Brazilian immersive tech play YDreams has been doing the round of Vancouver’s financiers over the last 24 hours, sharing their latest show reel, talking about new deals they’re doing, and generally wowing those who’ve donned their virtual reality headsets.
I took mover-shaker Brayden Sutton in today and watched him soak it all in. There was a lot to see.
The skyscraper with a side-of-the-building light show tied to a downloadable app. The bank headquarters with greeter robots that ask where you need to go and escort you there. The Coca Cola pavilion at the World Cup, featuring the ability to play on the Brazilian team using virtual reality headsets. The virtual aquarium you can stick under an escalator at a shopping mall, that allows kids to build a fish, name the fish, tie it to their social networks, and reminds them when they need to return to feed it.. or else.
The clients: L’Oreal, Audi, Fiat, Coke, Cisco, Qualcomm, Petrobras, Ambev, Unilever, Michelin…
$70m in pipeline revenue. Over $2m in closed deals in just the last week. And that’s before they even get busy in North America.
YDreams is raising $1.8m right now and expects to close quickly. The first 24 hours has seen them bring in commitments for almost $1m, by rough counts, and they’re rejecting money from investors they don’t feel have strong hands.
It’s taken some nine months to handle the pre-listing audits, as is the norm when bringing a foreign company onto a Canadian exchange, so the story has been bouncing around for a while. In previous trips up from Brazil, the presentation has had holes. Questions were asked about whether there was really a market up here, and why it needed to be public at all, since it was earning a profit.
But this time around, they’ve got the deal smoking fairly hot.
A nice addition to the deal is the news that they’ve closed their first Canadian client – a mining company that has requested a VR tour of its project with 360-degree, remote control, 24k video. No more flying people out to a patch of scratch, just slip on the headset and the potential investor can literally look around, move forwards and backwards, sideways, whatever.
Similar uses for the tech could involve being able to see the view from a stadium seat before you buy an upgrade ticket, while the game is going on. Medical potential, hotel potential, TV production potential – I’ll say it, there’s most definitely porn potential, if you want to go there (literally).
YDreams has been profitable for some time. There’s a YDreams Europe that isn’t profitable, and was financially damaged by a government contract that was left unpaid some time ago. This is not that YDreams and is not part of that deal.
In terms of revenues, YDreams had a slumpy year in 2015. They don’t hide that, but with the flaming burnout that is the Brazilian economy right now, combined with the slumping markets up here, that’s understandable.
On the upside, that terrible Brazilian economy makes for a nice cheap workforce that has done amazing things for not a lot of money.
What it comes down to with this deal is, if they’d started in the US or Canada, all of the projects they’ve completed would have been worth 20x what they cost down south. Redoing the retail locations of one of the largest banks in the country with immersive tech and VR and robots? That’s a $50m deal in New York or Toronto. In Brazil, it’s 6-figures.
Lighting up the entire facade of a skyscraper and tying it to whatever someone swipes on an app? That’s bad ass. A company maker. And they have that tech sitting there waiting to be resold.
To be blunt, if I came to you with over 150 pieces of created tech, from foosball tables that light up with sponsors as you play, or touchscreens that read your reactions and engage you in a game where you have to catch falling objects, or ‘out of the box’ aquariums that convince kids to nag their parents to go back to the mall, or RFID tech that spotted you going past the makeup counter and make that counter light up, call you over, and spritz you with L’Oreal’s latest product?
You’d buy that IP for 50x what YDreams is raising.
As for what they’re raising, it’s not ‘keeping the lights on’ cash. That’s growth cash. They’re already cash positive, so there’s no risk they’ll suddenly need to come with another outstretched hand in a few weeks. They plan to put a sales team to work in Canada, and do quick deals with companies that can use what they already have available. No six month development timelines, they can get product out in days with mild tweaks, that nobody has seen in North America yet.
Sutton plays his cards close to his chest, but did say to me, “It’s nice to see a junior play that is a real company, that brings something substantial to the table.”
And that’s why I like this deal. I’m not a consultant, don’t own stock. I just think, in a typical Canadian junior scenario, what we’d see out of a company like this is a beautiful video of what they hope to one day do, with clients they hope to one day sign.
YDreams has been doing this stuff for years, and has a longer, stronger client list than you’d expect to see on a company coming in below a $20m market cap.
This space is important, growing, valuable and larger than you know. Just one deal installing video screens at 7-11’s or a bank chain or a hotel chain could be worth multiple millions, and these guys have already done – and paid for – the work.
$0.15 raise, 51m shares fully diluted, expectations to raise further growth cash out of warrants going forward, audited with a fine toothed comb.
You’ve seen many worse. I don’t know if I’ve seen many better.
http://www.twitter.com/chrisparryDisclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.