OpenTable for the $27 billion U.S. nightlife market
We built Discotech to solve a problem that we were facing ourselves when we were trying to go out. In our mid twenties, we were frustrated with dealing with club promoters to get access to nightlife venues. We believed that we could leverage technology to create a more seamless way for people to go out, and Discotech was the result!
Ian and the team at Discotech have developed an innovative, revenue-positive business. The team has disrupted the large nightlife category and is poised for growth. They are great at UI and growth hacking. They have also pivoted well to include nightlife ticketing.
SVP of Skyview Capital, Member of Tech Coast Angels
Founded in 2012 by three UC Berkeley alumni who were tired of being exploited by club promoters, Discotech serves as a one-stop "virtual concierge" that helps users find events, buy tickets, book tables, and RSVP for guest lists.
I've never met a team that hustles harder than Discotech. These guys know their problem, know their market, and are relentless in building the relationships and products that will solve a two-sided pain point. And as they gain scale, their two-sided platform only becomes more valuable and defensible.
Founder and CEO of Grove Collaborative
Discotech is so easy to work with. They provide quality general admission guests and table reservations on a consistent basis.Their technology is easy to integrate with and their back end is built to data-mine important customer information. On the consumer side, their app is fast, easy and reliable. The customer service they provide the nightclub goer is second to none, and is a great representation of our standards. We love working with Discotech!
215+ investors since our founding
Early-stage venture capital firm based out of Santa Monica.
Strong Ventures is a seed fund, based in California, that finances, supports and mentors Korean/Asian/Global entrepreneurs, empowering them to build strong ventures and to break successfully into the global market.
Mike Jones (SCIENCE)
CEO Science- Dreamer, Leader, Father, Husband, Explorer - Former CEO Myspace, Userplane, Living Human
Tech Coast Angels
Tech Coast Angels, www.techcoastangels.com, is the largest angel investor group in the United States. Its members provide funding and guidance to more early-stage, high-growth companies in Southern California than any other investment group.
Seraph Group is an early-stage venture firm that offers investors a diversified portfolio of technology startups, and entrepreneurs between $100K to $2M in seed and early stage capital.
HIVE Seed Fund
We invest in daring Armenian entrepreneurs who build global companies
The 65,000+ nightlife venues in the U.S. depend on club promoters: middlemen who take their cut of the pie and operate primarily through word-of-mouth. These 100,000+ individual promoters are highly fragmented, difficult to manage, unreliable, and difficult to scale.
Promoters Don't Work
They are independent, take large commissions, and can only promote up to a handful of clubs at a time. Pricing is opaque and inconsistent. Most importantly, it is difficult for customers with no pre-existing contacts to get access to these promoters.
So, We Built the OpenTable for Nightlife
Discotech is highly scalable, with already 1,000+ nightlife venues (clubs, lounges, bars, concert venues, music festivals, pool parties) available in one platform. Pricing is transparent and predictable. Our venue partners can track customer count and prepare appropriately.
How it Works
All available club events in one list
See where your favorite DJs are spinning
Check out where your friends are going
Filter by music type, bottle price, free guest list, etc.
Sign up for free/discounted guest lists
Buy tickets directly on your phone; no printing required. Get access to discounted promos
Reserve VIP tables instantly
Our Customers Love Us
Discotech has a 4.9/5 star review on both iOS and Android app stores, with over 6,000 combined reviews.
The Largest Network of Nightlife Venues
We have successfully partnered with the best clubs and nightlife venues in the U.S. We have over 1,000 venues running their inventory on our platform, and are present in over 50 cities. We have the largest collection of nightlife specific merchants in our industry.
Proven Revenue Model
Discotech has been generating revenue since our iOS launched in 2014. We currently monetize the three different channels of admission on our platform - VIP Table Sales, Ticket Sales, and Guest List Commission. Our revenue has grown steadily year over year with little advertising spend. We finished 2019 with ~$7M in gross revenue, and ~$875K in net revenue. (Our gross profit is roughly $850K)
While our business does have seasonality, our summers are busier and our winters are slower, our company has demonstrated consistent growth each year.
User Adoption is Accelerating
We are adding more new users each year. It took our company roughly 5 years to get to 300,000 users. It then took less than 9 months to go from 300,000 to 400,000. The vast majority of our growth is organic. Because our customers love our product and service, the more users we have the faster that we grow via word of mouth.
Party Like a Pro
The nightlife space has long been plagued by inefficiency and non-transparency. As avid nightlife customers, the team here at Discotech has firsthand experience challenges of working with promoters and going out to hit the town. These negative experiences made us realize that there was an opportunity for technology to streamline the going out process.
Over the last 6 years, we have demonstrated that our business model works. We are now looking to take our company to the next level. This round of funding will go towards scaling our user-base and revenue, as well as developing innovative product features.
Going out with your friends is fun, but planning a night out is anything but. At Discotech, we believe that the nightlife industry is overdue for disruption and that we are part of the solution. We invite you to join us now as an investor and help up make nightlife better for everyone.
Ian, Mark, and Ian
What does your company do?
Discotech is a free mobile app and website that makes it easier for customers to discover events, reserve VIP tables, purchase tickets, and gain free guest list admission to nightlife events in different cities. We are the OpenTable for Nightlife. Our service makes it easier and more transparent for people to explore nightlife events without having to know a human club promoter. With Discotech, you can now browse through over 1,000 clubs in 50+ cities and enjoy the night seamlessly.
Where will your company be in 5 years?
Realistically, we would like to sell to a strategic acquirer within the next 3-5 years. We believe there are 3 channels that would make good acquisition channels: 1. Existing reservation platforms (Booking.com, Expedia, OpenTable, AirBnB). 2. Ticketing companies (EventBrite, LiveNation, AEG AXS). 3. Hospitality/Concierge Companies (i.e AMEX). Before this happens, we would like to continue to scale our venue partners and user base. We need to go from 400K users to 4M+!
Why did you choose this idea?
We built Discotech to solve a problem that we were facing ourselves when we were trying to go out. In our mid twenties, we were frustrated with dealing with club promoters to get access to nightlife venues. We believed that we could leverage technology to create a more seamless way for people to go out, and Discotech was the result!
What are you building?
Discotech is a platform / marketplace for nightlife experiences. We have developed 3 platforms for distribution, our iOS app, our Android app, as well as our web application.
We are also building a B2B white label solution which enables other companies to sell our inventory to their customers. Our goal is to partner with other travel, hospitality, and ticketing companies to help us sell our nightlife inventory to additional end customers.
What’s the problem you’re solving?
We are tackling the inefficiency and non-transparency that has been plaguing the nightlife space. People currently have to go through these nightclub promoters, traditional middlemen who are very hard to get in touch with and aren’t professional or very transparent when it comes to pricing. Our app and website makes it a lot easier for our customers to get the information they need, such as accurate pricing, floor plans, menus, etc. Ultimately, Discotech makes it easy for customers to buy tickets, make table reservations, and get access to guest lists without needing to go through human promoters.
Discotech also leverages our scale to negotiate exclusive deals such as ticket discounts, VIP table packages, and guest list perks to pass onto our customers. We save our customers money, time, and effort. I think our customers appreciate this because we have a 4.9 star review on both our iOS and Android apps.
What problems are you solving?
Not only are we a good solution for the end customer, but we also make things a lot easier for the nightlife venue. Club owners/operators find promoters to be a pain point. There are a lot of them (promoters), they’re highly fragmented, there is high turnover, and their loyalties are not steady. We make it easy and streamlined for the club to source customers without having to interface with so many different middlemen. Discotech is a non-biased marketplace, and we are much more professional to work with.
What do you have that traditional promoters don’t?
There’s a lot that we do that traditional promoters cannot do. One of the main differences is access to data analytics that comes with our app. We are able to see trends and analyze data based on which DJs are hot and which shows are successful. We can do a lot more for the club in terms of these data analytics but we can also help them as a CRM system because we can reach out to our customers via push notifications which clubs cannot do themselves.We also work with clubs in Los Angeles to provide an exclusive loyalty platform where our customers are able to accrue loyalty points and, just like airline miles, exchange them for rewards. The clubs allow us to do this because they trust that we can keep accurate tabs on customer spending whereas a human promoter may not be the most trustworthy.
How will you incentivize referrals?
We don’t currently have a referral reward system but it’s something that is very high in our to do list. We really want to go the Uber and Dropbox route where customer can get rewards or get incentives for sharing Discotech with their friends and also for inviting people to the party and doing different actions on the app.
How did you guys get started?
The idea for Discotech really came to us as a team. We’re three guys from UC Berkeley, friends since college. None of us worked in the nightlife space so the idea came to us from the customer’s perspective. I think four or five years out of college, we were convening together in Las Vegas and we had spent a couple of hours tracking down different promoters and talking to them. We finally agreed on a price and then on the night of the event, we showed up as scheduled and we were told that our promoter had misquoted us. We don’t know this was an intentional bait and switch or if the promoter had just made a mistake.Either way, we were in a really tough spot. We actually ended up paying the extra amount that night but all the guys were just furious. We weren’t really having fun because we were bitter. While we were having drinks, we were just talking about how bad it tasted and it was really that experience that inspired us to search online to see if there was a company that was already solving this problem so that we as customers wouldn’t have to deal with this again.It was during that exploratory phase back in, I think 2013, that we saw there wasn’t anyone really solving this problem in a meaningful way by leveraging technology. We decided to do this as a side project at first. We built a demo for some of our friends and then got a lot of approval from the big nightlife players in Los Angeles where I was based at that time. It was from that point, we realized that this thing had legs and we quit our full time jobs and the team moved from San Francisco down to LA. We’ve been hustling ever since.
Who are your customers?
Initially, when we started the app, we were focused on solving bottle service only so that target market was much smaller--typically wealthy males who spend a lot of money. We’ve since democratized the product, added on prefilled ticketing to our app, and also VIP guest lists. From there, we now target anyone who wants to go to a club at any point whether they want to get them for free, whether they want to pay for a ticket or whether they want to do the VIP bottle service which is the high-end package. We really make it accessible to everyone. Our demographics are split pretty evenly, slightly more men than women but it’s pretty close to 50:50 now. We see people of all sorts. From ages 21 to 35, I’d say is our target group but really people of all ages.
What’s the market size?
Our address market currently includes: Nightclubs, lounges, bars, music festivals, concert venues, and pool parties.
IbisWorld estimates the US Bar + Nightclub industry to be worth $27B domestically. Statista estimates the US Music Events Industry to be worth 8.6% domestically and is growing at 12.2% YoY.
While not all bars are relevant to our platform, and not all live music events are addressable either, our overall market is very large in the U.S alone. Discotech is already live in over 13 countries, so the global addressable market is quite considerable.
How do venues use your app?
To get on board the app is pretty straight forward. Once we give them the go-ahead, we simply need them to fill out a two-page venue sign up form which we provide online. The venue provides us with high resolution images that then get loaded into our platform. In regards to getting weekly event info, we either scrape them directly from their event APIs, if they have them, or we have a scraper built that pulls them automatically from their website.
How do guestlists work?
Every club is slightly different but for the most part at a certain time, we provide the club with a list of names for the guest list and that list is literally printed out or the doorman will have it on an iPad and then as customers come in, they’ll get checked off the list and then they’ll be given free admission or discount admission--whatever that guest list perk should be. Bottle service works the same way.
How does your app attract customers?
We offer services that no other traditional promoter could. We have the most efficient, streamlined system out there and we give customers the experience of being treated like high status royalty. For example, in Vegas, because there are a lot of venues, we will actually provide the customer with a dedicated VIP host who will contact the customer and set up a time to greet them in front of the venue. The host will then walk them into the club so that they don’t have to wait in any line. They’re getting the highest VIP experience. At other clubs, we book tables for them. They’re in the system, and then when people show up at the door, they’ll check in with their first and last name and just pay at the venue.
What can you do that traditional promoters can’t?
One thing that we do that a traditional promoter can’t do is actually just sell tickets, pre-sell tickets. The incumbent way of buying tickets would be to go to different websites and checking out the prices and then purchasing them online. We make it very easy to buy tickets in a few clicks. The QR code is stored on the app so you don’t need to print anything out or find it in your email. This makes it very easy since there’s a scan at the venue that reads the tickets that you bought on our app.
How did you guys start onboarding venues?
We launched and started off in Los Angeles. From LA, we branched into Las Vegas which is the largest market in the United States. That was really done through the connections that we made here in LA. For Las Vegas, the team actually moved to a suburb of Las Vegas near the strip. We lived there for seven months. During that time, we on-boarded all the major players in Las Vegas onto our platform.
The sale process initially was a lot more difficult. Getting the foot in the door wasn’t that easy when we didn’t really have traction in customers and customer referrals to back us up. Once we are able to get the foot in the door, the sales process is pretty straightforward. There’s really no risk for the club to be a part of our app because we don’t take an upfront subscription cost or a service fee. We only eat what we kill, the same way that traditional promoters do. For that reason, when we make the presentation to the clubs, they’re pretty receptive to us because they don’t really have anything to lose.
After we started to get more traction, it became much more easy for us to sign up venue partners. Most of our new venue partners today actually come to us. (They reach out via an intro, or they apply directly via our website). We have also signed up much larger enterprise partners such as EventBrite, LiveNation, Insomniac, and AEG AXS.
What’s the growth like?
You can check out the growth rates in our deck!
Who acquires the user base?
The vast majority of growth comes from organic sources. Word of mouth is definitely our number 1 source of growth. Search Engine Optimization (SEO) is our second largest source of growth, we rank very highly for many search terms on Google. This is due to the fact that we have many venue partners, have a lot of unique content on our website, and because we have been in business for many years. We also acquire customers through paid marketing channels (mostly digital), though this is a smaller piece of our growth strategy now. Lastly, we also throw Discotech sponsored events from time to time to grow our brand and awareness.
What’s the value per customer?
Our average LTV for customers now is between $9-$10.
How much do you guys make?
As far as we know, it’s pretty comparable to what promoters make. Right now, we are much more focused on growing users and building relationships with the clubs rather than maximizing our cash flow. We’ve kind of taken what was given to us, and we’re usually making between 10-15% commission on the traffic that we bring in.On the revenue side, growth has been great. Year over year, I think we’ve grown over 3x from where we were. I think around January of this year, we were probably doing around $100k in gross merchandise volume a month and now, we’re doing over $100k a month. We’ve definitively come a long way and we see that number continuing to grow especially as we gear up to launch our web app which we think will show an increase in our metrics.
How do you plan to grow and expand?
For us, we haven’t really been leveraging digital and paid marketing just because we’ve been very conservative and lean as a startup. We’ve been bootstrapping it. Where we really see the growth coming in is as follows:Continue to invest in the product, building out social features because nightlife is ultimately a social activity. You never do it by yourself; it’s something you do with your friends and the ability to see where your friends are going, invite your friends to events or parties--these are all part of the experience. Building in a referral program is something that we think would supercharge this organic growth that’s really been taking off for us.We want to get back involved in digital marketing and paid advertising. One of my co-founder’s backgrounds was doing that for five years at Zeus which is the online dating site. We think that we can do it in a very calculated and efficient manner. Lastly, we think that hiring the right people to help with community engagement, management, and social media would also be a big help for us because currently, we don’t have the human resources to really take full advantage of that and that’s something we’d like to look into.
Have you focused on specific types of nightlife venues?
We’re pretty agnostic. We like to start with the best clubs, the most popular ones in each city, largely because once you get the big guys on board, that addresses the most customers and other venues will typically follow if you get the big players on. They’ll say, “if you’ve got those guys then I need to be on this app, too.”
What’s the biggest challenge for you guys?
The most important thing for us is getting the users. I think we got the club on-boarding part down, at least for now. I think the hardest thing is just getting the word out, building a brand, and communicating that brand to our customers. Once you have that initial critical mass, things definitely get easier because when you’re discovering Discotech from your friend, you’re much more likely to trust that brand and that product than if you just saw it on a Facebook mobile ad or a Google ad. For us, we want to do things that build a strong initial following and then grows off of that. We want to take the strategy that we’ve used in LA and apply it in the different new cities that we’re launching in.
What are your plans for the future?
There are a lot of plays that we can do that don’t currently exist. For example, a “Hotel Tonight” type of play with last minute deals because ultimately, a club operates very similarly to a hotel. They have a lot of overhead but selling a table or selling a hotel room doesn’t really have any incremental costs for them. They’re all about filling up that inventory. With the right data and the right connection to the customers, we can help clubs fill out, unfold inventory and have dynamic pricing like Uber.We want to incorporate surge pricing based on demand and inventory remaining. I think that is a really cool opportunity that would be disruptive in the space. People might possibly even bid on certain tables with customers being able to bid down or up. That’s something that doesn’t really exist today. For us, we also just want to make it a one-stop shop where people from different countries can get on one app and just make it very easy for them to get information and get onto the platform.There’s actually a few other potential things that we could be doing with the technology that we have. One of them is leveraging location based technology. For example, if you’re on the strip and you’re walking around and we know you open the app, then we know which clubs that you’re closest to. We could send you an exclusive deal or package. If it’s close to your birthday and we know that information, we can ping you in advance with a push notification offering you a special from the club that has birthday specials. There’s definitely a lot that we can do with customer data and location data to help with hyper targeting.
Who are your competition?
We are the largest nightlife specific marketplace / app in the space. Historically, our largest competitor was TableList, which is based out of Boston/NY. However, they have pivoted away from their consumer facing app after they got brought down by their involvement with Fyre Festival. (You can google this pretty easily) They are now focused on building out a back end venue management platform, and we have actually partnered with them as affiliates.
Many of our other direct app competitors have closed shop. You can see the competition slide in our deck to learn more.
Tell us about the team.
The team is comprised of three founders. All three of us are UC Berkeley graduates, class of 2008. I (Ian) graduated from Berkeley with a degree in industrial engineering and business, and then started my professional career at Banning Company which is a management consulting firm. My office was based in San Francisco. After two years there, I moved down to LA and joined a medium sized private equity firm called The Gores Group which I believe had between $4-$5 billion of assets under management. Spent about a year and a half doing traditional M&A due diligence, mergers and acquisitions and then from year 1.5 to 2.5, I transitioned to an operational role at a couple of their portfolio companies.
Our CTO Ian Bushong is an electrical engineer computer scientist graduate from UC Berkeley. I think he’s a region scholar and he started his career at a company called Ambarella. They’ve since gone public. They do semi conductor chips and software for video processing hardware and their biggest customer is GoPro. Our third co founder is named Mark Wu. After graduating from Berkeley with degrees in business and economics, he joined Zeus which is the online dating company and there, he specialized in digital marketing, user acquisition and search engine optimization.
As CEO, I handle most of the business development for the business. Mark who’s our COO does a lot when it comes to design and helps with product management. Ian Bushong, our CTO, manages the product and the technology. We’re bringing on another full time developer very soon who is the former co-founder and CTO of a tech incubated company called Planted that raised over a million dollars. We’re really excited to be bringing him on board because he’s got a lot of relevant experience and we think he can hit the ground running. Then we also have interns who help us with operations and marketing. We also have contractors who helped us with tech development products from time to time as well.
At a Glance
to December 31
Short Term Debt
Raised in 2016
Cash on Hand
Discotech Inc develops and distributes the mobile application, Discotech. Discotech is a free to download application on iOS and Android platforms that allows users to browse events, reserve tables, purchase tickets, and sign up for VIP guest lists at nightlife venues in different cities. Discotech is currently partnered with over 130 nightlife venues in Los Angeles, Las Vegas, Miami, San Diego, Orange County, San Francisco, and New York. We make it more efficient and transparent for our customers to make plans and enjoy a night out.
Our company generates revenue from commissions we earn on table reservations, ticket sales, and guest list traffic that are sourced or transacted on our mobile application. In 2016, commissions from table reservations has comprised 76% of our company's net revenue. Guest list and ticket sales comprise 19% and 5% of our total net revenue respectively. In 2016 to date, we have generated approximately $153,000+ in net revenue off $1,350,000+ in gross merchandise volume.
Our table reservation feature generates between a 10% and 20% commission on the gross spend of our end customers depending on the nightlife venue that we are partnered with. When a customer reserves a table on Discotech, we book the table on behalf of our customer with the nightlife venue, and then we follow up by providing confirmation and instructions to the customer. The customer ultimately checks in at the venue under their name, and pays for the table at the venue. (You can think of this service as "OpenTable for Nightlife") For payment, Discotech receives commission from our venue partners based on a percentage of our customer's gross spend. For ticket sales, Discotech handles the transaction directly on the platform. We sell tickets at face value + service fee to our end customers, who receive a digital ticket and QR code which they can use at the door to gain admission to the event. Discotech returns the face value portion of the ticket back to our club partners, and keeps the service fee as our commission for the transaction. Our ticket prices are always less than or equal to the price of tickets that are available directly on a nightlife venue's own website. Lastly, for guest list admission, we allow customers to add their names to a club or lounge's VIP guest list. At the venue, our customers can check in with their first and last name to receive free or discounted admission to the event. For generating this foot traffic, our venue partners pay us between a $3-$5 commission for every guest that checks in via our guest list.
Our team originally founded Discotech in March of 2013 to disrupt the bottle service reservation process. We launched our product on iOS in December or 2013 and started to acquire users and generate revenue shortly thereafter. Despite having some initial traction, we were unsatisfied with our rate of growth in 2014, and so we "pivoted" to add VIP guest list sign ups in the Fall of 2014, and then we added pre-sale ticketing in March of 2015. After we launched these 2 new features, we started to see our organic growth and overall traffic pick up in a meaningful way. The last few months in 2016 have all had very exciting milestones for us:
March 2016 - Financial breakeven month
April 2016 - Discotech surpassed 50K total registered users
May 2016 - First month where we surpassed over $300K in monthly GMV (Over $30K in net revenue)
June 2016 - First time we had over 5,000 new user sign ups in a single month
Overall, we are seeing strong momentum and growth in 2016. All of our key performance metrics have been trending consistently upwards, and as mentioned, we hit a major milestone when we reached breakeven in March of 2016. Below are some of the key trends that we are tracking:
Monthly Gross Merchandise Volume (GMV) grew 190% from December 2015 to June 2016. ($119K to $286K in 12/15 and 6/16 respectively)
Monthly net revenue grew 184% from $11K in December 2015 to $31.5K in June 2016
Our EBIT went from negative to positive this year. (Grew from -$2.2K in January 2016 to +$17.5K in June 2016)
New User Registrations per month grew 138% YoY from December 2015 to June 2016. (2.1K vs. 5.0K)
Monthly active users grew 95% from December 2015 to June 2016 (8.2K vs. 15.9K)
Total registered users are up 57% between December 2015 to June 2016 (38.8K vs. 61.0K)
Unique monthly website visitors up 170% from December 2016 to June 2016. (13.2K vs 35.8K)
In the immediate future, we expect to see continued growth through the summer season. We expect to see our performance slow in the Winter of 2017, before expanding significantly in the Spring of 2017. (We have seen this pattern in the previous two years we have been in business) In addition to the strong organic growth that has been gaining momentum month over month, we believe that a future catalyst to our growth will be the launch of our web app product. Currently, our website is purely a lead generation platform to our Discotech mobile app. Visitors to our website are unable to create accounts, reserve tables, or make transactions on the website. To date, we are seeing over 2x as many unique visitors to our website compared to our mobile app. We believe the launch of our web app will result in a step function increase to all of our key performance metrics. Through the next 2-4 years, the management team forecasts continued YoY growth as we expand our app to new cities domestically and internationally. We also believe that new feature releases will be a source of continued growth and monetization. While the team is relentlessly focused on growing the business, our ultimate goal is to sell the company to a strategic buyer when the timing and opportunity are right.
The following trends or uncertainties could affect our financial condition, including the liquidity, cash flow and capital resources described below:
Economic downturn - Discotech, along with the nightlife industry, are susceptible to changes in discretionary spending and broader macro-economic shifts.
Competition - Although the industry does not currently have any strong technological players, we could see this shift over time. Additionally, it is possible that a larger player from an adjacent market (such as OpenTable or Priceline) may enter into our space. While we think that these players are more likely to acquire players, there exists a non-zero chance that they decide to enter the space organically.
Legislative Changes - Any legal changes surrounding alcohol consumption or nightlife regulation has the potential to negatively impact our business.
Talent/HR - any significant changes to our management team or developer team would have a significant impact on the productivity of our business.
Discotech currently has $172K in cash, $21K in accounts receivables, and $2K in current liabilities. The Company's networking capital is $191K. We are not currently burning cash on a monthly basis as our gross profit surpasses our expenses. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve capital and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts, certificates of deposit and money market funds that are currently providing only a minimal return.
We anticipate using our available cash and the proceeds of this offering to expand our team and to invest in user-acquisition. Our most pressing hiring needs are for software developers and full time customer service/business development employees. Additional cash in the war chest will be used to acquire additional users via digital marketing, promotions, and SEO improvements. Discotech has a very disciplined and bottom-line focused management team, and we do not anticipate running our business with a burn rate which would put our company at risk of running out of cash. Although the proceeds of this offering are not necessary to the viability of our business (we are already profitable), it will be integral for: 1) Developing a functional web app, 2) Developing new features to our mobile application, and 3) Expanding to new geographies. We believe that building a new product line, improving our existing technology, and expanding to new cities will result in significant growth to all of our key metrics. Ultimately, we believe that this investment will have a positive ROI in the form of greater positive cash flows, and a boost to our multiplier when we exit the business.
Our cash held as of July 25, 2016 is 84% greater than cash held as of the same date in 2015. This increase resulted primarily from new investments (new convertible notes and SAFE notes issued) and improvements to our business operations in 2016. We saw our cash position decline between July 2015 through February of 2016 since we had not yet achieved cash flow break even.
Cash flow from the Company's operating activities are derived from net income/losses and changes to our accounts receivables.
Net cash provided by operating activities was -$133,433 for the year ended 2015, which was driven by a net operating loss of -$104,910 and a $28,523 increase in accounts receivable.
Net cash provided by operating activities was -$121,096 for the year ended 2014, which was driven by a net operating loss of -$117,623 and a $3,473 increase in accounts receivable.
We have financed our operations over the past few years through convertible notes that we issued in 2013 and 2014 to the sum of $405,000. In March of 2016, our business operations became profitable, so we are also funding Discotech now through the cash flow that is being generated by our core business. Discotech does not currently use, and has never used a revolving loan facility or bank loan - we do not have any long term debt.
Operationally, our total net revenue increased by $81K, or 227%, from 2014 to $117K in the year ended 2015. This increase was primarily driven by an increased customer install base, which increased by 160% from the prior year (14,892 at year end 2014 to 38,780 at year end in 2015). We have enjoyed our fastest growth in 2016. We have generated over $60K in net revenue in the months of May and June combined, and we are expecting to drive $40K in the month of July.
Our overall direct costs of revenue increased by $9K, or 114% from the prior year to $16K in the year ended 2015. This was largely driven by an increase in ticket revenues, which grew 137% from $8.2K in 2014 to $19.6K in 2016. Ticket sales are the only revenue stream that have a direct cost of revenue associated with it. (Table revenue and guest list revenue are purely commission based, so no direct costs are associated with these transactions)
We expect these trends to continue in the current fiscal year and in the coming few fiscal years. The key driver to our growth stems from the number of new users that we are able to onboard onto Discotech. In 2016, we have seen our new downloads skyrocket through word of mouth and other organic channels. As our user base continues to grow, the virality of our product grows alongside it as there are now more people to share the app with new potential customers. Furthermore, Discotech is constantly investing in our product and developing new features that will improve our customer experience. We believe that this will result in greater virality of our product, higher engagement rates, and greater monetization over time. As mentioned before, we believe that the launch of our web app product will be a significant boost to our business as it will allow us to target customers who are not looking to download a new app to book a night out. Over the past few years, we have demonstrated that there is a clear need for our product in the nightlife industry, that our customers love Discotech and are actively sharing it with their friends, and that we can generate revenue in a profitable manner. I believe that our team will drive consistent growth into the future, and additional capital will allow us to make smart investments that will supercharge our business.
A note from Wefunder. Unlike companies on the NASDAQ, early-stage startups have little operating history. Financial analysis is not as useful when there is limited data. It's more important to predict the size of the future market. If the founder achieves their vision, will enough customers pay the company enough money?
It's also common for fast-growing startups to lose money even faster: they are investing in future growth. In these cases, it's often better to check if the Cost of User Acquisition (CAC) is lower than the Lifetime Value (LTV) of that customer. If one spends $1000 today to make $10,000 over the next five years, that may be a smart bet. Amazon is a famous example of re-investing potential profits to maximize growth over 20 years.
1. Economic/Market Risks - Although the nightlife industry has been on a steady rise over time, it is susceptible to broader changes in the macro-economic environment. Because nightlife is often associated with the luxury and discretionary spend category, significant declines to the domestic/global economic health could reduce demand for nightlife spend.
2. Competitor Risk - There is a risk that larger reservation platforms such as OpenTable or Priceline could enter into our space. (We believe they are more likely to acquire into this space rather than start from scratch, but its a possibility) Furthermore, Discotech competes with other start ups that are also competing to disrupt the nightlife space.
3. Talent Risk - A key assumption to our growth is the ability to hire and bring on talent that will help us improve our product, operations, and marketing. Finding the right employee fit for Discotech takes time, and a delay in the recruitment process could hinder our growth.
4. Privacy Risk - Discotech stores customer data on our servers. While we treat this data with the utmost importance and take measures to safeguard this data, there exists risk of data breach / hacking that presents itself as a risk to our business.
The Board of Directors
CTO of Discotech @ Discotech
COO of Discotech @ Discotech
Investor @ Ocean Road Partners
Jeffrey Ian Chen
CEO of Discotech @ Discotech
Jeffrey Ian Chen
7,154,089 Common Stock
7,632,119 Common Stock
Past Equity Fundraises
Convertible Notes Outstanding
Related Party Transactions
Use of Funds
1. Hire full-time software developer to support our development of web application and new features for the app.
1. Hire 2 full-time software developers1. Hire 1 full time operations / business development employee
1. Hire two full time software developers2. Hire 2 full time operations / business development employee3. $100K Customer Acquisition and Marketing Spend
1. Hire two full time software developers2. Hire 2 full time operations / business development employee3. Light Customer Acquisition and Marketing Spend4. $60K salary per founder
1. Hire 3 full-time software developers.2. Hire 2 full time operations/business-development employees. 3. $60K salary per founder4. $400K Customer Acquisition and Marketing Spend
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Securities (or Amount) Authorized
Securities (or Amount) Outstanding
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