Deal Abstract
B2B tech company that wants to increase reader retention by giving engagement widgets/pop quizzes at the end of an article. Has impressive revenue on a very large valuation.
Financials (VRB)
|Question|Notes|
|---|---|---|
|1. Fundraising Target? |$1070000|
|2. Fundraised So Far?|$248416|
|3. Pre-Money Valuation?|$45000000|
|4. Previous Year's Annual Revenue |$2463869|
|5. Previous Year's Annual Burn |~$512570|
The 6 Calacanis Characteristics ("Sow Passion, Not easy mediocrity", or S2 P6 N18)
| Criteria | Yes/No |
|---|---|
| 1. A startup that is based in SV? | True: Redwood City, CA |
| 2. Has at least 2 founders? | ****: Two |
| 3. Has product in the market? | True: |
| 4. 6 months of continuous user growth or 6 months of revenue? | ****: Rev dropped from 2.9m in 2018 to 2.4m in 2019. |
| 5. Notable investors? | ****: No one I recognize |
| 6. Post-funding, will have 18 months of runway? | ****: They need to close ~$750k to have 18 months runway, at present will not have enough money. |
The 7 Thiel Questions (Every Time Man Profits, Don't Dismiss Serendipity)
| Question | Score | Notes |
|---|---|---|
| 1. Engineering? | 2 | This is just embedding polls and interactive content in blogs, not seeing the innovative technology |
| 2. Timing? | 1 | Not sure why now is time to launch these tools, if anything, premium content is finding a moment |
| 3. Monopoly? | 1 | Have never heard of this company in my digital advertising experience |
| 4. People? | 2 | Seems fine |
| 5. Distribution? | 1 | Sell to large publications |
| 6. Durability? | 2 | If they can build something users actually interact with, then defensible |
| 7. Secret? | 1 | The answer to solve the ad infested web is to have a quiz/interactive content on websites that essentially checks users for comprehension (like a quiz,) then sell ad space around that. |
What has to go right for the startup to return money on investment:
1. Expand beachhead of user interest in product to other features; 2. Show that the quizzes and such drive more outcomes for ads; 3. Land more B2B partnerships
What the Risks Are
1. This future has more radical plans for the Internet than just a better ad widget; 2. Mainstream readers will never get to the point of doing homework after reading; 3. Product development for users to continually engage with this type of widget is challenging.
Bonus Muhan's Notes
Impressive progress.
Updates
This is where I’ll post updates about the company. This way all my notes from offering to post-offering updates will be on one page.
Review these deal memos every time the startup raises a new round
Test if original thesis still applies
Notice trends in how you think
So, did I invest?
Click here to find out.Other thoughts, questions, comments, or concerns? Write me at mail@muhanzhang.com and let me know.