Taste Labs is raising an equity offering priced at $4.97 million. This is a relatively reasonable valuation compared to similar technology companies engaging in crowdfunded raises. Taste Labs has been operating for several years, has a user base that exceeds 500,000, and owns a large proprietary codebase. On the other hand, the company’s revenues are low (just $63,000 in 2019 with no indication of significantly higher income in 2020). The combination of these factors results in Taste Labs’ medium-high price rating. 

Taste Labs offers one of the few products that virtually anyone is eligible to use. Almost all consumers engage with some sort of media, and almost everyone is struggling to choose what to consume next with the huge quantity of options out there. As a result, Taste Labs’ addressable market is theoretically the entire world. It’s important to note, though, that worldwide interest does not necessarily translate to worldwide monetization. Taste Labs’ obtainable market of users who would actually pay for a subscription to the app is significantly smaller, particularly because services like Yelp and Rotten Tomatoes are free to access. Yelp surpassed $1 billion in revenue in 2019, which likely represents the ceiling of Taste Labs’ revenue potential — and even that success would take years to achieve. Nonetheless, because Taste Labs’ product is relevant to almost all consumers, the company’s market rating is its highest. 

Taste Labs was co-founded by John Lin (CEO) and Justin Messina (CTO), both experienced in marketing and technology. Lin worked for almost 10 years as a digital strategist and head of UX for a marketing agency, servicing accounts like Xbox and Starbucks. He then served briefly as the head of product design for MadeClose before founding Taste Labs. Messina has a more engineering-focused background. He has almost 15 years of experience as a developer and worked for two of the same companies as Lin (the marketing agency and MadeClose) before collaborating with Lin to found Taste Labs. 

Taste Labs’ co-founding team is strongly qualified to build a product like the Taste recommendations app. Lin lends deep expertise in marketing and product design, helping the company to acquire users. Messina is the technical architect of the product. In addition, the co-founders have a solid history of collaboration in previous roles, which likely makes their working relationship smoother. Therefore, Taste Labs’ team rating is quite high.

Taste Labs’ biggest weakness is its lack of differentiation when compared to mainstream review and recommendation apps like Rotten Tomatoes, Yelp, and more. Taste is trying to position itself as the only all-in-one review app, spanning not just entertainment but also fashion, live events, and more. However, it competes against all of the specialty review apps in each of those domains. Consumers could reasonably assume that a specialized restaurant review app like Yelp would be a better place for a night out recommendation than Taste Labs and that specialty fashion apps like Stitch Fix or Poshmark have better clothing recommendations. 

From a purely product-based perspective, Taste Labs does bring a product that’s quite different from competitors. However, the concept is also not very defensible, and it could be a short leap for any of the major competitors that Taste Lab faces to branch their reviews and recommendations out into other sectors. Balancing all this together, the differentiators score for the company is slightly above average.

Taste Labs began as a bootstrapped side project and has grown admirably into an app with hundreds of thousands of users. From its movie and TV recommendations engine alone, Taste gained more than 500,000 registered users who view the app roughly 5.8 million times per month. The Taste app has also garnered more than 3,500 five-star reviews in the App Store. User acquisition seems to be driven primarily by ads, which are reportedly generating a 289% return on ad spending. These figures are a bit rosier than Taste Labs’ financial performance. The company generated just $63,123 in revenue for 2019 and hasn’t reported 2020 financials. Notably, the company posted a very large net loss in 2019 — more than $530,000. These mediocre financials balance out more impressive product metrics for a net performance rating that is middle-of-the-road.

Taste Labs has the ambitious goal of becoming the leading all-in-one recommendation app for any type of media or product that consumers might contemplate watching or buying. It’s just not clear, though, that the world really needs that app. Isn’t everyone already receiving the reviews and recommendations they need from domain-specific apps like Yelp and Goodreads? The company’s additional pitch is AI-powered recommendations based on reviews from “similar” users, but even that value proposition is matched by several other recommendation-generating products. It seems like Taste might struggle to carve out a foothold in a crowded industry, and it’s also a negative signal that the company is burning massive amounts of cash on very little revenue. Overall, there just don’t appear to be enough strong signals yet that Taste is destined to be a lucrative opportunity for investors. 

Taste Labs was founded by an experienced marketer and an experienced engineer, and they’ve managed to scrappily build a product with half a million users and strong positive feedback. User acquisition seems to be a strength of this team. Return on ad spending is high, and experiments with affiliate marketing (for product-oriented recommendation categories) are promising for future monetization. As the Taste app continues to expand in its quantity of review data and categories of recommendations, it seems like Taste Labs has the potential to continue expanding its user base and developing a more profitable business model. In addition, the company’s core AI-enabled technology could be a lucrative asset to a future acquirer. An exit probably wouldn’t be tremendously lucrative, at least at this stage, but could return a good chunk of change to investors that get in at this current reasonable price.

Taste Labs is building an all-in-one recommendation engine telling consumers what to watch, what to read, what to wear, and more based on reviews from people with similar preferences. The company launched with a movie and TV recommendation app, which boasts 500,000 registered users. Future expansions into additional recommendation categories — with the potential of affiliate marketing for products promoted on the app — are promising for future revenue potential. 

On the other hand, Taste Labs is competing against a large collection of specialized review apps that are already trusted leaders in finding someone’s next movie, book, armchair, or pair of jeans. Taste’s goal to become the leading source of recommendations across all of these categories is an extremely ambitious goal, one that will likely require significant time and money. The company’s burn is high, with a net loss of over half a million in 2019. Therefore, Taste Labs has been rated a Neutral Deal. 

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