Bellhop – Angel Investment Deal Memo

Bellhop – best all-in-one aggregator app connecting you to ride-hailing, food delivery, and other on-demand services and reservations

Quick Overview

Minimum Investment
$100

Funding Goal
$50k – $428k
($5M Valuation Cap, 20% Discount)

Date Funding Closes
Friday, October 20, 2017 at midnight PT

Crowdfunding Platform

Company Website
http://getbellhop.io/

Deal Positives

Reasons in favor of Bellhop

  • Existing model of affiliate revenue streams and aggregation of similar offerings is a proven model in travel, reservations, and retail.
  • Already shipped an initial product to get feedback and iterate.
  • Initial target market of ride-share aggregation is large and is fragmented enough to offer benefit to the consumer without creating too large of a starting technical challenge for Bellhop.
  • Growth opportunity for aggregating other service verticals that currently exist and will exist in the future.
  • Already ran a first fundraising campaign on Republic for $106k that was over-subscribed. With such high demand, they immediately opened a second, larger (and last) equity crowdfunding campaign.
  • The second campaign received $140k committed in the first week. Bellhop will finish north of $320k in total between the two campaigns. Great proxy for the interest in this consumer product. Investors means ambassadors for Bellhop.

Deal Concerns

Challenges Bellhop will face

  • Service providers (much like retailers) will want to continue to own their own relationship with the customer via their CRM instead of being abstracted through an intermediary.
  • Getting app marketshare is hard. Consumers use a very limited number of apps on a regular basis. Historically, getting on consumer’s radar means climbing in rank in the app stores and holding a top 10 position in a category, which is ultra-competitive at this point.
  • Relatively low barrier for clones.
  • Uber and/or Lyft discontinuing Bellhop’s access to their API’s before Bellhop can grow into other on-demand verticals with less concentration of key players.

Jump down to Investment Summary





Product Stage

Existing product, product-market fit, traction in users or sales?

Huge plus on the board from the start by already building and shipping a product with users. If you compare the app store screenshots to the ones used on the Bellhop funding page, you’ll see an important difference. They shipped an app that was good enough and are already iterating on the design and functionality for the next version They did not get paralyzed by trying to get every detail perfect before putting a product out in the world to receive real user feedback on what is actually most important, not what they thought was important.

Bellhop also claims to have a pilot program starting in November with JFK Airport (then expanding to Newark and La Guardia). The goal is to reduce the current wait times of taxis that averages 15 – 20 minutes and climbs to 45 minutes at peak. Details are scares, but looks like the NY / NJ Port Authority will encourage travelers to use Bellhop to call an Uber, Lyft, or Taxi to pick them up in 3 – 5 minutes as an alternative. Why? Because the airports ultimately want happy customers, believe it or not, so people want to keep coming back and flying into these airports. If I’m waiting in line 45 minutes for a cab at JFK, you better believe I’m telling everyone to either fly into a different airport, or don’t travel to New York at all to avoid the hassle.

With the recent soft launch, Bellhop isn’t sharing number of users, rides booked, or revenue. I wouldn’t expect much for the first 12 months anyway. The next year will be about reinforcing the core product and carefully watching consumer response to measure, understand, and nail the user retention model. This will make adding new users predictable and then Bellhop can turn on the marketing machine to add new but sticky users at an initial loss but projected positive lifetime value. Then ideally after hitting critical mass, a large portion of new users come from people sharing Bellhop with others.

Think of a typical interaction after grabbing dinner with friends. You walk outside and your friend asks if you can call an Uber to take everyone to the bar across town. You say sure, let me just open up Bellhop…oh looks like Lyft is actually faster and cheaper right now for a car that can fit 4 people. Done.

Your friend commends you for opening both the Uber and the Lyft apps, punching in the address of the bar twice, and comparing prices and wait times for both options. You chuckle and tell them you just use Bellhop. “Bellhop?”, your friend says, “What’s that?” You proceed to show them the features and benefits of Bellhop as you get into your ride-share. By the time you arrive cross-town, everyone else in the car has now also downloaded Bellhop to use for calling a car when they head home tonight.

Market

Size, Growth, Maturity, Competition, Alternatives?

To keep it simple, I’m going to use the market size numbers Bellhop put together on their fundraising page. If the Ride Share and Food Delivery markets are $11B and $30B gross respectively, Bellhop calculates that after commissions, these two markets could equal $1.8B in revenue. Even cutting in half that amount to account for aggressive commission and bookings rates – there is still a Billion dollar opportunity. This doesn’t even include the additional verticals Bellhop wants to tackle. Tours, show bookings, restaurant reservations.

While the majority of ride share today is concentrated in Uber and Lyft, don’t forget that in NYC alone (HQ of Bellhop) there is Juno, Via, and Gett trying to make a name for themselves. In Austin, we also have Fare, Fasten, Ride Austin, Wingz, and Get Me that all arrived from the vacuum of Uber and Lyft leaving Austin in 2016. Remember that? This doesn’t even account for the autonomous driving future that Tesla, GM, and others want to bring us. Anything can happen.

The food delivery market is even more fragmented with less concentration of total dollars going to one or two players. Companies come and go through the top 5 favorites a lot more than ride sharing as well. Also, the market is bigger right now. Not everyone needs a ride share today, but everybody needs to eat.

In my research for direct competitors in Ride Share aggregation, I found an app called PriceRide that hasn’t seemed to get off the ground. There is also RideGuru that includes taxis and limos in its comparisons when available. Ride Fair is another but it’s iOS app hasn’t seen an update since December 2016. Then there is possibly the first of the aggregators, Corral Rides, which was rename Hitch and pivoted to helping people split rides. Looks like after raising $600k in seed money, Hitch’s small team was acqui-hired by Lyft to work on the Lyft Line product way back in 2014.

I’m most excited about the growth that can happen in the Food Delivery vertical. This is an on-demand industry that will continue to grow and shift in unpredictable ways over the next 3 – 5 years. Consumers haven’t changed their eating habits this drastically this fast since the TV dinner was introduced in the 1950’s.

Team

Key team members. Ability to execute?

Payam Safa – Founder and CEO looks to be a smart cookie. Undergrad in Computer Science with honors, then went back for his MBA after a year developing drones at Northrop and four years as an Accenture Consultant. Sounds like a rare combination of technical and business acumen with the potential for uniquely powerful leadership.

Kevin J Rose – Head of Growth is a relatively recent formal addition to Bellhop, joining in August according to Linkedin. Kevin has been a marketer for a couple different colleges and major music labels. Sounds like he has done good things in the past, but not on the orders of magnitude of driving $10M’s yet.

Josef Richter – Not mentioned on the fundraising page as a key team member (but is under the full team section) is Lead Designer for the past two years according to LinkedIn and a YCombinator grad. Josef rounds out the three teammates that formally list Techotel (Bellhop’s parent company name) on their profile.

Advisors – They have several that I’ll let you checkout yourself on the Bellhop fundraising page. Advisors’ former positions range from SVP of Product at GrubHub, VP of Product at Expedia, Head of Google Play marketing and Senior Manager at McKinsey.

Side note, Nick Ferris who is listed as a key team member on the Bellhop fundraising page isn’t easily searchable on LinkedIn or clearly associated with Bellhop/Techotel. Without more clarification, I’d call that a yellow flag.

Business Model

How do they make money and is it fiscally sound? Previous Revenues? Unit economics and Forecasts?

This is pretty straight forward. Aggregator companies have been around for a long time and will continue to thrive wherever their is fragmentation, price volatility, and unknown information.

Expedia, Kayak, and Hipmunk are well known travel aggregator sites that let you book a combination of different airlines, hotels, and rental car for your trip.

Shopzilla, PriceGrabber, and Google Shopping are examples of price comparison sites for retail goods.

All these sites work off a commission model for sales they drive for other companies like Delta, Marriott, or Walmart. The tracking tools and percents paid by vertical are all well established in this mature marketing channel. This should make it relatively easy (in theory) when Bellhop is at scale to model out and predict their revenue growth as a function of the average number of users in a month and the average commission from each transaction.

Prior Funds Raised

Publicly available info

According to Crunchbase, there was a total of $450k raised across two seed rounds – one in 2014 and one in 2015. Based on that, there was probably a lot of sweat equity and hustling on their own time and dime by the founding team between then and now in addition.

Bellhop did an initial standard fundraising campaign on Republic with a max of $107k. This amount was achieved in a fairly short timeframe but they kept the waitlist open until the initially established close date. This allowed them to judge the interest in running a second campaign on Republic immediately. (Worth noting that expanding the cap of an initial campaign isn’t really feasible from an SEC paperwork stand-point. It’s becoming common to run a second larger campaign if the first is wildly successful)

The second fundraising campaign on Republic surpassed the total raised of the first campaign in what looked like about 72 hours, which is crazy. When adding the two campaigns together, Bellhop will probably be just north of $320k total from their Republic fundraising efforts.

Predictions of next fundraising round are covered in Investment Summary.

Exit Opportunities

Who would acquire this company? At what stage? Or is this IPO material?

IPO
I find it hard to put much weight behind any early stage startup realistically becoming one of the few that survives to grow as well as IPO instead of being acquired. In the case of Bellhop, the climate might align ~5 years from now to allow them to IPO at a reasonable size. If Uber sets the bar for the ride-share space with a successful +$100B, Bellhop might be able to demand an oversized +$1B valuation against revenues of drastically less. Especially when considering additional verticals like food delivery. Individual public investors would love a company that still has valuation growth remaining – not consumed in the late stage private equity market.

Expedia
An existing travel aggregator like Expedia may want to acquire a service like Bellhop to offer additional travel services once you arrive at your destination. Not too long ago, they acquired AirBnB competitor Home Away for $3.9B and Orbitz for $1.6B in cash. Highly likely that Expedia will continue to diversify in travel services to stay relevant.

AirBnB
They may have interest for similar reasons as Expedia, and it’s even more likely their customers need even more travel services during their trip. Someone staying in another person’s house can be looking for more of a home away from home experience than hotel room service. That makes aggregation of local food delivery services even more helpful for example.

Rakuten or other retail deal aggregator
Deal sites that historically work with retailers might start to diversify their acquisitions to go into services. Japanese company Rakuten is one of the largest and is comfortable with sizable acquisitions (Ebates and Viber for roughly $1B each). What better way than to bet on an aggregator and get exposure to several service companies and verticals at once. This also gives them the ability to rotate in the new hottest service company instead of only investing in one acquisition per vertical that may fall out of favor in a couple of years.

Big Vision Upside

What the company could become in an ideal world beyond launch product?

Bellhop does a good job on their Republic fundraising page logically detailing out the verticals they can go after once established in ride-share aggregation. The opportunity is way bigger than just combining the prices of Uber and Lyft in one app.

Blue sky outcome is that almost every search for a service or reservation starts on Bellhop in a similar way that almost all travel searches start on Expedia or Kayak. The last five years can be taken as an indicator that people value service businesses to pick them up in a car, bring food to their house, buy a bookcase from IKEA and then assemble it for them.

This trend of adding technology and apps to coordinate services for hire doesn’t show signs of slowing. More and more verticals will arise with fragmentation. Home cleaning, lawn mowing, dog walking, fitness instructors, medical and legal advice are already happening now. There will be a lot to aggregate if Bellhop can get it right and grow their consumer base fast.

Investment Summary

Is this investment right for you?

I think this is a no brainer to put $100 unaccredited angel investment against. It obviously has deal moment. They had no problem over-subscribing their first campaign on Republic. The success of the second campaign surpassing the first in funds raised in just a couple days, socially reinforces that this is a product people want. Also, the $5M valuation cap is a reasonable price compared to other equity crowdfunding campaigns I’ve seen.

This gives Bellhop options. They could take the momentum to VC’s over the next 3 months as social proof consumers want this product. This could help them raise $3M – $5M but is less desirable since it would likely be at a lower valuation, increasing dilution of ownership for co-founders and crowdfunding investors. The smarter option IMO is to stay lean and build the product over the next 6 – 12 months and drive a sizable bump in valuation before raising a VC led round.

The business model makes sense, is scalable, with predictable revenues that can be modeled out. There continues to be enough fragmentation in several service verticals beyond ride-share that can drive future growth for Bellhop.

Bellhop is not without it’s challenges in-front of it as noted in the Deal Concerns section. But the lean team looks good and was able to hustle a product to market, which is more than most. Combine that with the size of the market opportunity and this becomes one of the better bets I’ve seen on the unaccredited angel investment platforms.

The Bellhop final equity crowdfunding campaign is winding down fast. If you want to get in on this opportunity, do so before Friday, October 20th at midnight PST.

Invest in Bellhop

Back up to Product Stage





Disclaimer

The information on this website is for entertainment purposes only. Neither the author or this website offer professional investment advice. Information contained herein is not intended to be a source of advice or credit analysis with respect to the material presented, and the information and/or documents contained in this website do not constitute investment advice. At the time of reading this, the author or Angel Memos teammates may be investors in this company. Always do your own diligence and seek independent professional advice before investing.

Due Diligence Sources

Any additional URL’s or conversations not already mentioned

This ‘Aggregator’ App for Uber and Lyft Rides Hopes to Make the Cut (Fortune)

Hitch company profile (Crunchbase)

Bellhop company profile (Crunchbase)

 

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