Crowdfunding Hot Take: Hearo.Live
This company makes watching media on your phone much more social. We discuss opportunities, risks, and how COVID-19 may prove to be Hearo's wind beneath the wings.
Crowdfunding Hot Take: Hearo.Live
Industry: Social Media/Entertainment
Company: Hearo.Live
Platform: Republic.co
What is it: Hearo.Live is a social media platform that allows users to share viewing experiences (think: watch parties) for content on platforms like Twitch, Netflix, and YouTube. Users create or join watch parties for all kinds of content, including eSports, TV sports, movies, and more. Viewers can interact with other users in the watch party via audio.
Why it exists: The company observes that people collectively spend billions of hours watching content on their devices, with little or no interaction with others. Compared to previous social behavior like sitting on the family couch watching TV or going to a concert, current viewing trends lack a social component. Hearo provides consumers with a way to enjoy virtual events with friends and provides a way for content producers to further engage and monetize their audience.
Who’s running it: Hearo’s founders are Ned Lerner and Dwight Kwok.
· Lerner’s background is in game development, serving previously as CTO for the maker of the hit computer game The Sims, as well as a Director of Engineering at Sony working on PS4. Lerner has previous startup experience as a founder. He co-founded Looking Glass Technologies, a game developer that released several PC games in the 1990s before eventually shutting down. Lerner also co-founded Firetalk, an early VoIP provider that at one point had raised $45mm.
· Kwok works on the business side, having spent time in business development with gaming monetization services provider Xsolla.
What we like:
· Remote social tech is a long-term trend that received a major boost from the global pandemic. We believe the way people gather and consume content has changed permanently – movie theaters, concerts, festivals, stadiums and other large social gatherings will cede demand to safer, more scalable alternatives. Nothing will beat the experience of being in a crowd with thousands of people cheering on the home team, but technology like this is working to bridge the gap.
· Content producers and publishers are looking at new tools to expand and engage their audiences. Hearo’s Venue-as-a-Service model is an affordable technology solution that typically asset-heavy producers like LiveNation could leverage to drive high-margin revenue streams.
· We tested Hearo’s product and found no issues entering a viewing room and participating in the conversations. The product is currently geared towards gamers (and those that watch eSports), but we see the product appealing to distanced families and friends that want to watch content, live or otherwise, together.
· Active user numbers are growing quickly. Management cites 50,000 total users, up 2x over a 60-day period, as well as a 111% increase in monthly active users over a 4-week period in March.
· The founders have solid backgrounds in VoIP, gaming, and monetization services. Lerner’s prior founder experience, though absent a major exit, suggests an ability to navigate startup challenges.
· Hearo is backed by 500 Startups and notable angel investors, including a co-founder of Electronic Arts and the COO of Guitar Hero parent company, Harmonix.
What makes us nervous:
· Hearo is pre-revenue and management has not signaled an immediate shift to revenue generation, suggesting that they will need to return to fundraising in the near future. This is not atypical for a startup at this stage and in this space, but the fundraising environment is wilting and will become more competitive. As described below, the company does not have much cash to weather a funding drought.
· As of April 20, 2020, the company has just over $168,000 in cash. Management claims the company spends $50,000 per month, which puts the company at zero cash by early August. The equity crowdfunding campaign currently has $127,000+ committed, which would give the company an addition 2.5 months of runway, assuming no additional funds are committed to the campaign and the company maintains its aforementioned burn rate.
· Large entertainment companies could develop similar technology internally and own the entire value stream.
CAPVEE Call:
· We like the concept, the macro tailwinds, and the team. Consumer user growth is impressive and suggests the product is well-received, specifically among the gamer community.
· Hearo really needs money to build a business infrastructure around the technology and acquire paying enterprise customers. If funding doesn’t materialize over the next 3-6 months, the company may see a period of bootstrapped fits and starts or could shut down entirely.
· If the company can overcome short-term financing concerns and develop a paying customer base among content producers and publishers, the product should thrive in the post-COVID world.
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