BRCK Investment Analysis

Basic Company Description

BRCK is an integrated hardware and cloud software services company based in Nairobi, Kenya.
The firm creates rugged connectivity devices for the developing world. The creation of the
devices has been predicated on the idea that the developing world has different needs than cities
like London and San Francisco. Internet connectivity devices built for the first world are often
unreliable in major developing cities such as Nairobi or New Delhi, and especially so in rural
areas in Africa and elsewhere. The devices need to be reliable under difficult circumstances, such
as dirty power, harsh weather, and higher temperatures. Moreover, the infrastructure in the
developing world is poor, and resources for expanding in countries where internet connectivity is
not a priority are limited.
BRCK is a firm that deeply understands and is motivated by these circumstances, and with them
in mind, they developed the BRCK. The devices core function is to maintain reliable internet
connectivity in the harshest and most rural environments. It was designed to reach where no
other internet could. It can support up to 40 devices, has an 8-hour battery life in case the power
goes out, and jumps from Ethernet, to WiFi, and to 3G/4G service using a compatible SIM card,
and has 4GB of internal storage, which can be upgraded to 32GB. The device has an attachable
antenna that allows for additional connectivity when at the edges of available service.
Additionally, BRCK is extendable. Through the API made available through BRCKs cloud
content management system, software can be customized for the device. Sensors and other
devices can be attached through its Arduino compatible general purpose input/output port. The
device is priced at $250.00.
The company also has developed three other hardware products under their division BRCK
Education, based around the BRCK. The Kio Tablet, the Kio Kit, and the BRCK+Pi. The Kio
Tablet and the Kio Kit create a digital classroom in a box. The tablet is a rugged android tablet
based around Intels SOFIA 3G Atom processor, has 1GB of RAM, a 7-inch screen with a
resolution of 1024x600 pixels. The tablets are rubberized in order to withstand handling by
young students, and drops to concrete of about 2.5 feet. The tablets come preloaded with
culturally relevant learning materials from content creators such as Pearson. The Kio Kit
contains 40 Kio Tablets in a rugged charging case. The charging case only has one cable: a
power cable. The devices have been engineered to be charged wirelessly to avoid damage from
removal and insertion of a charging cable. When available for order, the Kio Tablets, and Kio
Kits are expected to cost $99 and $5,000 respectively.
The BRCK+Pi enables a web server to be hosted locallyvital for producing a learning

experience free of buffering and painfully slow downloads.

Business Model & Customer/Sales Strategy
BRCKs business model is based on the development and manufacture of high value, electronic
devices and related software. BRCKs most relevant target markets are the growing number of
individuals and organizations in Africa who need better internet connectivity, and schools and
NGOs interested in digitizing their classrooms. Customers use the products in locations with
poor internet infrastructure for better connectivity or for educating youth.
BRCKs can be purchased on the companys website, along with various BRCK accessories and
apparel. Revenue is generated by the sale of their devices, accessories, and apparel. Given the
nature of manufacturing, margins increase when operations are scaled up. Their company sells
direct to consumers and organizations through their website. Sold alone, the BRCK would likely
sell most frequently to individual consumers, while their education products are targeted at
NGOs and government organizations responsible for education.
BRCKs customer acquisition strategies are based on value. The products the BRCK, Kio
Tablets, and Kio Kit are highly differentiated, high quality, reliable devices suited for
environments found in markets in developing countries. Customers are acquired through word of
mouth and through media attention. I found no evidence of spending on marketing, nor of any
staff members with clear marketing responsibilities.
Management
The companys staff grew from 8 to 40 people from the beginning of 2015 to January 8, 2016.
The executives include: Erik Hersman, CEO, Reg Orton, CTO, and Philip Walton, COO.
Hersman is has demonstrated his ability to be successful in the tech-space in Africa. He is the cofounder of Ushahidi, a free and open source platform for crowdsourcing data, founder of
AfriGadget a multi-author blog site, and blogger at WhiteAfrican.com. Moreover, he is the
founder of iHub Nairobi, an innovation hub for the technology community in Kenya and a
general partner at Savannah Fund, an African based VC firm. He is also a TED Senior Fellow
and has a B.S. from Florida State University.
Orton designed BRCK v1 from scratch to its current state. He holds an engineering degree from
the University of Auckland and has lead engineering teams in the medical markets.
Walton is an accomplished entrepreneur and developer. He is the owner of an enterprise software
company, Tanasuk Technologies Africa, and developed the first Apple certified fingerprint
scanner for the iPhone platform.

Market Size and Characteristics

Roughly speaking, there are a billion people in Africa, and only 200 million of them are
connected to the internet. More broadly, around 60% of the world have yet to come online. Many
of these individuals are in developing regions of the world which lack proper infrastructure to
support internet connection. This represents a vast opportunity for BRCK, if the company could
capture a fraction of the addressable market.
According to African Development Bank, there are 410 million school children in Africa, and
very few with internet access.
BRCK has made its short-term market goals clear. It is an African company focused on solving
problems in Africa. Long term, they have aspirations to be a global company and brand. Thus
far, theyve shipped to 54 countries and 5 continents, including countries in the developed world.
Given the nature of developing countries, BRCK will likely encounter potential customers
lacking the resources necessary to purchase their devices. The high price of $250.00 may be
much more expensive than their target consumers can afford. Moreover, doing business in
developing countries poses inherent risks. For example, on the back of the BRCK device, the
following is inscribed: Designed in Nairobi Kenya, manufactured in the USA. Disrupt Africa,
a business news site, published commentary with BRCKs CEO. Erik Hersman said legacy laws
in Kenya make it nearly impossible for local assembly of the BRCK router. Assembling devices
in Nairobi incurs a 25%-30% duty, while assembling in the United States does not. The company
has exactly the reverse of the normal supply chain. These issues can squeeze the margins of
the growing company.
Competitive Landscape
BRCK faces competition from some of the largest companies in the world. The race to get
internet to the remaining 60% of the worlds population online has many notable participants.
Googles project Loon plans to provide internet access to all by using balloons that float in the
stratosphere and partnering with telecommunication companies. Facebooks internet.org, or Free
Basics is a platform to provide access to limited internet services on their mobile phones, for
free.
Moreover, producers of tablets are in generous supply. Google, Samsung, Apple, and more
produce high quality tablets that, if adapted for the unique circumstances of the developing
world, may interfere with the sales of BRCK. Such companies also have massive production
scale advantages over BRCK.
Key Competitive Advantage(s)/Strategy
BRCKs approach to bringing internet to the developing world is unique. Many

telecommunication companies and large tech companies such as Facebook and Google are trying
to tackle the issue on a macro-scale. Those companies are attempting to build additional
infrastructure, or create new, less expensive infrastructure to bring internet to those still offline.
Despite the deep pockets of the large companies, many of them run into regulatory issues.
Facebooks failure to bring Free Basics to India because of governmental dispute is a prime
example. In many ways, the success of BRCK is much less dependent on macroeconomic and
political factors when compared to the tech giants. BRCK leverages the existing technologies in
the developing countries to provide reliable internet via a single device instead of an extremely
expensive infrastructure implementation.
BRCKs team is deeply connected to the connectivity issues in the developing world, especially
Africa. The team understands the culture of Africawhich must provide some level of insight
into the rest of the developing worlds quest for connectivity. The companys devices were
conceived in an environment where achieving connectivity was the prioritynot a large
companys side project.
BRCK has developed partnerships with powerful companies. Mozilla helped develop the
BRCK+Pi. The Kio Tablets are powered by Intel processors. Pearson publishing has helped
developed the content for the Kio Tablets. These partnerships certainly provide a barrier to entry
for any smaller competitors.
Social/Environmental Impact Analysis & Quantification
Connecting people to reliable internet can provide access to better information about healthcare,
jobs, news, education, and local information.
The Kio Tablets and Kio Kit can provide quality education to youth in Africa, and in other
developing countries by creating an out of the box solution to poor internet connectivity.
Moreover, Kio Tables and Kio Kits digitize classrooms with as little hassle as possible, so
teachers can spend more time teaching, and less time worrying about technological errors and
logistics.
Valuation
Considering that cash flows at this stage of the companys growth should be fairly uninformative
of the companys value, analysis of previous funding rounds proved to be more helpful. The
company closed a funding round of $3M. In an interview with Kite Invest, the COO of BRCK,
Philip Walton mentioned that the company hoped to raise no more than $2M in equity, with the
rest balanced between debt and grants. Assuming the company was successful in this endeavor,
and estimating that the company issued 7% equity to investors, the company would be worth
roughly $29M.

Exit Strategy and Returns Analysis

BRCK has positioned itself well in the market of bringing internet to the developing world.
Based on the concern tech giants have for bringing the internet to the developing world, it is
foreseeable that BRCK could generate acquisition interest from such a giant. Perhaps in the race
to acquire a share of the emerging markets, tech incumbents would be interested in acquiring the
BRCK technology that has adapted cellular service to provide reliable connectivity.
Assuming that an investment could be made at a valuation of $29M, with a projected acquisition
in 5 years, an investment should produce a return of at least 15%, based on the illiquidity of the
investment and the risk of loss of capital. An investment of $1M should grow to roughly $2.01M
by the end of the 5th year.
Conclusion/Investment Thesis
After careful consideration, I would recommend an investment in BRCK. The company has
created superior devices worthy of generating sales by word of mouth alone. The company
approaches their mission to bring reliable connectivity to the developing world with a level of
granularity unrivaled by their tech giant competitors. The seek to solve the problem BRCK by
BRCK, instead of by developing expensive internet infrastructure. The company has important
and notable partnerships. Intel, Mozilla, and Pearson will be able to facilitate growth in the firm
by connecting the firm to their economies of scale. BRCK has a management team that has
proven their capacity for success in developing tech markets and one that is in touch with the
culture and unique needs of their customers. Moreover, their products align with and will help
facilitate a crucial component of developing markets: internet accessibility. Based on the size of
the addressable market, BRCKs potential upside is remarkable. Finally, the companys mission
to empower the developing world with reliable internet access is an honorable mission to stand
by. Not only can BRCK produce a satisfactory return, the company can do so by helping people
live better lives.