Gimme Radio (March 2019)

Deal Abstract

https://www.seedinvest.com/gimmeradio/seed

Twitch/Discord livestream/engagement meets music fans. Building a new music platform with deep expert DJ’s (think Inside.com and the columnist) to go niche and upsell the goods that are 4x to fans.

This is a retroactive deal memo, as the company raised $510k in March. I went to a live investor event.

Decision

Yes (hypothetically.)

Why Investing/Passing

  1. Right people with experience on music side of business
  2. Interesting take to engagement that has seen success in videogames (Twitch/Discord,) while also being tested in news (Inside.com)
  3. Solid media company, and while it’s impressive that Gimlet sold for $200MM in 5 years of founding, I’d say that’s the exception to the rule. (Alex Blumberg and NPR all-star team were essentially masters of their craft but under market value.)

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
3. Has product in the market Pass
4. 6 months of continuous user growth or 6 months of revenue.Pass
5. Notable investors?Pass: Techstars (Music)
6. Post-funding, will have 18 months of runway Fail: at present raise of $500k, that means 10 months of runway. If they raised 1.5MM, it would have been 30 months of runway.

Has $111k cash on hand for operations. “The Company’s cash position is relatively limited, and while the company has reduced its burn over recent months, gives the company a limited runway.”

Gimme Radio profile on SeedInvest

The 7 Thiel Questions (ETMPDDS)

  1. The Engineering question:
    • Good: introducing Twitch/Discord dynamics with superstar DJ’s has the potential of a 10x better engagement with superfans.
  2. The Timing question
    • Good: Not a bad time, especially since this is mainly a digital distribution platform for music, not really a music platform.
  3. The monopoly question
    • Good: if Gimme Radio can nail the human + tech + community aspect, it will be the Inside.com of music engagement.
  4. The people question: 
    • Good: years of experience in industry, tapping into Metal roots and unfair advantages.
  5. The distribution question
    • Good: sure, at >$1 CAC, not bad at all. Now to see those subscription rates.
  6. The durability question
    • Bad: Gimme Radio has a key hypothesis which is that the human component is rare, value, imperfect replicable, non-substitutable. The super fan DJ’s, by definition, are not that common. In addition, though these DJ’s are rare, they are not well advertised because this was historically an unmonetized expertise.
  7. *What is the hopeful secret?: 
    • Superstar DJ’s + solid tech platform + community of deep hardcores is valuable but scalable across enough niche music genres.

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

  1. Conversion rates to premium goes well.
  2. Scaling to country then other genres is like shampoo: rinse, lather, repeat.
  3. After becoming the Spotify for super fans, more market power to make taste/push other lucrative avenues.

What the Risks Are

  1. Conversion rates to premium does not go well.
  2. The deep fan is only in metal and not scalable ($$$ wise) to other genres.
  3. Competition like Spotify and such see the appeal and copy the tactics and model.

Financials (References)

  • Total Amount Raised: US $510,601
    Total Round Size: US $1,500,000
    Raise Description:  Seed
    Minimum Investment:  US $500 per investor
    Security Type:  Crowd Note
    Valuation Cap:  US $6,000,000
    Offering Type:   Side by Side Offering
  • Closing conditions:While Gimme Radio has set an overall target minimum of US $435,000 for the round, Gimme Radio must raise at least US $25,000 of that amount through the Regulation CF portion of their raise before being able to conduct a close on any investments below $20,000. For further information please refer to Gimme Radio’s Form C.
  • Security Type:Crowd Note
  • Conversion discount:20.0%
  • Valuation Cap:US $6,000,000
  • Interest rate:4.0%
  • Note term:24 months

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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