Can Fanbase Help Create a More Sustainable and Equitable Online Experience

Company Overview

Brief: Fanbase is a subscription-based social media network that allows users to monetize their content. It offers creators the ability to provide audio chats, short videos, live streams, and more. And the creators can decide which content to offer for free and which requires a paid subscription. Fanbase claims subscription revenue went up 164% over the past 12 months and that Android monthly recurring revenue grew by 35% since its launch in July 2021.

Key People: Founder and CEO Isaac Hayes III (veteran songwriter-producer, president and CEO of Isaac Hayes Enterprises which is his late father’s estate), CTORamiro Cánovas (former software specialist Dell EMC, founder of development agency ConsultR, more than 10 years experience in the tech industry)stry)

Already an Edge member? 👉 Check the Charts 📈 

It’s no coincidence that the same 20 venture firms make the Midas list every year!

They have an edge… And, now so do you! Join 10,000 investors using Edge to access the best deals and the best data available to the online private market.

Terms

Security Type: Equity - Common

Pre-Money Valuation: $84,926,904

Amount Raised: $1,811,600

Minimum Investment: $245

Takeaway

Here's what I like: First and foremost, subscription-based social media has the potential to create a more sustainable business model for social media companies. In the current model, social media platforms are reliant on advertising revenue to survive. Moving to subscriptions breaks that reliance.

Additionally, subscription-based social media could help to level the playing field for smaller creators and users currently being drowned out by platform algorithms that clearly favor larger players. So in theory, a subscription-based platform would create a more equitable online experience for all users by directly compensating creators -- not the companies and advertisers who currently reap the benefits of user-generated content.

Here's what I don't love: Despite the huge opportunity subscription-based platforms can offer to creators, there are some significant potential downsides of this model.

It could lead to the creation of digital divides and exclusivity. In a subscription-based model, only those who can afford to pay for access will get it -- potentially leading to a situation where certain groups (such as low-income individuals or marginalized communities) are excluded from participating in online conversations and accessing important information. And that kind of exclusivity would only further reinforce existing social and economic inequalities.

It could also lead to the creation of extremely siloed and fragmented online communities. In a subscription model, users may be more likely to gravitate towards platforms that cater to their specific interests and communities. This could lead to the creation of isolated and echo chamber-like environments, where users only hear from those who share their views and experiences, which (if you can imagine) is even worse than what currently exists on free platforms like Facebook and Twitter.

From a business perspective, there is also a growing concern that top-down, supply-driven, creator marketplace models are not viable. For example, Pinterest just killed its creator program, Meta and TikTok both recently announced they’re scaling back creator funds, and Patreon, Substack, and Cameo faced layoffs as they realized relying on creator pools to drive consistent revenue growth was not sustainable.

Who should invest and why: When it comes to investing in subscription-based social media apps, there are both pros and cons to consider. On the one hand, subscription-based models can provide a stable source of revenue for the company with far less reliance on ad revenue. On the other hand, subscription-based social media apps face a number of challenges because users are notoriously fickle and can quickly migrate from platform to platform.

Additionally, existing free platforms have a massive advantage because they can easily integrate new paid features into an existing user base.

Add all of these factors up and investors are left with a high-risk, high-reward bet.

Which is to be expected in venture, but consider the terms of this deal. Fanbase is asking for a pre-money valuation of $85M, with $162k in reported 2021 revenue — there is not a ton of upside left for early investors.

As always, startup investing is super high-risk, and anything can happen. Don't invest anything you can't afford to lose.

Invest in Fanbase here 👉 Term Sheet

DM’s open on Twitter & IG 🤳 @kitun.