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The startup is currently advertising LuggageHero on Seedrs about investors. In this article, I share my thoughts on whether the company's valuation is reasonable and assess opportunities and risks for you.

As the startup's name suggests, the company offers luggage storage for travelers. For this purpose, other companies are acquired as partners who then carry out the service. So LuggageHero acts as a franchisor for shops and provides the brand, the concept including luggage insurance and marketing. In 2019, the >1000 LuggageHero stores with the business model turned over a total of €1.5MM, which Luggage Hero reports as GMV (Gross Merchandise Value). The stores, in turn, paid LuggageHero a total of €0.9MM in fees or commission, which is LuggageHero's sales. What is striking here is that the turnover corresponds to 60% from GMV – which is a very high percentage percentage. In my view, it is questionable whether this high percentage can be sustained or whether more competition could force LuggageHero to lower commission rates. LuggageHero's partner concept, which relies on partners such as booking.com to win customers, is well done.

LuggageHero's pre-money valuation is around €14.5MM this round. The startup's revenue was 0.9MM last year according to data from the pitch, growing by 130% year-on-year. This gives us a multiple of >16x the company valuation compared to the annual turnover – the valuation is quite high and it is expensive for the investor to enter the company.

Almost a year ago (05/2019) LuggageHero has over Seedrs conducted a funding round of €1.5MM. As things stand, the new round will be in the range of €400-500k. Since LuggageHero is focusing on further aggressive expansion, this new funding should only correspond to an additional runway of 4-5 months in linear terms from history, maybe less. In view of the fact that the Corona consequences will still have a significant impact on travel volume in the next 3-9 months, I have no idea how this funding is supposed to be adequate for financing the company.

In the next three years, the retention hours are expected to increase from 1MM in the last 12 months to around 14MM in 2022, i.e. growth by a factor of 14x in three years (calculated from 1MM hours in 2019 and the ambition to add a total of 28MM more hours by 2022 ; therefore hypothetically assumed 5MM, 9MM, 14MM hours for 2020 to 2022). In order to achieve this growth, further rounds of financing in the millions are likely to be necessary in the near future.

I have been invested with a minimum amount since the first round in 2019. Unfortunately (as with so many startups) the startup communication and investor updates did not contain any hard facts on sales and losses. The founder promotes the campaign heavily with lots of glossy statements like "most popular campaign on Seedrs“. The statement may be factually correct as of today, but just last week the startup 'The Cheeky Panda' closed its very successful campaign of almost GBP 2.2MM. LuggageHero can't keep up with that after all.

My personal conclusion: Nice business model and, including the acquisition of an American competitor and previous scaling, nice successes, but also very expensive and high risks in the current environment. Not a strong investment case for me at the moment.