Rich Grinds
article
Financial Independence

Powered By Raspberry Pi - a Defensible Moat

9 min read
author
Rich Grinds

Raspberry Pi $RPBPF / $RPI.L

Ownership

Rasbperry PI foundation ~49% of shares

SoftBank: 8.4% ARM: 8.4% Lansdowne partners: 6.8% Raspberry Pi Employee Benefit Trust: 4% SW Investment Management LLC: 3.6% Ezrah Charitable Trust: < 4% Sony: < 2% Dr Eben Upton: < 2% Richard Boult: < 1%

Mike Thompson and Peter Green operating system developers:

“I felt I was the only one of the people who were talking in the threads about the project that became Raspbian with enough Debian knowledge to make the rebuild a success”

193.416M total shares

MOAT

Unfixable risks

Products

Industry

Costs

Distribution

Brand

Competitors (in order, or at least an attempt at it)

Partnerships:

Important assets:

Outstanding questions:

  1. What do they rely on for cloud providers for? Just the website ?
  2. When an order is placed how does it go through their supply chain and through to fulfilment?
  3. How is the Broadcom partnership different from Klaviyo’s and shopify?
  4. How is the Sony partnership different from Klaviyo’s and shopify?
  5. What is their product’s defect rate? Do new products they develop have higher defect rates?
  6. Creating new products makes their old ones obsolete?
  7. Who are their approved resellers? What is their take?
  8. What is their current/historical write downs of inventory? What’s the value of old assets? Scrap value? Can they be repurposed.
  9. They mention low barriers to entry, what are the barriers to entry?
  10. Does open source work against you in the long term?
  11. What 3rd party IP do they pay for a license?
  12. HDMI LLC
  13. MPEG LA
  14. Synopsys
  15. Cadence
  16. Arm
  17. CEVA
  18. Sirius
  19. Dolphin
  20. Aragio
  21. What other companies use ARM and Sony to design/manufacture - if they are complimentary you’ll see more partnerships together. Unless, RPI has a exclusivity deal with both
  22. What is the competitive dynamic with esp32
  23. Cheapest intel system is $139 on amazon. Why raspberry pi?
  24. What are their flywheels?

Industrial use cases

---MISC UNORGANIZED NOTES BELOW THIS LINE---

Broadcom:

Foundation owns significatnt equity

Only 12 months worth of expenses / growth expenses in cash?

Operating profit doubled+ from 21’-23’ to $260M 50% gross profit growth 22’-23’ Likely due to covid supply constraints which limited sales (~25% supply of chips decreased) 82% direct distribution in 2023 up from ~40% in 2021 covid related? ^ They expect this to stay roughly 70-80%

Avnet parent company of “Premier Farnell” licensee contracts dwindled to < 20% from ~60%. maybe strategic?

net equity - 190M what’s the value of old assets?

supply chain issues are the first thing mentioned in S1 (might be some recency bias there) Long lead times suck though ^ DRAM is a significant cost for them and called out specificially

TSMC is their supplier of semiconductors. Earthquakes and china regional risk

Broadcom is a primary supplier of chip components - You need to understand why can’t broadcom just raise prices on them here (scale probably) ^ How is this partnership different from Klaviyo’s and shopify?

Sony manufactures all of its products.. - You need to understand why can’t sony just raise prices on them here (scale probably) Decade long partnership - no official contractual agreement ^ How is this partnership different from Klaviyo’s and shopify?

Direct distribution - what could go wrong there in terms of scale?

What is their product’s defect rate? Do new products they develop have higher defect rates?

I’m not worried about failing to accurately develop new products - they’ve already proven they can do that

IP - banana pi, and tinkerboard are pretty much identical clones of the form factor

Creating new products makes their old ones obsolete?

Watch their write downs of inventory

Who are their approved resellers? What is their take?

skilled Labor is tough

hacking/Security claims

low price, low margin high volume is harder to compete with

something about the “tinkerer” market that seems in flux all the time. the needs of consumers change, and they have to adapt to create new designs. otherwise competition steps in. But, raspberry pi can sit and wait until that market is proven and create their own within their ecosystem. In other words they don’t have to be bleeding edge because people will switch once their ecosystem adopts it.

VALUATION