KC Underweight Deal: Wi-Fi When You Need It, But At What Cost?

Key Stats:

Summary

his week we are reviewing a new entrant to the equity crowdfunding world: HotSpotMe.

The startup is the owner of a mobile application conceptualized and developed by Robert J. Sabharwal for the sharing of a Wi-Fi signal.

It provides the users on-demand access to Wi-Fi connectivity wherever someone has the HotSpotMe app. One can think of it as the “Uber for WiFi” as it allows users to share their internet connection and earn money in return.

Technologically, we find the idea intriguing. However, one wonders whether there was a problem that needed to be addressed?

Wi-Fi is available practically everywhere in the US and there are hardly any people who do not hav e an internet connection on their smartphones. Most smartphones have a “hotspot” option which turns the mobile device into… that’s right a WiFi hotspot.

Which begs the question: Who is the target audience for HotSpotMe?

Let’s us take a deeper look into the concept of HotSpotMe and see if our initial concerns as to the use and growth potential of HotSpotMe cannot be addressed.

HotSpotMe: Raising on StartEngine

Is there a problem to be solved?

Mr. Sabharwal and his team have come up with a unique concept. The application will be able to provide on-demand wireless router-sharing service to those who need it – possibly in a pinch. The “hosts” register their router with HotSpotMe and get paid every time a user logs on to their network. However, our concern is that there doesn’t appear to be many people who need this service.

Simply put: Wi-Fi is no longer a luxury in the United States. Almost everyone has access to wireless internet connectivity. In 2018 the number of smartphones in the US surpassed 230 million. That’s in a country with a population of 320 million – including small children.

The company claims that people living close to cafes and restaurants can earn a lot by sharing their routers, but even this seems dubious: most cafes have free WiFi as well. We have to imagine, given the choice between paying for a HotSpotMe signal and free restaurant WiFi, customers will go with free.

Moreover, the HotSpotMe mobile application is currently available only for Android users while a vast majority of people own iPhones in the US. This further reduces the usability of HotSpotMe’s initial addressable market.

Limited operating history and revenues

HotSpotMe is an early stage company with a limited operating history. The valuation of the offering is not based on any concrete evidence, is hypothetical, and no projections can be made based on past performance.

This point, on its own, isn’t an issue: lack of operating history goes with the territory in the early-stage equity crowdfunding world. Our point is that when you have no actual results to point to the burden falls all-the-more on the concept or idea being pitched.

With no operating history under its belt and a concept that already makes us nervous, investors should be doubly cautious.

Uncertainty

As with any early stage startup, there are a large number of uncertainties associated with the future prospects of HotSpotMe. More specifically, HotSpotMe has only been able to complete a working prototype of the proposed mobile application.

Beta testing of the prototype is still pending. There is a chance that the patents turn out to be unenforceable or ineffective. This would significantly cut the potential revenues of the company as any success would quickly be replicated by competitors.

Price

The most critical concern regarding HotSpotMe application is its pricing. So, we put it to you dear reader, what would you be willing to pay for a WiFi signal?

We’ll add some context: most wireless services offer the ability to turn your smartphone into a hotspot. Some, like T-Mobile, do it for free. Others, like Verizon, do it with a subscription model charging around $10 per month. We already know how much WiFi at Starbucks costs.

Keep whatever figure you came up with in your head as we tell you that HotSpotMe’s management expects users to charge $0.50 per minute.

Even if there is a target market and there are individuals who would like to use the signal, we are highly doubtful that they’ll be willing to pay such a high price.

The reason for high pricing is that 72.5% of each transaction will be paid to the host – not unlike most of an Uber fare going to the driver. Thus, the application is mostly host-centered and can help them make money. However, we don’t believe that there will be enough users to generate significant revenues for hosts or HotSpotMe.

Rating

Given the exorbitantly high pricing of using the services, associated uncertainties and lack of identified market demand, we have assigned HotSpotMe an underweight deal rating.

Overall, HotSpotMe seems to be getting ready to cater to the audience that might not even exist. They are offering a solution to a non-problem. Its addressable market is further limited by the application only working on Android devices for the time being.

If you have any questions regarding the underweight rating of HotSpotMe, you can reach us at hello@kingscrowd.com.