Deal Abstract
https://republic.co/hellowoofy
Social media marketing platform driven by AI + Data Science. Auto-completes text and emojis for tweets and posts. $135k in sales in the last 6 months, revenue averaging $15k/mth lifetime. Also has a text and emoji auto-complete API that will make for interesting B2B opportunities.
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The 6 Calacanis Characteristics (91 161 18)
| Check | Yes/No |
| 1. A startup that is based in SV | No: New York, NY |
| 2. Has at least 2 founders | No: 1 |
| 3. Has product in the market | Yes |
| 4. 6 months of continuous user growth or 6 months of revenue. | Yes: “💰~$15k+/m sales; 🥇$135k Sales in 6 Months; 🏆 75%+ average gross margin” which means last 6 months of avg sales was hirer than all of 2020 avg. Of note, there didn’t seem to be revenue in 2019. |
| 5. Notable investors? | Yes: Tim Draper, 1517 Ventures (Thiel Fellowship) |
| 6. Post-funding, will have 18 months of runway | No: 2019 burn was $240k representing ~$20k/mth, raised $87k which is 4 months. |
The 7 Thiel Questions (ETMPDDS)
- The Engineering question:
- Good: Adding Gmail’s auto-complete feature into social media scheduling platforms seems like a no-brainer.
- The Timing question:
- Good: Again, Google being able to implement the auto-complete is a proof of where AI is right now. Will this company be able to replicate? Hard to say, but the timing is good.
- The monopoly question:
- Good: Can scale very quickly. More data the more predictions.
- The people question:
- Good Not Great: One founder, Arjun Rai. We share networks in common which is encouraging, and put in $165k of his own money. But I don’t see much of a team.
- The distribution question:
- Good: Partnering with Hootsuite very positive.
- The durability question:
- Good: owning all the data and insight of what emojis make what social media goes is very defensible. Selling that data programmatically via API also very defensible.
- *What is the hopeful secret?:
- Memes are the hieroglyphics of 2020 and naturally facilitate higher engagement in the social media era, so those that use it more and automatically will have higher returns on content marketing.
What has to go right for the startup to return money on investment:
- Demonstrate Return on Investment: Auto-completing text and memes is convenient, but how will HelloWoofy demonstrate how much value add their auto-completes are contributing?
- Memes Truly Outperform Non-Memes: Generally I’m quite bearish on social media, where the currency is attention and few people take action from it. That said, if emoji enhanced tweets/posts get higher shares, likes, and ultimately, conversions, that’s a high return for relative cheap investment.
- Expand the API Business: Building a SaaS business based off auto-completes is not a bad beachhead, but I think the move is to go the Grammarly route and eventually enterprise, whether through bulk licensing (straightforward) or programmatic solutions.
What the Risks Are
- Memes Don’t Convert: If the core value proposition is wrong, then this product will never scale beyond the team’s energy.
- At the Whims of Mercurial Platforms: Relying on Hootsuite, Facebook, Twitter, for integrations and such is a tough business to be in.
- Social Media Collapse with Ad-pocalypse: I really like what Robinhood’s Snacks podcast has termed the Ad-pocalypse. Digital marketing and ad-spend is so saturated that if the dollars start drying up, then those downstream effects will reach whatever products/companies service those needs.
Muhan’s Bonus Notes
Everything in social media marketing feels sketchy. That said, I do know that the problem is very real for small businesses. This is a good example of a deal that I’d be heavily tapping my network and unfair connections to vet.
Financials (References)
- Current Fundraised: $87k
- Valuation: ~9MM
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. Also, somewhat of a dearth of materials (whose the team? where are the comments? why are the financials so opaque?)