In a world that prioritizes experiences over products, keeping track of, and up-to-date on, the activities around you can be challenging. Where should you look for the events that will matter most to you? How often should you check back to see if or when events change? What other opportunities center around those you plan to attend that could also be of interest to you? These are all viable questions.  Keeping in touch with friends who have similar interests, and saving events on your calendar can help. However, Flowh believes this isn’t an adequate solution to this problem.

To address this opportunity and solve the problems inherent in the experience phase society is going through, Flowh has designed an interface that can search for, organize, and keep track of events that are important to its users. Management likens its system to Twitter.  The difference though is that instead of trafficking in tweets, they traffic in events. Instead of users, they utilize calendars as their medium for sharing content. In short, Flowh’s system operates as a personal event concierge that crawls public and personal calendars.  It then matches the events there with your personal interests and places the ones that you want on your calendar.

In terms of monetization, it has some users paying for its premium self-service dashboard. The monthly price is $15, while the annual plan costs $150. There are, however, other ways to generate revenue from the service. For instance, the company can use your interests to engage in target marketing. It does this in conjunction with event bundling. One example is if you go to a concert, they can alert you if the restaurant next door is giving away free or discounted food for patrons. Users who keep their tickets might be able to go down the street and, in exchange for their ticket stub, get a free beer. Another avenue for the firm to monetize the platform is by partnering with companies like Lyft. Management also envisions using the app to engage in event ticketing, affiliate marketing, providing professional services like calendar management, and more.

The company has been developing and operating its platform in Colorado for four years.  This is currently their only market. In the next five years, though, they believe they will grow into 125 of the 210 geographic markets in the US that have been identified by Nielsen. The first 12 of these markets will be achieved in the first year, generating $578,000 in revenue for the business during that timeframe. In Colorado today, the business has 5,000 calendars synched to its system.  They also have 150,000 events archived into their library. Despite all of this, though, their financial condition is disappointing. In 2018, revenue generated by the company was only $635. This was actually down from the $705 seen a year earlier. Its net loss, meanwhile, was $4,888 versus a $1,155 net loss in 2017.

Understanding Flowh’s market opportunities is a challenge. Technically, the firm can generate revenue through any form of advertising that’s directed to its users. In 2017, it was estimated that the digital marketing industry was a $192 billion a year market. By 2020, this is forecast to grow to $306 billion. That is only one piece of the pie though. You can place as many advertisements as you want on a platform but it won’t mean anything without a user base. Because of this, we view digital advertising as an opportunity, but one that’s second in nature to just having service users find value in. This narrows the picture some.

At the end of the day, the best market to place Flowh into is the Live Events space. According to Deloitte, the global live events and broadcasting industry was a $545 billion market last year. This can be narrowed down even further though, to a few select categories, as illustrated in the image below. Flowh doesn’t appear to have ambitions to get involved with content distribution and streaming.  This, then, slashes away most of what Deloitte was reviewing, leaving us with a few subcategories: Live performance (a $36 billion opportunity), cinema ($39 billion), exhibits and conferences classified as B2B events ($38 billion), and sports gate revenue ($33 billion). In all, this represents an opportunity for Flowh worth $146 billion per year, up from $141 billion, or 3.5%, a year earlier.

It is highly probable that moving forward, revenue associated with live events will continue to grow.  This is because 74% of Americans prefer quality experiences over buying desirable products. A different source looks specifically at Flowh’s target audience: Millennials. Based on that data, 78% of Millennials would rather spend money on an experience than on a product. 82% attended or participated in some sort of live experience in the past year, and 69% of them have expressed experiencing FOMO (fear of missing out). Since 1987, the share of consumer spending allocated toward live experiences and events relative to total US consumer spending has risen 70%.  In addition, when asked, 72% of Millennials expressed that they would like to spend more money on such experiences in the next year.

In order to grow their business further, the management team at Flowh is seeking a capital raise of between $10,000 and $240,000. The minimum investment being sought per investor is $150 and the company is issuing Class B common stock to investors coming in as part of this deal. These shares count as non-voting.  This means investing shareholders are only coming on board for the ride, not with an opportunity to enact change over the business. The pre-money valuation proposed by management as part of this deal is $2.40 million.

There are two members that comprise the core of Flowh’s team. The first of these is founder Aaron Hendrick and the other is his co-founder Eric Darst. In Flowh’s marketing materials, it says that Hendrick handles the company’s UX work.  It also alleges that at a prior firm he was involved in $30 million per month in worldwide transactions. It is unclear which firm this refers to, but a look at his LinkedIn profile shows that he currently is employed at a company called OnPoint.  There, he serves as its Senior Software Engineering Manager. In fact, he seems to have formally left Flowh in December of 2017. Other experience he has had included being a Senior Lead Developer at GTR Meetings and Events around the early days of his time working at Flowh.  He has also served as an Engineering Manager at a firm called Tillster.

Darst, then, appears to be running Flowh today, where he serves as the head of operations, content, and sales. Flowh’s marketing materials say that he built three technology companies over the years, two of which were sold. One of these had sales in excess of  $17 million per year and employed 70 workers. What we do know for sure is that he used to be CEO of a company called Energy Garden.  Its focus was on promoting efficiency and sustainability in the residential sector through the products it sold. He was also a President at Layer Dynamics, an online video advertisement business.

Conceptually, Flowh has a lot going for it. The company’s premise is intriguing and the industry it is seeking to tap is significant in size and is growing. In all, if the company can establish a foothold as a unique new form of social interaction, there may be attractive opportunities for it.  However, there are too many red flags for the good to outweigh the bad. The current portrayal of Hendrick with the business is either a sign of laziness on management’s side, or it’s intentionally misleading. This is only a small matter though.

The more egregious issue involves the company’s traction. Both Hendrick and Darst founded the company back in 2011. It has taken the firm 8 years to get here, and in the four years it has operated in the Colorado area, it hasn’t created a robust following. This can be seen by the two years of financial records that show, in each year, sub-$1,000 in revenue. A startup that has at least two years of sales under its belt is not indicative of a company. It’s evidence of a hobby. On top of that, it’s hard to see the path forward from there to a firm worth $2.40 million on a pre-money basis. If management can show some strong progress for 2019, this assessment might change.  But as it stands now, it’s difficult to justify this as a viable investment prospect. For these reasons, this has been rated an “Underweight Deal”

Analysis written by Chris Lustrino on October 29, 2019.