/en
VICIO’s crowdfunding space: https://www.crowdcube.eu/companies/vicio/pitches/by94db
great take, thank you!
Thank you so much for talking about this. I was a worker up until recently in the company (burger flipper literally) I cannot distress how much the managers hoard the employees to actively invest in the company and spread the campaign to family and friends. We even got early access to buy shares. It was unbearable. I told a my coworkers exactly what you described in this post, DO NOT INVEST UNTIL YOU GET THE FULL PICTURE DON'T BE FOOLED. I get the sense that this company is just a marketing agency disguised as a burger selling enterprise haha. Although they're pretty good burgers!