SaaS Interviews with CEOs, Startups, Founders
Festival Version of ClassPass Targeting $500k Seed, 1000's of Consumers, 100's of Events
11 Jun 2020
Chapter 1: What is the main topic discussed in this episode?
So if you're at $50 a month, assuming you have a six to 12 month lifetime value of that consumer, you're talking about $300 to $600 of an annual money coming in from that user. At our 30% margin we're hoping for... It's like $200. Yeah, I'd be happy to pay $200 to acquire somebody I think is going to stay on board for a year. You are listening to Conversations with Nathan Latka.
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My guest today is Ed Vincent. He's an entrepreneur with over 20 years of business technology and management experience, having founded and exited several companies in that time, including helping to launch film festivals in multiple locations and creating the concept for a Maxim branded hotel in the Caribbean. He's a former head of data at MoviePass, now building something called FestivalPass.com.
Ed, you ready to take us to the top? I am. Let's do it. All right. By the way, why move on from MoviePass? A lot of people would say that thing was a rocket ship. You just figure you learned everything you could. Yeah, I was a contractor brought in to help them with their data. And MoviePass has an interesting story in itself for the good or the bad.
I think a lot of people know some of the good and some of the bad. All right, let's go to FestivalPass. What's the company doing? What's the revenue model? Is it pure play SaaS? Sure. No, it is a subscription marketplace. So different than when you think of marketplaces in general, a lot of people think of the Ubers and Airbnbs and Postmates and other type of two-sided marketplaces.
And when we think of Festival Pass, it is a two-sided marketplace. You have the consumer and then you have the event owners, the rights holders that have a lot of these live events in the festival space, music, film, food and wine, tech and innovation, and both sides of the marketplace need to be fulfilled. Okay. So tell us what you do for both those sides.
So what do you, first off, who's paying you more? Are the consumers or the festival organizations? Yeah, so it's a consumer play, right? So consumers pay a monthly fee, and for that monthly fee, they get credits. They can then use those credits to attend thousands of live events throughout the country. Okay, what do you do for the festival organization? So for them, it's a couple pieces to it.
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Chapter 2: What is the business model behind FestivalPass?
Is that do you think you're going to change that kind of arbitrage spread over time while your per credit pricing come down? Or is that really what you're going to stick with for a while? Yeah, I think we'll stick with that.
From a business perspective, what gets really interesting about this whole credit model, and I'm still shocked that more marketplaces and subscription businesses haven't adopted it, and I give ClassPass a lot of credit for pioneering the way, is what it allows for is it really builds in a reverse dynamic pricing process. So we don't have to change the per month fee.
We don't even have to change the per credit fee. What we can play with is using data from hundreds of data points to to be able to identify what is the credit cost of an event. So you, who might tend to go to music festivals at an average $50 per festival, or use that example, somebody else might actually prefer food and wine festivals at a $200 per ticket typical concept.
I'll know over time, what is my lifetime value of you as a customer? I'll know how much I want you engaged in the activity. And I may choose to offer the same event to you for slightly different in credit pricing than I might somebody else based upon all your behavioral aspects. Yeah.
And just to be clear, so I mean, at someone that buys 100 credits from you, right, for let's call it 100 bucks, make the math easy that then uses that on the food and wine festival that we just talked about, you're essentially making, you know, 30 cents per credit, right? Effectively, that's the goal. Yeah. Correct.
Well, what I'm saying is when you have any kind of super popular festivals that are typically going to sell out anyway, it's unlikely the rights holder is going to give us such a large discount to drive that. However, if you look at the collection of thousands of festivals, 80% of them go unsold. So, of course, Coachella is going to be very difficult to get a 30 percent margin on.
But in order to get it on the platform, we might do it for a 5 percent margin, knowing that they also are running 2000 other festivals and they'll get 50 percent margin on those.
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Chapter 3: How does FestivalPass differentiate itself from other marketplaces?
Lost leaders. Yeah. OK, give us some give us some metrics, if you can, on the consumer side. How many consumers have signed up for you to pay you at least a dollar? Yeah, I mean, it's different because we're in an early stage. I can't really put an exact amount. We have thousands of people who have signed up to engage in the platform.
We've really only started offering a collection of events very recently. So we can say less than 1K paid. Is that fair? Yeah, that's fair. Okay, cool. Now, how have you gotten the... This is like the most beautiful step in any startup, in my opinion, right? Over the first couple of months.
You said you've gotten several thousand to just at least sign up and express some form of interest, even if they're not paying. What mousetrap have you used to get that sign of interest? Sure, many. So we've started to test different marketing channels, right? So I come from a background where understanding cost per acquisition and data metrics are super important to me.
So we've been building kind of our network of media partners in order to engage in that. So we have some media partners that have tens of millions of emails that they're going to use on our behalf as we go into 2020 to engage on a local level to drive people. Um, we've begun testing a few different partner festivals where we said, come in and sign up for free.
Um, and you know, you'll get a free ticket to a taco and tequila festival in Los Angeles. Um, so we're using some of our partners, uh, tools in order to drive interest initially. Um, we also have, um, these partners are people like festival squad, one H these kinds of people. Well, 1H wouldn't be because 1H is more of an investment-based vehicle.
But Festival Squad, of course, yes, they wrote an article on us. I'm talking more of big media partners. We're working with a few that manage all the digital properties for hundreds of radio stations and hundreds of television and local television stations. What's in it for them? What's in it for them is the ability to create live content within their environment.
So we're going to begin to offer all of our inventory showcased within their media pages through which they can then sell advertising around. So it creates content for them. Interesting. Yeah, really interesting. OK, going to the flip side, how many organizations do you have? Sorry, how many events do you have committed to the platform? Yeah, so we have hundreds.
So there are some one-offs that have come on and want to be a part of it that we've put on. But we're also right now, we're in deep talks with numerous of the big guys. I guess I could talk about strategic relationships, even though they're not finalized and closed. But we've been talking to iHeartRadio for months upon months, and they run 20,000 events online.
across different cities throughout the year. We're working to get them on the platform.
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Chapter 4: What types of events can consumers attend with FestivalPass?
Town Square Media runs hundreds of events. We're looking to get them on the platform. We're working on partnerships with other ticketing companies that already have tens of thousands of events to make their events available on our platform.
So we're very quickly, within this next quarter in 2020, there'll be thousands of events, and that's when we'll really kick in the marketing efforts to drive people. Just like any marketplace,
nobody wants to sign up unless there's a lot of product yeah i was gonna say you have the chicken and egg problem so your email to event to iheart media when they say who are you you're a small player why do we want to put our events on your platform your response is well we have media partnerships with 10 000 radio stations that are going to pump traffic in in q2 so you better get listed before they do that that is correct yeah and so you're kind of managing this two-sided thing now have you raised capital to help do this to give you some leverage or are you bootstrapping
Yeah, so we brought in some seed capital from some other entrepreneurs and strategic partners early on. We're in the process now of really closing out kind of a seed round. And we have a ton of interest in the institutional side for Series A. Since I've been an entrepreneur for 20 years, I've been through every type of capital raise you can imagine. I've done traditional VC.
I've done family office. I've done bootstrapping. I've done pure angel money. Ever used debt? Yeah, very much so. I have used that. And every entrepreneur has a dream on how they want to thread the needle to still maintain control and still find a way to not dilute the company.
So my perfect goal, I have a plan A, a plan B, and a plan C. So plan A is just finish out the seed round, which we should do in the next two weeks or so. Then we'll grow the lever of the marketplace into Q1, Q2. And then you're probably familiar with a lot of...
growth financing alternatives like ClearBank or Bravo or any of those guys, they have hundreds of millions of dollars sitting on the sideline right now to provide money for social media spend, for advertising spend. So ideally, I'd love to have an operating budget on one side that runs the company and then a growth budget that comes directly from low-cost debt capital.
So, you know, we can spend... The problem is that stuff is not low-cost, right? So a deal from ClearBank is going to look something like 1x your monthly revenues on a two-month term with an interest rate of 2% per month, right? I mean, that's on the bottom side. That's a 24% APR, essentially. That's expensive. It is. I would not go to 24%.
Some of the conversations I've had with providers like that tend to fall on the 6% to 12%. So anything over 15%, I wouldn't do. I have a lot of people interested in this kind of thing. I have spent a lot of time researching these costs of capital. I have not found somebody that's willing to provide debt capital to a startup at a 6% to 12% rate. Well, we'll see.
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