Investment Due Diligence
Understanding the brand’s reach, staying power and growth potential
A top investment firm was interested in making a substantial investment in a consumer facing ecommerce company [Unicorn]. Unicorn claimed it had tens of millions of app downloads and several million active, recurring users.
Since the space was relatively new to the firm and traditional data sources could only anecdotally confirm Unicorn’s own data, the investment firm sought a way to verify and quantify their claims and understand the brand’s reach, staying power and growth potential in various target markets.
As they saw it, they needed to answer four fundamental questions:
- What was the true current market share of Unicorn’s product?
- What did the current user base look like?
- Was there potential for increased market share for Unicorn’s product?
- How strong was the Unicorn brand? i.e. how many people, whether they had used the product or not, had heard of the brand and had a positive perception of it.
”The firm engaged i360 for a rapid analysis of the space and quick answers to these questions that would determine their investment strategy.Unicorn, Executive
Evaluate Unicorn’s position amongst competitors
To answer the first question, the firm sought to evaluate Unicorn’s position amongst competitors as well as market share amongst consumers.
Using its proprietary, identity-verified, online panel, i360 conducted a nationwide online survey targeted at ranking Unicorn against 15 direct competitors, as well as against larger ecommerce companies in the space for indexing purposes. With question topics ranging from ease of use to anticipated future use to enjoyableness of the application, the survey covered all the bases. Results supported Unicorn’s popularity claim with overall usage ranking second, just below the leader in the space.
Thanks to their vast database of consumers containing a wealth of information about each individual including demographics like gender and race to household income and area type, i360 was able to quickly answer question number 2 (“What did the current user base look like?), providing a profile of Unicorn users and helping the investment firm understand the audience.
It was later determined (after the investment) that the Information i360 provided on Unicorn’s users, went beyond the Information even Unicorn itself had its user base.
While this profile was useful, i360 felt it important to show the full the picture by expanding the survey to include respondents beyond those likely to take online surveys (people pre-disposed to using ecommerce applications).
Based on the individual data in i360’s 270 million person database, i360 conducted another nationwide survey of 5,000 respondents to quantify Unicorn’s reach among the full population including those that don’t frequent online ecommerce apps and sites—the true US adult population – and get an understanding of the full userbase.
The graphs to the left and below illustrate the importance of achieving a representative sample as the profile of Unicorn’s users who also are heavy internet users looks quite different than that of all of Unicorn users.
Additional questions asked provided more valuable insights such as frequency and ease of use and intent to use in the future.
Now, with a full understanding of the existing userbase and market share, the investment firm moved on to question number 3, wondering whether the app had saturated the market or if there was potential for growth into new markets with proper marketing.
To really evaluate the staying power of Unicorn, i360 incorporated questions about potential new products and features on Unicorn’s roadmap to gauge interest. To do this, i360 created a fictitious company (very similar to Unicorn) and surveyed a new random-sample audience, with questions designed to evaluate their appetite for the new product features and their anticipated rate of usage. The results were telling, suggesting high levels of interest and expansion potential for the Unicorn brand.
Finally, the investment firm turned to the status of the brand itself.
Understanding the position of the brand, its perception in the marketplace and its overall strength would help the firm determine if the product, brand or both were driving the company’s overall success.
Turning back to the survey results, the data suggested that the Unicorn brand was built to last with general brand awareness ranked much higher than competitors’ (15.16% of the surveyed population had heard of Unicorn whereas 8.02% had heard of the next most recognized brand). That piece of data alone coupled with the market’s expressed appetite for new products from Unicorn suggested that the brand was itself was an asset.
Confident Investment Strategy
i360 conducted these surveys and analyses in a span of only 9 days, giving the firm rapid Insights and confidence in its Investment in time to take advantage of the opportunity. With the data to support it, the investment moved forward with a 9 figure Investment.
Since the firm’s investment, Unicorn has launched its own payment solution which is quickly being adopted by its retail partners. According to the survey data, the growth potential for Unicorn is there and thanks to the firm’s investment, likely to become reality.