Deal Details
Minimum investment: $100
Investment type: Crowd SAFE (convertible note)
Valuation cap: $5 million
Discount: 20%
Deadline: November 7, 2017
Investment portal: MicroVentures
Conversion provisions: In connection with an equity financing of at least $1 million, the company has the option to convert the Crowd SAFE into shares of a series of non-voting preferred stock, at a discount of 20% of the price per share of the new preferred stock sold in the equity financing or a valuation cap of $5 million, whichever results in a lower conversion price. Please refer to the Crowd SAFE form for a complete description of the terms of the Crowd SAFE, including the conversion provisions.
Dear First Stage Investor,
Twitter was one of the best investments of my lifetime.
Early investors pocketed as much as 40,000% worth of profits.
Nobody could predict at the time that tens of millions of people would become addicted to the idea of communicating in short bursts.
Just 140 characters to say what you mean. Keep it simple. What’s not to like? Everyone saves time. And you can say a lot in 140 characters.
Like the above paragraph. It has 140 characters. I could have tweeted it.
It was an idea whose time had come. The handful of investors who recognized this early on were richly rewarded.
In time…
It took Twitter six years to hit 100 million users. It reached that milestone in 2012.
Now, five years later, it feels like ancient history. Twitter’s growth has slowed and it’s trying out new formats and formulas, like the blasphemous 240 character experiment.
Poor Twitter. It’s not going to disappear anytime soon. But I fear its heyday has come and gone.
It’s time for a new Twitter.
Something even quicker, more engaging and more addictive…
And, in the age of big data, something that can profit from the use of analytics.
I’ve found a startup that checks off all these boxes.
And this “new Twitter” has the potential to make investors just as much money as the old Twitter.
Arbit’s Brilliant Idea
Kudos to Facebook and Instagram. The like/love/emoji reactions are a cute idea.
But Baltimore-based Arbit has a much better idea.
Its users respond to simple A/B polls via side-by-side picture or video polling.
Once they cast their votes, they can instantly see the results.
Your favorite team: A or B?
Your favorite performer: A or B?
Your favorite snack: A or B?
The variations are virtually endless.
Arbit knew it was onto something potentially game-changing when every NBA player it reached out to quickly adopted it on their own social media sites. Several became investors. (Steph Curry of the Golden State Warriors is just the latest to show interest.)
At around the same time, Arbit was accepted into Baltimore’s coveted accelerator program.
I know a few of the folks who run this program, since I’m also based in Baltimore. It’s a top-notch program that attracts hundreds of applications each year.
While in the accelerator program, Arbit launched its polling app. It attracted a base of 100,000 users in a little more than half a year.
Then there was Google…
Every quarter, Google selects two or three apps to work with closely. This current quarter, it chose Arbit.
But, as far as I’m concerned, the most important investor confirmation came when Arbit got positive feedback from Under Armour’s VC arm.
These guys have high standards.
They encouraged Arbit to continue on its current path. They also told the startup to keep one thing foremost in mind…
Make it as easy as possible for businesses to use its technology.
Making the Idea Work
So Arbit decided to license its addictive technology to enterprises seeking to strengthen the bond between their audiences and their brands.
It’ll charge a monthly fee. How much depends on two things…
- The scale and frequency of use
- The level of data analysis requested.
Arbit now has 135,000 users and “proof of concept.” It can show companies how much people like to poll and be polled.
The idea works. And the company now has a plan to monetize it.
Making the Data Work
The social engagement that comes from polling is pretty compelling. But that’s not the part of the business that’s most exciting to me.
It’s the massive amounts of data Arbit will be collecting.
It’s a gold mine waiting to be discovered.
If it turns out that Arbit can’t develop several large revenue streams from it, then something will have gone terribly wrong.
Arbit’s surveys will be generating data subject to analytics that range from basic to very sophisticated.
The more sophisticated the analytics, the more it can charge clients… the larger the sample size, the more it can charge clients… the quicker it gives clients the analytics, the more it can charge those clients.
And Arbit will own all this data.
As it grows its client base and generates more and more polling results… leading to more and more data… from more and more people… on more and more products…
It will be building a large and extremely valuable data library where all sorts of consumer trends will be tracked and identified early.
This is where marketing is headed. It’s becoming increasingly data-driven. It’s what clients want and will pay handsomely for.
The global social media analytics market is expected to expand by more than six times in the next five years. From $2.9 billion in 2016, it should hit $18.7 billion by the end of 2022.
Arbit is primed to hop on board this rising trend.
Making the Endgame Work
Arbit has done a great job stretching a few bucks to come this far. It spends only about $20,000 per month.
Its developers are contracted out. It has a few paid interns. But the lion’s share of work falls on Arbit’s two irrepressible founders, Alex Bullington and Greg DiNardo.
Alex is the CEO and co-founder. He came up with the idea and contracted a team to build the app. He has a background in focusing on how professional athletes and brands engage their audiences on social media.
Greg is the chief operating officer and co-founder. I know Greg from his days with MicroVentures, one of my favorite startup portals. He was instrumental in helping the company grow its userbase from 1,000 to more than 130,000. When I learned that Greg had joined a startup based in Baltimore, of course I had to find out more.
I’ve had a series of fun but grueling meetings with Alex and Greg. I’ve asked dozens of tough questions, and for the most part, they’ve provided compelling answers.
Alex and Greg told me they want to exit in about two to four years via a buyout offer. They mentioned a few companies that could really make use of their technology.
We’ll see what happens. But I can easily see their technology becoming highly sought-after (once it gains traction).
This Could Go Viral
No other company offers what Arbit does. Instant polling… instant engagement… and instant results.
And the cherry on top: algorithm-provided instant analytics.
Arbit is targeting the thousands of businesses that want to connect with their customers and understand them better.
The beauty of Arbit’s polling services?
It does both.
This is how I’m thinking of Arbit’s upside…
These days, 99.9% of consumer businesses have a website. The vast majority of them have added a Facebook page. And many now have a Twitter account.
Why not an online polling place?
I can envision companies adopting Arbit’s polling technology fairly quickly. It’s not asking businesses to step out of their comfort zone. Just the opposite…
Arbit’s polling services are easy to use and understand. And the cost would be reasonable. It has the potential to be far more addictive than Facebook, Twitter or Instagram.
And I can’t repeat this enough: Arbit’s enterprise clients would also be getting valuable analytics and insight.
This thing could go viral.
How to Invest
This deal is being hosted on MicroVentures.com, a licensed broker and dealer. We have worked with MicroVentures on a number of recommendations over the last few years.
Adam and I have seen how well the portal has taken care of our members. No worries there.
The first step (if you don’t have a MicroVentures account yet) is to go here.
Then simply click the orange “Sign Up” button and follow the site’s instructions.
If you run into problems at any point, please call our friends at MicroVentures directly at 1.800.283.9903.
Editor’s Note: If you’re new to First Stage Investor, or if you just need a refresher on how to invest in startups through portals, check out our video tutorial “Investing in Startups Through Online Portals.”
Risks
Arbit is an early-stage tech investment, and like all such investments, it’s risky. Do not invest money you can’t afford to lose.
Also, remember that these types of investments are not liquid, meaning you can’t buy or sell your stake easily. If and when an exit opportunity arises, you’ll be informed immediately.
Good investing,
Andy Gordon
Co-Founder, First Stage Investor