Event Hollow (May 2020)

Deal Abstract

https://republic.co/event-hollow

Two-sided marketplace. This is the “Managed by Q” for weddings. Also ties in to this epic piece about how to become a squillionaire. Balancing the needs of individual contractors while also making money off the financing side is brilliant.

Hat tip to reader Moe for turning me on to this deal.

Additional hat tip to Max over at https://crowdonomics.co/ for helping me correct my understanding of Event Hollow’s fundraising round.

Crowdonomics is a research database for private & securities crowdfunding, providing data-driven insights and analytics to help guide investors to make better investing decisions. 

Event hollow started their raise 2/20/20, valuation cap $6m 0% discount.
They raised an additional $225k AFTER that date.
$50k 2/21/2020
$15k 2/28/2020
$150k 3/15/2020
All at a $3m cap 20% discount.
Just as an FYI.

Max, Founder at Crowdonomics.

Later Max and I had a discussion about what this means. In essence, big money is getting a 20% discount at half the valuation, whereas small investors like you and me are getting a “worse” deal. This to me feels fair since I put $200 in, instead of $25,000 which is the standard angel check ($250k on $5MM valuation means 10 angels as opposed to 1250 broke angels, or if you invest as low as $100, 2500 broke angels.) It’s open to interpretation, but if a slightly worse deal (but fundamentally good deal, imo) comes with lower capital commitments because we’re broke, then for the sake of learning and building up to full angel status, this is fair.

In addition, in terms of validation, if they raised an additional $225k, that cures my runway concerns. At $20k/mth burn, that’s 11.25 months of burn, and thanks to MVP (in this case, most valuable player, not minimum viable product,) Moe for clarifying:

You bet. Thanks for reaffirming my thoughts on it! BTW they’ve been bootstrapping it and their CTO and CDO have full time jobs on the side so it’s good for the runway in a sense. Certainly a venture but the possible return seems worth it. Waiting to see how the CEO responds to my questions and how much money they raise before I commit.

Y’all are awesome and I’m immensely grateful, keep the ideas coming and help me get better!

Decision

Heck yes.

Why Investing/Passing

  1. Great business model that fits a worldview of managed marketplaces.
  2. Disciplined valuation. Do wish they were raising more so they had more runway.
  3. This is what millennials want: I use Visor to file taxes, Managed by Q to manage an office, etc. Millennials want standardized, robo-advisors to do everything.

The 6 Calacanis Characteristics (91 161 18)

CheckPass/Fail
1. A startup that is based in SVPass: San Francisco, CA.
2. Has at least 2 founders Pass (2)
3. Has product in the market Pass
4. 6 months of continuous user growth or 6 months of revenue.Fail: Only launched on Valentine’s Day. Has booked 18k in revenue in three months. COVID has slowed things down.
5. Notable investors?Fail: don’t know any of the investors. But this is not a bad thing.
6. Post-funding, will have 18 months of runway Fail: Unknown burn due to lack of financials, but five professionals at $50k I presume minimum 20k burn/month. If fundraising only $50k-$107k, either no one is taking a salary, or they are being excessively optimistic.

The 7 Thiel Questions (ETMPDDS)

  1. The Engineering question:
    • For Sure: so much as this one consolidated two-sided marketplace is definitely better than handling all the contractors, for sure.
  2. The Timing question
    • Good: global pandemic not great for weddings, but in terms of cheapness of building two-sided marketplaces and millennials being ready for “robo-advising” everything, for sure.
  3. The monopoly question
    • Totally: If execution on point, this will be the one wedding marketplace.
  4. The people question: 
    • Mostly Excellent: But uncertain. Founder definitely has right industry experience. Few people from startup world but overall functional team.
  5. The distribution question
    • Excellent: Digital marketing to get people to hear about this, in addition to founder’s background in wedding planning, in addition to head of customer success.
  6. The durability question
    • Excellent: Establish payment information, list of verified contractors, guarantee of payment, etc. For sure this is durable.
  7. *What is the hopeful secret?: 
    • Wedding planning is like one enormous project management exercise, and that just like Managed by Q is solving that for office management, Event Hollow will solve it for weddings.

What has to go right for the startup to return money on investment:

  1. Survive COVID
  2. Drive value to consumers and vendors, but eventually capture value by standardizing the bargaining power on both sides (consumers don’t want to deal with 47 vendors, vendors don’t want to deal with fickle newbies who think they’re special snowflakes.)
  3. Roll out in the right timing e.g. is there an advantage to improving wedding dress sales first before food caterers, as the former might have better margins and therefore less business risk than the latter.

What the Risks Are

  1. Surprisingly, why hasn’t The Knot & other large companies done this? Perhaps the grunt work of managing and building two sided marketplaces is a PITA, but this seems obvious now that it’s here.
  2. Customization. Every couple surely feels they are special. How to standardize services without losing enough degree of flexibility.
  3. Capital risk. Easy to solve, but I’m concerned the company is raising to little. At $6MM valuation, they should shoot for $250k.

Financials (References)

  • Valuation Cap: $6MM
  • Discount: 0%
  • Minimum Investment: $100
  • Type of Security: Crowd SAFE
  • Funding Goal: $50k-$107k
  • Deadline: October 2, 2020

Updates

Review these deal memos every time the startup raises a new round

Test if original thesis still applies

Notice trends in how you think

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3 comments
  1. Moe
    Moe
    May 21, 2020 at 10:27 pm

    Ma man. Deal flow baby!

    Reply
    • muhan
      muhan • Post Author •
      May 21, 2020 at 10:33 pm

      Event Hollow seems like the real deal. Thank you for the send and look forward to continuing to collaborate!

      Reply
      • Moe
        Moe
        May 22, 2020 at 12:04 am

        You bet. Thanks for reaffirming my thoughts on it! BTW they’ve been bootstrapping it and their CTO and CDO have full time jobs on the side so it’s good for the runway in a sense. Certainly a venture but the possible return seems worth it. Waiting to see how the CEO responds to my questions and how much money they raise before I commit.

        Reply
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