Have you noticed how expensive going to the movies has gotten? I know I did when taking my 5-year-old son to see the new Disney movie.
Here’s a breakdown of what it cost:
1 adult ticket = $17
1 child’s ticket = $14
1 large popcorn = $7.25
1 large soda = $4.75
1 bag peanut M&M’s = $4.25
1 apple juice = free (I snuck it in since the theater only sells soft drinks)
All told, our bill was $47.25. It was a 3-D film, so knock a few bucks off for 2-D viewing.
We had a great time, but it wasn’t cheap.
Dealflicks, our latest recommendation, aims to change that.
When I spoke with Co-Founder Sean Wycliffe, he explained that 88% of movie theater seats go unsold. Dealflicks helps theater owners fill those seats.
Ticket buyers get discounts (20% to 50% or more) through Dealflicks’ website or mobile app. Or consumers can choose a bundled deal. For example, a theater owner might offer two tickets and a large popcorn for $15.
Sean told me the cinemas were initially reluctant since they thought their profit margins would take a cut. But once his team showed how they can increase the theater’s overall revenue and profitability, owners became very receptive to giving Dealflicks a try.
Owners got more BIS (butts in seats), which in turn generated more concession sales. Sean and his team are getting positive feedback from theater owners. Many say they acquired new customers who wouldn’t have come in without the discounts Dealflicks offered.
So far, Dealflicks has signed up more than 500 theaters and struck deals with a few midsized chains. Its annual revenue run rate is $2 million.
Here’s a chart showing growth over time:
Note the bump during the summer-blockbuster season. A slowdown in the fall is natural, with kids going back to school and the weather getting cooler. Things are picking up again with the start of the winter movie season; overall the chart shows solid growth.
How does the company plan to get to the next level?
Dealflicks is aiming to get enough users and theaters that word-of-mouth marketing takes over. It’s no easy feat, but Dealflicks is showing strong traction in several areas, like Kansas City where it has 10 active theaters. Building up a geographical density of theaters that use Dealflicks will be key to its success.
Until it gets there, the founders are driving all over the country and closing an impressive one to three new theaters a day.
I spoke with Sean in-depth about the company’s marketing spend. I know quite a bit about local online marketing, and its executing well in that department.
Try the Site
When investing – even as little as the $1,000 that will get you into this deal – we always recommend using the product. Especially when it’s a consumer product like Dealflicks.
In this case, Dealflicks may not be in your neighborhood yet. So check out the areas it has gained significant traction: Kansas City, Missouri, Satellite Beach, Florida, and Brooklyn, New York.
As you can see, many theaters are offering 50% or more off. That’s a very attractive value proposition to consumers and a big part of why we like Dealflicks.
Deal Details
Investment type: Convertible debt note (converts to shares on next financing)
Valuation cap: $7 million
Discount on conversion: 15%
Minimum investment: $1,000
Round: Seed
Notable investors in this round: Warner Bros, 500 Startups, Dave McClure.
Risk Factors
(Note: this is a new section we’re testing.)
As with any early stage investment, this one carries risk. The team needs to execute and close big movie theater chains. I’m not aware of any direct competitors at this time, but they could emerge in the future.
To attract venture capital funding, Dealflicks needs to continue growing revenues at a fast pace.
I strongly believe the risk/reward on this deal is favorable. And the minimum investment of $1,000 fits nicely with our core strategy of investing across 15 to 20 startups per year.
How to Invest
If you haven’t signed up for AngelList yet, click on the link below:
https://angel.co/registrations/continue_after_social_login
You’ll need to fill out some basic information and explain how you are accredited. The more information you can fill out on your profile, the better.
Once registered and signed in, navigate to Dealflicks’ page on Angel.co:
Click on the blue “Invest” button in the upper right of the screen. AngelList will then walk you through the investment process.
Later, you’ll be asked to provide verification that you are indeed an accredited investor. This can come in the form of a letter from your CPA, broker or lawyer. Read more about the AngelList verification process here. It doesn’t take long and will verify you for three to 12 months.
When the deal begins to close, you will receive an email from AngelList that it’s time to fund your investment.
If you’re interested in investing directly in Dealflicks (offline), use the “Get an Intro” button on its page on AngelList. You’ll be put in touch with the founders directly. Note: With direct investing, the minimum investment needed will be significantly higher than the $1,000 required to invest online.
Happy holidays,
Adam Sharp
Founder, Early Investing