Kneat makes a software that helps digitize validation processes for the life sciences industry. Various regulatory bodies around the world want to see various manufacturing processes for things like biotech, drugs, and medical devices are validated at each processing step.
Every bit of the manufacturing process — the equipment used, gages, heating, water quality, air-conditioning, all need to be checked, and tested, and validated. This is traditionally a very paper intensive process. Documents were printed and signed by hand, physically filed and a hard copy readied for audit. Kneat software is designed to track all the steps of the process— from creating the forms, to performing validation tests remotely, to generating reports for regulators.
The business model is a land and expand model. When they sign a customer, usually it is for three years. They will roll out the software on a handful of processes at one or a couple of the customer’s manufacturing sites. And then they proceed, rolling out in phases to other processes and other sites of the manufacturer. A customer might have something like 700 validations that need to be performed at each of 30 sites, if we’re talking about a particularly large customer.
What is the market opportunity? Kneat management estimates that their addressable market is $850 million dollars of annual recurring revenue. Today, total annual recurring revenue stands at about $8 million, which is up about 140% year-over-year.
The company currently counts 12 of the 20 largest bio-pharmacists as customers. They are each at various stages of their roll-out, and the roll-out does take a long time: six months to two years. But you might start with $100k in revenue initially, and every six months that rises as they add new processes and sites and you can get to $2 to $4 million in annual recurring revenue from a single customer.
- Gross Profit Margin is 56%
- $26 million in cash on the balance sheet.
- No debt.
- The Co-Founder is the CEO and owns 20% of the company.
- Joshua thinks it could 7-10x in 10 years.