Due Diligence For

CROWDFUNDING

Company Overview –

FUN-GI designs and publishes games that enable emerging brands to engage with fans beyond traditional media. Their first partners are the stars of HGTV’s most-watched show ever: Chip and Joanna of ‘Fixer Upper.’
*Souce: Wefunder

Company

Investment

Name: FUN-GI

Minimum Raise: $100K

CEO: Alfred Fung

Maximum Raise: $1M

Company Founded: 2014

Structure of Raise: Future Equity (SAFE)

Location: Los Angeles, CA

Valuation: $10M Valuation Cap

Crowdfunding Portal: Wefunder

Minimum Investment: $100

Crowdfunding Link: https://wefunder.com/fungi

 

Website: http://www.fun-gi.com/

 

Review Overview

Positives

Risks and Reservations

The licensing deal with HGTV stars Joanna and Chip Gaines provides significant traction and market access.

Competition in the mobile game market is extensive and competitors are well-funded.

The founder has previous startup experience in the domain and advisors are experts in most aspects of mobile game design and sales.

Success is dependent on ongoing popularity of the Gaines, which is not guaranteed and out of control of Fun-gi.

The mobile game market is growing quickly, and upscale female target audience is a growing demographic within the mobile game market.

Company success is currently tied to one game and genre, the failure of that game or loss of interest by the target audience in the genre could kill the company.

Strong product and marketing partners.

Competition for mobile game developers is intense and if the company cannot retain its existing developers or hire new ones when needed, the company may not be able to grow at the pace it requires.

Very strong Australian and New Zealand soft launch bodes well for US launch.

$10M valuation cap may be high for a pre-revenue company.

Problem

Growing brands need a new way to capture the attention of fans to remain relevant and grow.

Solution

Current:

Fun-gi has created a game development platform for brands who want to give fans ways to engage in brand-specific experiences and open up new revenue streams in mobile.

Long Term:

Launch additional games. They currently have two additional game designs beyond house flip that are ready to be produced, pending funding.

Business Model

FUN-Gi has three primary revenue channels; in-app purchases (70%), in-game advertising (15-20%), and in-game product placement sponsorships (15-20%). In-app purchases are estimated to be 6.6% CAGR by 2019, in-game advertising to be 73% CAGR by 2018, and in-game product placement sponsorships to be 26.5% CAGR by 2020.

Traction

  • Exclusive partnership with Chip & Joanna Gaines, stars of Fixer Upper, which brought in 25M viewers last season
  • Worldwide launch in expected January 2017
  • Landmark partners include Baylor University, USS Midway Museum, Arizona State University and more
  • Scripps Networks (which owns HGTV and the Fixer Upper show), is a media partner
  • Two additional game designs are in pre-production, also for growing brands
    *Source: Company provided on crowdfunding campaign website

Senior Management Team

 

Alfred Fund

Jimmy XU

Position:

CEO

Product Manager

Ownership Percent: 88%

N/A

Linkedin:

https://www.linkedin.com/in/alfredfung

https://www.linkedin.com/in/adventjex

 Advisors:

Calvin Lim – Co-CEO & CCO at SELECTIV

Summary:

Alfred Fung has significant startup and established mobile app development experience and other team members are likewise experienced.  The management team mainly consists of Alfred at this point, however, so while he may be experienced, he is just one person.  Overall, the team appears to be well qualified.

Market Analysis

Industry: Mobile app industry, specifically mobile games

TAM (Total Addressable Market): $36.9B
*Source: Wefunder

Driving Trends: 7.7% growth rate per year

Industry Opinion:

The mobile game market has been growing rapidly and shows no signs of slowing down.  In addition, the female mobile game player demographic is large and growing and seems to be willing to pay for freemium game content.  However, the mobile game market, including games that compete directly against Fun-gi’s game, is highly competitive with both existing games and new entries.  Successful mobile freemium games can generate significant income, but many lack longevity in the face of new games, changing interests or boredom.

Competition

Differentiator:

Undoubtedly, Fun-gi’s differentiator is their relationship with Chip and Joanna Gaines and HGTV.  This relationship will give Fun-gi significant brand recognition to help them attract and retain players. Most other mobile games lack this branding benefit so Fun-gi should be able to differentiate itself from most of its competitors, at least initially.

Main Competitor:

Company Name: Glu Mobile

Funds Raised: $7.5M

Company Website: http://www.glu.com/

Competitive Summary:

Competition in the mobile gaming field is intense, and the female target market is among the most competitive.  Fun-gi is following a proven success strategy of associating with a popular brand (the Gaines) and developing a mobile game around them.  This worked for the Kardashian’s mobile game and could work for Fun-gi.  Competitors realize the same thing however and there are many competing games who will likewise work with celebrities.  However, I believe Fun-gi should be able to compete effectively with their first game as long as the Gaines remain popular.

Company Financials

Revenue to date: $0

Revenue Last Fiscal Year: $0

Previous Funds Raised:

  • 12/2015 priced round for $125K
  • 10/2016 priced round for $200K

Use of Funds

  • If $100K is raised: Pay production to bring game to global launch
  • If $250K is raised: Boost global launch with marketing on social, search, and influencer channels
  • If $500K is raised: Hire another senior engineer to add new feature to the game in addition to production costs
  • If $750K is raised: Hire additional game designer/technical producer, and accelerate game feature and asset production.
  • If $1M is raised: Ramp up marketing spend to maximize user acquisition and hire a marketing specialist

Exit Opportunities

Successful mobile game companies tend to be acquired by more mature successful mobile game companies and that is the likely exit for Fun-gi.

Recent Acquisitions in the Field

Date

Company Acquired Acquired By Amount
Nov. 3, 2016 Crowdstar Glu Mobile

Unknown

May 31, 2016 Funtactix Playtech

Unknown

Expert Opinion Summary

While Fun-gi seems to have good traction for its first game, long term success will require sustained marketing and development of new games based on other successful brands.  Management has experience in the industry and there is a good advisory team.  To succeed, Fun-gi needs to raise as much money through this crowdfunding as possible in order to maximize marketing efforts and game development.  While competition is intense, the star power of the Gaines should be able to provide Fun-gi with enough recognition to break out in a crowded field.  How long they can maintain this is another matter.

AngelList: https://angel.co/fun-gi
Crunchbase: N/A

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.
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Todd Taylor

Todd Taylor

Senior Business Attorney at JUX Law Firm
Todd helps entrepreneurs with challenging legal issues facing their businesses. For almost 20 years, Todd has provided practice legal advice on business formation, angel and venture financing, contracts and buying and selling businesses. Todd enjoys working with technology companies, including those in cleantech, energy, food and agtech, IoT and manufacturing. Todd also represents investors in early stage companies and has been involved as a co-founder in a number of start up companies.
Todd Taylor

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