Security type: Crowd note (will convert into equity if the company is successful – this type of deal is extremely common and generally fair for both investors and companies)
Valuation (cap): $3 million
Minimum investment: $500
Where to invest: SeedInvest
Deadline: June 14
I’m very excited to announce our newest startup recommendation, Taste.
Taste is an app that recommends movies and TV shows to users based on their preferences. It is available on the Google Play store and Apple’s App Store. It has a rating of 4.4 out of 5 stars on the App Store and 4.25 out of 5 on Google Play.
If you’re considering investing in this deal, I strongly encourage you to download the app and give it a try. I downloaded it more than a week ago and have been using it regularly. The app has a slick interface, and it smoothly guides users through the first experience.
How It Works
The first time you open the app, you are asked to rate a number of movies most people have seen. Based on the results, Taste recommends movies that other people with similar tastes like. As you rate more movies, the experience gets better because it learns more about your preferences.
Taste uses sophisticated personalization algorithms and machine learning to suggest movies and TV shows to watch. That means the quality of its recommendations should only improve with time. I also believe the data Taste is generating and gathering will be extremely valuable.
Taste has raised very little money so far – only about $75,000 from angel investors last year. Besides that $75,000, the founders have invested their own money and lots of sweat equity.
I love how much this team has gotten done with so little capital. The Taste mobile app launched in May of 2018 and has been downloaded more than 250,000 times since. The team is lean and is shipping out a very promising product. And it is rapidly expanding its offerings. This is a bootstrapped startup, which is my favorite kind.
A deeper dive into its offering page reveals some interesting metrics:
- 300,000 registered users are generating 4.4 million screen views per month; 200,000 users have been added since the mobile app launch in May 2018.
- There were 4,800 daily active users and 47,000 monthly active users in February, up more than 45% month over month.
- Its match algorithm is 2.5 times more accurate than generic rating systems (based on management estimate), with more than 400 data points per user.
- Of users who have linked Facebook, 30% have friends on the Taste platform.
- It had 1,700 paid premium subscribers as of January, and acquisition costs for paid subscribers (six-month average) are down 20% month over month, bringing the ratio of paid subscribers’ lifetime value to the customer acquisition cost of paid subscribers to 1.43.
Taste is not a breakaway success yet, so the $3 million valuation seems reasonable.
The 1,700 paid subscribers are an encouraging sign. They show the app is providing value to users and monetization is possible. But I actually recommended to the team that it pull back on premium options for now, as they don’t seem very user-friendly. I think the team should add as much value to the free product as possible instead, to boost growth and usage. The team was very open to feedback and seemed to take the recommendation seriously, which is a good sign.
Taste had already raised $200,000 as of May 28 on SeedInvest, which is an impressive raise. The team notified Taste users about the fundraising through the app, and it appears that users are investing in the product, which is always a good sign. Taste could raise as much as $400,000, which I am confident it will put to good use. Bootstrapped startups tend to be extremely efficient with capital, and I’m guessing this team can do a LOT with $400,000.
Taste is still in bootstrapping mode. It is burning very little cash, and most key team members are working just for equity (shares). The co-founders, John Lin and Justin Messina, have worked together for the last seven years. John is the CEO and a designer by background. Justin is the chief technology officer and a full-stack developer (advanced programmer). Having a team that’s worked together before is a positive signal in startup investing, and having founders with useful technical skills is a good sign too.
The Early Investing team spoke with Lin for about an hour and came away from the conversation extremely impressed. He is clearly passionate about what they’re building and has a palpable drive to succeed.
Taste is using technical contract workers when needed and seems to have a very good handle on this process (which is not easy). They have a good relationship with a mobile development group in South America that provides excellent services at reasonable prices.
For now, Taste rates only TV and movies. But long term, this team is thinking big. It’s had music recommendations in private beta testing for six months, and it is nearly ready to launch.
Taste plans to eventually launch podcast, book, game and other new categories of recommendations. Here’s an excerpt from Taste’s Q&A on its deal page that explains how its system is built to scale and grow into new categories.
Question: What is the lead time for the development of each new category? What are the efficiencies in the development of each new category?
Answer: The efficiencies are exponential. The movie category took us eight months to build and collect enough data to release to the open public. The TV category took us four months. We intend to open multiple categories at once in 2019.
We are able to do this because the database has been written in a way that’s simple to scale. Our unit for recommendation is an item and most of the elements relating to the item are very similar. Our goal is to make categories and items open to user-generation within two years.
On the algorithm side, the system’s written in such a way that data can be computed separate or combined with other categories. Our system’s smart enough to know which cross-category correlations to use when necessary. We built the system this way with scaling across category in mind since day one.
The team has clearly put a lot of long-term thought into how it’s building this company. With the ability to launch multiple new categories relatively quickly, it’s more likely that at least one of them will be a breakaway success.
Movies and TV have provided a great start for Taste, but it’s possible that restaurant recommendations or mobile games or another category will end up being the most profitable.
At that point, the team can focus on that category or can continue to support multiple categories if others are still being used.
When investing in the very early stages of a startup, it’s good to see clear expansion options. In a pinch, the company can pivot its focus to a similar but better area. Taste has expansion and pivot options galore.
How to Invest
Follow SeedInvest’s instructions through the investment process and make sure you complete the investment.
This opportunity, like all early-stage investments, is risky. Early-stage investments often fail.
Expect to hold your position for at least three to five years. An earlier exit is always possible but should not be expected. All that said, I believe Taste offers an attractive risk-reward ratio.
Co-Founder, Early Investing