This means first-round investors are sitting on as much as 3.5x gains
Fanbase just launched another investment round on StartEngine, and it seems they come with a bout of good news. Fanbase is a social media company that basically mixes Instagram with Patreon, and it’s been a very popular investment on StartEngine. This is their third round, and they have managed to max out both previous rounds and raise about $5 million thus far. Now, they’re back for round three and looking to raise $2.5 million. Fortunately, they don’t come back empty-handed. They’re sitting at a price tag of $80 million, and that’s quite a bit. So, what do they have to show for it?
Fanbase 1 for 3.5 stock split
While this doesn’t directly contribute to the investability of the company, they recently conducted a 1 for 3.5 split. This means if you had 100 shares before, you now have 350 shares in the company. Since their first round was at $4/share and they’re sitting at $3.95/share, this means anyone that invested in their first StartEngine round is sitting at an almost exact 3.5x gains. Seeing that the first valuation was at $20 million and the current valuation is at $80 million, that means there really wasn’t that much dilution. It would have been 4x without dilution, so that means there’s only about $10 million in dilution to get to that 3.5x which is something I am fine with personally.
If you invested in their second round, you only have gains of about 40%, though. However, the earlier investors are going on about a year and a half of holding, so that makes sense. Their previous round ended in April of this year, so 40% gains during this year really isn’t bad. Obviously, all of this is just paper gains, but it’s still nice to see where you’re at if they go public (Which, for this company, wouldn’t be anytime soon).
Social media can be incredibly difficult because it’s surprisingly difficult to monetize a user base. There’s a difficult balance between keeping it free and accessible to everyone, so they use your platform, but also making money off them. Facebook found a great balance by having such a massive audience they can do well in their advertising. However, most startups don’t have that ability. If companies can’t find the right balance then they are doomed from the start.
Fortunately, we finally have some financials on the company to look at.
Most notable is their revenue increase of about 1100%. While it did cost them a substantial amount of money, most of that was paid out to develop new features for the site. So it doesn’t look great at first, but when $1m+ was for the development of their product it’s not quite as bad.
As well, $161k might not be a substantial amount of revenue, but it is really solid growth and helps prove their revenue model. While I did invest a small amount in their first round, I don’t think this ‘proves’ the company or model yet. I am happy to see the growth, but for a company raising millions and losing millions, there’s just not enough yet for me to chalk this up as a win. Long term, I do think this has potential (hence why I invested), but I am admittedly not fully convinced yet. If they come back with another 1000% and get to $1
million+ in revenue, then I think that is when things begin to snowball, and it’s really proved itself. The great thing about social media companies is they basically become cash cows if you’re able to monetize them properly. Facebook has been taking a lot of heat recently, because they are burning hundreds of billions on their new “Meta” ventures. Despite this, they are still insanely profitable and just an absolute cash cow. Their advertising business just rakes in ‘free’ money, and it’s only growing, and if you have an active population of people using the platform, that’s pretty much what it turns into is free money.
One of the main reasons I initially invested was because of how much traction they had with their raise. I think having thousands of investors in a social media startup will be a really big asset to them, and they have done well with it. I’d guess a few hundred of those will be active and supporting the company at the very least, and that’s not including any amount they manage to get signed up for otherwise.
Fortunately, it seems they have been doing pretty well as far as users, traction, and more. They have 270,000 users, and many social media sites actually have pretty good engagement rates. Companies like Facebook have over 65% of their users active on a monthly basis, and seeing that Fanbase has $160k revenue on that 270k users, it sounds like they are actually pretty active and using the product.
Lastly, Subscription revenue went up 164% over the past 12 months, with Android MRR growth rate of 35% since launching in July 2021. There’s lots of growth and great stats, so I am generally pleased as an investor as well.
Is Fanbase a Good Investment?
Many people are probably wondering if Fanbase is worth it at this price, and this is a bit harder for me. It’s definitely incredibly expensive at nearly 500x revenue, but the potential is massive, as described above. There are dozens of companies that have pretty quickly and easily become unicorns in the space, and companies with even minimal traction tend to garner hefty multiples due to this. It definitely has unicorn potential, but it’s definitely something you would have to consider if you believe in the product. Personally, I am an investor, and I like that they have been doing so well in the Equity Crowdfunding space, and I think that will help them significantly over time.