Due Diligence For

CROWDFUNDING

Company Overview –

FlipWord created a chrome extension that teaches language by integrating learning into everyday activities.
*Souce: Republic

Company

Investment

Name: FlipWord Minimum Raise: $50K
CEO: Thomas Reese Maximum Raise: $500K
Company Founded: July 2015 Structure of Raise: Crowd Safe, 20% Discount
Location: Palo Alto, CA Valuation: $5M Valuation Cap
Crowdfunding Portal: Republic Minimum Investment: $20
Crowdfunding Link: https://republic.co/flipword  
Website: https://flipword.co/  

Review Overview

Positives Risks and Reservations
6,000 beta users with 50% retention rate on free accounts Currently the product is only available as a Chrome extension, Mobile app is targeted for release in 3 months.
$5B online language learning market Pre-revenue startup
Founders previous experience includes Facebook and Amazon Proposed business model where the paying customers are incentivized to cancel their subscription due to lack of activity. This could lead to a very high churn rate when monetized.

Solves a common problem

FlipWord is utilizing gamification which is a hot trend in the education market.
FlipWord is based in Palo Alto

Problem

Language educators and app developers have been scrambling to increase the effectiveness of their lessons by making learning more fun. Knowledge fades and review habits don’t stick.

Solution

Current:
FlipWord integrates effortless language learning into web browsing. They have created a chrome extension (and soon mobile app) that intelligently and automatically replaces a few words with the language you want to learn on every English web page, as you casually browse.

Long Term:
Their next steps are to improve the learning system, connect learners, release a mobile app, and market experiments.

Business Model

FlipWord plans to charge users only for the days they don’t use FlipWord. Users that use FlipWord daily receive a completely free experience. Each user subscription will renew on a monthly basis. By doing this they build a committed, consistent, and engaged user base.

Traction

  • 6,000+ signed-up users for beta with over 50% user retention
  • Top prize at the University of Illinois Urbana Champaign (UIUC) Cozad New Venture Competition
    *Source: Company provided on crowdfunding campaign website

Senior Management Team

  Thomas Reese Yinghua Yang
Position: CEO, CTO COO, CDO
Ownership Percent: 70% 30%
Linkedin: https://www.linkedin.com/in/reeset https://www.linkedin.com/in/yangyinghua

Summary:

Both candidates are technical founders which is always a great benefit not having to rely on outside developers. Yinghua Yang adds additional credibility to the project with her background as a Masters Student pursuing her degree in Teaching English as a Second Language. Although it’s great to have technical founders, it would be more reassuring to have a core founder with business or CEO experience.

Market Analysis

Industry: Language Industry

TAM (Total Addressable Market): $5B
*Souce: Portal Page, Pitch Deck

Industry Opinion:
The online language learning industry does have some well-established competition, none have implemented technology or artificial intelligence to the extent that FlipWord has. The market is quite large enough to accommodate competition. Companies looking to make education more efficient are always highly encouraged and often benefit from grants that are available to help support research and development.

Competition

Differentiator:
The FlipWord system intelligently selects the best words to replace in your browsing to improve comprehension and language retention. The competition uses random word selection which has proven to have less retention in language learning.

Main Competitor

  Duolingo Rosetta Stone Memrise
Funds Raised $83.3M N/A $6.28M
Website https://www.duolingo.com/ http://www.rosettastone.com/ https://www.memrise.com/

Company Financials

Revenue to date: $72

Revenue Last Fiscal Year: $72 (2016)

Previous Funds Raised: $0

Use of Funds

  • Intermediary Fees
  • Estimated Attorney Fees
  • Estimated Accountant/Auditor Fees
  • Campaign Marketing Expenses
  • Marketing
  • Research & Development
  • Equipment
  • Future Wages
  • General Working Capital

Exit Opportunities

The industry powerhouse Rosetta Stone has previously acquired new technology that aids in the language learning process. FlipWord could become an attractive acquisition target if they are able to generate enough users to show data added efficiency.

Recent Acquisitions in the Field

Date Company Acquired Acquired By Amount
Dec. 11, 2013 Tell Me More Rosetta Stone $28M
July 25, 2013 Lexia Learning Systems Rosetta Stone $22.5M
April 2, 2013 Livemocha Rosetta Stone $8.5M
April 25, 2012 GoGo Lingo Rosetta Stone Unknown

Expert Opinion Summary

FlipWord has created a solution to a problem with a significant addressable market. While they do have 6,000 beta users, they have yet to monetize the platform and it’s unknown how many can be converted to paying customers. FlipWord is still very much in the proof of concept stage and true adoption levels hinder on the success of their upcoming mobile app. I think that success of FlipWord is highly dependent on their ability to execute the success of their future mobile app. I think it would also be highly beneficial for FlipWord to test and determine what percentage of free users they are able to convert to paid.

AngelList: N/A
Crunchbase: https://www.crunchbase.com/product/flipword#/entity

Disclaimer

Crowdfund Research and its authors do not offer investment advice, nor do we endorse or recommend investments in any company or the suitability of an investment for any particular investor. Crowdfund Research is not registered as a broker-dealer or financial or investment advisor and does not provide any services requiring such registration. The information in this report or on our website regarding any company is based on publicly available information or directly from the subject company.  Crowdfund Research makes no representation or warrant as to the adequacy, accuracy or completeness of such information. Any opinions or forecasts expressed herein are our own, are not intended as investment advice and are subject to change without notice. This report has been prepared solely for informative purposes and is not a solicitation of an offer to buy or an offer to sell any security.
This report or the posting of information on our website regarding any company, including any links to information on our website, should not be construed as an endorsement or recommendation of that company for any purpose whatsoever.  This report does not take into account the investment objectives, financial situation or needs of any particular investor, and each investor should consider whether any investment opportunity is appropriate given their investment objectives and current financial circumstances. Any person considering any investment in any equity crowdfunding investment whatsoever is encouraged to consult with their own investment or financial advisor, tax advisor and/or attorney beforehand.
All investments entail risk. The companies on our site are generally small or early stage companies and are subject to risks inherent in investing in any small or early stage company as well as other risks specific to their business and operations. In addition, securities of these companies may be highly illiquid, requiring that they be held for an indefinite period of time or have a limited market for resale. Therefore, no one should invest in any of these companies unless they have no need for liquidity of their investment and can sustain a total loss of their investment.  You should only invest an amount of money that you can afford to lose without changing your lifestyle.
You should thoroughly review the complete offering materials for any investment opportunity, particularly all risk factors, prior to investing in any offering and become familiar with the investor requirements, investment limits and your ability to resell the investment. 

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Jake Fisher
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Jake Fisher

Entrepreneur and Angel Investor. Along with founding Crowdfund Research, Jake is the Managing Partner at Venture Formations.
Jake Fisher
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