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Modumetal Series B Financing

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Company Presentation

Deal Specifics

Series Raise: Series B

Series Size: $14M

Valuation (Pre-Money): $18M

Secondary or Primary: Primary Issuance

Founder(s): Christina Lomasney (see management bios)

Sponsor(s): Vulcan (Paul Allen), Steve Singh, Founders Fund (Peter Thiel) (see Modumetal Sponsors)


Modumetal Management

Meet Our Team

Modumetal Sponsors

Meet Our Advocates


Forbes on Modumetal (Part 1)

Forbes on Modumetal (Part 2)


Technology Overview

Impact Overview


Footnotes are available in the PDF download.
Download PDF


Product Deployment Strategy

Product Sales Plan


Market Size Of Future Applications

Market Size Of Current Applications

Addressable Market of $9.5B (in $B)

Source: "Oil & Gas Coatings Market Analysis" by Frost & Sullivan for Modumetal.

Customers Began Specifying In 2017

# of Customers Spec'ing Modumetal

Each customer needs to approve a specification in order to place orders for more than field trials.

Fortune 500 and other major specifying customers:

  • Q4'17: ExxonMobil, ConocoPhillips (AU)

  • Q1'18: Chevron, BP, ConocoPhillips (UK), B&V

  • Q2'18: Noble, APC, Mercury, Partsmaster, API 11B

  • Q3'18E: Shell, ADNOC

  • Q4'18E: Petronas, Woodside, Abel, Bechtel

This Drives Highly Visible Sales

Footnotes are available in the PDF download.

Download PDF


Visible Sales Bridge To Breakeven

Likely Last Round Before Breakeven


Historical & Projected Financials

Profit Margin Analysis

Profit Margins (%)


Intellectual Property Strategy

Competitive Landscape

Footnotes are available in the PDF download.

Download PDF


Valuation Is Very Compelling Today

Modumetal vs. Median Valuations

Source: Pitchbook's "2Q 2018 PitchBook-NVCA Venture Monitor" for Series A-C. Pitchbook's "VC Valuations 1Q 2018" for median valuation of late-stage startups with a corporate VC ("CVC") participating.

Background On Today's Valuation

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Further information regarding Modumetal’s competitive valuation is available under FAQ Question #8.


Pro Forma Capitalization Table

Financing History & Lead Investors


Frequently Asked Questions ("FAQ")

 

1)   What is now driving customers' adoption of Modumetal's technology?

Within the last 6-8 months, Modumetal products have been widely specified within the industrial energy market.  In December 2017, ExxonMobil notified Modumetal that the NanoGalv® product would be trademark specified in their Global Bolting Standard.  In Q1 2018, Modumetal received similar notifications from BP, Chevron, and ConocoPhillips. Since then, several others have followed, including customers from adjacent construction and marine industries.  In 2018, ASTM International also approved changes to ASTM B841 (industry consensus standard on zinc nickel plating) such that NanoGalv® now also qualifies under any specification which calls out this standard.  Modumetal’s sucker rod pump products were also approved in FY 2018.

Now, Modumetal is operating at full production capacity as the largest energy operators have started specifying and purchasing our nanolaminated alloy products. Without any marketing, we are at full production capacity and working to bring on more production to serve immediate market demand.

2)   What is driving customer interest in the NanoGalv® and Nanoplex® technologies?

Modumetal has committed to delivering an improved return on assets for our customers from day one.  We consistently receive positive feedback on the ultra-high performance of our nanolaminated alloy products from independent lab and field trial testing. One customer who conducted independent testing of the NanoGalv® product reported it has “outperformed everything they have tested”, including much higher priced products from competitors.

Customers and partners such as ExxonMobil, Toyota, ConocoPhillips, BP, Mercury Marine, Partsmaster, Fastenal, TriStar and many others have conducted independent lab testing and field trials and performance results have consistently exceeded customer expectations.  NanoGalv® and Nanoplex® prices are generally below alternative corrosion mitigation solutions, providing a low-cost alternative with far superior performance.

3)   How does the sales cycle work in the Industrial Energy sector?

Modumetal is selling product into the Industrial Energy sector, which shares similar sales cycle to other major industrial sectors, such as construction and transportation (automotive, aerospace and marine).  Three major block players participate in this sales cycle, (1) the End Customer (2) the Distributor and (3) the OEM (Supplier).  In this model, the End Customer not only purchases product, but it is also the specifying authority (either directly, or more often through an industry consortium of End Customers). The Distributor sells products to the End Customer in accordance with Specification requirements and the OEM (Supplier) produces and sells product to the Distributor. Modumetal sells both directly, serving in the role of OEM (Supplier), and indirectly as a licensor to the OEM (Supplier).

Modumetal also has strong relationships with the end-user (energy operator) customers through our Technical User Group and through direct engagement with specifying authorities within these End Customer organizations.  Modumetal products have been directly specified by a number of End Customers through trademarked product references.

4)   How does Modumetal plan to achieve its sales targets in FY 2019 and 2020?

Starting in 2018, Modumetal is building up the licensee base for products.  By Q2 2019, we anticipate 10 full scale licensees will be up and running globally.  Today, one of these is already online and the remainder are either under contract and in progress or in the pipeline.  Over 70% of revenue in FY 2020 is projected to come from licensing.  Much of the FY 2020 licensing revenue is expected to come from licensees that are already online or in the current pipeline. 

5)   Which sectors / product extensions does Modumetal plan to pursue over the next 3-5 years?

Modumetal is currently focused on the manufacture of two products:  NanoGalv® and Nanoplex® for specific applications in Fasteners, Pumps and Tubulars.  Modumetal is currently working to deploy these products in the Industrial Energy sector. The directly addressable market size for these products within this specific sector alone is almost $10 billion. 

The NanoGalv® product for metal coating of fasteners has further application within the broader fastener industry.  Modumetal is currently qualifying for additional market sector applications for construction (i.e. building and infrastructure) and transportation (i.e. automotive, aerospace and marine).  In the former case, Modumetal has already received notices of intent to specify.  These market segments represent together over $60 billion in direct sales potential. The Nanoplex® products have further application in additive manufacturing (the company is already exploring this application with Nike) and broader applications of tubulars (which the company is already exploring under contract with the Abu Dhabi National Oil Company).  Together, these applications represent over $5 trillion in market potential. 

6)   How protected is Modumetal's technology and intellectual property?

The Modumetal manufacturing process, several of the compositions of matter and equipment used in the manufacturing process are subject of an extensive portfolio of international patents that span North America, Europe, Asia, Middle East and South America.  In addition, the Modumetal manufacturing process relies on the careful formulation of electrolytes that are responsive to the patented process and equipment technologies.  Sales of these electrolytes is how Modumetal monetizes our licenses.  Our Modumetal-formulated electrolytes (“modulytes”) are carefully controlled and blended and are maintained as trade secret.

7)   Are there any emerging technologies that pose a competitive threat?

Modumetal competes in a space that is largely occupied by incumbent materials that have been specified for several years (as opposed to emerging materials).  Due to the lengthy process involved in material qualification and specification, there is little to no significant threat from emerging technologies in Modumetal’s target industrial markets.  Major competitors are hot dip galvanizing, cadmium plating, and organic coating technologies such as SermaGard® and Xylan®.  Modumetal’s competitive cost combined with far superior performance have established its NanoGalv® and Nanoplex® coating systems as leading contenders for market share in each of the major industrial markets where it has been specified.

8)   What is behind Modumetal’s competitive valuation?

The major reason for Modumetal’s current valuation has been driven by the lengthy cycle associated with specification of the company’s products.  The process of specifying products is very difficult to predict and original projections held that this would be achieved two years earlier than actual.  For context, based on company benchmarking, it takes approximately 18 years to change an industrial metal specification.  See further explanation of the specification process during our presentation at a Geekwire innovation event in 2016.

The current valuation is a reflection of the 5+ year process required for specification and was set during FY 2017, before the current specifications had been secured.  During this period, an existing investor syndicate put forth a valuation and terms to fund the company through what might have been a lengthy specification process. Today, a competitive valuation has been set for Modumetal’s Series B financing, which is projected to be our last to achieve cash flow break even.

9)   What is the use of proceeds from the Series B?

A robust pipeline of growth opportunities, strong margins and capital efficiency characterizes Modumetal’s financial projection.  For the projected period, Modumetal anticipates rapid growth based on its strong pipeline of project opportunities with our current partners, which can lead us to cash flow break even.  Revenue is projected to grow rapidly through licensing, from just over $1 million in FY 2017 to over $9 million in FY 2019, as commercial licensing of specified products scales to serve currently-identified field adoption opportunities.  EBITDA is also expected to grow rapidly as the company moves into high gross margin licensing, taking the company to cash flow break even in mid-FY 2020.  The Series B funds will be used to build out production, accelerate licensing deployment globally and generally for operating capital to reach cash flow break even.


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