Technology has certainly helped to deal with the terrible impact of the novel coronavirus pandemic, as seen with Slack Technologies (NYSE:WORK) and Zoom Video Communications (NASDAQ:ZM). But there are a variety of early-stage startups that are looking to provide solutions as well. Just look at Hearo.Live. The company’s mobile app allows you to chat while doing such things as watching movies, games, Netflix (NASDAQ:NFLX) streams or shows. What’s more, through the crowdfunding site Republic, you can invest in Hearo.Live.
So far, the company has raised $196,536 from 629 investors and the valuation is $12.5 million.
The founders include CEO Edward Lerner and Dwight Kwok, the company’s vice president of business development. Lerner is the person who wrote Electronic Arts’ (NASDAQ:EA) first 3D game. He has also created companies likes Looking Glass and Multitidue. As for Kwok, he was the general manager in Greater China for Xsolla, where he was responsible for monetizing media and entertainment properties.
So then, let’s take a look at the merits of whether to invest in Hearo.Live.
You can download the app from both Apple’s (NASDAQ:AAPL) iTunes or Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) Play. While the reviews for iOS are 4.4, they are only 2.9 for Android. Some of the comments note that there needs to be further improvement, such as with the sound quality.
Using the app is fairly straightforward. You select the show you want to watch and then you will send a party link to some of your friends. And yes, you will be able to chat away. Everyone also has their own avatars.
For those looking to invest in Hearo.Live, it is encouraging that the company has been getting some traction. During the first quarter of 2020, the app saw 75% growth, even though there was zero spent on marketing (although, the investor profile does not provide the actual number of downloads). The average user also stays more than 20 minutes and the seven-day retention rate is on par with Snap’s (NYSE:SNAP).
To help with the growth, the company has been aggressive in adding content. For example, there are more than 10 deals with eSports operators. The company is also planning to expand into TV supports.
What about the business model? Well, the company has something called VaaS, or Venue as a Service. This involves a mix of ads as well as a fee for businesses for VOIP rates. There are also packages for white label versions, called eStadiums.
Invest in Hearo.Live?
The market opportunity is massive. When you look at the media and entertainment market, the worldwide spending is $2.2 trillion. However, even if you just focus on esports, there are more than 200 million fans and $1 billion in revenue, growing at 36% on a year-over-year basis.
Keep in mind that Hearo.Live has already raised $1.8 million from prominent angels and venture capitalists. The largest investor is 500 Startups, which has invested $450,000 (this is triple its usual amount). In other words, the crowdfunding round is likely more than about capital – that is, it should help provide more visibility for the company’s app.
To invest in Hearo.Live, the minimum is $100 and you get a SAFE (Simple Agreement for Future Equity) instrument. This means you receive equity when there is a “trigger event,” such as an acquisition or IPO. The investment also includes various perks based on the amount invested. For example, if you invest $2,200, you will have priority acceptance in the beta test and your name will be on the investor page. There will also be priority support.
True, while the app is certainly interesting and the team is impressive, there are still considerable risks. Perhaps the biggest is the potential competition. If the concept catches on, it probably would not take too much for a company like Twitch – which is a subsidiary of Amazon (NASDAQ:AMZN) – to make a play for the market.
So yes, before you invest in Hearo.Live, make sure you do your own analysis and research.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.